SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For The Year Ended January 1, 1995 Commission File No. 0-12064
STRATUS COMPUTER, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2697554
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 FAIRBANKS BOULEVARD, MARLBOROUGH, MA 01752
(Address of principal executive offices) (Zip Code)
(508) 460-2000
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of The Act:
Title of each class Name of each exchange on
which registered
Common Stock , $.01 par NYSE, Boston Stock Exchange,
value per share Midwest Stock Exchange
Common Stock Purchase Rights NYSE, Boston Stock Exchange,
Midwest Stock Exchange
Securities Registered Pursuant to Section 12(g) of The Act:
NONE
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
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
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-
affiliates of the registrant was approximately $760,596,512 based
on the last reported sale price of the Common Stock on the NYSE,
Boston Stock Exchange and the Midwest Stock Exchange on March 13,
1995.
Number of shares outstanding of each class of Common Stock as of
March 13, 1995: 25,090,641 shares of Common Stock (par $.01).
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K into
Document which incorporated
Portions of Annual Report to
Stockholders for the Year Ended
January 1, 1995. Parts I, II and IV
Portions of Proxy Statement for
Annual Meeting of Stockholders
on April 25, 1995. Part III
PART I
Item 1. Business
Founded in 1980, Stratus Computer, Inc. ("Stratus" or "the
Company") offers a broad range of continuous availability computer
platforms, application solutions, middleware and professional
services for critical online operations. Continuous availability,
as compared to the term "high availability," refers to Stratus"
systems' ability to substantially reduce the two main sources of
downtime: 1) downtime due to unexpected system failures, such as
hardware or operating system crashes, and 2) downtime associated
with shutting down a system for planned maintenance and upgrade
procedures. Stratus systems are used primarily for online
transaction processing (OLTP), communications control, distributed
computing and other interactive applications in which system
availability, rapid high-volume processing and data integrity are
critical. Examples of such applications include securities
quotation and trading, stock exchange control, numerous
telecommunications applications, electronic funds transfer,
automated teller machine networks, credit authorization,
reservation systems, health insurance adjudication, and lottery and
gaming systems. The Stratus systems' distinguishing feature is the
ability to provide a high level of application availability through
1) a hardware-based fault-tolerant design, which provides
uninterrupted operations in the event of hardware component
failures, 2) online system administration and 3) remote online
service. Stratus systems link with other systems such as terminals,
workstations, shop floor devices and retail terminals for user
input and transaction collection, and with large systems such as
mainframes and other superminicomputers for database, planning and
other business applications.
The Company offers high-growth vertical markets a variety of application
software and professional services through its subsidiaries. S2 is a leader
in applications and networking solutions for the financial, retail,
travel/transportation, and healthcare markets, including solutions
for credit authorization, automated teller machines and pharmacy automation.
Isis Distributed Systems provides the basis for creating distributed
applications with reliability--safeguards against failures in clients
and servers, system software, networks and application software--and
with scalability--the means to add servers across a network to boost
application performance and meet growing processing requirements. Isis
has customers worldwide in the financial services, telecommunications,
manufacturing and scientific computing fields.
In November 1994, the Company acquired all of the outstanding
stock of the TCAM Group of companies ("TCAM") for approximately
$16.0 million in cash plus additional consideration of up to $33.0
million based upon TCAM's attainment of planned objectives over the
next three years. The TCAM Systems Group includes TCAM Systems,
Inc. in New York and TCAM Systems (U.K.) Ltd. in London and
Edinburgh, Scotland. TCAM provides system integration and
customized software solutions to the worldwide securities industry,
and offers a broad range of application solutions on PC,
client/server, distributed and continuously available computing
environments.
In December, 1994, the Company acquired certain assets of
AST/Transact Ltd. of London ("AST") for $2.9 million in cash.
AST's primary product acquired by the Company is its UM-20
electronic funds transfer (EFT) and credit card processing software
for retail banking. AST develops and markets retail banking
application software and professional services to customers in the
United Kingdom and continental Europe.
PRODUCTS
Stratus Continuous Processing" Systems are used as highly
reliable and expandable computer "platforms" on which businesses
run critical online business operations. Key Stratus product
features which apply to this type of computing include hardware
fault tolerance, modular expansion, high-volume transaction
processing, systems compatibility, online remote service, support
of industry standards and a productive development environment.
