SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 1995
Commission file number 1-7713
A M D A H L C O R P O R A T I O N
(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 (Zip Code)
executive offices)
Registrant's telephone number: (408) 746-6000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of class which registered
common stock American Stock Exchange, Inc.
par value of $.05 London Stock Exchange
per share
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
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 [ ]
Aggregate market value of the registrant's common stock held
by non-affiliates, based on the closing sales price on March 4,
1996: $ 559,068,501.
<PAGE>
Number of shares of common stock, par value of $.05 per
share, outstanding as of March 4, 1996: 119,774,909.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference in
those parts of this Annual Report on Form 10-K as set forth
below, but only to the extent specifically stated in such parts:
(1) Portions of Registrant's Annual Report to Stockholders for
the fiscal year ended December 29, 1995 (the "Annual Report")
into Parts I and II; and
(2) Portions of Registrant's definitive Proxy Statement for the
Annual Meeting of Stockholders scheduled to be held on May 2,
1996 (the "Proxy Statement") into Part III.
<PAGE>
PART I
ITEM 1. BUSINESS
General
Amdahl Corporation ("Amdahl" or the "Company"), organized in
1970, provides large-scale, high performance, general-purpose
computer systems and related storage products which are
architecturally compatible at specific software and hardware
interface levels with the basic functions of competing IBM
systems. The Company also offers client-server computer and
storage systems for the open systems marketplace. In addition,
the Company provides equipment maintenance, professional and
consulting services and software products for both the IBM
compatible and open systems marketplace. Amdahl's customer base
is diversified and includes large corporations, financial
institutions, public utilities, government agencies and
universities.
Since its first product shipment of IBM compatible
processors in June 1975, the Company has continued to introduce
new and more powerful computer systems. In December 1991 Amdahl
began initial shipments of the most current of these systems, the
5995M series. In 1994 Amdahl began delivery of the highest
performance models in this series, its ten-way and twelve-way
processors, as well as new models of storage products. In late
1993, the Company also began delivery of high performance servers
for the open systems market pursuant to a reseller agreement with
Sun Microsystems. The Company has announced its intention to
begin delivery during the latter half of 1996 of its new IBM
compatible mainframe systems, utilizing for the first time lower
cost CMOS technology, as well as new IBM compatible storage
systems.
In addition to its computer and storage systems offerings,
Amdahl offers maintenance and other related operational services,
consulting and professional services and a variety of software
products. During the first half of 1995, the Company acquired
Dalworth Holdings, Inc., a provider of multi-vendor hardware
maintenance services, as part of its plan to expand its
maintenance and related operational services offerings. In
August 1995, Amdahl and British Gas PLC formed a joint venture
company, in which Amdahl holds a majority position, for the
purpose of providing programming and other professional services
to the public utility sector in the United Kingdom; and in
November 1995, the Company completed the acquisition of DMR Group
Inc. based in Montreal, Quebec, Canada, a major provider of
professional and consulting services in a number of important
international markets. Huron ObjectStar, a comprehensive
applications development and production system, is the Company's
principal software product. In late 1995 the newest version of
this software was released and is intended to expand Huron
ObjectStar's use and availability across a wide range of
computing environments. In addition, the Company offers UTS, a
Unix based operating system for IBM compatible mainframes, and
the A+ family of performance and productivity tools intended
primarily for the open systems environment.
The Company is organized along lines of business consisting
of its Enterprise Computing Group, including its compatible
processor, storage, maintenance and other hardware related
services operations; consulting and professional services (for
which DMR Group Inc. is the principal operational unit); Antares
Alliance Group which develops and markets Huron ObjectStar and
other software applications and Open Enterprise Systems
operations. The overall focus of this organizational structure
is to enable the Company to offer to its primary customers a
comprehensive set of product and service offerings which will
meet their enterprise wide data processing requirements. The
Company intends to continue to enhance the scope of these
offerings and to enter into partnerships and alliances with other
companies as a way of expanding its existing product offerings
and developing new products and services. Until its professional
services, Huron ObjectStar and open systems offerings are more
fully developed, however, the compatible processor business,
including its related maintenance service and storage components,
will continue to be the primary source of the Company's revenues.
Fujitsu Limited ("Fujitsu"), a major Japanese manufacturer
of computer systems, telecommunications equipment and electronic
components, owns approximately 43% of the Company's outstanding
common stock and is of substantial importance to the Company in
the areas of manufacturing and technical assistance and supply of
subsystems and components. Fujitsu also manufactures the
Company's principal storage products. In November 1993 Amdahl
and Fujitsu entered into an agreement pursuant to which Amdahl
and Fujitsu would participate in the joint development of the
Company's next generation of compatible mainframes. Under the
agreement, Fujitsu will undertake primary responsibility for the
design and manufacture of these systems. Because of Amdahl's
increased dependence on Fujitsu as its supplier of future
large-scale compatible processors and Fujitsu's participation with the
Company in certain other ongoing research and development
activities, the ability to negotiate favorable pricing terms with
respect to future product requirements and to maintain a
satisfactory working relationship are important.
Marketing
The Company markets its products and services directly
through its sales force to customers in the United States,
Canada, Europe and Asia Pacific, through Fujitsu in Brazil,
Japan, Malaysia and Spain and through other distributors in
Indonesia, Saudi Arabia, Latin America and Korea. In 1995
approximately 42% of Amdahl's revenues were from international
operations.
The Company offers its products for sale and lease. For
further information on leasing see "Note 4 - Equipment Leasing
and Third Party Transactions" of the Annual Report.
Service for Amdahl products is provided under service and
parts warranty or separate maintenance agreements. For further
information on warranties, see "Note 1 - Summary of Accounting
Practices" of the Annual Report.
While it may receive "letters of intent" and "orders" from
potential customers for its large-scale systems, typically the
Company does not have a firm contract with a customer until
shortly before shipment. In addition, the Company in many cases
will permit cancellation of an order without charge at any time
until actual delivery, which is common practice in the industry.
For these reasons, the Company does not believe indications of
customer interest and "orders" constitute a firm "backlog" and
believes that a disclosure of a value of unfilled orders is not a
meaningful indicator of revenues nor material to an understanding
of its business.
Major Customer Information and Geographic Area Data
The information under "Note 9 - Major Customer, Geographic
Area, and Product Line Data" of the Annual Report is incorporated
by reference.
Competition
The principal segment of the data processing industry in
which the Company competes remains the highly competitive
mainframe computer system and related storage products and
services segment. Amdahl markets its products in competition with
several major multinational companies with substantial resources.
IBM is Amdahl's principal competitor and is dominant in this
segment of the computer industry. Competition is based primarily
on price and performance, product enhancements and new product
development, and customer service and support. However,
price/performance relationships can change as new models or
enhancements to existing models are introduced and as prices
change. The financial strength and long-term viability of the
supplier are also important.
IBM competitive actions in the large-scale computer market
and related submarkets have historically taken the form of price
reductions and shortened product life cycles. As a result,
selling prices and residual values of large-scale computer
systems have declined substantially over time. Moreover, because
nearly all compatible mainframes operate under the control of IBM
operating system software, the ability of IBM to extend favorable
licensing terms to purchasers of competing IBM hardware systems
frequently requires Amdahl to offer substantial discounts on its
own systems in order to compensate for the effect of such
licensing terms. Also, the continuing introduction by IBM of
certain product modifications requires that Amdahl make
comparable changes to remain fully compatible.
The growth in the market for large-scale computers has been
affected by rapid technological changes in recent years which
have enabled smaller, less costly computer systems to compete for
the development of application programs historically run in
mainframe environments.
The areas into which the Company has diversified its
product, software and service offerings are also intensely
competitive. Competitors include both highly specialized
companies as well as fully integrated vendors such as IBM,
Digital Equipment Corporation and Hewlett-Packard Company. New
computer products, particularly in the open systems marketplace,
are subject to rapid technological changes, short product life
cycles, frequent product enhancements and price reductions. For
software products, ease of use, product reliability, quality of
technical support and product capabilities are important.
Strength of distribution channels and brand name recognition are
also of great importance.
While the Company believes that it can compete successfully
in its established and newer areas of business, each of the
Company's businesses remains subject to inherent risks and
uncertainties. The introduction of new hardware products is
always subject to technological risks which can have a
significant impact on product reliability and performance, as
well as on the timing of when such products become available,
notwithstanding planned or announced introduction dates.
Moreover, the ability to deliver new products with their
attendant functional capabilities can also impact product
acceptance. Development of major software systems quite commonly
is subject to schedule delays and it is not uncommon for product
deficiencies and reliability problems to be recognized after
product delivery to a number of installations. Product
reliability problems, in the case of both hardware and software
systems, can place added costs and burdens on existing support
staff and can also adversely impact the completion of follow on
projects. Organizations which grow through acquisitions or joint
venturing arrangements with other companies may be unable to
realize expected synergies which can adversely affect planned
financial performance. Professional and consulting services
organizations are highly dependent on the skill of their
personnel and their ability to both retain such personnel and to
experience high levels of utilization. Finally, the market for
the Company's products and services can be subject to sudden and
unexpected changes in demand due to actions of the Company's
competitors as well as changes in general economic conditions
which can often cause customers to defer or cancel major product
acquisitions or project expenditures.
<PAGE>
For further discussion of competitive conditions, see
"Management's Discussion & Analysis - Results of Operations and
Factors That May Affect Future Operating Results" of the Annual
Report.
Manufacturing
Amdahl manufactures its computers in Sunnyvale, California.
Major subsystems and components used in its computers are
manufactured by Amdahl as well as by Fujitsu. As part of prior
years' restructuring programs, Amdahl has significantly reduced
its manufacturing capacity, partly to address the less than
expected levels of business in the large-scale mainframe market
and in anticipation of greater dependence on Fujitsu for the
supply of future mainframe products.
Amdahl purchases under contracts with Fujitsu certain
subassemblies and substantially all of its large-scale integrated
semiconductor components and high-density printed circuit boards.
Its primary products are manufactured by Fujitsu to Amdahl
specifications.
While the Company seeks to identify qualified second sources
of supply and to maintain adequate inventories, it may have only
one source of supply for certain critical components, and
material interruptions in product shipments could occur if those
components were unavailable for a period of time. In addition,
if for a substantial period Fujitsu failed to deliver
subassemblies, direct-access storage devices or certain other
equipment as required under manufacturing agreements with Amdahl,
or should Fujitsu fail to meet development or manufacturing
schedules for future mainframe and storage products, serious
interruptions to the Company's delivery schedules would occur,
which would have a material adverse effect on the Company.
The current supply agreements between Amdahl and Fujitsu
generally provide for fixed U.S. dollar prices so long as the
U.S.-Japanese currency exchange rate remains within a specified
range. If the exchange rate fluctuates outside of this range,
prices are to be adjusted pursuant to a formula under which
Amdahl and Fujitsu will share equally any benefits or
disadvantages. For further information regarding purchases from
Fujitsu see "Note 2 - Relationship with Fujitsu Limited" of the
Annual Report.
Product Development
The Company's future prospects depend upon its successful
introduction of new products. During the last three years, the
Company's product development costs, including amounts expended
on development of both existing and new products, amounted to
$149,610,000 in 1995 (excluding the write-off of purchased in-
process engineering and development of $27,296,000), $203,241,000
in 1994, and $334,514,000 in 1993. However, as part of recent
restructuring efforts, the Company has substantially reduced
certain of its product development activities and expects that
future product development expenditures will be considerably
below those of recent years. The Company intends to rely, to a
much greater degree than in the past, on strategic alliances,
partnering arrangements and original equipment manufacturer (OEM)
relationships for major new products or product components.
Patents, Licenses and Related Matters
Amdahl has an active program to file applications for and
obtain patents in the United States and in selected foreign
countries where a potential market for its products exists. The
Company's general policy has been to seek patent protection for
those inventions and improvements likely to be incorporated into
its products or otherwise expected to be of value. While Amdahl
believes that its patents and applications have value, it also
believes that its competitive position depends on the technical
competence of its development personnel and the ability to
successfully enter into partnering or OEM agreements with outside
suppliers.
Amdahl and IBM are parties to an agreement pursuant to which
each grants to the other nonexclusive worldwide licenses as to
certain of each other's patents to be issued on patent
applications having an effective filing date prior to January 1,
1998. Under the agreement, which supersedes prior agreements
between the companies, Amdahl is licensed under substantially all
IBM patents relating to computer systems and software,
communications networks and related semiconductor technology,
generally covering the planned products of the Company while IBM
is licensed under substantially all Amdahl patents. For further
information regarding IBM see "Management's Discussion and
Analysis - Factors That May Affect Future Operating Results" of
the Annual Report.
The Company has also entered into licensing agreements with
others and contemplates entering into additional license
agreements under patents or know-how in the routine conduct of
its business.
<PAGE>
Employees
As of February 23, 1996, the Company had approximately 8,000
full-time employees.
Executive Officers of Amdahl
<TABLE>
<CAPTION>
The executive officers of the Company as of March 18, 1996
are as follows:
Name Age Positions
- ----- --- ----------
<S> <C> <C>
John C. Lewis 60 Chairman of the Board, Chief
Executive Officer and President
Linda T. Alepin 50 Vice President, Corporate Strategy
David L. Anderson 48 Chief Technical Officer and
Vice President,
Enterprise Server Development
Michael R. Carabetta 47 Vice President and General Manager,
Open Enterprise Systems
John C. Cavalier 56 President and Chief Executive
Officer, Antares Alliance Group
Pierre Y. Ducros 56 Chairman of the Board and
Chief Executive Officer,
DMR Group Inc.
William F. Ferone 51 Vice President, Customer Services
William Flanagan 56 Vice President and General Manager,
Compatible Systems
Charles E. Fonner 52 Vice President, Business
Development
Gregory R. Grodhaus 48 Vice President and General Manager,
Enterprise Storage Systems
Orval J. Nutt 55 Chief Marketing Officer and
Vice President, Corporate Marketing
Michael J. Poehner 49 Chief Operating Officer and
President, DMR Group Inc.
Anthony M. Pozos 55 Senior Vice President, Human
Resources and Corporate Services
<PAGE>
Bruce J. Ryan 52 Executive Vice President,
Chief Financial Officer
and Corporate Secretary
Ernest B. Thompson 59 Vice President and Controller
David B. Wright 46 Executive Vice President,
Enterprise Computing Group
</TABLE>
Mr. John C. Lewis was appointed Chairman of the Board in
1987 and was reelected President and Chief Executive Officer on
March 15, 1996. He was President of Amdahl from 1977, when he
joined the Company, until 1987. He was the Company's Chief
Executive Officer from 1983 until 1992.
Ms. Linda T. Alepin joined the Company in 1978. She held
positions of increasing responsibility within the Company until
she was appointed Vice President of Market Development in 1989.
She was appointed Vice President of Business Development in 1993.
At the beginning of 1996 Ms. Alepin became Vice President of
Corporate Strategy.
Mr. David L. Anderson joined the Company in 1971 and was
elected Vice President, Processor Product Management in 1987. In
1989 Mr. Anderson became Vice President of Advanced Systems and
in 1992 became Vice President of Compatible Products Development.
In 1993 he was appointed Vice President and General Manager of
Compatible Systems, and at the beginning of 1996 became Chief
Technical Officer and Vice President of Enterprise Server
Development.
Mr. Michael R. Carabetta joined the Company in 1994 as Vice
President and General Manager of Open Enterprise Systems. Prior
to joining Amdahl Mr. Carabetta worked at Digital Equipment
Corporation, where he served as Vice President Finance and
Administration, Business Systems from 1993 to 1994. He had
previously been Group Manager at Digital Equipment Corporation.
