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 March 31, 1996 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)
Delaware 94-2805249
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
2550 Garcia Avenue, Mountain View, CA 94043-1100
(Address of principal executive offices with 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 the issuer's classes
of common stock, as of the latest practical date.
Class Outstanding at March 31, 1996
Common stock - $0.00067 par value 184,067,944
<PAGE>
INDEX
PAGE
----
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 8
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 13
Item 5 - Other Information 14
Item 6 - Exhibits and Reports on Form 8 - K 16
SIGNATURES 17
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, June 30,
1996 1995
------------ ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 453,136 $ 413,869
Short-term investments 403,368 814,151
Accounts receivable, net 1,187,460 1,041,804
Inventories 507,999 319,672
Other current assets 386,207 344,868
----------- -----------
Total current assets 2,938,170 2,934,364
Property, plant and equipment, at cost 1,221,464 1,045,876
Accumulated depreciation and amortization (719,959) (616,871)
----------- -----------
501,505 429,005
Other assets, net 171,168 181,184
----------- -----------
$ 3,610,843 $ 3,544,553
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 27,708 $ 50,786
Accounts payable 399,579 303,995
Accrued liabilities 777,721 688,325
Other current liabilities 265,929 287,676
----------- -----------
Total current liabilities 1,470,937 1,330,782
Long-term debt and other obligations 63,393 91,176
Stockholders' Equity 2,076,513 2,122,595
----------- -----------
$ 3,610,843 $ 3,544,553
=========== ===========
See accompanying notes
3
<PAGE>
<TABLE>
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
----------------------- ------------------------
March 31, April 2, March 31, April 2,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenues $1,840,028 $1,505,030 $5,076,689 $4,253,818
Cost and expenses:
Cost of sales 1,028,688 855,136 2,842,386 2,478,627
Research and development 165,402 142,775 477,582 414,858
Selling, general and administrative 444,147 356,591 1,264,015 1,039,028
---------- ---------- ---------- ----------
Total costs and expenses 1,638,237 1,354,502 4,583,983 3,932,513
Operating Income 201,791 150,528 492,706 321,305
Interest income, net 8,954 7,630 27,958 13,398
---------- ---------- ---------- ----------
Income before income taxes 210,745 158,158 520,664 334,703
Provision for income taxes 67,438 50,611 166,612 107,105
---------- ---------- ---------- ----------
Net Income $ 143,307 $ 107,547 $ 354,052 $ 227,598
========== ========== ========== ==========
Net income per common and
and common - equivalent
share $0.73 $0.54 $1.80 $1.16
===== ===== ===== =====
Common and common-equivalent
shares used in the calculation
of net income per share 195,743 197,394 196,447 195,700
======= ======= ======= =======
<FN>
See accompanying notes.
</FN>
</TABLE>
4
<PAGE>
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Nine Months Ended
-------------------------
March 31, April 2,
1996 1995
---------- ----------
Cash flow from operating activities:
Net income $ 354,052 $ 227,598
Adjustments to reconcile net income
to operating cash flows:
Depreciation, amortization and
other non-cash items 251,811 201,488
Increase in accounts receivable (145,656) (33,778)
Increase in inventories (188,327) (31,786)
Increase (decrease) in accounts payable 95,584 (72,197)
Net increase in other current
and non-current assets (28,460) (63,431)
Net increase in other current
and non-current liabilities 59,107 260,022
---------- ----------
Net cash provided from operating activities 398,111 487,916
---------- ----------
Cash flow from investing activities:
Acquisition of property, plant and equipment (222,691) (203,738)
Acquisition of other assets (62,421) (35,216)
Acquisition of short-term investments (1,131,865) (2,315,526)
Maturities of short-term investments 1,543,880 2,142,584
---------- ----------
Net cash (used by) provided from investing activities 126,903 (411,896)
---------- ----------
Cash flow from financing activities:
Issuance of common stock 43,515 35,431
Acquisition of treasury stock (504,640) (25,039)
Proceeds from employee stock purchase plans 38,104 29,907
Reduction of short - term borrowings, net (23,078) (56,698)
Reduction of long - term borrowings and other (39,648) (41,782)
---------- ----------
Net cash used by financing activities (485,747) (58,181)
---------- ----------
Net increase in cash and cash equivalents $ 39,267 $ 17,839
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 13,796 $ 13,520
Income taxes $ 170,492 $ 79,983
See accompanying notes.
