SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
For the quarterly period ended June 27, 1997
Commission file no. 1-7713
AMDAHL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-1728548
(State of incorporation) (I.R.S. Employer
Identification No.)
1250 East Arques Avenue
Sunnyvale, California 94088-3470
(Address of principal executive offices) (Zip code)
Registrant's telephone number: (408) 746-6000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X
No
Number of shares of common stock, $.05 par value, outstanding at
August 1, 1997: 122,984,000.
<PAGE>
PART I. FINANCIAL INFORMATION
AMDAHL CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following unaudited consolidated financial statements reflect, in the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position as of the dates
and results of operations for the periods indicated.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the Securities and Exchange
Commission rules and regulations. Amdahl Corporation (the Company) believes the
information included in the following report on Form 10-Q, when read in
conjunction with the financial statements and related notes included in the
Company's 1996 Annual Report to Stockholders, not to be misleading.
CERTAIN OF THE STATEMENTS CONTAINED IN THIS REPORT ON FORM 10-Q ARE FORWARD
LOOKING AND INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES WHICH ARE DESCRIBED IN
THE SECTION OF THIS REPORT TITLED MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, THE COMPANY'S 1996 ANNUAL REPORT
TO STOCKHOLDERS AND IN OTHER DOCUMENTS FILED FROM TIME TO TIME WITH THE U.S.
SECURITIES AND EXCHANGE COMMISSION, INCLUDING WITHOUT LIMITATION, THE REPORT ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 27, 1996. ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE PROJECTED.
The results of operations for the six months ended June 27, 1997 are not
necessarily indicative of results for the entire year ending December 26, 1997.
<PAGE>
<TABLE>
<CAPTION>
AMDAHL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 27, 1997 AND DECEMBER 27, 1996
(Dollars in thousands)
(Unaudited)
1997 1996
----------- -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 126,893 $ 134,646
Restricted cash - 57,126
Short-term investments 184,002 210,671
Receivables, net of allowances 425,986 498,851
Inventories -
Purchased materials 17,610 30,766
Systems in process 28,130 26,407
Finished goods 42,969 71,582
Prepaid expenses and deferred tax benefit 64,020 86,360
----------- -----------
Total current assets 889,610 1,116,409
----------- -----------
Long-term receivables and other assets 38,429 33,647
----------- -----------
Property and equipment, at cost:
Leased systems 29,336 41,582
System spares 345,465 368,209
Production and data processing equipment 327,743 318,527
Office furniture, equipment, and improvements 144,788 140,050
Land and buildings 78,426 82,318
----------- -----------
925,758 950,686
Less - Accumulated depreciation and amortization (683,959) (705,723)
----------- -----------
Property and equipment, net 241,799 244,963
----------- -----------
Excess of cost over net assets acquired, net of amortization 201,798 201,385
----------- -----------
$ 1,371,636 $ 1,596,404
=========== ===========
Liabilities and stockholders' equity
Current liabilities:
Notes payable and short-term debt $ 42,162 $ 45,053
Short-term debt - stockholder (Fujitsu Limited) 80,000 80,000
Accounts payable 112,111 141,697
Accounts payable - stockholder (Fujitsu Limited) 24,911 68,625
Accrued liabilities 397,117 541,743
----------- -----------
Total current liabilities 656,301 877,118
----------- -----------
Long-term liabilities 48,140 43,663
----------- -----------
Deferred income taxes 57,812 62,375
----------- -----------
Stockholders' equity:
Common stock, $.05 par value -
Authorized - 200,000,000 shares
Outstanding - 122,780,000 shares in 1997
and 121,753,000 shares in 1996 6,139 6,088
Additional paid-in capital 563,041 555,690
Retained earnings 35,395 44,313
Cumulative translation adjustments 7,005 9,300
Unrealized holding losses on securities (2,197) (2,143)
----------- -----------
Total stockholders' equity 609,383 613,248
----------- -----------
$ 1,371,636 $ 1,596,404