Stratus systems achieve fault tolerance through a proprietary
hardware architecture which uses comparative circuitry, duplication
of off-the-shelf microprocessors and the proprietary Stratus
Virtual Operating System (VOS) or Stratus FTX", the Company's UNIX"
System V.4-compliant operating system. Stratus' hardware-based
fault tolerance design requires no programming, a competitive
advantage over most other fault-tolerant implementations. Stratus'
multiprocessor architecture and operating systems were specifically
designed to provide the functions and performance required by
online transaction processing and other complex communications-
based applications that older technologies such as batch
processing, timesharing or general minicomputers could not provide.
For example, both VOS and FTX distribute the processing workload
across multiple microprocessors, allowing the system to handle
heavy transaction loads efficiently, and permitting multiple users
to access and update data simultaneously. To increase capacity,
Stratus users simply add additional processors without rewriting
software, a feature which permits economical online expansion.
From the user's perspective, a Stratus system consists of one
or more processing modules in any combination. A module can be
regarded as the composite of a cabinet which contains processors,
memory, communications subsystems and data storage devices. Any VOS-
based processing module from any Stratus product line can be linked
to form a multimodule computer system. Up to 32 VOS-based modules -
- containing as many as 192 processors or CPUs -- can be connected
locally using StrataLINK, a high-speed intermodule communications
bus. Using StrataNET", a wide area network, thousands of modules
can be networked through standard telecommunications facilities to
appear as a single system running thousands of transactions per
second. Modules can also be connected to a wide variety of other
processors and devices using industry-standard and specialized
communications protocols.
Stratus introduced its most powerful family of hardware fault-
tolerant computers in February, 1995. The Continuum Series offers
improved price/performance available for true fault-tolerant
reliability and offers high performance, guaranteed availability,
and robust open systems. The entire range of Continuum systems
combines Hewlett-Packard's PA-RISC-based (Reduced Instruction Set
Computing) symmetric multiprocessing technology with the Company's
proven continuously available architecture.
The Continuum Series offers two ranges of systems. Continuum
Models 610S, 610, 620, and 625 are midrange, high-performance
systems that provide open, continuously available computing in
distributed and departmental environments. Continuum Models 1210,
1215, 1220, 1225, and 1245 are the family's high-end systems for
the expandability and growth path customers need for large online
transaction processing applications.
The Continuum Series offers up to four times the
price/performance of the Company's XA/R Series of fault-tolerant
systems. Design innovations include incorporating up to 512MB
memory on each CPU board, offloading the bus of memory traffic;
dedicated I/O processors; and symmetric multiprocessing.
The Continuum architecture allows users to expand system
capabilities incrementally as needs increase. All Continuum
models within each Series utilize the same system logic cabinet
and are upgradable simply by swapping or adding processor boards.
Designs of the memory, disk, and I/O subsystems also
simplify incremental growth. The Continuum Series supports up to
three I/O communications processors, four logical RISC
processors, 1GB of duplex memory, 178GB of duplex disk, and 84
I/O adapters which allow up to 1344 direct connect communications
lines.
As with all Stratus systems, the Continuum Series is binary
compatible among all models and is source code compatible with
all prior Stratus models, including the XA/R Series based on i860
microprocessors from Intel and XA 2000 Series based on the 680X0
microprocessors from Motorola. Full source code compatibility
protects existing software investments by allowing earlier
applications to easily run on Continuum with only a recompile.
The Continuum Series can be ordered with either VOS, the
company's original proprietary operating system, or with FTX
which incorporates all of the fault tolerance of VOS in Stratus'
native implementation of the System V, Release 4 UNIX operating
system.
The VOS 13 operating system provides a sophisticated
environment tuned to meet the needs of OLTP applications in
critical online computing environments. VOS also supports a large
portfolio of industry-specific applications that provide
solutions to customers with critical computing needs.
The FTX Release 3 operating system provides an industry
standard computing environment that complies with SVID (System V
Interface Definition) Issue 3, POSIX 1003.1, and X/Open's XPG3
standard. FTX facilitates customers' implementations of
heterogeneous networks based on open systems, and provides for the
portability of applications from other UNIX systems.
The Continuum Series also offers existing Stratus customers a
migration path forward. Both FTX and VOS on the Continuum Series
provide application source code compatibility across system
architectures. This benefits customers two ways: by preserving
their investments in application software and ensuring a continued
growth path for the future. The FTX and VOS operating system
environments, available on all Continuum models, give customers
access to a wealth of end-user applications and database solutions.
