<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended December 26, 1993 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________________________ to
____________________
Commission file number: 0-15086
SUN MICROSYSTEMS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 94-2805249
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
255 GARCIA AVENUE, MOUNTAIN VIEW, CA 94043-1100
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 960-1300
N/A
(Former name, former address and former fiscal year, if
changed since last report)
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 ____
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES ____ NO ____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<S> <C>
Class Outstanding at December 26, 1993
--------------------------------- --------------------------------
Common stock - $0.00067 per value 93,463,629
</TABLE>
Page 1
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COVER PAGE 1
INDEX 2
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial Condition 7
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 12
Item 5 - Other Information 13
Item 6 - Exhibits and Reports on Form 8-K 14
SIGNATURES 15
</TABLE>
Page 2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
December 26, June 30,
ASSETS 1993 1993
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 443,581 $ 828,839
Short-term investments 426,044 309,873
Accounts receivable, net 742,226 627,174
Inventories 231,382 256,275
Other current assets 245,737 250,185
------------- -------------
Total current assets 2,088,970 2,272,346
Property, plant and equipment, at cost 820,459 775,038
Accumulated depreciation and amortization (474,919) (426,656)
------------- -------------
Net property, plant and equipment 345,540 348,382
Other assets, net 175,038 146,901
------------- -------------
$ 2,609,548 $ 2,767,629
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 89,406 $ 90,890
Accounts payable 313,298 270,440
Accrued liabilities 454,489 393,264
Other current liabilities 154,178 192,450
------------- -------------
Total current liabilities 1,011,371 947,044
Long-term debt and other obligations 128,691 177,802
Stockholders' equity 1,469,486 1,642,783
------------- -------------
$ 2,609,548 $ 2,767,629
============= =============
</TABLE>
See accompanying notes.
Page 3
<PAGE> 4
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- ------------------------------
December 26, December 27, December 26, December 27,
1993 1992 1993 1992
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net revenues $ 1,130,678 $ 1,050,809 $ 2,091,159 $ 1,906,748
Costs and expenses:
Cost of sales 658,805 619,195 1,226,778 1,107,500
Research and development 111,429 110,837 219,327 216,327
Selling, general and administrative 294,892 269,162 563,962 522,435
----------- ------------ ----------- ------------
Total costs and expenses 1,065,126 999,194 2,010,067 1,846,262
=========== ============ =========== ============
Operating income 65,552 51,615 81,092 60,486
Interest income (expense), net 848 (1,180) 1,438 (2,947)
Settlement of litigation - (15,000) - (15,000)
----------- ------------ ----------- ------------
Income before income taxes 66,400 35,435 82,530 42,539
Provision for income taxes 22,576 11,340 22,100 13,613
----------- ------------ ----------- ------------
Net income $ 43,824 $ 24,095 $ 60,430 $ 28,926
=========== ============ =========== ============
Net income per common and
common-equivalent share $ 0.46 $ 0.23 $ 0.62 $ 0.28
=========== ============ =========== ============
Common and common-equivalent
shares used in the calculation
of net income per share 95,450 105,293 98,213 103,220
=========== ============ =========== ============
</TABLE>
See accompanying notes.