Mr. John C. Cavalier joined the Company in 1993 as Vice
President and General Manager, Huron Sales and Development. In
1993 Mr. Cavalier became President and Chief Executive Officer of
Antares Alliance Group. From 1990 through 1992 Mr. Cavalier was
President and Chief Executive Officer of Bimillennium
Corporation.
Mr. Pierre Y. Ducros joined the Company in 1995 as Chairman
of the Board and Chief Executive Officer of DMR Group Inc. He
co-founded DMR Group Inc. in 1973.
Mr. William F. Ferone joined the Company in 1978 and was
elected Vice President of Customer Services in 1987. In 1988 he
became Vice President of Unix Systems. Mr. Ferone was elected to
the position of Vice President, Marketing, Open Systems
Operations in 1990 and to the position of Vice President and
General Manager of Customer Services 1992. At the beginning of
1996 he was appointed Vice President of Customer Services.
Mr. William Flanagan joined the Company in 1973 and was
elected Vice President of Manufacturing in 1985. In 1993 he
became Vice President of Operations, Compatible Systems and in
1994 he was appointed Vice President, Business and Marketing,
Compatible Systems. At the beginning of 1996 Mr. Flanagan became
Vice President and General Manager of Compatible Systems.
Mr. Charles E. Fonner joined the Company in 1979 and was
elected Vice President of Systems Marketing in 1991. In 1992 Mr.
Fonner became Vice President of Product Management and Marketing.
At the beginning of 1996 he became Vice President of Business
Development.
Mr. Gregory R. Grodhaus joined the Company in 1995 as Vice
President and General Manager of Enterprise Storage Systems.
Prior to joining Amdahl, he was the President and Chief Executive
Officer of IPL Systems, prior to which he served in a variety of
roles at Memorex Telex Corporation.
Mr. Orval J. Nutt joined the Company in 1976 and was elected
Vice President of Corporate Marketing in 1986 and Vice President
and General Manager of U.S. Operations in 1991. In 1993 Mr. Nutt
became Vice President and General Manager of Worldwide Field
Operations. At the beginning of 1996 he became Chief Marketing
Officer and Vice President of Corporate Marketing.
Mr. Michael J. Poehner joined the Company in 1992 as Vice
President and General Manager, East Area, Office of Field
Operations. In 1994 he became Vice President and General Manager
of the Business Solutions Group and in 1995 he was appointed
President of DMR Group Inc. From 1991 until Mr. Poehner joined
the Company he served as Executive Vice President of North
American Operations for Zenith Data Systems.
Mr. Anthony M. Pozos has been Senior Vice President, Human
Resources and Corporate Services since 1986. Mr. Pozos joined
the Company in 1976 as Corporate Vice President, Industrial
Relations, and in 1983 assumed responsibility for Corporate
Services.
Mr. Bruce J. Ryan joined the Company in 1994 as Senior Vice
President, Chief Financial Officer and Corporate Secretary. At
the beginning of 1996 he became Executive Vice President and
retained his positions of Chief Financial Officer and Corporate
Secretary. From 1993 through 1994 Mr. Ryan was Vice President of
Industry Marketing at Digital Equipment Corporation, where prior
to which he served as Vice President and Corporate Controller.
Mr. Ernest B. Thompson joined the Company in 1978 as
Controller. He was elected Corporate Vice President in 1980.
Mr. David B. Wright joined the Company in 1987 as a regional
Vice President of Sales. After being named Vice President of
Commercial U.S. Sales in 1989 and Vice President and General
Manager of European Operations in 1992, Mr. Wright was appointed
Vice President and General Manager of Worldwide Field Operations
in 1993. At the beginning of 1996 he became Executive Vice
President of the Enterprise Computing Group.
ITEM 2. PROPERTIES
Amdahl's corporate headquarters is in Sunnyvale, California,
as are its principal United States manufacturing, marketing,
engineering and educational facilities. Of these facilities,
Amdahl owns 339,678 square feet and leases 944,051 square feet.
Amdahl also leases approximately 109 sales and service offices
throughout the United States, Canada, Europe and Asia-Pacific.
See also "Note 13 - Lease Commitments" of the Annual Report.
An additional 37 locations have been added worldwide due to
the acquisition of Dalworth Holdings, Inc. ("Dalworth") and DMR
Group Inc. ("DMR"). Lease obligations assumed with the
acquisition of Dalworth cover approximately 330,000 square feet
in seven locations, including major sites in Texas, Illinois and
England. Obligations assumed in the acquisition of DMR cover
approximately 300,000 square feet of leased space, including
major sites in Massachusetts; Melbourne, Australia; and
throughout Canada. A 15,000 square foot owned facility in
Belgium was also acquired with DMR.
Restructuring actions, which began in 1993, caused certain
Company facilities and properties to be under utilized. Included
within this group of facilities and properties are 631,680 square
feet of leased properties worldwide, the European headquarters in
Dogmersfield Park, England (50,000 square feet), a facility in
Rexburg, Idaho (5,819 square feet) and two buildings in San Jose
(168,536 square feet). The 631,680 square feet of leased
properties are subleased or offered for sublease. The
Dogmersfield Park facility is being offered for sale. The
Rexburg facility and San Jose buildings are leased to third
parties.
ITEM 3. LEGAL PROCEEDINGS
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY OWNERS
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information under "Note 15 - Common Stock Dividends and
Price Range" of the Annual Report is incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information under "Note 14 - Summarized Quarterly
Financial Data" of the Annual Report is incorporated by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information under "Management's Discussion & Analysis"
of the Annual Report is incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information contained in the following sections of the
Annual Report is incorporated by reference: "Report of
Independent Public Accountants," "Consolidated Balance Sheets,"
"Consolidated Statements of Operations," "Consolidated Statements
of Cash Flows," "Consolidated Statements of Stockholders' Equity"
and "Notes to Consolidated Financial Statements."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information under "Certain Information with Respect to
Directors and Officers - Nominees to Board of Directors" and
"Compliance with Section 16(a) of the Securities Act of 1934" in
the Proxy Statement is incorporated by reference. Also refer to
the item entitled "Executive Officers of Amdahl" in Part I of
this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information under "Certain Information with Respect to
Directors and Officers - Director Compensation" and "Executive
Compensation" (but excluding the information under "Compensation
Committee Report on Executive Compensation" and "Company Stock
Price Performance") in the Proxy Statement is incorporated by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information under "Principal Stockholders" and "Certain
Information with Respect to Directors and Officers - Security
Ownership" in the Proxy Statement is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under "Certain Information with Respect to
Directors and Executive Officers - Compensation Committee
Interlocks and Insider Participation", "Certain Transactions" and
"Loans to Executive Officers" in the Proxy Statement is
incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)(1) Financial Statements
Consolidated Financial Statements
The following consolidated financial statements and
related notes, together with the report thereon of
Arthur Andersen LLP, independent public accountants,
are incorporated by reference from the Annual Report:
Consolidated Balance Sheets--December 29, 1995 and
December 30, 1994.
Consolidated Statements of Operations for each of the
three years in the period ended December 29, 1995.
Consolidated Statements of Cash Flows for each of the
three years in the period ended December 29, 1995.
Consolidated Statements of Stockholders' Equity for
each of the three years in the period ended December
29, 1995.
(a)(2) Schedules Supporting Consolidated Financial Statements
Report of Independent Public Accountants on Schedules
II Valuation and Qualifying Accounts and Reserves
Schedules Omitted
In accordance with the rules of Regulation S-X, the
other required schedule is not submitted because (a) it
is not applicable to or required by the Company or (b)
the information required to be set forth therein is
included in the consolidated financial statements or
other schedules.
(a)(3) Exhibits
Exhibit Description
------- -----------
2(a) Offer to Purchase Class A and Class B shares
of DMR Group Inc. by Amdahl Canada
Acquisition Inc. dated September 27, 1995
(incorporated by reference to Exhibit 2(a)to
Form 10-Q for the fiscal period ended
September 29, 1995)
2(b) Notice of Change and Variation dated October
19, 1995 to the Offers to Purchase Class A
and Class B shares of DMR Group Inc. by
Amdahl Canada Acquisition Inc. dated
September 27, 1995 (incorporated by reference
to Exhibit 2(b) to Form 10-Q for the fiscal
period ended September 29, 1995)
2(c) Notice of Change and Variation dated November
1, 1995 to the Offers to Purchase Class A and
Class B shares of DMR Group Inc. by Amdahl
Canada Acquisition Inc. dated September 27,
1995 (incorporated by reference to Exhibit
2(c) to Form 10-Q for the fiscal period ended
September 29, 1995)
3(a) Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3(a) to
Form 10-K for fiscal year ended December 30,
1994)
3(b) Restated By-Laws (incorporated by reference
to Exhibit 3(b) to Form 10-K for fiscal year
ended December 30, 1994)
Executive Compensation Plans and Agreements
-------------------------------------------
10(a) Amdahl Corporation 1994 Stock Incentive Plan,
as amended (incorporated by reference to
Exhibit 10(c) to Form 10-Q for fiscal period
ended March 31, 1995)
10(b) Amdahl Corporation Long-Term Executive
Incentive Performance Plan (incorporated by
reference to Exhibit 10(b) to Form 10-Q for
fiscal period ended March 31, 1995)
10(c) Amdahl Corporation Short-Term Executive
Incentive Performance Plan (incorporated by
reference to Exhibit 10(a) to Form 10-Q for
fiscal period ended March 31, 1995)
10(d) Amdahl Corporation Officer Loan Program, as
amended (incorporated by reference to Exhibit
10(c) to Form 10-K for the fiscal year ended
December 30, 1994)
10(e) Amdahl Corporation Director Fee Deferral
Election Plan, as amended (incorporated by
reference to Exhibit 10(g) to Form 10-K for
the fiscal year ended December 25, 1992)
10(f) Amdahl Corporation Deferral Election Plan, as
amended (incorporated by reference to Exhibit
10(a) to Form 10-Q for fiscal period ended
June 30, 1995)
10(g) Amdahl Corporation Corporate Officer
Severance Guidelines (incorporated by
reference to Exhibit 10(f) to Form 10-K for
the fiscal year ended December 30, 1994)
*10(h) Amdahl Corporation 1995 Chief Executive
Officer Bonus Guidelines
*10(i) Amdahl Corporation 1995 Bonus Program for
Officers, Vice Presidents, Seniors and Keys,
10(j) Form of Restricted Stock Purchase Agreement
under the Restricted Stock Plan (incorporated
by reference to Exhibit 4(k) of Registrant's
Registration Statement 33-54171, filed June
17, 1994)
*10(k) Agreement with Named Executive Officer
*10(l) Promissory Note with Named Executive Officer
and Second Deed of Trust Securing the Note
<PAGE>
Other Material Agreements
-------------------------
10(m) Partnership Agreement dated June 21, 1993
between wholly owned subsidiaries of Amdahl
and Electronic Data Systems Corporation
(Portions of this exhibit are deleted
pursuant to a request for confidential
treatment) (incorporated by reference to
Exhibit 10(y) to Form 10-K for the fiscal
year ended December 31, 1993)
10(n) Joint Development Agreement between Amdahl
and Fujitsu dated December 8, 1993 (Portions
of this exhibit are deleted pursuant to a
request for confidential treatment)
(incorporated by reference to Exhibit 10(aa)
to Form 10-K for the fiscal year ended
December 31, 1993)
10(o) Loan Agreement between Amdahl and Fujitsu
dated January 29, 1994 (incorporated by
reference to Exhibit 10(c) to Form 10-Q for
the fiscal period ended April 1, 1994)
Additional Exhibits
-------------------
*13 Annual Report to Stockholders for fiscal year
1995 (only those portions incorporated by
reference)
*21 List of Subsidiaries
*23 Consent of Arthur Andersen LLP
*24 Power of Attorney
*27 Financial Data Schedule
*Filed herewith
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
December 29, 1995.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To Amdahl Corporation:
We have audited in accordance with generally accepted
auditing standards, the consolidated financial statements
included in Amdahl Corporation's Annual Report to Stockholders
incorporated by reference in this Form 10-K, and have issued our
report thereon dated January 24, 1996. Our audits were made for
the purpose of forming an opinion on those statements taken as a
whole. The schedule listed under Item 14 is the responsibility
of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and
is not part of the basic financial statements. This schedule has
been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states
in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken
as a whole.
/s/Arthur Andersen LLP
----------------------
ARTHUR ANDERSEN LLP
San Jose, California
January 24, 1996
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
AMDAHL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(in thousands)
Additions Additions
Balance Charged Charged Reserves
at to Costs to Property of Balance
Beginning and and Acquired Deduc- at end
Of Period Expenses Equipment Companies tions(3) of Period
<S> <C> <C> <C> <C> <C> <C>
Year Ended
December 31, 1993:
Doubtful Receivables $ 3,227 $ 1,009(1) $ --- $ --- $ 970 $ 3,266
Future Engineering ======== ========== ========= ======== ======== =======
Changes $ 86,004 $16,672(2) $ 967(2) $ --- $ 46,510 $57,133
======== ========== ========= ======== ======== =======
Year Ended
December 30, 1994:
Doubtful Receivables $ 3,266 $ 2,080(1) $ --- $ --- $ 150 $ 5,196
Future Engineering ======== ========== ========= ======== ======== =======
Changes $ 57,133 $ --- (2) $ ---(2) $ --- $ 18,490 $38,643
======== ========== ========= ======== ======== =======
Year Ended
December 29, 1995:
Doubtful Receivables $ 5,196 $ 656(1) $ --- $ 1,374 $ 1,262 $ 5,964
Future Engineering ======== ========== ========= ======== ======== =======
Changes $ 38,643 $ --- (2) $ ---(2) $ --- $ 35,342 $ 3,301
======== ========== ========= ======== ======== =======
(1) Estimated uncollectible accounts receivable.
(2) Estimated costs of future engineering changes for shipped and capitalized systems.
(3) The deductions represent charges against the reserves for the purposes for which the
reserves were established. Doubtful receivables deductions also include changes in
estimates.
</TABLE>
<PAGE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
For the purposes of complying with the amendments to the
rules governing Form S-8 under the Securities Act of 1933, the
Company hereby undertakes as follows:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or
controlling persons of the Company, the Company has been advised
that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection
with the securities registered on the Form S-8 Registration
Statements identified below, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
The preceding undertaking is hereby incorporated by
reference to outstanding Registration Statements Nos. 33-55460
and 33-54171 of the Company on Form S-8.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on this 25th day of March, 1996.
AMDAHL CORPORATION
/s/ John C. Lewis
---------------------------
JOHN C. LEWIS
Chairman of the Board,
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/John C. Lewis Chairman of the Board, March 25, 1996
- ------------------ Chief Executive Officer
(JOHN C. LEWIS) and President
(Principal Executive
Officer)
/s/Ernest B. Thompson Vice President and March 25, 1996
- --------------------- Controller
(ERNEST B. THOMPSON) (Principal Accounting
Officer)
/s/Bruce J. Ryan Executive Vice March 25, 1996
- ----------------- President,
(BRUCE J. RYAN) Chief Financial Officer
and Corporate Secretary
(Principal Financial
Officer)
<PAGE>
Signatures Title Date
- ---------- ----- ----
Keizo Fukagawa* Director
- ------------------
(KEIZO FUKAGAWA)
Michael R. Hallman* Director
- -------------------
(MICHAEL R. HALLMAN)
E. F. Heizer, Jr.* Director
- --------------------
(E. F. HEIZER, JR.)