=========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMDAHL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per common share amounts)
(Unaudited)
FOR THE THREE MONTHS ENDED
JUNE 27, 1997 JUNE 28, 1996
--------------- ---------------
<S> <C> <C>
REVENUES
Equipment sales $ 129,636 $ 106,395
Service, software and other 308,840 276,459
------------- -------------
438,476 382,854
------------- -------------
COST OF REVENUES
Equipment sales 80,030 252,350
Service, software and other 251,611 207,398
------------- -------------
331,641 459,748
------------- -------------
Gross margin 106,835 (76,894)
------------- -------------
OPERATING EXPENSES
Engineering and development 24,121 32,198
Marketing, general and administrative 80,988 103,621
Purchased in-process engineering and development - 20,700
------------- -------------
105,109 156,519
------------- -------------
Income (loss) from operations 1,726 (233,413)
------------- -------------
INTEREST
Income 4,333 7,503
Expense (1,972) (2,526)
------------- -------------
2,361 4,977
------------- -------------
Income (loss) before provision for
income taxes 4,087 (228,436)
PROVISION FOR INCOME TAXES 2,000 21,000
------------- -------------
NET INCOME (LOSS) $ 2,087 $ (249,436)
============= =============
PER COMMON SHARE AMOUNTS:
Net income (loss) $ .02 $ (2.07)
============= =============
Average outstanding shares 124,774 120,221
============= =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMDAHL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per common share amounts)
(Unaudited)
FOR THE SIX MONTHS ENDED
JUNE 27, 1997 JUNE 28, 1996
--------------- ---------------
<S> <C> <C>
REVENUES
Equipment sales $ 242,503 $ 200,859
Service, software and other 588,878 499,023
------------- -------------
831,381 699,882
------------- -------------
COST OF REVENUES
Equipment sales 151,567 337,934
Service, software and other 471,217 366,260
------------- -------------
622,784 704,194
------------- -------------
Gross margin 208,597 (4,312)
------------- -------------
OPERATING EXPENSES
Engineering and development 48,795 62,761
Marketing, general and administrative 168,215 199,974
Purchased in-process engineering and development - 20,700
------------- -------------
217,010 283,435
------------- -------------
Loss from operations (8,413) (287,747)
------------- -------------
INTEREST
Income 9,322 15,899
Expense (4,827) (4,742)
------------- -------------
4,495 11,157
------------- -------------
Loss before provision for income taxes (3,918) (276,590)
PROVISION FOR INCOME TAXES 5,000 11,369
------------- -------------
NET LOSS $ (8,918) $ (287,959)
============= =============
PER COMMON SHARE AMOUNTS:
Net loss $ (.07) $ (2.40)
============= =============
Average outstanding shares 122,353 119,894
============= =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMDAHL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
FOR THE SIX MONTHS ENDED
JUNE 27, 1997 JUNE 28, 1996
<S> <C> <C>
Cash and cash equivalents at beginning of period $ 134,646 $ 192,980
------------------- -------------------
Cash flows from operating activities:
Net loss (8,918) (287,959)
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities:
Depreciation and amortization 46,506 49,154
Purchased in-process engineering and development - 20,700
Write-down of processor inventories and lease systems to market - 130,000
Deferred income tax provision (4,563) 4,831
Loss (gain) on dispositions of assets (373) 318
Changes in assets and liabilities net of effects of business acquisitions:
Decrease in receivables 68,243 28,446
Decrease in inventories 20,312 63,078
(Increase) decrease in prepaid expenses and deferred tax benefit 20,302 (6,239)
Increase in long-term receivables and other assets (4,614) (4,932)
Decrease in accounts payable (71,725) (13,848)
Decrease in accrued liabilities (72,144) (8,214)
Increase (decrease) in long-term liabilities 7,303 (3,203)
------------------- -------------------
Net cash provided by (used for) operating activities 329 (27,868)
------------------- -------------------
Cash flows from investing activities:
Purchases of available-for-sale short-term investments (64,386) (108,493)