Page 4
<PAGE> 5
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
--------------------------------------------
December 26, June 30,
1993 1993
-------------- -------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 60,430 $ 28,926
Adjustments to reconcile net income to
operating cash flows:
Depreciation, amortization and other non-
cash items 118,081 126,523
Net increase in receivables, inventories and
other current and non-currentassets (80,610) (183,624)
Net increase in payables, accruals and other
current and non-current liabilities 53,549 99,610
------------ -----------
Net cash provided from operating activities 151,450 71,435
------------ ------------
Cash flow from investing activities:
Acquisition of property, plant and equipment (94,085) (91,803)
Acquisition of other assets (49,946) (9,643)
Acquisition of short-term investments (1,116,198) (1,129,007)
Maturities of short-term investments 1,000,026 1,052,154
------------ -----------
Net cash used by investing activities (260,203) (178,299)
------------ ------------
Cash flow from financing activities:
Issuance of common stock, net 7,289 22,870
Acquisition of treasury stock (266,419) (88,615)
Proceeds from employee stock purchase plans 21,630 20,616
(Reduction) proceeds of short-term
borrowings, net (1,484) 49,167
Reduction of long-term borrowings and other (37,521) (38,147)
------------ ------------
Net cash used by financing activities (276,505) (34,109)
------------ ------------
Net decrease in cash and cash equivalents $ (385,258) $ (140,973)
------------ ------------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 11,441 $ 19,738
------------ ------------
Income taxes $ 40,290 $ 5,048
============ ============
</TABLE>
See accompanying notes.
Page 5
<PAGE> 6
SUN MICROSYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Sun
Microsystems, Inc. and its wholly-owned subsidiaries. Intercompany accounts
and transactions have been eliminated.
While the quarterly financial information furnished is unaudited, the
financial statements included in this report reflect all adjustments
(consisting only of normal recurring accruals) that the Company considers
necessary for a fair presentation of the results of operations for the
interim periods covered and of the financial condition of the Company at the
date of the interim balance sheet. The results for interim periods are not
necessarily indicative of the results for the entire year. The information
included in this report should be read in conjunction with the Company's
1993 Annual Report to Stockholders.
INVENTORIES (in thousands)
<TABLE>
<CAPTION>
December 26, 1993 June 30, 1993
----------------- -------------
<S> <C> <C>
Raw materials $116,955 $134,633
Work in process 51,334 34,974
Finished goods 63,093 86,668
-------- --------
$231,382 $256,275
======== ========
</TABLE>
INCOME TAXES
The Company accounts for income taxes under the liability method of
Statement of Financial Accounting Standards No. 109. The provision for
income taxes during the interim periods considers anticipated annual income
before taxes, research and development tax credits and other differences.
Page 6
<PAGE> 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following table sets forth items from the Condensed Consolidated
Statements of Income as percentages of net revenues:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------------------- ---------------------------------------
December 26, 1993 December 27, 1993 December 26, 1993 December 27, 1992
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net revenues 100.0% 100.0% 100.0% 100.0%
Cost of sales 58.3 59.0 58.7 58.1
------ ------ ------ ------
Gross margin 41.7 41.0 41.3 41.9
Research and development 9.8 10.5 10.5 11.3
Selling, general and
administrative 26.1 25.6 27.0 27.4
------ ------ ------ ------
Operating income 5.8 4.9 3.8 3.2
Interest income (expense), net 0.1 (0.1) 0.1 (0.2)
Settlement of litigation -- (1.4) -- (0.8)
------ ------ ------ ------
Income before income taxes 5.9 3.4 3.9 2.2
Provision for income taxes 2.0 1.1 1.0 0.7
------ ------ ------ ------
Net income 3.9% 2.3% 2.9% 1.5%
====== ====== ====== ======
</TABLE>
RESULTS OF OPERATIONS
The transition to the Solaris 2 operating environment, which began in fiscal
1993, has continued into fiscal 1994. The success of this transition is
critical, as the Company expects to generate significant revenue in fiscal
1994 from products that operate exclusively in the Solaris 2 environment.
The demand for these products will continue to depend, in part, upon the
availability of third party application software, which requires the
continuing efforts of independent software vendors to port their software to
the new operating environment, as well as the acceptance and migration of
customers to Solaris 2.
Management believes the Company is well positioned and in strong financial
condition with a competitive offering of products. However, the Solaris 2
transition, the generally uncertain state of several key international
economies and continued intense competition in Sun's markets will continue
to result in pressure on fiscal 1994 profitability. The mitigation of these
factors will depend, in part, on the Company's ability to generate higher
system, service and software license volumes and achieve additional
component cost reductions. The potential benefits of such higher volumes
could be increased as a result of the Company's ongoing efforts to provide
additional operating efficiencies through the continual review and
improvement of business processes and cycle times. In connection with these
efforts, the Company is continuously engaged in the process of managing the
mix and level of its workforce.