Kazuto Kojima* Director
- ------------------
(KAZUTO KOJIMA)
Burton G. Malkiel* Director
- --------------------
(BURTON G. MALKIEL)
George R. Packard* Director
- --------------------
(GEORGE R. PACKARD)
Walter B. Reinhold* Director
- ---------------------
(WALTER B. REINHOLD)
Takamitsu Tsuchimoto* Director
- -----------------------
(TAKAMITSU TSUCHIMOTO)
<PAGE>
Signatures Title Date
- ---------- ----- ----
J. Sidney Webb* Director
- ------------------
(J. SIDNEY WEBB)
*By: /s/Bruce J. Ryan Attorney-in-Fact March 25, 1996
------------------
(BRUCE J. RYAN)
<PAGE>
EXHIBIT INDEX
Exhibit Description
- ------- -----------
10(h) Amdahl Corporation 1995 Chief Executive Officer Bonus
Guidelines
10(i) Amdahl Corporation 1995 Bonus Program for Officers,
Vice Presidents, Seniors and Keys
10(k) Agreement with Named Executive Officer
10(l) Promissory Note with Named Executive Officer and Second
Deed of Trust Securing the Note
13 Annual Report to Stockholders for fiscal year 1995
(only those portions incorporated by reference)
21 List of Subsidiaries
23 Consent of Arthur Andersen LLP
24 Powers of Attorney
27 Financial Data Schedule
Exhibit 10(h)
AMDAHL CORPORATION
1995 CHIEF EXECUTIVE OFFICER BONUS GUIDELINES
Architecture
1. Bonus can rage from 0 to 150 percent of salary earned during
the year. Target bonus is 100 percent of salary at standard
performance.
2. There are three independent components to bonus: a
corporate profit element, a Line of Business revenue element and
an "other" element.
3. Sixty-five percent of bonus (or 0 to 97.5 percent of salary)
can be earned depending upon performance against the profit
element.
4. Twenty percent of bonus (or 0 to 30 percent of salary) can
be earned depending upon performance against the Line of Business
revenue element.
5. Fifteen percent of bonus (or 0 to 22.5 percent of salary)
can be earned depending upon performance against the other
measures.
6. No bonus is earned under the profit component until 76
percent of the profit goal is achieved.
7. The Board may establish a minimum threshold of something
other than 75 percent for a particular year if circumstances
warrant such a modification.
8. Over-achievement of goals results in bonus greater than 100
percent of salary.
9. Maximum bonus is 150 percent of salary.
<PAGE>
Bonus Schedule
Bonus Payable Under Bonus Payable under
Percent of the Profit Element the Line of Business
Plan Achieved as a percent of Salary Revenue Element as a
percent of Salary
75 0 0
76 2.6 0.8
80 13.00 4.0
85 26.00 8.0
90 39.00 12.0
95 52.00 16.0
100 65.00 20.0
105 71.50 22.0
110 78.00 24.0
115 84.50 26.0
120 91.00 28.0
125 or higher 97.50 30.0
Exhibit 10(i)
AMDAHL CORPORATION
1995 BONUS PROGRAM FOR
OFFICERS, VICE PRESIDENTS, SENIORS AND KEYS
Principles:
1. Maintain a tiered approach to bonus plans to reflect market
practice
2. Raise the threshold at which bonuses begin to be paid
3. Strengthen the link between performance and compensation by
trending salaries towards the 50th percentile and targeting base
salary plus bonus to the 75th percentile of the market
4. Increase the bonus opportunity to make possible greater
variability in pay
5. Make pre-tax profit, operating income or other financial
measures the determinant at target of 60 percent of bonus
opportunity for Seniors and Keys and 80 percent for Vice
Presidents and Officers
6. Make performance against other operational goals the
determinant at target of 40 percent of bonus opportunity for
Seniors and Keys and 20 percent for Vice Presidents and Officers
7. Persons managing or assigned to the various lines of
business may earn 60 percent of bonus based on their units'
operating income or other financial measures at target
8. Persons managing or assigned to the corporate functions may
earn 60 percent of bonus based on corporate pre-tax income profit
at target
Bonus Eligible Population
Approximately nine percent of the company's employees would be
bonus eligible. These employees have been assigned to various
levels of incentive participation based on competitive
positioning and internal organization.
<PAGE>
Incentive Representative Bonus
Plan Level Participants Range
2 Sr. Officers 0-100%
& LOB GM's
3 Other Officers 0-75%
& Senior VP's
4 Other VP's 0-60%
5 Seniors 0-30%
6 Keys 0-15%
Exhibit 10(k)
Agreement with Named Executive Officer
On August 3, 1994, the Compensation Committee of Amdahl
Corporation (the "Company") authorized the Company to pay Bruce
J. Ryan $45,000 per year, for 20 years, commencing at age 65.
The Committee also authorized the vesting of Mr. Ryan's account
under the Long-Term Executive Incentive Performance Plan at the
rate of 7-1/2% per year.
Exhibit 10(l)
NOTE SECURED BY SECOND DEED OF TRUST
(Mortgage Loan)
$300,000.00 September 27, 1994
Sunnyvale, California
FOR VALUE RECEIVED, the undersigned, Bruce J. Ryan and
Kathleen M. Ryan, husband and wife ("Makers"), promise to pay,
jointly and severally, to the order of Amdahl Corporation
("Amdahl"), at its principal offices at 1250 East Arques Avenue,
Sunnyvale, California, the principal sum of Three Hundred
Thousand Dollars ($300,000.00), together with interest (from the
date of this Note until the date of payment) on the unpaid
balance at seven and five-hundredths percent interest (7.05%) per
annum, compounded annually. Unless this Note is previously paid,
forgiven or accelerated as specified in the terms hereinafter
provided, the principal balance under this Note and all accrued
interest shall be paid in full on September 26, 2000.
This Note constitutes a portion of the unpaid balance of the
purchase price of the real property defined in Section 1 of this
Note, purchased by Makers and securing this Note.
This Note shall be subject to the following terms and
conditions:
1. Second Deed of Trust. This Note is secured by a Second
Deed of Trust on the real property located at 14580 Clearview
Drive, Los Gatos, California 95030, parcel number 409-29-020,
executed the 27th day of September, 1994.
2. Payment Terms. On January 15, April 15, July 15 and
October 15 of each year that this Note remains outstanding,
commencing with January 15, 1995, the accrued interest through
the first of that month shall be due and payable.
3. Application of Payments. Each payment shall be made in
lawful tender of the United States and, except for the Annual
Credit set forth in Section 4 of this Note, shall be credited
first to accrued interest then due and payable and the remainder
shall then be applied to principal. Prepayment of principal,
together with all accrued interest, may be made at any time,
without penalty, on or before September 26th of each year that
this Note remains outstanding.
4. Annual Credit. So long as Makers are not in default of
this Note or payment of this Note has not been accelerated
pursuant to Section 5 of this Note then Amdahl shall credit Fifty
Thousand Dollars ($50,000.00) toward the outstanding principal
balance of the Note commencing September 26, 1995 and continuing
on September 26th of each year that this Note remains
outstanding.
5. Events of Acceleration. Payment of the unpaid balance
of this Note (principal plus accrued unpaid interest to date)
shall be subject to acceleration upon the following terms and
conditions:
A. At the election of Amdahl, or other holder of
this Note, fifteen days (15) following the date Mr. Ryan shall
for whatever reason cease to be an employee of Amdahl, then the
entire unpaid balance of this Note shall become immediately due
and payable.
B. Upon the insolvency of Makers, the commission
of any act of bankruptcy by Makers, the execution by Makers of a
general assignment for the benefit of creditors, the filing by or
against Makers of any petition in bankruptcy or any petition for
relief under the provisions of the federal bankruptcy act or any
other state or federal law for the relief of debtors and the
continuation of such petition without dismissal for a period of
fifteen (15) days or more, or the appointment of a receiver or
trustee to take possession of the property or assets of Makers,
the entire unpaid balance of this Note shall become immediately
due and payable.
C. In the event the property described in Section
1 of this Note, or any interest therein, is sold, agreed to be
sold, conveyed or alienated by Makers, or by operation of law or
otherwise, the entire unpaid balance of this Note shall become
immediately due and payable at the option of the holder of this
Note.
D. If default occurs in the payment of any
installment under this Note when due, or in the event of
violation or breach of any of the terms or conditions in the
Second Deed of Trust securing this Note (attached hereto as
Exhibit A), the entire unpaid balance of this Note shall become
immediately due and payable at the option of the holder of this
Note. Failure to exercise such option will not constitute a
waiver of the right to exercise such option with respect to any
subsequent default.
6. Collection. If action is instituted to collect this
Note, Maker promises to pay, and shall be personally liable for
all costs and expenses, including reasonable attorney's fees,
incurred in connection with such action.
7. Waiver. Maker hereby waives notice of default,
presentment or demand of payment, protest or notice of nonpayment
or dishonor and all other notices or demands relative to this
Note.
8. Usuary. All agreements, including this Note, between
Makers and the holder hereof are expressly limited so that under
no contingency or event whatsoever shall the amount paid or
agreed to be paid to Amdahl for the use, forbearance or detention
of the money advanced exceed the lawful highest rate permissible
under the prevailing law. If fulfillment of any provision of
this Note or any other agreement pertaining hereto at the time
performance of such provisions be due, shall involve transcending
the limit of validity prescribed by statute or which a court of
competent jurisdiction may deem applicable hereto, ipso facto,
the obligation to be fulfilled shall be reduced to the limit of
such validity, and if for any circumstances Amdahl or the holder
hereof shall ever receive as interest an amount which would
exceed the highest lawful rate, such amount which would otherwise
be excessive interest shall be applied to the reduction of the
unpaid principal balance due under the Note and not to the
payment of interest. This provision shall control every other
charge for the use, forbearance or detention of money advanced or
to be advanced hereunder.
9. Governing Law. This Note shall be construed in
accordance with the laws of the State of California.
MAKERS:
/s/Bruce J. Ryan /s/Kathleen M. Ryan
- ---------------- -------------------
BRUCE J. RYAN KATHLEEN M. RYAN
<PAGE>
SHORT FORM DEED OF TRUST AND ASSIGNMENT OF RENTS
This Deed of Trust, made this 27th day of September, 1994,
between Bruce J. Ryan and Kathleen M. Ryan husband and wife
herein called TRUSTOR, whose address is 24580 Clearview Drive,
Los Gatos, CA 95030 STEWART TITLE of CALIFORNIA a California
corporation, herein called TRUSTEE, and Amdahl Corporation,
herein called BENEFICIARY,
Witnesseth: That Trustor IRREVOCABLY GRANTS, TRANSFERS AND
ASSIGNS TO TRUSTEE IN TRUST WITH POWER OF SALE, that property in
SANTA CLARA County, California described as:
SEE EXHIBIT A ATTACHED HERETO AND MADE A PART HEREOF
In the event the herein described property or any part thereof,
or any interest therein is sold, agreed to be sold, conveyed or
alienated by the Trustor, or by the operation of Law or otherwise
all obligations secured by this instrument, irrespective of the
maturity dates expressed therein, at the option of the holder
hereof and without demand or notice shall immediately become due
and payable.
This deed of trust is second and subordinate to that certain deed
of trust recorded concurrently herewith, executed by:
Bruce J. Ryan and Kathleen M. Ryan, as trustor(s) in favor of
Wells Fargo Bank, as beneficiary(ies), in the amount of
$550,000.00.
TOGETHER WITH the rents, issues and profits thereof, SUBJECT,
HOWEVER, to the right, power and authority given to and conferred
upon Beneficiary by paragraph 10 of the provisions incorporated
herein by reference to collect and apply such rents, issued and
profits. For the Purpose of Securing: 1. Performance of each
agreement of Trustor incorporated by reference or contained
herein. 2. Payment of the indebtedness evidenced by one
promissory note of even date herewith and any extension or
renewal thereof, in the principal sum of $300,000.00 executed by
Trustor in favor of Beneficiary or order. 3. Payment of such
further sums as the then record owner of said property hereafter
may borrow from Beneficiary, when evidenced by another note (or
notes) reciting it is so secured. To Protect the Security of
This Deed of Trust, Trustor Agrees: By the execution and delivery
of this Deed of Trust, and the note secured hereby, that
provisions (1) to (14), inclusive, of the fictitious deed of
trust recorded under date, in the book and at the page of
Official Records in the office of the county recorder of the
county where said property is located, noted below opposite the
name of such county, viz:
<PAGE>
COUNTY REEL IMAGE
OR BOOK OR PAGE
Alameda........ 2210 970
San Joaquin.... 3221 325
Santa Clara.... 8178 33
Sacramento..... 68-07-03 250
COUNTY REEL IMAGE
OR BOOK OR PAGE
San Francisco.. B-254 678
San Mateo...... 5497 162
Napa........... 789 977
Solano......... 1515 107
COUNTY REEL IMAGE
OR BOOK OR PAGE
Santa Cruz..... 1890 217
Monterey....... 563 919
Stanislaus..... 2227 312
COUNTY REEL IMAGE
OR BOOK OR PAGE
Marin......... 2223 30
Sonoma........ 2339 251
Contra Costa.. 5660 126
(which provisions, identical in all counties, are printed on the
reverse hereof) hereby are adopted and incorporated herein and
made a part hereof as fully as though set forth herein at length;
that he will observe and perform said provisions; and that the
references to property, obligations, and parties in said
provisions shall be construed to refer to the property,
obligations, and parties set forth in this Deed of Trust. The
undersigned trustor requests that a copy of any Notice of Default
and of any Notice of Sale hereunder be mailed to him at his
address hereinbefore set forth. For any statement regarding the
obligations secured hereby, Beneficiary may charge the maximum
amount permitted by law at the time of the request therefor.
/s/ Bruce J. Ryan
-----------------
BRUCE J. RYAN
STATE OF CALIFORNIA )
COUNTY OF Santa Clara )ss.
) /s/ Kathleen M. Ryan
By Bruce J. Ryan
(attorney in fact)
-------------------
KATHLEEN M. RYAN
On September 27, 1994 before me, Donna J. Dickinson
personally appeared Bruce J. Ryan personally known
to me (or proved to me on the basis of
satisfactory evidence)to be the person(s)
whose name(s)is/are subscribed to the within
instrument and acknowledged to me that
he/she/they executed the same in his/her/their
authorized capacity(ies) and that by his/her/their
signature(s) on the instrument the person(s)
or the entity upon behalf of which the person(s)
acted, executed the instrument.
Signature /s/ Donna J. Dickinson (notary seal
---------------------- affixed here)
DONNA J. DICKINSON
<PAGE>
To Protect the Security of This Deed of Trust, Trustor
Agrees:
(1) To keep said property in good condition and repair; not
to remove or demolish any building thereon: to complete or
restore promptly and in good workmanlike manner any building
which may be constructed, damaged or destroyed thereon and to pay
when due all claims for labor performed and materials furnished
therefor; to comply with all laws affecting said property or
requiring any alterations or improvements to be made thereon; not
to commit or permit waste thereof; not to commit, suffer or
permit any act upon said property in violation of law: to
cultivate, irrigate, fertilize, fumigate, prune and do all other
acts which from the character or use of said property may be
reasonably necessary, the specific enumerations herein not
excluding the general.
(2) To provide, maintain and deliver to Beneficiary fire
insurance satisfactory to and with loss payable to Beneficiary.
The amount collected under any fire or other insurance policy may
be applied by Beneficiary upon any indebtedness secured hereby
and in such order as Beneficiary may determine, or at option of
Beneficiary the entire amount so collected or any part thereof
may be released to Trustor. Such application or release shall
not cure or waive any default or notice of default or notice of
default hereunder or invalidate any act done pursuant to such
notice.
(3) To appear in and defend any action or proceeding
purporting to affect the security hereof or the rights or powers
of Beneficiary or Trustee: and to pay all costs and expenses,
including cost of evidence of title and attorney's fees in a
reasonable sum in any such action or proceeding in which
Beneficiary or Trustee may appear, and in any suit brought by
Beneficiary to foreclose this Deed.