Proceeds from sales of available-for-sale short-term investments 63,556 265,029
Proceeds from maturities of short-term investments 84,580 -
Payment of business acquisitions, net of cash acquired (3,327) (67,005)
Payment of acquisition price payable to Trecom (65,209) -
Capital expenditures:
Leased systems (2,584) (26,131)
System spares (10,848) (5,825)
Other property and equipment (17,891) (22,739)
Proceeds from property and equipment sales 8,537 2,701
------------------- -------------------
Net cash provided by (used for) investing activities (7,572) 37,537
------------------- -------------------
Cash flows from financing activities:
Decrease in notes payable and short-term debt (3,486) (3,994)
Repayments of long-term borrowings (2,480) (1,042)
Sale of common stock and exercise of options 7,402 6,160
------------------- -------------------
Net cash provided by financing activities 1,436 1,124
------------------- -------------------
Effect of exchange rate changes on cash (1,946) (1,833)
------------------- -------------------
Net increase (decrease) in cash and cash equivalents (7,753) 8,960
------------------- -------------------
Cash and cash equivalents at end of period $ 126,893 $ 201,940
=================== ===================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
AMDAHL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying interim financial statements and related notes should be read
in conjunction with the financial statements and related notes included in the
Company's 1996 Annual Report to Stockholders.
RELATIONSHIP WITH FUJITSU LIMITED
During the second quarter of 1997 the Company recognized equipment sales to
Fujitsu Limited (Fujitsu) under distributorship and other arrangements which
contributed $1,700,000 to equipment sales compared to $1,830,000 in the second
quarter of 1996 ($6,854,000 and $9,316,000 for the first six months of 1997 and
1996, respectively).
Fujitsu reimburses Amdahl for certain specific engineering development
activities performed by Amdahl from time to time related to products which are
being jointly developed by Amdahl and Fujitsu. In connection with these
development efforts, Amdahl recorded $6,832,000 as an offset to engineering and
development expenses in the second quarter of 1997, compared to $6,200,000 in
the second quarter of 1996 ($15,735,000 and $12,400,000 for the first six months
of 1997 and 1996, respectively).
In March 1997 Amdahl granted Fujitsu a license for certain storage system
software for use in conjunction with Fujitsu's proprietary operating system for
$4,700,000. This amount was recognized in first quarter 1997 as software
revenue. In addition, Fujitsu has agreed to pay Amdahl a total of $18,200,000
during 1997 in compensation for changes requested by Fujitsu to development
schedules for storage products currently being developed by Fujitsu for the
Company under existing joint development programs. Of this compensation, the
Company recorded $6,000,000 as an offset to engineering and development expenses
in the second quarter of 1997 ($12,200,000 for the first six months of 1997, of
which 6,000,000 was recorded as an offset to engineering and development
expenses and $6,200,000 was recorded as an offset to equipment cost of
revenues).
Amounts due from Fujitsu and their subsidiaries included in receivables were
$24,218,000 and $43,906,000 as of June 27,1997 and December 27, 1996,
respectively.
At June 27, 1997 and December 27, 1996, $80,000,000 was outstanding under the
loan agreement with Fujitsu. The terms of the loan were renegotiated in January
1997, and the full amount is payable in January 1998. Interest expense
associated with the
<PAGE>
loan was $1,400,000 and $1,364,000 in the second quarters of 1997 and 1996,
respectively ($2,775,000 and $2,922,000 in the first six months of 1997 and
1996, respectively).
SUPPLEMENTARY CASH FLOW DISCLOSURE
Income taxes of $9,525,000 (net of taxes refunded of $557,000) were paid by the
Company in the first six months of 1997, and income taxes of $3,162,000 (net of
taxes refunded of $7,021,000) were paid by the Company in the first six months
of 1996. Interest paid on all borrowings was $4,713,000 and $4,842,000 for the
first six months of 1997 and 1996, respectively.