Page 7
<PAGE> 8
Sun operates in an industry marked by rapidly changing technology and
increasing competition, consolidation and globalization. The Company's
future operating results will depend to a considerable extent on its ability
to rapidly and continuously develop, introduce and deliver in volume new
products that offer customers enhanced performance at competitive prices
(see "Future Operating Results").
Net revenues
Net revenues were $1,130.7 million for the second quarter and $2,091.2
million for the first six months of fiscal 1994, representing increases of
8% and 10%, respectively, over the comparable periods of fiscal 1993. The
growth in net revenues is primarily attributable to higher nonsystems and
service revenues. Although system unit shipments declined by approximately
9% for both the second quarter and first six months of fiscal 1994 when
compared with the same periods of fiscal 1993, this decrease was more than
offset by higher nonsystems revenues, including memory and storage options
and accessories, as well as a mix shift to server units with higher average
selling prices. As a result, system revenues remained relatively constant
in absolute dollars for both the second quarter and first six months of
fiscal 1994 when compared with the comparable periods of fiscal 1993.
Service revenues, while not significant as a percentage of total net
revenues, did represent approximately 18% and 11% of the total net revenue
growth for the second quarter and first six months of fiscal 1994 when
compared with the same periods of fiscal 1993. In the second half of
fiscal 1994, Sun expects the shift to servers and higher service revenues to
continue.
Domestic net revenues grew 4% and 9%, while international net revenues
(including United States exports) grew 11% in both the second quarter and
first six months of fiscal 1994, respectively, over the comparable periods
of fiscal 1993. Europe net revenues increased 5% for the second quarter but
decreased slightly for the first six months of fiscal 1994 over the
comparable periods of fiscal 1993, primarily as the result of generally weak
economic conditions in certain European countries. Net revenues in the Rest
of World increased 19% and 28% in the second quarter and first six months of
fiscal 1994, respectively, when compared with the comparable periods of
fiscal 1993. International net revenues represented 52% and 50% of total net
revenues in the second quarter and first six months of fiscal 1994,
respectively, compared with 50% and 49% for each of the comparable periods
of fiscal 1993.
The impact of currency fluctuations on net revenues and operating results
cannot be precisely measured because the Company's product mix and pricing
change over time in various markets, partially in response to currency
movements. Further, the Company's international structure and transaction
activity provide a degree of natural hedge where fluctuations in a
particular currency result in financial effects that mitigate, or tend to
offset each other on a consolidated basis. The Company generally manages
currency exposure through an established hedging program, the objective of
which is to minimize the impact of currency fluctuations on results of
operations.
Compared with the second quarter and first six months of the prior fiscal
year, the dollar has strengthened against most European currencies but
weakened against the Japanese yen. Management has estimated that the net
impact of currency fluctuations on operating results, while slightly
unfavorable, was not significant in the second quarter or first six months
of fiscal 1994.
Gross margin
Gross margin was 41.7% for the second quarter and 41.3% for the first six
months of fiscal 1994, compared with 41.0% and 41.9%, respectively, for the
comparable periods of fiscal 1993. System margins improved in the second
quarter of fiscal 1994 due to a higher mix of server systems with
accompanying higher margins, as well as the absence of certain specific
upgrade and promotional costs incurred in the second quarter of fiscal 1993.
The improvement in system margins in the second quarter of fiscal 1994 over
the comparable period in the prior year more than offset the unfavorable
effects attributable to a mix of higher nonsystems revenues which generally
carry lower margins. The improvement in second quarter fiscal 1994 system
margins was not sufficient to offset the margin impact of the higher
nonsystems revenues in the first six months of fiscal 1994 when compared to
the same period in the prior year.