(4) To pay: at least ten days before delinquency all taxes
and assessments affecting said property, including assessments on
appurtenant water stock; when due, all incumbrance, charges and
liens, with interest, on said property or any part thereof, which
appear to be prior or superior hereto: all costs, fees and
expenses of this Trust.
Should Trustor fail to make any payment or to do any act as
herein provided, then Beneficiary or Trustee, but without
obligation so to do and without notice to or demand upon Trustor
and without releasing Trustor from any obligation hereof, may:
make or do the same in such manner and to such extent as either
may deem necessary to protect the security hereof, Beneficiary or
Trustee being authorized to enter upon said property for such
purposes; appear in and defend any action or proceeding
purporting to affect the security hereof or the rights or powers
of Beneficiary or Trustee; pay, purchase, contest or compromise
any incumbrance, charge or lien which in the judgment of either
appears to be prior or superior hereto; and, in exercising any
such powers, pay necessary expenses, employ counsel and pay his
reasonable fees.
(5) To pay immediately and without demand all sums so
expended by Beneficiary or Trustee, with interest from date of
expenditure at the amount allowed by law in effect at the date
hereof, and to pay for any statement provided for by law in
effect at the date hereof regarding the obligation secured hereby
any amount demanded by the Beneficiary not to exceed the maximum
allowed by law at the time when said statement is demanded.
(6) That any award of damages in connection with any
condemnation for public use of or injury to said property or any
part thereof is hereby assigned and shall be paid to Beneficiary
who may apply or release such moneys received by him in the same
manner and with the same effect as above provided for disposition
of proceeds of fire or other insurance.
(7) That by accepting payment of any sum secured hereby
after its due date, Beneficiary does not waive his right either
to require prompt payment when due of all other sums so secured
or to declare default for failure so to pay.
(8) That at any time or from time to time, without liability
therefor and without notice, upon written request of Beneficiary
and presentation of this Deed and said note for endorsement, and
without affecting the personal liability of any person for
payment of the indebtedness secured hereby. Trustee may:
reconvey any part of said property; consent to the making of any
map or plat thereof; join in granting any easements thereon: or
join in any extension agreement or any agreement subordinating
the lien or charge hereof.
(9) That upon written request of Beneficiary stating that
all sums secured hereby have been paid, and upon surrender of
this Deed and said note to Trustee for cancellation and retention
and upon payment of its fees, Trustee shall reconvey, without
warranty, the property then held hereunder. The recitals in such
reconveyance of any matter or facts shall be conclusive proof of
the truthfulness thereof. The grantee in such reconveyance may
be described as "the person or person legally entitled there."
Five years after issuance of such full reconveyance, Trustee may
destroy said note and this Deed (unless directed in such request
to retain them).
(10) That as additional security, Trustor hereby gives to
and confers upon Beneficiary the right, power and authority,
during the continuance of these Trusts, to collect the rents,
issues and profits of said property, reserving unto Trustor the
right, prior to any default by Trustor in payment of any
indebtedness secured hereby or in may at any time without notice,
either in person, by agent, or by a receiver to be appointed by a
court, and without regard to the adequacy of any security for the
indebtedness hereby secured, enter upon and take possession of
said property or any part thereof, in his own name sue for or
otherwise collect such rents, issues and profits including those
past due and unpaid, and apply the same, less costs and expenses
of operation and collection, including reasonable attorney's
fees, upon any indebtedness secured hereby, and in such order as
Beneficiary may determine. The entering upon and taking
possession of said property, the collection of such rents, issues
and profits and the application thereof as aforesaid, shall not
cure or waive any default hereunder or invalidate any act done
pursuant to such notice.
(11) That upon default by Trustor in payment of any
indebtedness secured hereby or in performance of any agreement
hereunder, Beneficiary may declare all sums secured hereby
immediately due and payable by delivery to Trustee a written
declaration of default and demand for sale and a written notice
of default and election to cause to be sole said property, which
notice Trustee shall cause to be filed for record. Beneficiary
also shall deposit with Trustee this Deed, said note and all
documents evidencing expenditures secured hereby.
After the lapse of such time as may then be required by law
following the recordation of said notice of default and notice of
sale having been given as then required by law, Trustee, without
demand on Trustor, shall sell said property at the time and place
fixed by it in said notice of sale, either as a whole or in
separate parcels, and in such order as it may determine at public
announcement at the time fixed by the preceding postponement.
Trustee shall deliver to such purchaser its deed conveying the
property so sold, but without any covenant or warranty, express
or implied. The recitals in such deed of any matters or facts
shall be conclusive proof of the truthfulness thereof, any
person, including Trustor, Trustee, or Beneficiary as hereinafter
defined, may purchase at such sale.
After deducting all costs, fees and expenses of Trustee and
of this Trust, including cost of evidence of title in connection
with sale, Trustee shall apply the proceeds of sale to payment of
all sums expended under the terms hereof, not then repaid, with
accrued interest at the amount allowed by law in effect at the
hereof all other sums then secured hereby; and the remainder, if
any, to the person or persons entitled thereto.
(12) Beneficiary, or any successor in ownership of any
indebtedness secured hereby, may from time to time, by instrument
in writing substitute a successor or successors to any Trustee
named herein or acting hereunder, which instrument, executed by
the beneficiary and duly acknowledged and recorded in the office
of the recorder of the county or counties where said property is
situated, shall be conclusive proof of proper substitution of
such successor Trustee or Trustees, who shall, without conveyance
from the Trustee predecessor, succeed to all its title, estate,
rights, powers and duties. Said instrument must contain the name
of the original Trustor, Trustee and Beneficiary hereunder, the
book and page where this Deed is recorded and the name and
address of the new Trustee.
(13) That this Deed applies to, inures to the benefit of,
and binds all parties hereto, their heirs, legatees, devises,
administrators, executors, successors and assigns. The term
Beneficiary shall mean the owner and holder, including pledgees,
of the note secured hereby, whether or not named as Beneficiary
herein. In this Deed, whenever the context so requires, the
masculine gender includes the feminine and or neuter, and the
singular number includes the plural.
(14) That Trustee accepts this Trust when this Deed, duly
executed and acknowledged, is made a public record as provided by
law, Trustee is not obligated to notify any party hereto of
pending sale under any other Deed of Trust or of any action or
proceeding in which Trustor, Beneficiary or Trustee shall be a
party unless brought by Trustee.
REQUEST FOR FULL RECONVEYANCE
To be used only when note has been paid.
To STEWART TITLE OF CALIFORNIA, Trustee: Date:
The undersigned is the legal owner and holder of all
indebtedness secured by the within Deed of Trust. All sums
secured by said Deed of Trust have been fully paid and satisfied;
and you are hereby requested and directed, on payment to you of
any sums owing to you under the terms of said Deed of Trust, to
cancel all evidence of indebtedness, secured by said Deed of
Trust, delivered to you herewith together with said Deed of
Trust, and to reconvey, without warranty, to the parties
designated by the terms of said Deed of Trust, the estate now
held by you under the same.
MAIL RECONVEYANCE TO:
Do not lose or destroy this Deed of Trust OR THE NOTE
which it secures. Both must be delivered to the
Trustee for cancellation before reconveyances will be made.
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
ASSESSOR'S PARCEL NUMBER: 409-29-020
LOT TWENTY ONE (21), as shown on that certain Map entitled,
"Tract 632 La Rinconada Knolls", which said Map was filed for
record in the Office of the Recorder of the County of Santa
Clara, State of California on August 27, 1951 in Book 34 of Maps,
at page 21.
Exhibit 13
Management's Discussion And Analysis
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
REVENUES
Total revenues decreased 7% and equipment sales decreased 23% or
$247 million from the prior year. Equipment sales were 53% and
64% of total revenues in 1995 and 1994, respectively. Processor
equipment sales decreased 22% due to a higher percentage of sales
of 5995M processor upgrades than in 1994 and a significant
decline in pricing experienced in the fourth quarter of 1995.
Overall, 5995M prices declined 32% in 1995. Equipment sales of
the older lines of mainframe computers also decreased. Revenues
from storage product equipment sales decreased 59% in 1995 when
compared to 1994 as a result of pricing and volume declines
associated with delays in the introduction of new storage
products. Equipment sales of high performance servers acquired
under original equipment manufacturer (OEM) arrangements with Sun
Microsystems, which were 10% and 3% of total equipment sales
revenues in 1995 and 1994, respectively, increased 186% or $50
million from 1994 to 1995.
Service, software and other revenues increased 21% or $124
million from the prior year and were 47% and 36% of total
revenues in 1995 and 1994, respectively. The increase in revenues
consisted of increased consulting and professional services
revenues of $80 million, increased maintenance revenues of $26
million from a larger customer installed base, and increased
software revenues of $30 million, of which $15 million was of a
nonrecurring nature (see Note 2 to the Consolidated Financial
Statements). DMR Group Inc. (DMR), which the Company acquired in
November 1995, contributed $35 million to consulting and
professional services revenues (see Note 3 to the Consolidated
Financial Statements). Operating lease revenues decreased $12
million.
1995 revenues were favorably impacted by approximately $36
million by a weakened U.S. dollar, as international revenues
denominated in foreign currencies translated into more dollars in
1995, when compared to 1994.
GROSS MARGINS
Gross margin as a percentage of revenues increased from 36% in
1994 to 37% in 1995. Gross margin on equipment sales as a
percentage of equipment sales revenues increased from 32% in 1994
to 33% in 1995, due in part to lower manufacturing costs and a
higher percentage of sales of 5995M processor upgrades, which
yield better gross margins than sales of complete new systems.
However, as a result of the severe 5995M price declines
experienced in the fourth quarter of 1995, the Company charged
cost of equipment sales for $26 million to reduce 5995M
inventories to market value. In addition, gross margins on
storage product sales were adversely affected by significant
pricing declines. Gross margins on service, software and other
revenues as a percentage of revenues decreased from 44% in 1994
to 41% in 1995, because consulting and professional services and
multi-vendor maintenance services contributed a greater
proportion of revenues in 1995 than in 1994, and these revenues
generate lower gross margins than the Company's traditional
maintenance revenues.
OPERATING EXPENSES
In the fourth quarter of 1995 the Company recorded a charge to
operating expenses of $27 million to write off purchased
in-process engineering and development associated with the
acquisition of DMR that had no probable alternative future uses
(see Note 3 to the Consolidated Financial Statements). Operating
expenses in 1995 and 1994, excluding this charge, were 34% and
32% of revenues, respectively.
Excluding the write-off of purchased in-process engineering and
development, engineering and development expenses decreased $54
million or 26%, when compared to 1994, primarily due to the
agreement with Fujitsu for the joint development of the next
generation of IBM compatible systems. Marketing, general and
administrative expenses increased $43 million or 13% in 1995 when
compared to 1994 due to increased marketing efforts directed
toward the Company's newer lines of business.
INTEREST INCOME/EXPENSE AND INCOME TAXES
Net interest income increased $24 million or 150% from 1994 to
1995 due to increased interest income from higher average cash
and investment levels.
The effective annual income tax rate increased from 7% in 1994 to
43% in 1995, due to the write-off of purchased in-process
engineering and development discussed above and certain reserves
for which no tax benefit was recognized in 1995, and the current
mix of international and domestic income, which limited the
Company's utilization of net operating loss carryforwards and
deferred tax assets in 1995 when compared to 1994.
<PAGE>
RESULTS OF OPERATIONS
1994 COMPARED TO 1993
REVENUES
In 1994, total revenues decreased 2% and equipment sales
decreased 7% from the prior year. Processor equipment sales
revenue declined 4% from 1993 to 1994 due primarily to a 46%
decrease in revenues from equipment sales of the Company's older
5995A mainframe product line. However, revenues from equipment
sales of 5995M systems increased 5% from 1993 to 1994 due to an
increase in shipment volumes of approximately 59%, although when
compared to 1993 these shipment volumes consisted of smaller
processor configurations. The revenue generated from the increase
in 5995M shipment volumes more than offset 5995M pricing declines
of approximately 20% in 1994. 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
sales decreased 24% from 1993 primarily due to price declines
and, to a lesser extent, decreased shipment volumes as the
Company began to transition to new products. Open systems
equipment sales of high performance servers acquired under OEM
arrangements with Sun Microsystems, which the Company began
shipping in volume at the beginning of 1994, increased revenues
in 1994, in part offsetting the declines discussed above.
Service, software and other revenues increased 7% from the prior
year, reflecting increased maintenance revenues from a larger
customer installed base and to a lesser extent increased sales of
Huron software licenses.
The impact of fluctuations in foreign currency exchange rates on
revenues was immaterial in 1994.
[a bar graph entitled Gross Margins (Percent) is inserted next to
the above text, indicating that the gross margins for 1993, 1994
and 1995 were 27%, 36% and 37%, respectively]
GROSS MARGINS
Gross margin as a percentage of revenues increased from 27% in
1993 to 36% in 1994. Gross margin on equipment sales as a
percentage of revenues increased from 22% in 1993 to 32% in 1994,
which primarily reflected lower production costs resulting from
reductions in excess manufacturing capacity and other
Company-wide restructuring actions begun in 1993 as well as a
reduction in vendor component costs. In addition, cost of
equipment sales in 1993 included the provision of $17 million
(compared to no provision in 1994) for implementation of
engineering changes to support IBM features on certain 5995M
processors shipped during 1993. The lower manufacturing costs
more than offset the pricing declines discussed above. Also,
gross margins on service, software and other revenues as a
percentage of revenues increased from 36% in 1993 to 44% in 1994,
reflecting the cost reduction actions taken in the field service
organization in 1993.
OPERATING EXPENSES
Operating expenses in 1994 and 1993, excluding 1993 restructuring
charges of $478,000,000, were 32% and 41% of revenues,
respectively.
Engineering and development expenses decreased 39% from 1993 to
1994 due to cancellations and reductions in the scope of certain
product development projects as well as other cost reduction
benefits realized from the restructuring of operations (see Note
8 to the Consolidated Financial Statements). 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. The decrease in marketing,
general and administrative expenses of 8% from 1993 to 1994 also
reflected cost reductions from the restructuring of operations.
[a bar graph entitled Operating Expenses* (Dollars in Millions)
is inserted next to the above text, indicating that the operating
expenses for 1993, 1994 and 1995 were $689 million, $531 million
and $520 million, respectively. *Excluding 1995 write-off of DMR
in-process engineering and development and 1993 restructuring
charges]
INTEREST INCOME/EXPENSE AND INCOME TAXES
Net interest income increased $11 million or 188% in 1994 from
the prior year, as decreased interest expense from lower average
debt levels and increased interest income from higher average
cash levels were partially offset by decreased interest income
from lower levels of sales-type leases.
The effective annual income tax rate decreased from 18% in 1993
to 7% in 1994, reflecting utilization of net operating loss
carryforwards.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
During the fourth quarter of 1995 the market for the Company's
existing mainframe computer systems entered a product transition
period marked by the announcement of new product offerings from
both Amdahl and its competitors which are expected to become
available during the second half of 1996. Product transition
periods are traditionally characterized by decreased demand,
resulting in accelerated price declines for existing products.
Because the new products involve the use of lower cost CMOS
technologies which will reduce the cost of mainframe computing to
end users, these factors will be more acute during the current
transition period as evidenced by the significant declines
experienced in existing mainframe prices during the fourth
quarter of 1995. Coupled with extremely aggressive competitive
pricing pressures in many of the Company's principal accounts,
this situation is expected to persist and will materially
adversely affect operating results until the Company is able to
deliver its new mainframe systems in volume in the latter part of
1996. In addition, market conditions for the Company's storage
products are not expected to improve until Amdahl's newly
announced storage product offerings are available in volume
during the second half of 1996. Should any delays in current
development schedules occur or should the new mainframe and
storage product offerings fail to receive strong customer
acceptance, the Company's future operating results will be
further adversely affected.
