SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 15, 1998
COMPAQ COMPUTER CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 1-9026 76-0011617
-------- ------ ----------
(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
20555 SH 249
HOUSTON, TEXAS 77070
-------------- -----
(Address of Principal Executive Offices) (Zip Code)
(281) 370-0670
--------------
(Registrant's telephone number, including area code)
(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS.
1. In a release dated July 15, 1998, Compaq Computer Corporation (NYSE:
CPQ) announced its financial results for the period ended June 30, 1998,
including an unaudited consolidated balance sheet as of June 30, 1998 and an
unaudited consolidated statement of income for the period ended June 30, 1998.
The news release is attached as Exhibit 99.
ITEM 7. EXHIBITS.
Exhibit 99 News Release dated July 15, 1998.
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 hereunto duly authorized.
COMPAQ COMPUTER CORPORATION
Dated: July 15, 1998
By: /s/ Linda S. Auwers
-------------------------
Linda S. Auwers
Vice President and
Associate General Counsel
Exhibit 99
COMPAQ COMPUTER CORPORATION P.O. BOX 692000 NEWS RELEASE
PUBLIC RELATIONS DEPARTMENT HOUSTON, TEXAS 77269-2000
TEL 281-514-0484
FAX 281-514-4583
HTTP://WWW.COMPAQ.COM
[LOGO OF COMPAQ COMPUTER CORPORATION APPEARS HERE]
FOR IMMEDIATE RELEASE
- ---------------------
COMPAQ REPORTS SECOND QUARTER RESULTS
ACHIEVES WORLDWIDE CHANNEL INVENTORY GOALS
HOUSTON, July 15, 1998 - Compaq Computer Corporation (NYSE: CPQ) today
announced worldwide sales of $5.8 billion for the second quarter ended June
30, 1998, an increase of 5.7 percent compared to the second quarter of 1997.
The Company reported a net loss of $3.6 billion or $2.33 per share. Excluding
charges in connection with the acquisition of Digital Equipment Corporation
and the closing of certain Compaq facilities, net income for the quarter was
$32 million or $.02 per share.
"During the quarter, we achieved two major milestones: the completion of
the Digital acquisition on June 11 and the achievement of worldwide commercial
channel inventory goals," said Eckhard Pfeiffer, Compaq's President and Chief
Executive Officer. "We are now moving quickly with the integration of
Digital."
"With the decisive steps taken to position our products competitively in
commercial channels worldwide and reset goals for the newly combined
companies, we are now moving aggressively to achieve targeted levels of
performance and growth in Return On Invested Capital," said Earl Mason,
Compaq's Senior Vice President and Chief Financial Officer. "Early
integration progress can be seen on the Company's new balance sheet ending the
second quarter with $4.6 billion of cash with very little debt."
The Company recorded several charges during the second quarter in
Connection with the Digital acquisition and closing of certain Compaq
facilities. These charges, net of related taxes, included $3.2 billion for the
write-off of purchased in-process technology, $291 million for restructuring
charges related to Compaq employee separations and elimination of certain Compaq
facilities, and $139 million for other operating adjustments. These operating
adjustments were primarily for incremental pricing actions on certain Digital
products to integrate them with Compaq products in the marketplace and the
higher cost of sales as a result of fair value adjustments for acquired Digital
products sold since the acquisition date.
The Digital acquisition was accounted for as a purchase transaction. A
restructuring reserve of $1.5 billion related to Digital employee separations,
elimination of duplicate facilities, and employee relocations, was included as
part of the purchase price allocation upon completion of the acquisition on
June 11, 1998.
OUTLOOK
"Our emphasis is on future growth and realizing significant synergies,"
said Mason. "As previously discussed, the third quarter will largely be
transitional, focused on both the integration of products and services, and
the achievement of revenue and cost synergies. We continue to believe
earnings for the combined companies will be accretive as early as the fourth
quarter."
"With Compaq's business model, built on open industry-standard products,
combined with leading enterprise technology and a global service offering,
Compaq is now positioned to dramatically change the competitive landscape,"
said Pfeiffer.
COMPANY BACKGROUND
Founded in 1982, Compaq Computer Corporation is a Fortune Global 200
company. Compaq is the second largest computer company in the world and the
largest global supplier of personal computers. Compaq develops and markets
hardware, software, solutions, and services, including industry-leading
enterprise computing solutions, fault-tolerant business-critical solutions,
networking and communication products, commercial desktop and portable
products and consumer PCs. The company is an industry leader in
environmentally friendly programs and business practices.
Compaq products are sold and supported in more than 100 countries through
a network of authorized Compaq marketing partners. Customer support and
information about Compaq and its products are available at
http://www.compaq.com or by calling 1-800-OK-COMPAQ. Product information and
reseller locations are available by calling 1-800-345-1518.