Page 8
<PAGE> 9
Research and development
Research and development (R&D) expenses were $111.4 million in the second
quarter and $219.3 million for the first six months of fiscal 1994, compared
with $110.8 million and $216.3 million for the same periods of fiscal 1993.
As a percentage of net revenues, R&D expenses decreased to 9.8% for the
second quarter of fiscal 1994 from 10.5% for the corresponding period of
fiscal 1993, and decreased to 10.5% for the first six months of fiscal 1994
from 11.3% in the comparable period of the prior year. The decrease as a
percent of revenues reflects the Company's efforts to focus engineering
efforts to bring targeted technologies to market. Sun continues to believe
that the market for its products is characterized by rapid rates of
technological innovation for both hardware and software products. To
maintain its competitive position in the industry, the Company expects to
continue to invest significant resources in new hardware and software
product development as well as in enhancements to existing products.
Selling, general and administrative
Selling, general and administrative (SG&A) expenses were $294.9 million in
the second quarter and $564.0 million in the first six months of fiscal
1994, representing increases of $25.7 million (9.6%) and $41.6 million
(7.9%), respectively, from the corresponding periods of fiscal 1993. As a
percentage of net revenues, SG&A expenses were 26.1% and 25.6% in the second
quarters of fiscal 1994 and 1993, respectively, and 27.0% and 27.4% in the
first six months of fiscal 1994 and 1993, respectively. The dollar increase
primarily reflects investments for additional sales headcount in support of
new sales channel development. The decrease as a percent of net revenues in
the first six months of fiscal 1994 reflects, in part, the Company's ongoing
efforts to reduce the structural level of such expenses over time through
improvements in business processes and cycle times.
Interest income/expense, net
Net interest income was $.8 million for the second quarter and $1.4 million
for the first six months of fiscal 1994, compared with $1.2 million and $2.9
million, respectively, in net interest expense for the corresponding periods
in fiscal 1993. The decrease was primarily due to the elimination of
certain interest expense due to the conversion of the Company's subordinated
debentures in November 1992.
Income taxes
The Company's effective income tax rate for the second quarter and first six
months of fiscal 1994 was 34% compared with 32% for the corresponding
periods of fiscal 1993. The effective tax rate for the first six months of
fiscal 1994 was impacted by a one-time credit of $5.9 million recorded in
the first quarter as a result of the Omnibus Budget Reconciliation Act of
1993, which included a retroactive reinstatement of the research and
development credit. The increase in the fiscal 1994 rate compared with the
fiscal 1993 rate is primarily due to the increase in the U.S. statutory rate
from 34% to 35%.
Settlement of Litigation
Second quarter fiscal 1993 earnings included a charge of $15 million in
connection with the settlement of two securities class action lawsuits
brought against the Company and certain of its current and former officers
by purchasers of the Company's stock and debentures.
Future operating results
The transition to the Solaris 2 operating environment, which began in fiscal
1993, has continued into fiscal 1994. The success of this transition is
critical, as the Company expects to generate significant revenue in fiscal
1994 from products that operate exclusively in the Solaris 2 environment.
New system shipments will continue to depend, in part, upon the continuing
efforts of independent software vendors to port application software to the
new operating environment, as well as the acceptance and migration of
customers to Solaris 2.
Page 9
<PAGE> 10
The Company expects that the markets for its products and technology, as
well as its competitors within such markets, will continue to change as the
rightsizing trend shifts customer buying patterns to distributed systems
employing multiple-platform networks. In addition, improvements in
microprocessor performance in products introduced, or to be introduced, by
Intel Corporation and Motorola, Inc., coupled with enhanced operating system
software introduced by Microsoft Corporation, are expected to improve the
price/performance characteristics of certain networked personal computer
solutions. These developments are expected to provide competitive pressure,
particularly at the low end of the Company's product range, where customers
are more price sensitive and the systems environment is less complex. The
Company's future operating results will depend, in part, on its ability to
compete in microprocessor technology and operating system software.