The Company expects its software, services and open systems
businesses to improve during 1996 and to result in a higher
percentage of the Company's overall revenues than in previous
years. The degree of improvement will depend in major part on the
Company's ability to rapidly complete the integration of its
former professional services operations into the recently
acquired DMR business structure; to generate strong customer
acceptance of the newest version of the Huron ObjectStar software
developed by the Amdahl/Electronic Data Systems joint venture,
Antares Alliance Group; to continue the expansion of its new
operational and multi-vendor maintenance service offerings; and
to realize higher gross margins from sales of servers. However,
it is unlikely that any improvements in these operations would be
sufficient to offset any resulting declines in the Company's
traditional mainframe and storage businesses if existing
mainframe prices do not stabilize and if the Company fails to
successfully introduce its new mainframe and storage product
offerings as planned.
In July 1995, IBM terminated its Undertaking with the European
Commission which IBM had entered into 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 believes that IBM will continue
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 the extent to which this would negatively
affect future operating results.
The Company does not expect total operating expenses in 1996 to
significantly change from 1995 levels. The Company expects that
interest income will decrease due to lower average cash and
investment levels in 1996 than in 1995 and that its effective tax
rate will decrease in 1996 from the 1995 rate of 43% due to its
ability to utilize deferred tax assets.
In March 1995 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of (FAS 121). The Company will adopt this standard
in the first quarter of 1996 and does not believe its adoption
will have a material impact on its financial position or results
of operations.
FINANCIAL CONDITION
DECEMBER 29, 1995 COMPARED TO DECEMBER 30, 1994
The Company's net cash position (cash and short-term investments
net of short-term and long-term debt, excluding capitalized lease
obligations) decreased by $80 million from December 30, 1994 to
December 29, 1995. Cash, cash equivalents and short-term
investments decreased $62 million, reflecting the use of $137
million (net of $3 million cash acquired) to finance the purchase
of the outstanding shares of DMR (see Note 3 to the Consolidated
Financial Statements).
Receivables increased $10 million, primarily due to the
acquisition of DMR. Inventories decreased $8 million, reflecting
an end-of-life build up of 5995M inventories, offset by the $26
million write-down to market value.
Net property and equipment decreased $65 million due in part to
sales of buildings and retirements of production and data
processing equipment and because depreciation exceeded capital
spending in 1995.
At December 29, 1995, the excess of cost over DMR's net assets
acquired, net of accumulated amortization, was $107 million (see
Note 3 to the Consolidated Financial Statements).
The cash, cash equivalents and short-term investments balances as
of December 29, 1995 included approximately $161 million
currently invested outside the United States. Repatriation of
these investments and cash would give rise to federal taxable
income in the year of transfer, taxes for which have been
provided. (See Note 12 to the Consolidated Financial Statements
regarding foreign subsidiaries' earnings on which taxes have not
been provided.)
The Company's valuation allowance against worldwide operating
losses, deferred tax assets, and tax credit carryforwards which
may expire before the Company can utilize them decreased from
$112 million at December 30, 1994 to $89 million at December 29,
1995. The Company believes sufficient uncertainty exists
regarding the realizability of these items and accordingly has
continued to provide a valuation allowance for them.
Accounts payable to vendors other than Fujitsu increased $42
million, due in part to accounts payable assumed upon the
acquisition of DMR ($17 million at December 29, 1995). Accounts
payable to Fujitsu decreased $42 million, due to decreased
purchases of materials.
Accrued liabilities decreased $80 million due to decreased
deferred maintenance revenues, reserves for future engineering
changes, and accrued restructuring costs. Charges against accrued
restructuring costs resulted in a decrease in the balance from
$88 million at December 30, 1994 to $55 million at December 29,
1995 (see Note 8 to the Consolidated Financial Statements).
At December 29, 1995 and at December 30, 1994, long-term debt
(excluding capitalized lease obligations) was $86 million and $80
million, respectively, which included $80,000,000 outstanding
under the Fujitsu loan agreement (see Note 7 to the Consolidated
Financial Statements).
[a bar graph entitled Inventories (Dollars in Millions) is
inserted next to the above text, indicating that inventories for
1993, 1994 and 1995 were $511 million, $283 million and $275
million, respectively]
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 short-term
investments, together with borrowings under its loan agreement
with Fujitsu, will be adequate to finance continuing operations,
investments in property and equipment, inventories and spare
parts, and expenditures for the development of new products at
least through 1997. The Company has no significant commitments
with vendors other than Fujitsu (see Note 2 to the Consolidated
Financial Statements).
Subsequent to December 29, 1995, the Board of Directors
authorized the Company to buy back up to $100,000,000 of the
Company's common stock.
[a bar graph entitled Net Cast* (Debt) (Dollars in Millions) is
inserted next to the above text, indicating that Net Cast for
1993, 1994 and 1995 was $117 million, $611 million and $531
million, respectively. *Cash and short-term investments, minus
total debt (excluding capitalized lease obligations)]
<PAGE>
Report Of Independent Public Accountants
TO AMDAHL CORPORATION:
We have audited the accompanying consolidated balance sheets of
Amdahl Corporation (a Delaware corporation) and subsidiaries as
of December 29, 1995 and December 30, 1994, and the related
consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended
December 29, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Amdahl Corporation and subsidiaries as of December 29, 1995
and December 30, 1994, and the results of their operations and
their cash flows for each of the three years in the period ended
December 29, 1995 in conformity with generally accepted
accounting principles.
As discussed in Note 12 to the Consolidated Financial Statements,
the Company adopted the provisions of Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, in
1993.
/s/Arthur Andersen LLP
----------------------
SAN JOSE, CALIFORNIA ARTHUR ANDERSEN LLP
JANUARY 24, 1996
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
December 29, 1995 and December 30, 1994
(Dollars in thousands) 1995 1994
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 192,980 $ 358,006
Short-term investments 444,006 340,600
Receivables, net of allowances of
$5,964 in 1995 and $5,196 in 1994 319,777 309,927
Inventories 274,813 283,081
Prepaid expenses and deferred tax assets 69,115 54,874
--------- ---------
Total current assets 1,300,691 1,346,488
--------- ---------
Long-term receivables and other assets 28,083 34,908
--------- ---------
Property and equipment:
Leased systems 37,937 30,238
System spares 379,797 384,685
Production and data processing equipment 327,051 410,557
Office furniture, equipment and improvements 173,691 156,195
Land and buildings 111,715 137,429
--------- ---------
1,030,191 1,119,104
Less - accumulated depreciation
and amortization 757,523 781,465
------- -------
Property and equipment, net 272,668 337,639
------- -------
Excess of cost over net assets acquired,
net of accumulated amortization
of $692 in 1995 106,756 -
--------- ---------
$ 1,708,198 $ 1,719,035
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term debt $ 22,026 $ 8,816
Accounts payable 111,871 69,603
Accounts payable - stockholder
(Fujitsu Limited) 29,152 71,214
Accrued liabilities 431,600 511,706
------- -------
Total current liabilities 594,649 661,339
------- -------
Long-term debt - stockholder
(Fujitsu Limited) 80,000 80,000
------ ------
Long-term debt and liabilities 51,152 49,674
------ ------
Deferred income taxes 48,573 51,767
------ ------
Stockholders' equity:
Common stock, $.05 par value
Authorized - 200,000,000 shares
Outstanding - 119,259,000 shares in 1995
and 116,636,000 shares in 1994 5,963 5,832
Additional paid-in capital 542,269 519,856
Retained earnings 370,995 342,468
Cumulative translation adjustments 10,932 8,861
Unrealized holding gains (losses)
on available-for-sale securities 3,665 (762)
------- -------
Total stockholders' equity 933,824 876,255
--------- ---------
$ 1,708,198 $ 1,719,035
========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements Of Operations
For the Three Years Ended December 29, 1995
(Dollars in thousands, except per common share amounts) 1995 1994 1993
<S> <C> <C> <C>
REVENUES
Equipment sales $803,567 $1,050,236 $1,132,447
Service, software and other 712,821 588,377 548,085
--------- --------- ---------
1,516,388 1,638,613 1,680,532
--------- --------- ---------
COST OF REVENUES
Equipment sales 540,541 716,144 881,528
Service, software and other 419,046 327,420 350,982
------- --------- ---------
959,587 1,043,564 1,232,510
------- --------- ---------
Gross margin 556,801 595,049 448,022
------- ------- -------
OPERATING EXPENSES
Engineering and development 149,610 203,241 334,514
Marketing, general and administrative 370,771 327,917 354,939
Purchased in-process engineering and development 27,296 - -
Restructuring costs - - 478,000
------- ------- ---------
547,677 531,158 1,167,453
------- ------- ---------
INCOME (LOSS) FROM OPERATIONS 9,124 63,891 (719,431)
------- ------- ---------
INTEREST
Income 51,334 26,305 23,461
Expense (10,481) (9,942) (17,772)
-------- ------- --------
40,853 16,363 5,689
------ ------ -------
INCOME (LOSS) BEFORE PROVISION
FOR (BENEFIT FROM) INCOME TAXES 49,977 80,254 (713,742)
Provision for (Benefit from) Income Taxes 21,450 5,450 (125,000)
------ ------ ---------
Income (loss) before change in accounting principle 28,527 74,804 (588,742)
Cumulative Effect of Change in Accounting Principle - - 8,746
------ ------ ---------
NET INCOME (LOSS) $28,527 $74,804 $(579,996)
======= ======= =========
EARNINGS (LOSS) PER COMMON SHARE
Income (loss) before change in accounting principle $.24 $.63 $(5.17)
Net income (loss) $.24 $ .63 $(5.09)
Average outstanding shares and equivalents 120,383,000 118,909,000113,933,000
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
For the Three Years Ended December 29, 1995
(Dollars in thousands) 1995 1994 1993
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR $358,006 $149,484 $173,012
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) 28,527 74,804 (579,996)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 108,552 132,864 209,612
Purchased in-process engineering and development 27,296 - -
Restructuring charges - - 478,000
Deferred income tax provision (3,201) (7,083) (102,611)
Loss (gain) on sales of assets (343) (8,524) 1,208
Change in assets and liabilities net of effects
from purchase of DMR:
(Increase) decrease in receivables 33,771 (2,384) 269,784
Decrease in inventories 30,391 271,872 221,454
(Increase) decrease in prepaid expenses
and deferred tax assets (12,157) (1,781) 40,551
Decrease in long-term receivables and other assets 10,981 9,992 53,874
Increase (decrease) in accounts payable (13,407) 68,964 (150,914)
Decrease in accrued liabilities (113,955) (49,774) (128,722)
Decrease in long-term liabilities (11,853) (2,287) (10,070)
-------- ------- --------
Net cash provided by operating activities 84,602 486,663 302,170
-------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available-for-sale short-term investments (376,503) (47,016) -
Purchases of held-to-maturity short-term investments (287,067) (519,684) -
Proceeds from sales of available-for-sale
short-term investments 107,411 40,677 -
Proceeds from maturities of held-to-maturity
short-term investments 458,116 286,075 -
Decrease in short-term investments - - 18,372
Payment for purchase of DMR, net of cash acquired (136,692) - -
Capital expenditures:
Leased systems (27,156) (18,200) (45,045)
System spares (16,559) (8,584) (50,841)
Other property and equipment (38,159) (40,841) (39,033)
Proceeds from property and equipment sales 30,158 62,352 68,191
------- ------- -------
Net cash used for investing activities (286,451) (245,221) (48,356)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in notes payable
and short-term borrowings 11,070 2,521 (106,854)
Long-term borrowings - 80,000 -
Repayments of borrowings under revolving credit agreement - (130,000) (170,000)
Sale of common stock and exercise of options 22,544 12,064 7,393
Dividends paid - - (5,676)
------ -------- ---------
Net cash provided by (used for) financing activities 33,614 (35,415) (275,137)
------- -------- ---------
Effect of exchange rate changes on cash 3,209 2,495 (2,205)
------- -------- ---------
Net increase (decrease) in cash and cash equivalents (165,026) 208,522 (23,528)
--------- ------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $192,980 $358,006 $149,484
======== ======== ========
Noncash investing and financing activities:transfers of Amdahl-manufactured systems from
net property, plant and equipment to inventories were $17,423,000 in 1995 and $46,225,000
in 1994.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Stockholders' Equity
For the Three Years Ended December 29, 1995
(Dollars in thousands, except per share amounts)
UNREALIZED
ADDITIONAL CUMULATIVE HOLDING
COMMON PAID-IN RETAINED TRANSLATION GAINS
STOCK CAPITAL EARNINGS ADJUSTMENTS (LOSSES) TOTAL
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 25, 1992 $5,657 $500,574 $853,336 $11,549 $- $1,371,116
Sale of 1,439,269 shares, net of
repurchases, of common stock
under employee stock benefit plans 72 7,234 - - - 7,306
Income tax benefit arising from
employee stock option plans - 87 - - - 87
Cash dividends ($.05 per share) - - (5,676) - - (5,676)
Net loss - - (579,996) - - (579,996)
Translation adjustments - - - (2,631) - (2,631)
------ ------- --------- -------- -------- ---------
BALANCE AT DECEMBER 31, 1993 5,729 507,895 267,664 8,918 - 790,206
Sale of 2,057,964 shares, net of
repurchases, of common stock
under employee stock benefit plans 103 9,513 - - - 9,616
Income tax benefit arising from
employee stock option plans - 2,448 - - - 2,448
Net income - - 74,804 - - 74,804
Translation adjustments - - - (57) - (57)
Unrealized holding losses on
available-for-sale securities - - - - (762) (762)
------- ------- ------- -------- -------- --------
BALANCE AT DECEMBER 30, 1994 5,832 519,856 342,468 8,861 (762) 876,255
Sale of 2,622,920 shares, net of
repurchases, of common stock
under employee stock benefit plans 131 17,513 - - - 17,644
Income tax benefit arising from
employee stock option plans - 4,900 - - - 4,900
Net income - - 28,527 - - 28,527
Translation adjustments - - - 2,071 - 2,071
Unrealized holding gains
on available-for-sale securities - - - - 4,427 4,427
-------- ------- -------- -------- -------- --------
BALANCE AT DECEMBER 29, 1995 $5,963 $542,269 $370,995 $10,932 $3,665 $933,824
========= ======== ======== ======== ======= ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
NOTE 1
SUMMARY OF ACCOUNTING PRACTICES
Amdahl Corporation and subsidiaries (the Company or Amdahl) is a
multinational company that provides large-scale, high
performance, general-purpose computer systems, storage, software
and communications products, and client-server hardware systems
for the open systems marketplace. The Company also provides
equipment maintenance, consulting and professional services. See
Note 9 for information on revenues by classes of product and
services and by geographic area. The Company's markets are
worldwide and include the communications, banking, finance and
insurance, services and government industries.
USE OF ESTIMATES
The preparation of finanical statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported components of results of operations during the reporting
period. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly-owned and majority-owned subsidiaries.
Intercompany accounts and transactions have been eliminated.
FISCAL YEAR
The Company's fiscal year ends on the last Friday in December. As
a result, 1995 and 1994 were each 52-week years, and 1993 was a
53-week year.
TRANSLATION OF FOREIGN CURRENCIES
The financial position and results of operations of the Company's
non-U.S. subsidiaries are measured using local currency as the
functional currency. Accordingly, all assets and liabilities are
translated into U.S. dollars at current exchange rates as of the
respective balance sheet date. Revenue and expense items are
translated at the average exchange rates prevailing during the
period. Cumulative translation gains and losses are reported as a
separate component of stockholders' equity.