NONCASH INVESTING ACTIVITIES
Net inventory capitalized into property, plant and equipment was $7,002,000 in
the second quarter of 1997, compared to a net transfer of Amdahl-manufactured
systems from net property, plant and equipment to inventories of $3,771,000 in
the second quarter of 1996. Net inventory capitalized into property, plant and
equipment was $19,603,000 in the first six months of 1997 and $3,174,000 in the
first six months of 1996.
BUSINESS ACQUISITIONS
On April 16, 1997, Amdahl's professional services company, DMR Trecom, Inc.,
acquired William J. Kelley & Co., Inc.(Kelley), a Boston-based information
technology firm. Under the stock purchase agreement, $3 million of the purchase
price was paid in April 1997 and $2.1 million is payable without interest in
April 1998. The present value of the aggregate purchase price at the acquisition
date, including acquisition costs, was $5.5 million.
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.
SUBSEQUENT EVENTS
On July 30, 1997 the Company and Fujitsu entered into a merger agreement whereby
Fujitsu, through one of its subsidiaries, will purchase for $12.00 per share in
cash all outstanding shares of Amdahl stock not currently owned by Fujitsu for
approximately $850 million. The merger agreement was unanimously approved by the
Amdahl directors who are unaffiliated with Fujitsu.
In accordance with the agreement, Fujitsu commenced a tender offer on Tuesday,
August 5, 1997. The tender offer is scheduled to expire at 5:00p.m. EDT, Friday,
September 5, 1997, unless extended. Pursuant to the merger agreement, if the
tender offer
<PAGE>
is consummated, Fujitsu will be obligated to acquire any remaining Amdahl shares
in a cash merger at the same price as the tender offer. Fujitsu currently owns
approximately 42 percent of Amdahl's shares. The tender offer is subject to
several conditions, including the tender of a minimum number of shares that,
when added to Fujitsu's existing 42 percent stake, will represent 51 percent of
the outstanding Amdahl shares on a fully diluted basis, and other customary
conditions. The merger agreement further provides that upon acquisition of the
minimum number of shares by Fujitsu's subsidiary, that subsidiary will be merged
with and into the Company, and the separate corporate existence of the
subsidiary shall cease with Amdahl continuing as the surviving corporation.
Shortly after the July 30, 1997 public announcement that Fujitsu
proposed to acquire those shares of the Company that it did not
already own, several putative class actions were filed in the
Delaware Court of Chancery and in the California Superior Court
for the County of Santa Clara challenging the fairness of the
proposed transaction to Company stockholders. Cases filed in the
Delaware Court of Chancery as of August 1, 1997 are: Lopez v.
Amdahl Corp., et al. (Civ. Act. No. 15833NC), filed July 30,
1997; Kaltman v. Lewis, et al. (Civ. Act. No. 15834NC), filed
July 30, 1997; Uzzo v. Lewis, et al. (Civ. Act. No. 15837, filed
July 31, 1997; O'Shea v. Kojima, et al. (Civ. Act. No. 15838),
filed July 31, 1997; Gachot & Gachot, Inc. v. Amdahl Corp., et
al. (Civ. Act. No. 15839), filed July 31, 1997; Crandon Capital
Partners v. Lewis, et al. (Civ. Act. No. 15840), filed July 31,
1997; Bodakian v. Amdahl Corp., et al. (Civ. Act. No. 15841),
filed July 31, 1997; McCeady v. Amdahl Corp. (Civ. Act. No.
15845), filed July 31, 1997; Zicherman v. Lewis, et al. (Civ.
Act. No.15847NC), filed August 1, 1997 and Halebian v. Lewis, et
al. (Civ. Act. No. 15850NC), filed August 1, 1997. Cases filed
in the California Superior Court for the county of Santa Clara as
of August 1, 1997 are: Lacoff v. Amdahl Corp., et al. (Case No.