Further, the Company's future operating results will depend to a
considerable extent on its ability to rapidly and continuously develop,
introduce and deliver in quantity new hardware and software products that
offer its customers enhanced performance at competitive prices. Inherent in
this process are a number of risks. The development of new, high
performance computer products is a complex and uncertain process requiring
high levels of innovation from both the Company's designers and those of its
suppliers, as well as accurate anticipation of customer requirements and
technological trends. Once a hardware product is developed, the Company
must rapidly bring it into volume manufacturing, a process that requires
accurate forecasting of both volumes and configurations, among other things,
in order to achieve acceptable yields and costs. The Company is
increasingly dependent on the ability of its suppliers to deliver advanced
components required for the timely introduction of new products and, if
necessary, makes advance payments under contracts with certain of its
suppliers. The failure of any of these suppliers to deliver components on
time could result in a significant adverse impact on the Company's operating
results. The production of sufficient quantities of advanced components on
a timely basis entails both design risk and manufacturing risk. The
inability to secure enough components to build products, including new
products, in the quantities and configurations required, or to produce, test
and deliver sufficient products to meet demand in a timely manner, would
adversely affect the Company's net revenues and operating results. The
production and introduction of new or enhanced products also requires the
Company to manage the transition from older, displaced products in order to
minimize disruptions in customer ordering patterns and excessive levels of
older product inventory and to ensure that adequate supplies of new products
can be delivered to meet customer demand. Because the Company is
continuously engaged in this product development and transition process, its
operating results may be subject to considerable fluctuation, particularly
when measured on a quarterly basis.
Generally, the computer systems sold by Sun are the result of both hardware
and software development, so that delays in software development can delay
the ability of the Company to ship new hardware products. In addition,
adoption of a new release of an operating system, such as the Solaris 2
operating environment, typically requires effort on the part of the customer
as well as software porting by software vendors providing applications. As
a result, the timing of conversion to a new release is inherently
unpredictable. Moreover, delays in adoption of a new release of an
operating system by customers can limit the acceptability of hardware
products tied to that release. In either situation, the future operating
results of the Company could be adversely affected.
The Company's operating results will also be affected by the volume, mix and
timing of orders received during a period and by conditions both in the
computer industry and in the general economy, such as recessionary periods,
political instability, changes in trade policies and fluctuations in
interest or currency exchange rates. As the Company has reduced delivery
lead times, backlog levels have declined as a percentage of revenue.
Increasingly, the Company must generate a higher percentage of revenue from
new order bookings in the same fiscal period. As the Company has become
more global, seasonality has become a factor, particularly in the first
quarter of each fiscal year. In addition, the Company's operating expenses
are increasing as the Company continues to expand its operations, and future
operating results will be adversely affected if revenues do not increase
accordingly. The ability of the Company to match supply and demand is
further complicated by the need to take pricing actions in response to
competitive pressures, which may result in the Company not being able to
correctly anticipate the demand for the mix of products following those
pricing actions.
Page 10
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
Total assets at December 26, 1993 decreased by approximately $158.1 million
from June 30, 1993, due principally to decreases in cash, cash equivalents
and short-term investments ($269.1 million), offset by an increase in
accounts receivable ($115.1 million). Cash decreased principally due to the
completion in November 1993 of the planned repurchase of approximately 10
million shares of the Company's common stock. The increase in accounts
receivable is primarily due to a longer collection cycle in the second
quarter of fiscal 1994 when compared with the fourth quarter of fiscal 1993,
resulting in days sales outstanding increasing to 59 days from 45 days over
that same period.
Total liabilities increased approximately $15.2 million from June 30, 1993.
The increase is primarily attributable to increases in accrued liabilities
for payments due under contractual obligations, as well as increases in
accounts payable, offset by income tax payments made and scheduled debt
repayments.