Gains of $247,000 in 1995 and $81,000 in 1994 and a loss of
$2,948,000 in 1993 resulted from foreign exchange transactions
and were included in marketing, general and administrative
expenses.
REVENUES
Revenues from equipment sales and sales-type leases are generally
recognized when the equipment has been shipped, installed and
financing arrangements have been completed. Revenues from
operating leases are recognized over the term of the respective
contracts.
Service for Amdahl products is provided under service and parts
warranty or separate maintenance agreements. The large-scale
computer systems normally carry a oneyear service and parts
warranty, and the storage and other products usually have shorter
warranty periods. Where material, a portion of equipment sales
revenue is deferred and recognized over the warranty period as
service is provided. Following the warranty period, Amdahl
provides maintenance service under separate contracts which
typically can be terminated by the customer on ninety days
notice. Revenues from maintenance contracts are recognized over
the term of the respective contracts as service is provided.
The Company accounts for software revenues in accordance with the
American Institute of Certified Public Accountants' Statement of
Position 91-1, Software Revenue Recognition. Revenues earned
under software license agreements with end users are generally
recognized when the software has been shipped, payment is due
within one year, collectibility is probable, and there are no
significant obligations remaining.
FUTURE ENGINEERING CHANGES
Amdahl's computer systems are architecturally compatible at
specific software and hardware interface levels with the basic
functions of competing IBM computer systems. The introduction
from time to time by IBM of certain product enhancements requires
that Amdahl make product changes to remain fully compatible. In
addition, the Company periodically makes engineering changes to
enhance the functionality of its products. The Company provides a
reserve for estimated future engineering changes in connection
with each sale. The reserve is intended to cover direct material,
direct labor and manufacturing overhead associated with
implementation of engineering changes. Amounts provided and
charged to cost of equipment sales were $16,672,000 in 1993. No
amounts were provided and charged to cost of sales in 1995 and
1994 because shipments made in those years were not expected to
require future engineering changes.
INVENTORIES
Inventories are stated at the lower of cost (firstin, firstout)
or market. Systems in process and finished goods include
material, labor and manufacturing overhead. Yearend inventories
consisted of the following:
<TABLE>
<CAPTION>
1995 1994
(In thousands)
<S> <C> <C>
Purchased materials $18,879 $45,561
Systems in process 168,322 135,408
Finished goods 87,612 102,112
-------- --------
$274,813 $283,081
======== ========
</TABLE>
Inventories contained components and assemblies in excess of the
Company's current estimated requirements and were fully reserved
at December 29, 1995 and December 30, 1994. Also, as a result of
severe price declines in the fourth quarter of 1995, the Company
charged cost of equipment sales for $26 million to reduce 5995M
inventories to market value. Due to competitive pressures, it is
reasonably possible that these estimates could change in the near
term.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and
amortization are computed using the straight-line method over
estimated useful lives (or, for leasehold improvements and assets
recorded under capital lease obligations, over the remaining
lease terms or estimated useful lives, whichever is shorter) as
follows:
<TABLE>
<CAPTION>
YEARS
<S> <C>
System spares 5
Production and data processing equipment 3-15
Office furniture, equipment and improvements 3-20
Buildings 20-40
</TABLE>
INTANGIBLE ASSETS
Excess of cost over net assets acquired (goodwill) is amortized
by the straight-line method over twenty-five years. The
realizability of goodwill is evaluated periodically as events or
circumstances indicate a possible inability to recover its
carrying amount. Such evaluation is based on various analyses,
including cash flow and profitability projections that
incorporate, as applicable, the impact on existing lines of
business. The analyses necessarily involve significant management
judgment to evaluate the ability of an acquired business to
perform within projections.
Certain software development costs have been capitalized and
amortized over the life of the product. At December 29, 1995 and
December 30, 1994 software development costs that had been
capitalized were immaterial.
<PAGE>
EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share have been computed based on the
weighted average number of common and common equivalent shares
outstanding. Common equivalent shares result from the assumed
exercise of stock options which would have a dilutive effect in
years where there are earnings. Primary and fully diluted
earnings per common share amounts are substantially the same.
NOTE 2
RELATIONSHIP WITH FUJITSU LIMITED
At December 29, 1995, Fujitsu Limited (Fujitsu) owned
approximately 43% of the Company's outstanding stock. The Company
has entered into various transactions with Fujitsu, as follows:
A. Amdahl purchases under contracts with Fujitsu certain
subassemblies and substantially all of its large-scale integrated
semiconductor components and high-density printed circuit boards.
Its primary products are manufactured by Fujitsu to Amdahl
specifications. The cost of computer equipment, subassemblies and
spare parts purchased from Fujitsu and the amount included in
cost of revenues for equipment sales were as follows:
<TABLE>
<CAPTION>
COST OF
PURCHASES REVENUES
(In thousands)
<S> <C> <C>
1995 $282,913 $275,707
1994 $218,925 $374,224
1993 $434,732 $444,595
</TABLE>
Amdahl was committed to purchase manufacturing material and other
equipment from Fujitsu totaling approximately $51,000,000 at
December 29, 1995. Prices for these manufacturing materials and
other equipment are subject to adjustment if the U.S.
dollar-Japanese yen exchange rate fluctuates outside of specified
ranges. The Company has entered into hedging arrangements
designed to protect against currency exchange risks associated
with anticipated product purchases from Fujitsu in 1996.
B. Under joint development efforts, Fujitsu supplies Amdahl with
services and material related to the Company's development of
current and future products, which resulted in charges to
engineering and development expense of $2,399,000 in 1995,
$6,443,000 in 1994 and $8,633,000 in 1993.
In November 1993 Amdahl and Fujitsu entered into an agreement
pursuant to which Amdahl and Fujitsu agreed to participate in the
joint development of the Company's next generation of IBM
compatible systems. Under the agreement, Fujitsu will undertake
primary responsibility for the design and manufacture of these
systems.
In 1991 the Company entered into a cross-license agreement
related to certain technologies in the Company's processor
products, in which the Company agreed to pay Fujitsu up to
$15,000,000 in royalties, to be remitted to Fujitsu as shipments
occurred in 1992 and 1993. Amounts charged to cost of revenues
related to this agreement amounted to $3,600,000 in 1993. There
are no remaining commitments under this agreement.
C. Fujitsu markets Amdahl's computer equipment in Brazil, Japan,
Malaysia and Spain under distributorship arrangements. Sales in
1995, 1994 and 1993 by the Company of computer systems and
complementary storage products to Fujitsu contributed
$37,290,000, $38,682,000 and $28,162,000 to equipment sales and
$17,190,000, $14,405,000 and $11,687,000 to gross margin,
respectively.
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 $9,375,000 and $1,035,000 to equipment
sales and gross margin, respectively, in 1995.
In the fourth quarter of 1995 Fujitsu agreed to pay Amdahl
$14,800,000 for the right and license to use certain software
diagnostic tools developed by Amdahl and $1,000,000 for the right
to market certain storage products in Japan. These amounts were
recognized in the fourth quarter of 1995 as software revenue and
equipment sales revenue, respectively.
At December 29, 1995 and December 30, 1994 receivables included
$35,795,000 and $21,097,000, respectively, from Fujitsu.
D. In January 1994 the Company entered into an agreement with
Fujitsu under which Fujitsu agreed to 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. As of December 29, 1995 and December 30,
1994, $80,000,000 in principal was outstanding under this
agreement (see Note 7). Interest expense associated with the loan
was $5,745,000 in 1995 and $4,238,000 in 1994 of which $958,000
and $987,000 was payable and was included in accrued liabilities
at December 29, 1995 and December 30, 1994, respectively.
NOTE 3
ACQUISITION OF DMR GROUP INC.
On November 15, 1995 the Company acquired all of the outstanding
shares of DMR Group Inc. (DMR), a multinational information
technology consulting company, for $140 million. The acquisition
was funded with existing cash. The results of DMR's operations
have been combined with those of the Company since the date of
acquisition.
The acquisition was accounted for using the purchase method of
accounting. Accordingly, a portion of the purchase price was
allocated to the net assets acquired based on their estimated
fair values. The fair value of tangible assets acquired and
liabilities assumed was $60 million and $55 million,
respectively. In addition, $27,296,000 of the purchase price was
allocated to in-process engineering and development projects that
had not reached technological feasibility and had no probable
alternative future uses, which the Company expensed at the date
of acquisition. The balance of the purchase price, $108 million,
was recorded as excess of cost over net assets acquired
(goodwill) and is being amortized over twenty-five years on a
straight-line basis.
The following table reflects unaudited pro forma combined results
of operations of the Company and DMR on the basis that the
acquisition had taken place and the related charge, noted above,
was recorded at the beginning of the fiscal year for each of the
periods presented:
<TABLE>
<CAPTION>
1995 1994
(Dollars in thousands, except per common share amounts)
<S> <C> <C>
Revenues $1,693,912 $1,857,880
Net income 20,783 38,777
Net income per common share $.17 $ .33
Shares used in computation 120,383,000 118,909,000
</TABLE>
In management's opinion, the unaudited pro forma combined results
of operations are not indicative of the actual results that would
have occured had the acquisition been consummated at the
beginning of 1994 or at the beginning of 1995 or of future
operations of the combined companies under the ownership and
management of the Company.
NOTE 4
EQUIPMENT LEASING AND THIRD PARTY TRANSACTIONS
The Company is the lessor of equipment under operating leases for
periods generally less than three years. Certain operating leases
contain provisions for early termination with a penalty or with
conversion to another system. The cost of leased systems is
depreciated to a zero value on a straight-line basis over two to
four years. Accumulated depreciation on leased systems was
$12,462,000 at December 29, 1995 and $14,119,000 at December 30,
1994. The Company also leases equipment to customers under
sales-type leases as defined in Statement of Financial Accounting
Standards No. 13, Accounting for Leases. The current portion of
the net investment in sales-type leases is included in
receivables and the long-term portion is included in long-term
receivables and other assets. The components of the net
investment in sales-type leases were as follows:
<TABLE>
<CAPTION>
1995 1994
(In thousands)
<S> <C> <C>
Minimum rentals receivable $8,020 $22,001
Estimated residual values
of leased equipment (unguaranteed) 2,500 4,607
Less unearned interest income (1,116) (3,182)
------- -------
Net investment in sales-type leases $9,404 $23,426
======= =======
</TABLE>
Minimum rentals receivable under existing leases as of December
29, 1995 were as follows:
<TABLE>
<CAPTION>
SALES-TYPE OPERATING
(In thousands)
<S> <C> <C>
1996 $4,786 $14,272
1997 2,818 9,597
1998 402 3,062
1999 14 106
2000 - -
Thereafter - -
------- --------
$8,020 $27,037
======= ========
</TABLE>
In addition, during the periods presented, the Company sold
certain equipment subject to operating leases and financed
certain sales-type equipment leases and installment contracts
with financing institutions (Third Parties). The Company
sometimes agrees to perform certain services and obligations with
respect to the equipment and related leases, such as general
lease administration, invoicing and collection of rentals,
payment of insurance and personal property taxes, maintenance
services and non-priority remarketing of equipment that comes off
lease. For these services and obligations, the Company generally
receives its normal maintenance charges and a remarketing and
administration fee. Many of the agreements with Third Parties
provide the Company with residual rights in revenues, if any,
derived from the equipment after the Third Parties have received
a designated return. Equipment sales revenues arising from these
transactions with Third Parties were approximately $48,000,000,
$71,000,000 and $91,000,000 in 1995, 1994 and 1993, respectively.
Note 5
FINANCIAL INSTRUMENTS
The Company invests in a variety of financial instruments but
does not hold or issue financial instruments for trading
purposes.
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
The Company hedges certain portions of its exposure to foreign
currency fluctuations through a variety of strategies and
financial instruments, including the use of forward foreign
exchange contracts and currency swap agreements. These contracts
and swaps generally have maturities that do not exceed three
months and two years, respectively. At December 29, 1995 and
December 30, 1994 the Company had approximately $57,000,000 and
$94,000,000, respectively, in notional principal of forward
foreign exchange contracts outstanding. The Company had
$20,000,000 of currency swap agreements outstanding at December
29, 1995 and December 30, 1994. The gains and losses associated
with currency rate changes on forward foreign exchange contracts
and currency swap agreements are recorded currently in income as
they offset corresponding gains and losses on the foreign
currency-denominated assets and liabilities being hedged.
Therefore, the carrying value of forward foreign exchange
contracts and currency swap agreements approximates their fair
value, which was immaterial at December 29, 1995 and December 30,
1994.
The Company enters into foreign currency options to protect
against currency exchange risks associated with its probable
anticipated, but not firmly committed, non-U.S. intercompany
sales and with both inventory purchase commitments and probable
anticipated inventory purchases from Fujitsu. Realized and
unrealized gains and losses on such contracts and the associated
cash flows that qualify as hedges are reported as components of
the related transactions. These option contracts generally have
maturities that do not exceed one year. At December 29, 1995 and
December 30, 1994 the Company had approximately $80,000,000 and
$40,000,000 in notional principal of purchased option contracts
outstanding, respectively. The net income effect deferred on
foreign currency option contracts represents the amount by which
the carrying value of the option contracts exceeded their fair
value and was immaterial as of December 29, 1995 and December 30,
1994.
The Company enters into interest rate swap agreements to extend
the effective duration of a portion of the Company's investments
in available-for-sale debt securities and accrues the
differential to be paid or received under the agreements as
interest rates change over the life of the contracts. These
agreements generally have maturities that do not exceed three
years. Notional principal outstanding under these agreements at
December 29, 1995 and December 30, 1994 was approximately
$12,000,000 and $30,000,000, respectively. The fair value of
interest rate swaps is the estimated amount that the Company
would receive or pay to terminate the swap agreements at the
reporting date, taking into account current interest rates. The
fair value of interest rate swaps at December 29, 1995 and
December 30, 1994 was immaterial.
BALANCE SHEET FINANCIAL INSTRUMENTS
Substantially all cash equivalents consist of investments in
major bank time deposits, certificates of deposit and commercial
paper with initial maturities of three months or less.
Substantially all short-term investments consist of major bank
time deposits, certificates of deposit, commercial paper and U.S.
government securities which the Company intends to hold between
three and twelve months.
In January 1994 the Company adopted Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments
in Debt and Equity Securities (FAS 115). In compliance with the
standard, the Company's investments in debt or equity securities
which are available for sale are stated at fair value and
investments which are held to maturity are stated at amortized
cost. Adoption of FAS 115 did not have a material impact on the
Company's financial position or results of operations.
In November 1995 the Financial Accounting Standards Board issued
a Special Report, A Guide to Implementation of Statement 115 on
Accounting for Certain Investments in Debt and Equity Securities
(Special Report). Concurrent with the issuance of the Special
Report the Company reassessed the appropriateness of the
classifications of its securities investments and reclassified
all of its held-to-maturity securities to the available-for-sale
category. Amortized cost of the securities transferred was
$161,033,000 and the related unrealized gain was $225,000.