5
<PAGE>
SUN MICROSYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Sun
Microsystems, Inc. ("Sun" or the "Company") and its wholly owned
subsidiaries. Intercompany accounts and transactions have been eliminated.
Certain amounts from prior years have been reclassified to conform to
current year presentation.
While the quarterly financial information 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 the 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 1995 Annual
Report to Stockholders which is incorporated by reference in the Company's
1995 Form 10-K.
INVENTORIES (in thousands)
March 31, 1996 June 30, 1995
-------------- -------------
Raw materials $350,003 $170,337
Work in process 72,899 32,356
Finished goods 85,097 116,979
-------- --------
$507,999 $319,672
======== ========
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, earnings
of foreign subsidiaries permanently invested in foreign operations, and other
differences.
STOCK DIVIDEND
The Company effected a two-for-one stock split (effected in the form of a stock
dividend) to stockholders of record as of the close of business on November 20,
1995. Share and per share amounts presented have been adjusted to reflect the
stock dividend.
6
<PAGE>
LITIGATION
On January 24, 1995, a putative class action entitled Abraham and Evelyn Kostick
Trust V. Peter O. Crisp, et al. No. CV755458 ("Kostick Matter"), was filed in
the Superior Court of the State of California in the County of Santa Clara.
Named as defendants were Apple Computer, Inc., members of Apple's Board of
Directors and the Company. The plaintiff claimed that certain actions alleged to
be taken by Apple and its Board of Directors amounted to a breach of fiduciary
duty by Apple's Board of Directors. The Company was alleged to incur liability
by "aiding and abetting" the Apple Board's actions. The complaint sought an
injunction against any combination by Apple with the Company and an award of
unspecified compensatory and punitive damages. On February 22, 1996, the Company
received a letter from Milberg Weiss Bershad Hynes & Lerach regarding the
Kostick matter and a related matter, filed subsequent thereto, Manson v. Peter
O. Crisp, Case No. CV755504. This letter specifically notified the Company that
the Company was being dropped as a defendant in the foregoing matters and that
the Company need not respond to the complaints set forth therein. On February
22, 1996, an amended complaint was filed in the Superior Court of the State of
California, County of Santa Clara regarding and consolidating the forgoing
matters and the Company was no longer named as a defendant.
SUBSEQUENT EVENT
During April 1996 the Company acquired all of the assets of Integrated Micro
Products, plc and its wholly - owned subsidiaries Integrated Micro Products (UK)
Ltd. and Integrated Micro Products, Inc. for $96,100,000 in cash and estimated
acquisition expenses of $4,200,000. As a result of this acquisition the Company
is expecting to take a one time charge of approximately $38,300,000 related to
In - Process R&D in the fourth quarter of fiscal year 1996. The acquisition will
be accounted for as a purchase.
7
<PAGE>
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 a percentage of net revenues:
Three Months Ended Nine Months Ended
------------------ -------------------
March 31, April 2, March 31, April 2,
1996 1995 1996 1995
----- ----- ----- -----
Net Revenues 100.0% 100.0% 100.0% 100.0%
Cost of sales 55.9 56.8 56.0 58.3
----- ----- ----- -----
Gross margin 44.1 43.2 44.0 41.7
Research and development 9.0 9.5 9.4 9.7
Selling, general and administrative 24.1 23.7 24.9 24.4
----- ----- ----- -----
Operating income 11.0 10.0 9.7 7.6
Interest income, net 0.5 0.5 0.6 0.3
----- ----- ----- -----
Income before income taxes 11.5 10.5 10.3 7.9
Provision for income taxes 3.7 3.4 3.3 2.5
----- ----- ----- -----
Net income 7.8% 7.1% 7.0% 5.4%
===== ===== ===== =====
RESULTS OF OPERATIONS
Net revenues
Net revenues were $1.840 billion for the third quarter and $5.077 billion for
the first nine months of fiscal 1996, representing increases of 22.3 % and
19.3%, respectively, over the corresponding periods of fiscal 1995.