At December 26, 1993, the Company's primary sources of liquidity consisted
of cash, cash equivalents and short-term investments of $870 million;
uncommitted lines of credit available to the Company's international
subsidiaries totalling approximately $426 million, of which approximately
$337 million was available; and a revolving credit facility with banks
aggregating $300 million, all of which was available. The Company believes
that the liquidity provided by existing cash and short-term investment
balances and the borrowing arrangements described above will be sufficient
to meet the Company's capital requirements through fiscal 1994. However,
the Company believes the level of financial resources is a significant
competitive factor in its industry and may choose at any time to raise
additional capital through debt or equity financings to strengthen its
financial position, to facilitate growth and to provide the Company with
additional flexibility to take advantage of business opportunities that may
arise.
Page 11
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 27, 1993, the Annual Meeting of Stockholders of the Company was
held in Mountain View, California. An election of directors was held with
the following individuals being elected to the Board of Directors of the
Company:
<TABLE>
<CAPTION>
Votes
-----------------------------------------
For Withheld
--- --------
<S> <C> <C>
Scott G. McNealy 82,136,431 496,300
L. John Doerr 82,332,275 300,456
William R. Hearst III 82,363,246 269,485
Robert L. Long 82,139,933 492,798
M. Kenneth Oshman 80,677,255 1,955,476
J. Phillip Samper 82,352,628 280,103
A. Michael Spence 80,653,079 1,979,652
</TABLE>
The seven nominees who received the highest number of votes were elected to
the Board of Directors. Votes withheld from any nominee were counted for
purposes of determining the presence or absence of a quorum.
The stockholders also approved an amendment to the Company's 1988 Directors'
Stock Option Plan which increased the number of shares of Common Stock
reserved for issuance thereunder by 200,000 shares to an aggregate of
400,000 shares. There were 67,390,317 votes cast for the amendment,
15,002,794 votes cast against the amendment and 239,620 abstentions. The
affirmative votes of the stockholders of a majority of the shares of the
Company's Common Stock present or represented and "entitled to vote" at the
Annual Meeting on the amendment to the 1988 Directors' Stock Option Plan was
required to approve this amendment. Votes cast against the proposal were
counted for the purposes of determining the presence or absence of a quorum
for the transaction of business and the total number of shares present or
represented and entitled to vote on the proposal. Votes cast against were
also counted for purposes of determining whether the affirmative vote of a
majority of the shares present or represented and entitled to vote on the
proposal had been obtained, and were treated as votes against the proposal.
While there is no definitive statutory or case law authority in Delaware as
to proper treatment of abstentions in the counting of votes with respect to
a proposal such as the amendment to the 1988 Directors' Stock Option Plan,
the Company believes that abstentions should be counted for purposes of
determining both the presence or absence of a quorum for the transaction of
business and the total number of shares present or represented and entitled
to vote on the proposal. The Company treated abstentions on this proposal
in this manner. In a 1988 Delaware case, Berlin v. Emerald Partners, the
Delaware Supreme Court held that broker non-votes may be counted for
purposes of determining the presence or absence of a quorum for the
transaction of business. There were no broker non-votes with respect to
this proposal.
The stockholders also ratified the appointment of Ernst & Young as
independent auditors to the Company for the 1994 fiscal year. There were
82,055,893 votes for the ratification, 129,155 votes against the
ratification and 47,683 abstentions. Abstentions were counted as present
for the purposes of determining if a quorum was present. There were no
broker non-votes with respect to this matter.
Page 12
<PAGE> 13
ITEM 5 - OTHER INFORMATION
CHANGE OF EXECUTIVE OFFICERS
Kevin C. Melia, Vice President and Chief Financial Officer of the Company
and Acting President of Sun Microsystems Computer Corporation (SMCC), the
Company's computer systems subsidiary, has resigned from his position as
Chief Financial Officer of the Company, effective March 1, 1994. Michael E.