At December 29, 1995 the Company's available-for-sale securities
had contractual maturities of overnight to fifteen years and the
average maturity was one year. The fair value of
available-for-sale securities was determined based on quoted
market prices at the reporting date for those instruments. At
December 29, 1995 and December 30, 1994 the amortized cost basis,
aggregate fair value and gross unrealized holding gains and
losses by major security type were as follows:
<PAGE>
<TABLE>
<CAPTION>
AMORTIZED AGGREGATE UNREALIZED
1995 COST FAIR VALUE GAINS
(In thousands)
<S> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
Equity securities $2,582 $2,894 $312
Debt securities issued by U.S. Treasury
and other U.S. government agencies 222,036 223,553 1,517
Debt securities issued by foreign governments 1,821 2,020 199
Corporate debt securities 283,877 285,285 1,408
Mortgage-backed securities 17,096 17,325 229
-------- -------- ------
Total investments in debt and equity securities $527,412 $531,077 $3,665
======== ======== ======
</TABLE>
<TABLE>
<CAPTION>
AMORTIZED AGGREGATE UNREALIZED
1994 COST FAIR VALUE LOSSES
(In thousands)
<S> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
Equity securities $2,582 $2,345 $(237)
Debt securities issued by U.S. Treasury
and other U.S. government agencies 11,935 11,499 (436)
Debt securities issued by foreign governments 1,821 1,809 (12)
Corporate debt securities 6,145 6,125 (20)
Mortgage-backed securities 10,024 9,967 (57)
------ ------ -----
32,507 31,745 (762)
------ ------ -----
HELD-TO-MATURITY SECURITIES
Debt securities issued by foreign governments 19,721 19,705 (16)
Corporate debt securities 155,729 155,603 (126)
Bank debt securities 417,592 417,010 (582)
------- ------- -----
593,042 592,318 (724)
------- ------- -----
Total investments in debt and equity securities $625,549 $ 624,063 $(1,486)
======= ======== ========
</TABLE>
<PAGE>
In 1995 and 1994 proceeds from sales of available-for-sale
securities were $107,411,000 and $40,677,000, respectively. Gross
realized gains of $832,000 in 1995 and gross realized losses of
$2,171,000 in 1994 were recognized on those sales and were
included in marketing, general and administrative expenses. The
Company used specific identification as the cost basis in
computing realized gains and losses.
At December 29, 1995 and December 30, 1994 the carrying value of
notes payable, short-term debt and long-term debt approximated
fair value because of the variable interest rate nature of these
instruments.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of temporary
cash investments and trade receivables. The Company has cash
investment policies that limit the amount of credit exposure to
any one financial institution and restrict placement of these
investments to financial institutions evaluated as highly
creditworthy. Concentrations of credit risk with respect to trade
receivables are limited due to the large number of customers
comprising the Company's customer base and their dispersion
across many different industries and geographies.
NOTE 6
ACCRUED LIABILITIES
<TABLE>
<CAPTION>
Accrued liabilities consisted of the following:
1995 1994
(In thousands)
<S> <C> <C>
Payroll and vacation $125,482 $110,958
Restructuring costs (Note 8) 55,110 88,228
Income taxes 38,085 38,588
Deferred income 95,968 120,857
Future engineering changes 3,301 38,643
Other 113,654 114,432
------- -------
$431,600 $511,706
======== ========
NOTE 7
LONG-TERM DEBT AND LIABILITIES AND BANK CREDIT AGREEMENTS
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Long-term debt and liabilities consisted of the following:
1995 1994
(In thousands)
<S> <C> <C>
Long-term debt - stockholder
(Fujitsu) (Note 2) $80,000 $80,000
Bank loans at DMR 7,444 -
Capitalized lease obligations (Note 13) 19,856 20,414
Long-term liabilities 26,970 30,271
------- -------
134,270 130,685
Less current maturities 3,118 1,011
-------- --------
Long-term debt and liabilities $131,152 $129,674
======== ========
</TABLE>
Bank loans at DMR primarily consist of the outstanding balance on
a $14,700,000 revolving term line of credit having an original
maturity of five years and bearing interest at a rate based upon
the Canadian Bankers' Acceptance Rate. The amount outstanding at
December 29, 1995 matures in 1997 but may be extended under a
two-year revolving period with the lender's authorization; at the
end of the revolving period the amount outstanding may be paid
over three years at the Company's election.
The Company has credit agreements with a number of banks
providing for short-term borrowings in U.S. dollars and various
foreign currencies at varying interest rates. At December 29,
1995 and December 30, 1994, $18,908,000 and $7,805,000,
respectively, was outstanding under these agreements.
Interest paid on all borrowings was $10,460,000, $9,098,000 and
$19,821,000 in 1995, 1994 and 1993, respectively.
Long-term liabilities included deferred equipment maintenance
revenues and long-term amounts accrued under the Executive
Incentive Performance Plan.
NOTE 8
RESTRUCTURING OF OPERATIONS
In 1993 the Company began to restructure its worldwide operations
in order to address the competitive conditions in the markets for
large-scale computing systems, including pricing which declined
at much greater than historical rates and reduced levels of
demand. The restructuring consisted of a series of planned
actions, including a reduction in the number of employees by
approximately one-third, consolidation of offices and facilities
and disposition of assets that were no longer required due to
changes in product plans, reduction in manufacturing capacity by
approximately 50%, and elimination of selected product
development programs, as well as other expense reductions. In
connection with these actions the Company recorded restructuring
charges totaling $478,000,000 to operating expenses, $243,000,000
of which was recorded in the first quarter of 1993 and
$235,000,000 of which was recorded in the third quarter of 1993.
The majority of these actions were initiated by the end of 1994
and are expected to be completed in 1996.
The 1993 restructuring charges reflected $298 million of noncash
write-downs of recorded assets and $180 million of projected cash
outflows and were comprised of several major components related
to the planned actions. The provision for reduction of the
workforce of approximately $120 million included severance and
medical and other termination benefits for approximately 2,400
employees in manufacturing, development, service, sales,
marketing and administrative functions. In 1995 the estimated
reduction in the workforce increased to approximately 3,600
employees, approximately 80% of which had taken place at December
29, 1995. Approximately $200 million was provided for lease
payments on idle facilities, write-downs of leasehold
improvements, production, data processing and other equipment,
and other expenses associated with the consolidation of offices
and facilities throughout all principal geographic areas.
Approximately $60 million was provided for write-downs of excess
inventory resulting from reduced manufacturing capacity and
changes in product plans, and $10 million was provided for vendor
charges due to the cancellation of development programs. The
provision for various other charges totaled $88 million and
consisted of write-downs of leased systems and system spares as a
result of changes in product plans and other costs associated
with the restructuring actions.
In the fourth quarter of 1995, the Company included a
restructuring reserve totalling $2,272,000 in the allocation of
the purchase price of DMR (see Note 3).
Of the restructuring charges, at December 29, 1995 $55,110,000
remained in accrued liabilities and $24,158,000 remained as a
reduction of inventories. The $55 million balance in accrued
restructuring costs was comprised of approximately $42 million
for the remaining reduction of the workforce and $13 million for
closing excess facilities, all of which represents estimated
future cash outflows. At December 30, 1994 $88,228,000 remained
in accrued liabilities and $27,942,000 remained as a reduction of
inventories. A summary of the restructuring activity is presented
below:
<PAGE>
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
1993 provision $ 478,000
1993 activity:
Non-cash write-downs of property,
equipment and inventories (224,936)
Reduction in workforce and
other cash outflows (72,321)
---------
Balance at December 31, 1993 180,743
1994 activity:
Non-cash write-downs of property,
equipment and inventories (11,113)
Reduction in workforce and
other cash outflows (53,460)
--------
Balance at December 30, 1994 116,170
1995 activity:
Restructuring reserve associated
with the acquisition of DMR 2,272
Non-cash write-downs of property,
equipment and inventories (17,004)
Reduction in workforce and
other cash outflows (22,170)
--------
Balance at December 29, 1995 $ 79,268
========
</TABLE>
NOTE 9
MAJOR CUSTOMER, GEOGRAPHIC AREA, AND PRODUCT LINE DATA
No single customer accounted for 10% or more of total revenues in
1995, 1994 or 1993. The Company's operations by geographical area
for the three years ended December 29, 1995 were as follows:
<PAGE>
<TABLE>
<CAPTION>
UNITED ASIA PACIFIC ADJUSTMENTS
1995 STATES CANADA EUROPE & OTHER & ELIMINATIONS CONSOLIDATED
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Customers $872,153 $52,731 $455,216 $ 136,288 $- $1,516,388
Intercompany 236,477 1,016 10,998 - (248,491) -
---------- -------- -------- ---------- --------- ----------
Total revenues $1,108,630 $53,747 $466,214 $136,288 $(248,491) $1,516,388
========== ======== ======== ========= ========== ==========
Income (loss) from
operations $(24,390) $(23,563) $40,309 $1,641 $15,127 $9,124
Interest income, net 40,853
-------
Income before income taxes $49,977
=======
Identifiable assets $666,019 $202,484 $945,553 $56,118 $(738,903) $1,131,271
Corporate assets 576,927
----------
Total assets $1,708,198
==========
</TABLE>
<TABLE>
<CAPTION>
UNITED ASIA PACIFIC ADJUSTMENTS
1994 STATES CANADA EUROPE & OTHER & ELIMINATIONS CONSOLIDATED
(In thousands)
<S> <C> <C> <C> <C> <C>
Revenues:
Customers $955,090 $62,433 $506,526 $114,564 $- $1,638,613
Intercompany 241,468 (88) 7,428 - (248,808) -
-------- ------- -------- --------- --------- ----------
Total revenues $1,196,558 $62,345 $513,954 $114,564 $(248,808) $1,638,613
========== ======= ======== ======== ========== ==========
Income from operations $49,908 $4,444 $3,256 $3,672 $2,611 $63,891
Interest income, net 16,363
-------
Income before income taxes $80,254
=======
Identifiable assets $663,205 $23,051 $681,193 $32,128 $(354,320) $1,045,257
Corporate assets 673,778
----------
Total assets $1,719,035
==========
</TABLE>
<TABLE>
<CAPTION>
UNITED ASIA PACIFIC ADJUSTMENTS
1993 STATES CANADA EUROPE & OTHER & ELIMINATIONS CONSOLIDATED
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Customers $1,042,490 $50,540 $488,259 $99,243 $- $1,680,532
Intercompany 186,400 4,412 27,774 - (218,586) -
---------- ------- -------- ------- --------- ----------
Total revenues $1,228,890 $54,952 $516,033 $99,243 $(218,586) $1,680,532
========== ======= ======== ======= ========== ==========
Income (loss) from
operations $(502,594) $(5,949) $(190,410) $3,275 $(23,753) $(719,431)
Interest income, net 5,689
----------
Loss before income taxes $(713,742)
==========
Identifiable assets $983,405 $33,259 $763,273 $59,057 $(393,128) $1,445,866
Corporate assets 226,321
----------
Total assets $1,672,187
==========
</TABLE>
<PAGE>
The Company's operations are structured to achieve consolidated
objectives. As a result, significant interdependencies and
overlaps exist among the Company's operating units. Accordingly,
the revenue, operating income (loss) and identifiable assets
shown for each geographic area may not be indicative of the
amounts that would have been reported if the operating units were
independent of one another.
Intercompany sales and transfers of manufacturing materials and
finished systems between areas are accounted for based on
established intercompany sales prices.
Operating income (loss) is revenue less related costs and direct
and allocated operating expenses, excluding interest and, for all
areas except the United States, the unallocated portion of
corporate expenses. United States operating income (loss) is net
of corporate engineering and development and administrative
expenses. Canada's 1995 operating loss includes the write-off of
purchased in-process engineering and development and Canada's
1995 identifiable assets include the excess of cost over net
assets acquired related to the acquisition of DMR (see Note 3).
Corporate assets include assets maintained for general purposes,
principally cash equivalents and short-term investments.
The Company operates in the large-scale computer system and
related storage and communications products segment of the data
processing industry. Revenues for similar classes of products or
services within this one business segment for the most recent
three years are presented below:
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993
(In millions)
<S> <C> <C> <C>
Processor equipment sales $622 $802 $837
Storage product equipment sales 83 203 268
Server equipment sales 77 27 -
Communications and other product equipment sales 21 18 28
----- ----- -----
Total equipment sales 803 1,050 1,133
----- ----- -----
Maintenance revenues 475 449 423
Consulting and professional services revenues 148 68 65
Lease revenues 18 30 28
Software revenues 72 42 32
---- ----- -----
Total service, software and other revenues 713 589 548
---- ----- -----
$1,516 $1,639 $1,681
====== ====== ======
</TABLE>
<PAGE>
Note 10
CAPITAL STOCK
There are 200,000,000 authorized shares of common stock, par
value of $.05 per share, of which 119,259,000 shares were issued
and outstanding as of December 29, 1995.
<TABLE>
<CAPTION>
As of December 29, 1995 the Company had reserved shares of its
common stock for the following purposes:
DESCRIPTION SHARES RESERVED
<S> <C>
1994 Stock Incentive Plan-
Stock options outstanding 6,875,167
Stock options and
restricted stock available for grant 5,061,549
Employee Stock Purchase Plan 1,825,216
----------
13,761,932
==========
</TABLE>
Subsequent to December 29, 1995 the Board of Directors
authorized, subject to stockholder approval, an increase of
5,000,000 shares in the number of shares issuable under the
Employee Stock Purchase Plan.
There are 5,000,000 authorized shares of Preferred Stock, par
value of $1 per share. This stock, if issued, will carry
liquidation preferences and other rights, as determined by the
Board of Directors. As of December 29, 1995 no Preferred Stock
had been issued.
Subsequent to December 29, 1995 the Board of Directors authorized
the Company to buy back up to $100,000,000 of the Company's
common stock.
Note 11
EMPLOYEE STOCK OPTION AND BENEFIT PLANS
Under the Company's stock option plans, options generally become
exercisable in cumulative annual installments beginning one year
after the date of grant, are fully exercisable after four or five
years and expire after ten or fifteen years. Options are granted
to non-employee directors under the Automatic Option Grant
Program. On December 29, 1995 options for 3,113,761 shares were
exercisable at prices ranging from $4.72 to $18.88 per share.
Activity in the Company's option plans excluding restricted stock
is summarized as follows:
<PAGE>
<TABLE>
<CAPTION>
SHARES OPTION PRICES
<S> <C> <C>
Options outstanding at December 25, 1992 6,574,270 $.38- $20.75
Granted 9,681,672 4.72- 8.19
Exercised (39,231) .38- 7.03
Expired or canceled (5,480,498) .38- 20.75
---------- ------------
Options outstanding at December 31, 1993 10,736,213 4.72- 18.88
Granted 391,477 5.50- 10.06
Exercised (935,302) 4.72- 8.19
Expired or canceled (1,196,626) 4.72- 16.56
----------- -------------
Options outstanding at December 30, 1994 8,995,762 4.72- 18.88
Granted 377,359 9.13- 12.88
Exercised (2,032,203) 4.72- 8.69
Expired or canceled (465,751) 4.72- 18.88
----------- ------------
Options outstanding at December 29, 1995 6,875,167 $4.72- $18.88
=========== ============
</TABLE>
<PAGE>
As of December 29, 1995, the Company had 198,579 shares of
restricted common stock outstanding with certain officers and key
employees under the 1994 Stock Incentive Plan. These shares carry
certain restrictions on transferability, which will lapse over
periods as determined by the Board of Directors at the time of
award. The difference between the fair market value at the date
of grant and the purchase price of the shares (generally, $.05
per share) is recorded as compensation expense ratably over the
period from the date of grant to the date the restrictions lapse.
Under the Employee Stock Purchase Plan, the Company's employees,
subject to certain restrictions, may purchase shares of common
stock at a price per share that is the lesser of 85% of the fair
market value as of the first day or the last day of each three
month purchase period.