Approximately two-thirds of the growth in revenues resulted from strong demand
for richly configured servers, and high-end desktop systems, and from memory,
storage options, and accessories shipped as part of system sales and as separate
orders. The remaining increase reflects growth in revenues from other Sun
businesses, including service, aftermarketing, microprocessors, and software.
Domestic net revenues increased by 22.6% and 16.8% while international net
revenues (including United States exports) grew 21.9% and 21.8% in the third
quarter and first nine months of fiscal 1996, respectively, compared with the
corresponding periods of fiscal 1995. European net revenues increased 26.1% and
21.7% while net revenues in Rest of World increased 18.3% and 21.9% in the third
quarter and first nine months of fiscal 1996, respectively, when compared with
the corresponding periods of fiscal 1995. These increases are due primarily to
continued strengthening of the markets in Japan, Germany and the United Kingdom
and the expanding markets in Korea and Taiwan.
8
<PAGE>
Compared with the third quarter of fiscal 1995 and for the nine months ended
April 2, 1995, the dollar has remained relatively consistent against most major
European currencies and strengthened 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 third quarter or the
first nine months of fiscal 1996.
Gross margin
Gross margin was 44.1% for the third quarter and 44.0% for the first nine months
of fiscal 1996, compared with 43.2% and 41.7%, respectively, for the
corresponding periods of fiscal 1995. The increase in the gross margin reflects
the effects of increased revenue generated from richly configured, higher margin
servers and memory storage options and accessories.
While, the factors described above resulted in a favorable impact on gross
margin for the third quarter and first nine months of fiscal 1996, systems
repricing actions are likely to be initiated in the future, which could result
in downward pressure on gross margins. Sun's future operating results would be
adversely affected if such repricing actions were to occur and the Company is
unable to mitigate the margin pressure by maintaining a favorable mix of
systems, software, service, and other revenues and / or by achieving component
cost reductions and operating efficiencies.
Research and development
Research and development (R&D) expenses were $165.4 million in the third quarter
and $477.6 million for the first nine months of fiscal 1996, compared with
$142.8 and $414.9 million for the same periods of fiscal 1995. As a percentage
of net revenues, R&D expenses decreased to 9.0% and 9.4% for the third quarter
and first nine months of fiscal 1996, respectively, from 9.5% and 9.7% in the
corresponding periods of fiscal 1995. The decrease as a percentage of net
revenues is primarily due to the increase in revenues in both the third quarter
and first nine months of fiscal 1996 over the comparable periods of fiscal 1995.
Slightly more than a half of the dollar increase in the third quarter and the
first nine months of fiscal 1996 over the corresponding periods in fiscal 1995
reflects increases in compensation as a result of increased staffing. The
remaining increase in dollar amount of such expenses is due to Sun's development
of UltraSPARC and the Company's continuing emphasis on technological advancement
for both hardware and software products, as well as microprocessor technologies.
To maintain its competitive position in the industry, the Company expects to
continue to invest significant resources in new hardware, software and
microprocessor product development, as well as in enhancements to existing
products.
Selling, general and administrative
Selling, general and administrative (SG&A) expenses were $444.1 million in the
third quarter and $1,264 million in the first nine months of fiscal 1996,
compared with $356.6 and $1,039 million for the same periods of fiscal 1995. As
a percentage of net revenues, SG&A expenses increased to 24.1% and 24.9% in the
third quarter and first nine months of fiscal 1996, respectively, from 23.7% and
24.4%, respectively, in the corresponding periods of fiscal 1995. Approximately
half of the dollar increase is attributable to increased marketing costs related
to new product introductions and other promotional programs, and an increase in
marketing headcount as compared to the third quarter and first nine months of
fiscal 1995. The remaining increases primarily reflect costs incurred in
connection with the Company's ongoing efforts to improve business processes. The
Company expects to continue to invest in efforts to achieve additional operating
efficiencies through continual review and improvement of business processes . In
addition, the Company expects to continue to hire personnel to drive its demand
creation programs and service and support organizations.