Lehman, currently Vice President and Corporate Controller of the Company,
will replace Mr. Melia as Chief Financial Officer, effective as of such
date. Mr. Melia will remain as Acting President of SMCC until a permanent
president has been named. The Company is evaluating candidates for the
permanent position of SMCC President. Mr. Melia will continue as a Vice
President and Corporate Executive Officer of the Company, serving in a
capacity to be determined by the Company.
SCHEDULE OF SALES BY EXECUTIVE OFFICERS DURING THE QUARTER
The following is a summary of all sales of the Company's Common Stock by the
Company's executive officers who are subject to Section 16 of the Securities
Exchange Act of 1934, as amended, during the fiscal quarter ended December
1993:
<TABLE>
<CAPTION>
OFFICER DATE PRICE NUMBER OF SHARES SOLD
------- ---- ----- ---------------------
<S> <C> <C> <C>
Lehman, Michael 10/25/93 $24.625 600
Zander, Edward 10/26/93 $24.50 16,000
Graham, Robert 11/12/93 $26.25 5,000
11/12/93 $26.25 1,089
11/12/93 $26.25 5,000
11/12/93 $26.25 873
Melia, Kevin 11/29/93 $26.50 6,000
11/29/93 $26.50 528
11/29/93 $26.50 901
Raduchel, William 11/24/93 $26.50 8,000
Terrell, Dorothy 11/29/93 $26.625 1,169
Wozniak, Curtis 11/30/93 $26.065 10,000
</TABLE>
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<PAGE> 14
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS
11.0 Statement re: Computation of Earnings Per Share
B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended December
26, 1993.
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<PAGE> 15
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.
SUN MICROSYSTEMS, INC.
BY
/s/ Kevin C. Melia
-------------------
Kevin C. Melia
Vice President and Chief Financial Officer
/s/ Michael E. Lehman
----------------------
Michael E. Lehman
Vice President and Corporate Controller,
Chief Accounting Officer
Dated: February 9, 1994
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<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description Page
------ ----------- ----
<S> <C> <C>
11.0 Statement re: Computation of Earnings Per Share 17
</TABLE>
Page 16
<PAGE> 1
EXHIBIT 11.0
SUN MICROSYSTEMS, INC.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
PRIMARY
-------
Three Months Ended Six Months Ended
---------------------------- ---------------------------
December 26, December 27, December 26, December 27,
1993 1992 1993 1992
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income $43,824 $24,095 $60,430 $28,926
======= ======= ======= =======
Weighted average common
shares outstanding 94,150 102,219 96,558 100,353
Common-equivalent shares
attributable to stock options and warrants 1,300 3,074 1,655 2,867
Total common and
common-equivalent shares
outstanding 95,450 105,293 98,213 103,220
====== ======= ====== =======
Net income per common and
common-equivalent share $ 0.46 $ 0.23 $ 0.62 $ 0.28
======= ======= ======= =======
</TABLE>
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<PAGE> 2
EXHIBIT 11.0 (continued)
SUN MICROSYSTEMS, INC.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
FULLY DILUTED
-------------
Three Months Ended Six Months Ended
---------------------------- ---------------------------
December 26, December 27, December 26, December 27,
1993 1992 1993 1992
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income $43,824 $24,095 $60,430 $28,926
======= ======= ======= =======
Adjustment for interest
assuming conversion of 5 1/4%
subordinated debentures,
net of taxes 0 582 0 2,324
Adjusted net income 43,824 $24,677 $60,430 31,250
====== ======= ======= ======
Weighted average common
shares outstanding 94,150 102,219 96,558 100,353
Common-equivalent shares
attributable to:
Stock options and warrants 1,477 3,526 1,769 3,138
Conversion of 5 1/4%
subordinated debentures - 1,920 - 3,660
Total common and
common-equivalent shares
outstanding 95,627 107,665 98,327 107,151
====== ======= ====== =======
Net income per common and
common-equivalent share $ 0.46 $ 0.23 $ 0.61 $ 0.29
======= ======= ======= =======
</TABLE>
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