CV767860), filed July 30, 1997; and Silverman v. Amdahl Corp., et
al. (Case No. CV767896), filed August 1, 1997. In substance, the
complaints allege that because of Fujitsu's ownership of
approximately 42% of the Company, the relationship between
Fujitsu and the Company and the alleged control of Fujitsu over
the Company's officers and directors, Fujitsu dictated the terms
of the transaction and that those terms do not reflect the fair
value of the Company. The complaints also allege that the
defendants - Fujitsu, the Company and several individuals serving
as officers or directors of one or more of those companies -
possess material non-public information regarding the fair value
of the Company and breached their fiduciary and other duties to
the public stockholders of the Company by failing to take
adequate steps to determine the fair value of the Company or to
condition the offer on acceptance by holders of a majority of the
<PAGE>
shares held by persons other than Fujitsu and its affiliates. The relief sought
by the plaintiffs includes an injunction against the acquisition of shares by
Fujitsu; an injunction requiring that certain steps be taken to evaluate the
value of the Company; a declaration that defendants have breached their
fiduciary and other duties; an accounting for damages; compensatory and/or
rescissionary damages; costs of suit; and attorneys' and experts' fees in
unspecified amounts. The Company believes, and understands that Fujitsu
believes, that all of these suits are without merit and intends to vigorously
defend such suits.
On May 5, 1997 a jury rendered a verdict in favor of one of the
Company's suppliers in the amount of $3.8 million as a result of
a lawsuit arising out of a contract dispute. The Company was
also liable for interest and attorneys' fees but was entitled to a credit for
equipment returned by the Company and either resold or utilized by the supplier
for other purposes. Pursuant to a settlement and release agreement, the Company
made a final payment to the supplier of $4.8 million on July 22, 1997. Full
provision for the settlement and related legal costs have been recognized in the
Company's financial statements.
NEW ACCOUNTING STANDARDS
In February 1997 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 128, Earnings per Share,
which will be adopted by the Company in the fourth quarter of 1997. SFAS No. 128
requires companies to compute net income per share under two different methods,
basic and diluted, and to disclose the methodology used for the calculation. If
SFAS No. 128 had been applied by the Company during the second quarter and six
months ended June 27, 1997 and June 28, 1996, basic net income per share and
diluted net income per share would not have changed from what has been reported.
In July 1997 the Statement of Financial Accounting Standards
(SFAS) No. 130, Reporting Comprehensive Income, was issued and is
effective for fiscal years ending after December 15, 1997. The
adoption of SFAS No. 130 is not expected to have a material
effect on the financial statements.
<PAGE>
AMDAHL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis should be read in conjunction
with the Management's Discussion and Analysis included in the Company's 1996
Annual Report to Stockholders.
RESULTS OF OPERATIONS
Second quarter and first six months of 1997 compared to second quarter and first
six months of 1996:
Total revenues increased 15% to $438,476,000 in the second quarter of 1997 from
$382,854,000 in the second quarter of 1996 and increased $131,499,000 or 19% in
the first six months of 1997 compared to the first six months of 1996. Equipment
sales revenues increased 22% in the second quarter of 1997 from the second
quarter of 1996 and increased 21% in the first six months of 1997 compared to
the first six months of 1996. Equipment sales were 30% and 28% of total revenues
in the second quarters of 1997 and 1996, respectively. The largest component of
second quarter 1997 equipment sales came from volume shipments of the Company's
Millennium CMOS mainframe systems, which were not yet available for sale in the
second quarter of 1996. Quarterly revenues from equipment sales of 5995M
mainframe systems decreased 77% year over year, reflecting price declines and
lower unit volumes associated with end-of-life sales of the Company's remaining
ECL technology inventories. Revenues from storage product equipment sales
increased 56% in the second quarter of 1997 when compared to the same period of
1996 due to increased volume. Equipment sales of high-performance servers
increased 26% in the second quarter of 1997 compared to the same quarter a year
ago, reflecting the increased volume of high-performance servers acquired under
original equipment manufacturer (OEM) arrangements with Sun Microsystems.