9
<PAGE>
Interest income, net
Net interest income was $8.9 million for the third quarter and $27.9 million for
the first nine months of fiscal 1996, compared with $7.6 million and $13.4
million, respectively, in net interest income for the corresponding periods in
fiscal 1995. The increase is primarily the result of interest savings from
reduced debt levels and an increase in the effective interest rate earned on
investments in fiscal 1996 as compared to the corresponding periods in fiscal
1995.
Income taxes
The Company's effective income tax rate for the third quarter and the first nine
months of both fiscal 1996 and 1995 was 32%.
FUTURE OPERATING RESULTS
This following section of the report contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve risks and uncertainties so that actual
results may vary materially.
The future operating results discussed below represent specific risks which
could impact the financial condition and results over the next few quarters.
This information below should be read in conjunction with the 1995 Annual Report
to Stockholders which is incorporated by reference in the Company's 1995 Form
10-K.
Sun introduced and began shipments of its new enhanced desktop systems based
upon the UltraSPARC processors in the second quarter of this fiscal year. In
addition, enhanced server systems based upon the UltraSPARC processor were
introduced in the fourth quarter of fiscal 1996. Future operating results will
depend to a considerable extent on the Company's ability to closely manage the
introduction of products based upon UltraSPARC processors. In addition, the
timing of introductions of new products and services by Sun's competitors may
negatively affect the future operating results of the Company. These new
UltraSPARC products include advanced components designed internally and
manufactured by third party suppliers. The manufacture and timely delivery of
the Company's UltraSPARC products depends on the ability of certain suppliers to
manufacture and deliver advanced components in sufficient quantity and quality
to build these products. Furthermore, in order to secure components for
production and introduction of these new products, the Company frequently makes
advanced payments to certain suppliers and often enters into noncancelable
purchase commitments with vendors with respect to the purchase of components.
Due to the variability of material requirement specifications during development
and production, the Company must closely manage material purchase commitments
and respective delivery schedules. The inability of the Company to secure enough
components to build the new products in the quantities and configurations
required or to produce, test and deliver sufficient products to meet demand in a
timely manner, and any delays in production or variability of customer demand in
light of the Company's noncancelable purchase commitments would adversely affect
the Company's net revenues and operating results.
The introduction of the UltraSPARC products requires that the Company must
rapidly bring such products to volume manufacturing, a process that requires
accurate forecasting of volumes, mix of products and configurations, among other
things in order to achieve acceptable yields and costs. The Company must manage
the transition from older, displaced products to minimize disruptions in
customer ordering patterns, reduce levels of older product inventory, and ensure
that adequate volumes of the new products can be delivered to meet customer
demand. The ability of the Company to match supply and demand is further
complicated by the Company's need to adjust prices to reflect changing
competitive and market conditions and the variability and timing of customer
orders taken with respect to its older products. As a result, the Company's
operating results
10
<PAGE>
could be adversely affected if the Company is not able to correctly anticipate
the level of demand and the mix of products. Because the Company is continuously
engaged in this product development, introduction and transition process, its
operating results may be subject to considerable fluctuations particularly when
measured on a quarterly basis.
Generally, the computer systems sold by Sun, such as the UltraSPARC products,
are the result of hardware and software development, such that delays in the
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 may
require effort on the part of the customer and porting by software vendors
providing applications. As a result, the timing of conversion to a new release
is inherently unpredictable. Moreover, delays by customers in adopting a new
release of an operating system can limit the acceptability of hardware products
tied to that release. Such delays could adversely affect the future operating
results of the Company. Sun's systems based on the UltraSPARC processors operate
using the Company's recently released version of its operating system, Solaris
2.5. In attempts to minimize the aforementioned risks, the Company has expended
significant effort toward making Solaris 2.5 binary compatible with the
applications currently running on Solaris 2.x, so customers should not need to
modify these applications to run on UltraSPARC- based systems. The Company's
operating results would be adversely affected if Solaris 2.5 does not achieve
market acceptance in a timely manner.