This release contains forward-looking statements based on current
expectations that involve a number of risks and uncertainties. The potential
risks and uncertainties that could cause actual results to differ materially
include the implementation of operations and systems improvements,
particularly those associated with the Optimized Distribution Model; the
operational integration associated with the acquisition of Digital Equipment
Corporation; market responses to pricing actions and promotional programs;
continued competitive factors and pricing pressures; inventory risks due to
shifts in market demand; timely development, production, and acceptance of the
products; and changes in product mix. Further information on the factors that
could affect the Company's financial results are included in its SEC filings,
including the Form 10-Q for the quarter ended March 31, 1998, and the Form
10-Q for the quarter ended June 30, 1998, which will be filed shortly.
(Attached is Consolidated Balance Sheet and Statement of Income.)
# # #
Compaq, Registered U.S. Patent and Trademark Office. Digital is a registered
trademark of Digital Equipment Corporation. Product names mentioned herein may
be trademarks and/or registered trademarks of their respective companies.
For further editorial information, contact:
Compaq Computer Corporation Jim Finlaw 281-514-6137
[email protected]
Shandwick International Mark Ostermann 281-514-5893
[email protected]
For investor information, contact:
Investor Relations 281-514-9549
Investor Relations Fax Service 800-433-2391
<PAGE>
<TABLE>
<CAPTION>
COMPAQ COMPUTER CORPORATION
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
JUNE 30, DECEMBER 31,
1998 1997
--------- -----------
(in millions)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,596 $ 6,418
Short-term investments - 344
Accounts receivable, net 5,431 2,891
Inventories 2,202 1,570
Deferred income taxes 1,981 595
Other current assets 578 199
--------- ---------
Total current assets 14,788 12,017
Property, plant and equipment, less accumulated depreciation 2,855 1,985
Deferred income taxes 862 -
Intangible and other assets 3,243 629
--------- ---------
Total $ 21,748 $ 14,631
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,614 $ 2,837
Income taxes payable 201 195
Accrued restructuring costs 1,734 -
Other current liabilities 5,017 2,170
---------- ---------
Total current liabilities 10,566 5,202
---------- ---------
Postretirement and other postemployment benefits 398 -
Minority interest 422 -
Stockholders' equity:
Preferred stock, $.01 par value
(authorized: 10 million shares; issued: none)
Common stock and capital in excess of $.01 par value
(authorized: 3 billion shares; issued:
1,671 million shares at June 30, 1998 and
1,519 million shares at December 31, 1997) 6,724 2,096
Retained earnings 3,664 7,333
Treasury stock (at cost) (26) -
---------- ---------
Total stockholders' equity 10,362 9,429
---------- ---------
Total $ 21,748 $ 14,631
========== =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPAQ COMPUTER CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
Six months Quarter
ended June 30, ended June 30,
--------------------- ----------------------
1998 1997 1998 1997
---------- --------- ---------- ----------
(in millions, except per share amounts)
<S> <C> <C> <C> <C>
Revenue:
Product sales $ 10,947 $ 10,573 $ 5,372 $ 5,405
Service revenue 572 214 460 110
---------- --------- ---------- ----------
11,519 10,787 5,832 5,515
---------- --------- ---------- ----------
Cost of sales:
Cost of product sales 9,007 7,677 4,406 3,897
Cost of service revenue 379 156 316 81
---------- --------- ---------- ----------
9,386 7,833 4,722 3,978
---------- --------- ---------- ----------
Selling, general, and administrative expense 1,836 1,309 1,051 670
Research and development costs 494 387 249 198
Purchased in-process technology 3,234 208 3,234 208
Restructuring and asset impairment charges 393 - 393 -
Other income and expense, net (74) (19) (44) (4)
---------- --------- ---------- ----------
5,883 1,885 4,883 1,072
---------- --------- ---------- ----------
Income (loss) before provision for income taxes (3,750) 1,069 (3,773) 465
Provision (benefit) for income taxes (134) 398 (141) 208
---------- --------- ---------- ----------
Net income (loss) $ (3,616) $ 671 $ (3,632) $ 257
========== ========= ========== ==========
Earnings (loss) per common share:
Basic $ (2.35) $ .45 $ (2.33) $ .17
========== ========= ========== ==========
Diluted $ (2.35) $ .43 $ (2.33) $ .17
========== ========= ========== ==========
Shares used in computing earnings (loss) per
common share:
Basic 1,539 1,497 1,556 1,500
========== ========= ========== ==========
Diluted 1,539 1,547 1,556 1,552
========== ========= ========== ==========
</TABLE>