Service, software and other revenues were 70% and 72% of total revenues in
the second quarters of 1997 and 1996, respectively. Service, software and other
revenues increased 12% in the second quarter of 1997 from the second quarter of
1996 and 18% in the first six months of 1997 from the first six months of 1996.
The increases resulted from growth in the consulting and professional services
business, partially offset by decreases in hardware maintenance revenues. Part
of the growth for the first six months of 1997 compared to the same period in
1996 reflects the effect of the acquisition of Trecom Business Systems, Inc.
(Trecom), which was purchased in April 1996.
<PAGE>
Total gross margin was 24% of revenues in the second quarter of 1997 compared to
a negative 20% in the second quarter of 1996, and 25% of revenues in the first
six months of 1997 compared to a negative 1% in the first six months of 1996.
The improvement in overall gross margin was driven by significant improvement in
equipment sales gross margins from year to year. Gross margin on equipment sales
increased to 38% in the second quarter of 1997 from a negative 137% in the
second quarter of 1996, in large part because equipment gross margin in the
second quarter of 1996 included a charge of $130 million to reduce end-of-life
5995M assets to market value. Without the $130 million charge, the gross margin
from equipment sales for the second quarter and first six months of 1996 would
have been a negative 15% and a negative 4%, respectively. The additional
increase from 1996 to 1997 reflects higher gross margins from the Company's
Millennium systems, which comprised the majority of S/390 compatible mainframe
sales in 1997, compared with the older 5995M systems which dominated equipment
sales in the first half of 1996.
The gross margin on service, software and other revenues decreased to 19% in the
second quarter of 1997 from 25% in the second quarter of 1996 and decreased to
20% in the first six months of 1997 from 27% in the first six months of 1996.
The decreases reflect the combination of a shift to professional services, which
generate lower gross margins as a percentage of sales than maintenance services,
and negative effects on the hardware maintenance business from competitive
pricing pressures and a decline in the installed base of older generations of
mainframes.
In the second quarter of 1996 the Company recorded a charge to operating
expenses of $20.7 million to write off purchased in- process engineering and
development that had no probable alternative future uses associated with the
acquisition of Trecom. Excluding this charge, the second quarter 1997
engineering and development expenses decreased $8 million or 25% when compared
to the second quarter of 1996. This decrease is due to increased engineering and
development funding by Fujitsu plus reductions in the Company's workforce and
facilities to levels more appropriate to current business requirements. These
reductions also contributed to the decrease in second quarter 1997 marketing,
general and administrative expenses of $23 million or 22% when compared to the
second quarter of 1996.
Net interest income decreased $3 million in the second quarter of 1997 from the
second quarter of 1996 due primarily to a reduction in short-term investments,
reflecting the remaining payment of $65 million for the acquisition of Trecom in
April 1997.
The effective income tax rate was 49% in the second quarter of 1997, compared to
a negative 9% in the second quarter of 1996.
<PAGE>
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
The following factors that may affect future operating results are supplemental
to, and should be read in conjunction with, the factors discussed in the
Management's Discussion and Analysis section of the Company's 1996 Annual Report
to Stockholders.
Sales of the Company's Millennium mainframes remain subject to strong
competitive pricing pressures. The ability of the Company to increase shipment
volumes of the systems is being adversely
affected by the availability of more powerful competing IBM CMOS systems in
advance of the Company's introduction of its next generation of mainframes
currently expected to occur in the first quarter of 1998. In addition, the terms
of sale of existing Millennium systems may permit the customer to migrate to the
Company's more powerful systems when they become available, which in certain
cases requires the Company to defer recognizing a portion of current revenues
until a future date. A continuation of the above factors would adversely affect
the Company's earnings over the next several quarters. Moreover, a failure by
Fujitsu to continue funding certain expenses associated with joint engineering
and development activities beyond its current contractual commitments would have
a material adverse effect on the Company.
FINANCIAL CONDITION
June 27, 1997 Compared to December 27, 1996
The Company's net cash position (cash, restricted cash and short-term
investments net of short-term and long-term debt, excluding capitalized lease
obligations) decreased by $90 million from December 27, 1996 to June 27, 1997.