The Company's order backlog at March 31, 1996 was approximately $334 million, an
increase of $11 million from the backlog level of approximately $323 million at
June 30, 1995. Backlog includes only orders for which a delivery schedule within
six months has been specified by the customer. Backlog levels vary with demand,
product availability and the Company's delivery lead times and are subject to
decreases as a result of customer order delays, changes or cancellations. As
such, backlog levels are not a reliable indicator of future operating results.
The Company receives questions from time to time from stockholders regarding the
fluctuation of operating results. The Company's future operating results will
continue to be subject to quarterly variations based upon a wide variety of
factors, including volume, mix, and timing of orders received during the period,
the ability to develop, manufacture and introduce new products, the timing of
new product introductions, the availability of components, price erosion,
conditions in the computer hardware and software industries generally and the
general economy, such as recessionary periods, political instability, changes in
trade policies, fluctuations in interest or currency exchange rates and other
competitive factors. Seasonality also affects the Company's operating results,
particularly in the first quarter of each fiscal year. 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. In addition, the Company plans to continue to evaluate and, when
appropriate, make strategic investments which are considered beneficial. As part
of this process, the Company will continue to evaluate the carrying value of its
assets and, when necessary, make adjustments thereto. While the Company cannot
predict what effect these various factors may have on its financial results, the
aggregate effect of these and other factors could results in significant
volatility in the Company's future performance and stock price.
LIQUIDITY AND CAPITAL RESOURCES
Total assets at March 31, 1996 increased by approximately $66 million from June
30, 1995, due principally to increases in accounts receivable ($146 million)
inventories ($188 million), other current assets ($41 million), property, plant
and equipment- net ($73 million) offset by a decrease in cash, cash equivalents
and short-term investments ($371 million). Cash and short-term investments
decreased primarily due to the repurchase of 17.2 million shares of common stock
for $455 million during the first quarter of fiscal 1996, and to scheduled debt
repayments ($60 million), offset by net maturities of short term investments of
$183 million. The accounts receivable increase reflects an increase in quarterly
revenues from the fourth quarter of fiscal 1995 to the third
11
<PAGE>
quarter of fiscal 1996 of $192 million. The increase in inventories reflects a
build-up of supply to meet anticipated customer demand for new products
introduced in the fourth quarter of fiscal 1996. Other current assets increased
principally due to the timing of payments for income and other taxes. Increase
in property, plant and equipment reflects additions to the Company's Menlo Park
campus and capital additions to support the increased headcount, primarily in
engineering and marketing.
Total liabilities increased $113 million from June 30, 1995, due principally to
increases in accounts payable ($96 million) and accrued liabilities ($89
million) and offset by a decreases in short-term and long term debt obligations
($51 million) and other current liabilities ($22 million). The increase in
accounts payable primarily reflects increased inventory receipts in the last two
weeks of the quarter as compared to the fourth quarter of fiscal 1995. Accrued
liabilities increased in part due to increases in sales and marketing costs,
accrued purchase commitments to meet customer demand for future products, and
the timing of stock purchases under the Employee Stock Purchase Plan. Short-term
and long term debt obligations decreased as a result of scheduled debt
repayments. The net decrease in other current liabilities reflects the decreases
in income tax payable due to the timing of tax payments, offset by an increase
in deferred revenues on service contract renewals.
At March 31, 1996, the Company's primary sources of liquidity consisted of cash,
cash equivalents and short-term investments of $857 million and a revolving
credit facility with banks aggregating $150 million, which was available subject
to compliance with certain covenants. 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 calendar 1996. 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 financing
to strengthen its financial position, facilitate growth and provide the Company
with additional flexibility to take advantage of business opportunities that may
arise. The sufficiency of the Company's capital resources are forward looking
statements which involve risks and uncertainties and actual results may vary
materially.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
On January 24, 1995, a putative class action entitled Abraham and Evelyn Kostick
Trust V. Peter O. Crisp, et al. No. CV755458 ("Kostick Matter"), was filed in
the Superior Court of the State of California in the County of Santa Clara.