The Company has a capital accumulation plan available to all its
North American employees to which it contributes based on its
profits. The Company also has a savings plan for domestic
employees whereby it matches 25% of employee contributions up to
specified limits. In addition, under the Executive Incentive
Performance Plan, amounts up to 2% of income before taxes are
accrued for selected key employees instead of their participation
in the capital accumulation plan. Approximately half of the award
vests over the following four years and the remainder vests over
a service period of up to twenty years. The total cost of these
plans charged to operations was $10,303,000 in 1995, $9,025,000
in 1994 and $3,705,000 in 1993.
NOTE 12
INCOME TAXES
Income (loss) before taxes and the provision for (benefit from)
income taxes were comprised of the following:
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Income (loss) before taxes:
Domestic $18,104 $65,941 $(488,628)
Foreign 31,873 14,313 (225,114)
------- ------- ----------
$49,977 $80,254 $(713,742)
======= ======= ==========
Provision for (benefit from) income taxes:
Federal-
Current $25,804 $20,531 $(47,378)
Deferred, net (12,918) (4,895) 6,578
-------- ------- ---------
12,886 15,636 (40,800)
-------- ------- ---------
State-
Current 4,328 (7,284) (4,253)
Deferred, net (2,328) 8,484 5,466
-------- ------- ---------
2,000 1,200 1,213
-------- ------- ---------
Foreign-
Current 6,291 (744) (5,090)
Deferred, net 273 (10,642) (80,323)
-------- ------- --------
6,564 (11,386) (85,413)
-------- ------- --------
Net tax provision
(benefit) $21,450 $5,450 $(125,000)
======== ======= =========
</TABLE>
The effective income tax provision (benefit) differed from the
statutory federal provision due to the following (prior year
amounts have been reclassified to conform to current year
presentation):
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Statutory federal tax provision (benefit) $17,492 $28,089 $(249,810)
State tax provisions, net of federal tax benefit 1,300 780 780
Foreign losses in excess of available benefits 15,563 4,199 15,483
Unutilized deductible temporary differences - - 105,075
Change in valuation allowance (22,486) (40,484) -
Foreign subsidiaries' earnings taxed at rates in
excess of the statutory federal rate 235 8,750 94
Write off of purchased in-process
engineering and development 9,554 - -
Other (208) 4,116 3,378
------- ------ ---------
Net tax provision (benefit) $21,450 $5,450 $(125,000)
======= ====== ==========
Net effective tax rate 43% 7% 18%
----- --- ----
</TABLE>
<PAGE>
Net income taxes of $26,050,000 were paid by the Company in 1995,
and net income tax refunds of $12,340,000 and $16,000,000 were
received by the Company in 1994 and 1993, respectively.
The components of the net deferred tax liability at December 29,
1995 and December 30, 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
(In thousands)
<S> <C> <C>
Deferred tax liabilities:
Taxes on foreign income $(18,520) $(39,926)
Depreciation (26,173) (31,059)
Other (12,450) (9,524)
--------- ---------
Total deferred tax liabilities (57,143) (80,509)
--------- ---------
Deferred tax assets:
Reserves 84,594 126,682
Revenue timing 20,860 -
Net operating loss and
credit carryforwards 40,423 50,074
-------- -------
145,877 176,756
Valuation allowance (89,367) (111,853)
-------- ---------
Total deferred tax assets 56,510 64,903
------- ---------
Net deferred tax liability $(633) $(15,606)
======= =========
</TABLE>
No tax benefit was recorded for losses other than recoverable
taxes or future taxable income from the reversal of deferred
items.
The valuation allowance at December 29, 1995 and December 30,
1994 provided reserves against worldwide operating losses,
deferred tax assets, and tax credit carryforwards which may
expire before the Company can utilize them. The Company believes
sufficient uncertainty exists regarding the realizability of
these items and accordingly has continued to provide a valuation
allowance for them.
In the first quarter of 1993 the Company adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income
Taxes. The adoption of this standard changed the Company's method
of accounting for income taxes from the deferred method to an
asset and liability method. The cumulative effect of this change
in accounting reduced the net loss in 1993 by $8,746,000 or $.08
per share.
Cumulative undistributed earnings of foreign subsidiaries for
which no United States income or foreign withholding taxes have
been recorded, because such earnings are expected to be
reinvested indefinitely, amounted to $105,200,000 at December 29,
1995. The Company provides in full for United States income taxes
on the earnings of foreign subsidiaries not considered
indefinitely invested outside the United States.
At December 29, 1995 the Company had foreign net operating loss
carryforwards of $25,600,000 which will expire at various dates
from 1999 through 2003 and $39,400,000 which can be carried
forward indefinitely.
In 1994 the Company agreed to certain adjustments proposed by the
Internal Revenue Service (IRS) related to the Company's 1983
through 1986 tax years, which resulted in net operating loss and
credit carryforwards, previously utilized in 1987, being
reordered to the 1983 through 1986 tax years. In the third
quarter of 1994 the Company paid $32,000,000, including interest,
to cover the deficiency created by the audit adjustments.
In the fourth quarter of 1994 the IRS issued a notice of
deficiency to the Company for disputed items related to the 1983
through 1986 tax years, the most significant of which related to
the treatment of system spares. The proposed tax deficiency
totals approximately $40,200,000 and would carry interest through
December 29, 1995 of approximately $78,000,000. If paid, the tax
and interest would give rise to a deferred tax asset of
approximately $51,000,000, subject to the recognition criteria of
FAS 109. State income taxes payable as a result of the proposed
tax deficiency would be approximately $15,700,000, net of federal
income tax benefit.
In the first quarter of 1995 the Company filed a petition in the
United States Tax Court contesting the proposed deficiency.
Management believes the Company possesses strong factual support
for its treatment of system spares and will vigorously defend its
position. In the opinion of management, the final resolution of
the proposed deficiency will not have a material adverse impact
on the Company's financial position or results of operations. The
IRS field audit of the Company's 1987 through 1990 tax years is
in progress.
NOTE 13
LEASE COMMITMENTS
The Company leases a substantial portion of its principal
facilities under capital lease agreements extending through the
year 2008. Capitalized facilities leases totaling $32,995,000 and
$31,347,000 with accumulated amortization of $24,176,000 and
$22,098,000 were included in the land and buildings
classification on the balance sheets at December 29, 1995 and
December 30, 1994, respectively. The lease agreements provide for
renewal options extending the lease terms beyond the initial
terms in five-year increments. The Company also leases certain
equipment and sales and service facilities under operating
leases. The minimum lease commitments as of December 29, 1995
were as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
(In thousands)
<S> <C> <C>
1996 $4,095 $37,066
1997 3,694 29,284
1998 3,368 23,195
1999 2,600 17,048
2000 2,602 14,107
After 2000 18,344 29,296
------ -------
Total minimum lease commitments 34,703 $149,996
========
Less imputed interest (9.25% to 13.74%) (14,847)
--------
Present value of minimum
lease commitments (Note 7) $19,856
========
</TABLE>
Minimum obligations have not been reduced by minimum rentals of
$1,549,000 and $15,840,000 receivable in the future under
noncancelable subleases of capital leases and operating leases,
respectively, as of December 29, 1995.
<TABLE>
<CAPTION>
Rental expense charged to income was as follows:
1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Minimum rent $37,701 $38,768 $47,376
Less sublease rent (6,276) (4,073) (2,423)
------- ------- -------
$31,425 $34,695 $44,953
======= ======= =======
</TABLE>
<PAGE>
NOTE 14
<TABLE>
<CAPTION>
SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
First Second Third Fourth Year
(In thousands, except per commonshare amounts and amounts in note below)
<S> <C> <C> <C> <C> <C>
FISCAL QUARTER AND YEAR 1995
Revenues $371,526 $378,666 $350,016 $416,180 $1,516,388
Gross margin $145,315 $148,271 $142,469 $120,746 $556,801
Income (loss) before taxes $26,394 $33,642 $25,707 $(35,766) $49,977
Net income (loss) $20,594 $26,242 $20,057 $(38,366) $28,527
Net income (loss)per common share $.17 $.22 $ .17 $(.32) $.24
FISCAL QUARTER AND YEAR 1994
Revenues $378,791 $396,909 $364,210 $498,703 $1,638,613
Gross margin $129,069 $140,514 $138,145 $187,321 $595,049
Income before taxes $7,110 $13,166 $15,493 $44,485 $80,254
Net income $7,110 $12,516 $14,293 $40,885 $74,804
Net income per common share $.06 $.11 $ .12 $.34 $.63
Note: Fourth quarter 1995 results of operations included charges of $27,296,000 or $.23
per share to write off in-process engineering and development at DMR Group Inc. and
$26,000,000 or $.22 per share to reduce inventories to market value.
</TABLE>
<PAGE>
NOTE 15
COMMON STOCK DIVIDENDS AND PRICE RANGE (UNAUDITED)
DIVIDENDS
Dividends declared per share for the most recent five years were
$.05 in 1993 and $.10 in 1991 and 1992. No dividends were
declared or paid in 1995 or 1994. Payment of future dividends
will be dependent upon the Company's earnings, capital
requirements, financial condition and other factors.
MARKET PRICE
The common stock is listed on both the American and London Stock
Exchanges. The following table sets forth, for the periods
indicated, the range of high and low sale prices on the American
Stock ExchangeComposite Transactions, as reported by The Wall
Street Journal.
<TABLE>
<CAPTION>
1995 HIGH LOW
<S> <C> <C>
First Quarter $12 1/4 $9 7/8
Second Quarter $13 5/8 $10 1/2
Third Quarter $11 3/4 $8 5/8
Fourth Quarter $10 3/4 $8 1/8
1994 HIGH LOW
First Quarter $7 3/8 $5 1/2
Second Quarter $7 7/8 $5 3/8
Third Quarter $10 1/4 $5 1/4
Fourth Quarter $11 1/8 $8
</TABLE>
At December 29, 1995 there were approximately 20,000 holders of
record of Amdahl common stock.
Exhibit 21
Office of the Corporate Secretary
Amdahl Corporation December 1995
AMDAHL CORPORATION SUBSIDIARIES
JURISDICTION SUBSIDIARY
- ------------ ----------
Australia Amdahl Australia Pty. Ltd.
Australia Amdahl Imports Pty. Ltd.
Australia Amdahl Pacific Services Pty. Ltd.
Australia Amdahl Superannuation (Australia) Pty.
Ltd.
Australia Antares Alliance Group, Australia PTY
Limited
Australia DMR Group Australia Pty. Ltd.
Australia DMR Group Development Pty. Ltd.
Australia Emsys International Pty. Ltd.
Australia Qadrant International Pty. Ltd.
Australia RailTek Australia Pty. Ltd.
Austria Amdahl Computersysteme Gesellschaft
m.b.H.
Belgium Amdahl Belgium S.A./N.V.
Belgium DMR Group (Belgium) S.A.-N.V.
Bermuda Amdahl Ireland Limited
Bermuda Amdahl Middle East Operations Limited
California Amdahl Asia, Inc.
California Amdahl Capital Corporation
California Amdahl Finance Corporation
California Amdahl International Corporation
California Amdahl International Sales Corporation
California Amdahl International Services
Corporation
California Amdahl Investment Corporation
California Amdahl North Atlantic, Inc.
California Amdahl Pacific Basin Operations, Inc.
California Amsub Inc.
California Amtemp, Inc.
Canada 2638-6193 Quebec Inc. (APSI)
Canada Amdahl Canada Limited
Canada Amdahl Canada NRO Inc.
Canada Amdahl Communications Inc.
Canada Antares Alliance Group Canada Limited
Canada DMR AMS Inc.
Canada DMR Group (Europe) Inc.
Canada DMR Group Inc.
Canada DMR Quebec Inc.
Canada The IT Macroscope Inc.
Delaware Amdahl Federal Service Corporation
Delaware Antares Alliance Group
Delaware Antares Alliance Group, Europe, L.L.C.
Delaware Antares Alliance Group Holdings, Inc.
Denmark Amdahl Danmark Computer Systems A/S
France Amdahl France S.A.
France Group DMR S.A.
Germany Amdahl Deutschland GmbH
Hong Kong Amdahl (China) Limited
Ireland Amdahl Ireland Limited
Italy Amdahl Italia S.p.A.
Malaysia Amdahl Asia Services SDN BHD
Malaysia DMR Group Malaysia SDN BHD
Massachusetts DMR Group, Inc.
Netherlands Amdahl Europe B.V.
Netherlands Amdahl Nederland B.V.
Netherlands Antilles Amdahl Overseas Capital Corporation N.V.
New Zealand DMR Group New Zealand Limited
Norway Amdahl Norge A/S
South Africa Amdahl South Africa (Pty) Limited
Switzerland Amdahl (Schweiz) AG
Texas Bridging Solutions Corporation
Texas C. E. Services, Inc.
Texas Dalworth Holdings, Inc.
United Kingdom AG Solutions Limited
United Kingdom Amdahl Communications Systems Limited
United Kingdom Amdahl International Management Services
Limited
United Kingdom Amdahl (U.K.) Limited
United Kingdom C E Services (Europe) Limited
United Kingdom DMR Group Limited
United Kingdom Landmark Communications Systems Limited
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our reports included (or
incorporated by reference) in this Form 10-K into the Company's
previously filed Registration Statement Nos. 33-55460 and 33-54171
on Form S-8.
/s/Arthur Andersen LLP
----------------------
ARTHUR ANDERSEN LLP
San Jose, California
March 21, 1996
Exhibit 24
AMDAHL CORPORATION
POWER OF ATTORNEY
The undersigned directors of Amdahl Corporation, a Delaware
corporation, do hereby appoint Bruce J. Ryan, Corporate Secretary
of the Corporation, their lawful attorney and agent for signature
with power to execute the Corporation's Annual Report on Form 10-K
filed with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934, as amended. The power
granted herewith includes the power and authority to sign the
names of the undersigned directors to any and all amendments
filed to the Annual Report. Each of the undersigned hereby
ratifies and confirms all that said attorney and agent shall do
pursuant to this power. This power of attorney may be signed in
several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this
Power of Attorney as of February 8, 1996.
/s/Keizo Fukagawa /s/George R. Packard
- ----------------- --------------------
KEIZO FUKAGAWA GEORGE R. PACKARD
/s/Michael R. Hallman /s/Walter B. Reinhold
- --------------------- ---------------------
MICHAEL R. HALLMAN WALTER B. REINHOLD
/s/E.F. Heizer, Jr. /s/Takamitsu Tsuchimoto
- ------------------- -----------------------
E.F. HEIZER, JR. TAKAMITSU TSUCHIMOTO
/s/Kazuto Kojima /s/J. Sidney Webb
- ---------------- -----------------
KAZUTO KOJIMA J. SIDNEY WEBB
- ---------------- --------------------
JOHN C. LEWIS E. JOSEPH ZEMKE
/s/Burton G. Malkiel
- --------------------
BURTON G. MALKIEL
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-29-1995
<PERIOD-END> DEC-29-1995
<CASH> 192,980
<SECURITIES> 444,006
<RECEIVABLES> 325,741
<ALLOWANCES> 5,964
<INVENTORY> 274,813
<CURRENT-ASSETS> 1,300,691
<PP&E> 1,030,191
<DEPRECIATION> 757,523
<TOTAL-ASSETS> 1,708,198
<CURRENT-LIABILITIES> 594,649
<BONDS> 86,121
0
0
<COMMON> 5,963
<OTHER-SE> 927,861
<TOTAL-LIABILITY-AND-EQUITY> 1,708,198
<SALES> 803,567
<TOTAL-REVENUES> 1,516,388
<CGS> 540,541
<TOTAL-COSTS> 959,587
<OTHER-EXPENSES> 547,677
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,481
<INCOME-PRETAX> 49,977
<INCOME-TAX> 21,450
<INCOME-CONTINUING> 28,527
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,527
<EPS-PRIMARY> 0
<EPS-DILUTED> .24
</TABLE>