The decrease is due primarily to the payment of the remaining purchase price of
Trecom of $65 million on April 22, 1997. Cash, cash equivalents, restricted cash
and short-term investments decreased $92 million. Receivables decreased $73
million, reflecting lower quarterly revenues.
Inventories decreased $40 million, due to lower manufacturing costs of
Millennium mainframe systems and the capitalization of certain inventory into
property, plant and equipment of $20 million.
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 will be adequate to finance continuing operations,
investments in property and equipment, inventories and spare
<PAGE>
parts, expenditures for the development of new products, and repayment of
outstanding debt at least through 1997. Over the longer term, Amdahl must
successfully execute its plans to generate significant positive cash flows if it
is to sustain adequate liquidity without impairing growth or requiring the
infusion of additional funds, either from external sources of cash or from the
sale of business assets.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
(a) Annual Meeting of Stockholders was held on May 1, 1997.
(b) The vote for the nominated directors was as follows:
<TABLE>
<CAPTION>
NOMINEE IN FAVOR WITHHELD
------- -------- --------
<S> <C> <C>
John C. Lewis 110,113,592 3,553,958
Michael R. Hallman 110,111,022 3,556,528
E.F. Heizer, Jr. 110,127,525 3,540,025
Kazuto Kojima 110,141,756 3,525,794
Burton G. Malkiel l10,150,901 3,516,649
Takeshi Maruyama 110,121,860 3,545,690
George R. Packard 110,127,296 3,540,254
Walter B. Reinhold 110,115,540 3,552,010
Takashi Takaya 110,122,660 3,544,890
J. Sidney Webb 110,128,705 3,538,845
</TABLE>
(c) Other matters voted upon at the meeting were as follows:
<TABLE>
<CAPTION>
1. Approval for amendments to the Amdahl Corporation
1994 Stock Incentive Plan:
% of votes cast
<S> <C> <C>
For 82,397,533 72.49%
Against 30,932,524 27.21%
Abstain 337,493 0.30%
----------
Total shares voted 113,667,550
</TABLE>
<TABLE>
<CAPTION>
2. Ratification of the selection of Arthur Andersen LLP
as independent public accountants for 1997 was approved
as follows:
% of votes cast
<S> <C> <C>
For 113,247,984 99.63%
Against 130,169 0.11%
Abstain 289,397 0.26%
-----------
Total shares voted 113,667,550
===========
</TABLE>
<PAGE>
Item 5. Other information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial data schedule.
(b) Reports on Form 8-K
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMDAHL CORPORATION
Date: August 11, 1997 By: /s/ John C. Lewis
-------------------------- --------------------
John C. Lewis
Chairman of the Board,
President and
Chief Executive Officer
(Principal Executive Officer)
Date: August 11, 1997 By: /s/ Ernest B. Thompson
-------------------------- -------------------------
Ernest B. Thompson
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
Item Description
- ---- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-mos
<PERIOD-END> Jun-27-1997
<FISCAL-YEAR-END> Dec-26-1997
<CASH> 126,893
<SECURITIES> 184,002
<RECEIVABLES> 425,986
<ALLOWANCES> 0
<INVENTORY> 88,709
<CURRENT-ASSETS> 889,610
<PP&E> 925,758
<DEPRECIATION> 683,959
<TOTAL-ASSETS> 1,371,636
<CURRENT-LIABILITIES> 656,301
<BONDS> 9
0
0
<COMMON> 6,139
<OTHER-SE> 603,244
<TOTAL-LIABILITY-AND-EQUITY> 1,371,636
<SALES> 242,503
<TOTAL-REVENUES> 831,381
<CGS> 151,567
<TOTAL-COSTS> 622,784
<OTHER-EXPENSES> 217,010
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,827
<INCOME-PRETAX> (3,918)
<INCOME-TAX> 5,000
<INCOME-CONTINUING> (8,918)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,918)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