Named as defendants were Apple Computer, Inc., members of Apple's Board of
Directors and the Company. The plaintiff claimed that certain actions alleged to
be taken by Apple and its Board of Directors amounted to a breach of fiduciary
duty by Apple's Board of Directors. The Company was alleged to incur liability
by "aiding and abetting" the Apple Board's actions. The complaint sought an
injunction against any combination by Apple with the Company and an award of
unspecified compensatory and punitive damages. On February 22, 1996, the Company
received a letter from Milberg Weiss Bershad Hynes & Lerach regarding the
Kostick matter and a related matter, filed subsequent thereto, Manson v. Peter
O. Crisp, Case No. CV755504. This letter specifically notified the Company that
the Company was being dropped as a defendant in the foregoing matters and that
the Company need not respond to the complaints set forth therein. On February
22, 1996, an amended complaint was filed in the Superior Court of the State of
California, County of Santa Clara regarding and consolidating the forgoing
matters and the Company was no longer named as a defendant.
13
<PAGE>
ITEM 5 - OTHER INFORMATION
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 and directors who are subject to Section
16 of the Securities Exchange Act of 1934, as amended, during the fiscal
quarter ended March 31, 1996:
OFFICER / DATE PRICE NUMBER OF
DIRECTOR SHARES SOLD
============================================================================
Kenneth Alvares 2/9/96 $49.00 10,000
2/22/96 $49.875 2,000
2/23/96 $53.875 2,000
2/26/96 $54.875 1,000
2/26/96 $55.125 1,000
2/27/96 $54.6875 1,200
Lawrence Hambly 2/22/96 $50.25 3,018
2/22/96 $49.50 5,284
2/22/96 $50.50 17,500
2/22/96 $49.25 5,000
Masood Jabbar 2/16/96 $48.50 10,000
2/16/96 $48.625 1,000
2/22/96 $48.625 9,000
2/26/96 $54.88 45,106
William Joy 2/26/96 $55.1563 20,000
2/28/96 $53.2188 20,000
2/29/96 $53.2875 10,000
2/29/96 $53.375 20,000
2/29/96 $53.0938 10,000
Michael Lehman 2/9/96 $48.5884 22,634
2/12/96 $48.375 10,000
2/16/96 $47.50 10,000
Michael Morris 2/12/96 $48.815 4,516
Frank Pinto 2/26/96 $55.065 10,000
William Raduchel 2/14/96 $47.375 36,822
George Reyes 2/9/96 $48.50 418
Joesph Roebuck 2/29/96 $53.50 20,000
14
<PAGE>
OFFICER / DATE PRICE NUMBER OF
DIRECTOR SHARES SOLD
============================================================================
JanPieter Scheerder 1/29/96 $44.44 4,000
2/21/96 $47.63 2,012
Eric Schmidt 2/12/96 $48.375 5,000
2/21/96 $47.875 5,000
2/22/96 $51.125 5,000
2/23/96 $53.25 5,000
2/28/96 $54.125 5,000
2/29/96 $52.625 5,000
John Shoemaker 2/22/96 $51.50 8,000
Chester Silvestri 2/12/96 $48.125 10,000
2/12/96 $48.25 10,000
2/12/96 $48.125 20,000
2/23/96 $52.81 10,000
Michael Spence 2/20/96 $47.125 10,000
Dorothy Terrell 2/22/96 $49.25 6,000
2/23/96 $54.00 2,000
2/23/96 $53.1875 2,000
2/26/96 $55.125 2,000
Kevin Walsh 2/28/96 $53.2734 16,000
Edward Zander 2/9/96 $48.5625 28,000
2/23/96 $53.375 3,600
2/23/96 $53.00 13,600
2/23/96 $53.75 5,000
2/26/96 $56.50 5,000
2/29/96 $52.875 5,000
15
<PAGE>
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
11.0 Statement re: Computation of Earnings Per Share
27.0 Financial data for the period ended March 31, 1996
b) REPORTS ON FORM 8-K
A report on Form 8-K was filed on July 11, 1995 whereby the Company stated
that on July 10, 1995, the Company gave public notice that William Heart
III resigned from the Company's Board of Directors, effective July 1, 1995.