The Continuum Series' robust architecture enables the Company
to offer the strongest availability guarantee in the industry. In
the guarantee, the Company agrees to refund a month's service fees
to a customer if that customer experiences even one second of
unplanned system downtime. Stratus offers the availability
guarantee in addition to the standard Stratus Continuum one-year
warranty.
Stratus' XA/R system family comprises twelve fully software
compatible systems from entry-level models through powerful
mainframe-class platforms. The XA/R systems are equipped with RISC
(reduced instruction set computing) microprocessors and deliver
more efficient performance than Stratus' previous generation's CISC
(complex instruction set computing) microprocessor. The entire XA/R
family, consisting of the entry-level Models 5-S, 10-S and 15-S,
midrange Models 25-S, 35-S, 45-S and 55-S, and high-end Models 300,
305, 310, 320 and 330, combines RISC technology with advanced cache
memory design. In addition, the Models 15-S, 45-S, 55-S, 310, 320
and 330 offer symmetric multiprocessing for higher performance.
This feature provides for a tightly coupled architecture in which
multiple processor resources are available to any system or
application task; system performance is thus improved. All system
memory is available to all system processors, providing further
system overhead savings. The XA/R Models 5-S through 55-S were
introduced in 1993.
The XA/R Models 5-S, 10-S and 15-S are entry-level systems
positioned as critical servers for small to medium-sized
applications and distributed computing sites where modest growth is
expected. The midrange XA/R Models 25-S, 35-S, 45-S and 55-S are
appropriate as critical servers where more expandability and growth
are required. The XA/R Series 300 provides the performance, growth
path and expandability demanded by large OLTP applications. CPU,
memory, communications and disks can be increased online while an
application is running, providing dynamic application growth.
Specifically, the Models 305, 310 and 320 are upgraded by swapping
or adding additional processor boards. From one to eight I/O
subsystems may be configured on the XA/R Series 300 to provide a
range of communications growth and flexibility. The Series 300
supports a maximum of six RISC processors, 512MB of duplex memory,
230GB of duplex disk capacity and 112 I/O adapters that allow up to
1,744 direct communications lines.
Distributed intelligence also contributes to Stratus system
performance. In addition to the RISC-based CPUs, microprocessors
are used throughout the system. All I/O processors, as well as
input/output adapters (IOAs), contain onboard intelligence
working simultaneously to increase throughput.
Stratus systems are scalable, which means that customers can
custom-design their system expansion, tailoring their system
configuration to their application needs. CPUs, as well as I/O
subsystems, can be added online so that a balance of CPU power
and I/O throughput can be maintained throughout the life of the
system, as performance is boosted.
Stratus systems can identify and isolate many of their own
failures, and automatically dial in to a Stratus Customer
Assistance Center (CAC) to report system interruptions and order
replacement parts. Duplicate hardware components keep the system
running the same as before the failure. Users can readily replace
these components. CAC personnel can diagnose and fix most software
problems remotely.
Stratus' system software was designed expressly to handle
online computing functions and to enhance the productivity of
programmers at customer sites. All Stratus systems can run VOS,
the company's proprietary operating system optimized for
transaction processing and availability, as well as FTX, the
company's industry standard operating system fully compliant with
UNIX SVR4. The company offers a broad array of layered software
products, including databases, communications, programming
languages, development tools, interfaces and transaction monitors
for the VOS and FTX operating environments.
Application software solutions, designed specifically for
the Stratus online platform, are provided through the company's
wholly owned subsidiaries, including S2 and the TCAM Group of
companies, as well as through select third parties such as
software houses, systems integrators and value-added resellers.
S2 provides application software for online credit authorization,
ATM network management, health insurance adjudication and other
financial applications; the firm also provides communications
middleware used by a range of businesses to link their legacy
systems -- central systems housing vital business data -- with a
wide array of remote systems and terminals. The TCAM Group of
companies is a leading provider of application software and
services to the worldwide securities industry. The company offers
a broad range of application solutions in PC, client/server,
distributed, and continuous availability computing environments
using both open and proprietary operating systems on a broad
range of hardware platforms.