A report on Form 8-K was filed on February 26, 1996 whereby the Company
stated that it had received a letter from Milberg Weiss Bershad Hynes &
Lerach regarding the matter of Kostick Trust v. Peter O. Crisp, et. al.,
Case No. CV755458 (Kostick v. Crisp) and related matters, filed subsequent
thereto, informing the Company that it was being dropped as a defendant in
these matters and that the Company need not respond to the claims set forth
therein. For a further description of this matter see "Item 1- Legal
Proceedings".
16
<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.
SUN MICROSYSTEMS, INC.
BY
/s/ Michael E. Lehman
-------------------------
Michael E. Lehman
Vice President and Chief Financial Officer
/s/ George Reyes
-------------------------
George Reyes
Vice President and Corporate Controller,
Chief Accounting Officer
Dated: May 14, 1996
17
<PAGE>
EXHIBITS TO REPORT
ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
18
<PAGE>
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS PER SHARE
(unaudited)
(in thousands, except per share amounts)
PRIMARY
Three Months Ended Nine Months Ended
-------------------- --------------------
March 31, April 2, March 31, April 2,
1996 1995 1996 1995
-------- -------- -------- --------
Net income $143,307 $107,547 $354,052 $227,598
======== ======== ======== ========
Weighted average common
shares outstanding 183,673 190,888 185,653 190,014
Common - equivalent shares
attributable to stock options
and warrants 12,070 6,506 10,794 5,686
-------- -------- -------- --------
Total common and common -
equivalent shares outstanding 195,743 197,394 196,447 195,700
======== ======== ======== ========
Net income per common and
common - equivalent share $0.73 $0.54 $1.80 $1.16
===== ===== ===== =====
19
<PAGE>
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS PER SHARE
(unaudited)
(in thousands, except per share amounts)
FULLY DILUTED
Three Months Ended Nine Months Ended
-------------------- --------------------
March 31, April 2, March 31, April 2,
1996 1995 1996 1995
-------- -------- -------- --------
Net income $143,307 $107,547 $354,052 $227,598
======== ======== ======== ========
Weighted average common
shares outstanding 183,673 190,888 185,653 190,014
Common - equivalent shares
attributable to stock options
and warrants 12,391 6,534 11,213 5,854
-------- -------- -------- --------
Total common and common -
equivalent shares outstanding 196,064 197,422 196,866 195,868
======== ======== ======== ========
Net income per common and
common - equivalent share $0.73 $0.54 $1.80 $1.16
===== ===== ===== =====
20
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 453,136
<SECURITIES> 403,368
<RECEIVABLES> 1,187,460
<ALLOWANCES> 99,418
<INVENTORY> 507,999
<CURRENT-ASSETS> 2,938,170
<PP&E> 1,221,464
<DEPRECIATION> 719,959
<TOTAL-ASSETS> 3,610,843
<CURRENT-LIABILITIES> 1,470,937
<BONDS> 40,309
<COMMON> 72
0
0
<OTHER-SE> 2,076,441
<TOTAL-LIABILITY-AND-EQUITY> 3,610,843
<SALES> 1,840,028
<TOTAL-REVENUES> 1,840,028
<CGS> 1,028,688
<TOTAL-COSTS> 1,638,237
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,307
<INTEREST-EXPENSE> 2,780
<INCOME-PRETAX> 210,745
<INCOME-TAX> 67,438
<INCOME-CONTINUING> 143,307
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143,307
<EPS-PRIMARY> .73
<EPS-DILUTED> .73
</TABLE>