Stratus also has a broad range of products and solutions
targeted at the growing markets for open systems and open,
distributed computing. In 1993, Stratus introduced FTX 2.2, the
multiprocessing version of the company's UNIX SVR4 operating system
and the industry's highest level of availability for critical UNIX-
based applications. For reliability, Stratus removed major causes
of "panics" or crashes in the UNIX kernel. For serviceability,
Stratus added a maintenance and diagnostic subsystem -- pioneered
in the VOS operating system -- that allows online upgrades,
component replacements and all of the traditional Stratus remote
service benefits. Stratus FTX systems support most networking
software products to provide continuously available services to
desktop clients and other servers, including Novell's Netware for
UNIX, TCP/IP and IBM SNA; relational databases, such as Oracle,
Sybase and Informix and their client-server toolkits; and software
for building distributed transaction processing applications, such
as Tuxedo, Encina and OSF's DCE.
To bring additional reliability to open, distributed
applications, Stratus acquired Isis in 1993. Isis provides reliable
distributed computing middleware -- a new class of software
technology providing the foundation for sending messages, data,
commands and requests between clients and servers. Isis ensures
the reliability of an application by replicating data and processes
on multiple servers and clients, including Stratus systems and
those produced by many UNIX systems vendors.
Stratus, the Stratus logo, Continuous Processing, FTX, and
StrataNET are registered trademarks, and Continuum, XA, XA/R, and
StrataLINK are trademarks of Stratus Computer, Inc. All other
trademarks are the property of their respective owners.
MARKETING, SALES AND SERVICE
Markets
Stratus products -- hardware, software and related maintenance
and consulting services -- are used prominently in industries such
as telecommunications, banking and financial services, brokerage,
retail, healthcare, gaming and entertainment, information services,
insurance and government. A headquarters staff of marketing
professionals is employed with responsibility for direction of the
field sales force, marketing strategy, technical support,
advertising and public relations, customer and field training,
competitive analysis and product planning.
Sales Channels
Stratus sells its products and services to end users directly
through its sales organization in the United States, Canada,
Western Europe, the Far East and Australia, and indirectly through
or in conjunction with its system integrators, VARs, application
software houses and distributors. In 1994, the Company added new
distributors of its products to Egypt, the Russian Federation,
United Arab Emirates, and Lebanon to complement existing
distributors located in Central America, Taiwan, Korea,
Philippines, Chile, Mexico, Columbia, Argentina, Brazil, Venezuela,
Thailand, Indonesia, Greece and Cypress, Saudi Arabia, Israel,
Turkey, Finland, the Czech Republic, South Africa, Poland and
Zimbabwe. The Company also sells through certain general purpose
OEMs such as Olivetti Systems & Networks S.R.L. (Olivetti) and NEC
Corporation.
For information on sales by geographic segment, see Note 12 in
Notes to Consolidated Financial Statements included as part of the
1994 Annual Report to Stockholders, which Note is incorporated
herein by reference.
Olivetti has rights to distribute selected Stratus products on
a non-exclusive basis in Italy and the rest of the world.
Olivetti remarkets Stratus' family of fault-tolerant systems,
primarily under the Olivetti label and product line designated
LSX4000. NEC has non-exclusive rights to sell Stratus' UNIX-based,
fault-tolerant systems worldwide. Targeting the telecommunications
market, NEC uses Stratus systems in a variety of applications,
including integration with various NEC telecommunications systems.
Competition
The Company faces intense competition from computer
manufacturers who market minicomputers, mainframe computers,
servers and work stations into the OLTP market. The Company's
chief competitors are Tandem Computers Inc., Digital Equipment
Corporation, IBM, Sun Microsystems, Inc. and Hewlett Packard
Company. While its chief competitors are substantially larger and
have significantly more resources, the Company believes that its
singular focus on critical online business applications, including
the strategic acquisitions, its expertise in hardware-based
continuous availability, transaction processing, automated service
and specialized application solutions provide unique advantages
compared with those of its competitors. The Company also believes
it competes successfully on the basis of product capabilities,
price and life cycle costs, ease of programming and its third party
marketing programs.
BACKLOG
Part of the Company's manufacturing and distribution strategy
is to minimize the elapsed time between receipt of customer
purchase orders and delivery of equipment. The final completion of
the Company's manufactured products is usually accomplished with
standard parts and without the need for additional engineering,
generally permitting shipment of products within 30 to 60 days from
receipt of order. A substantial portion of quarterly shipments
tend to be made in the last month of each quarter, and any backlog
is generally filled within weeks of the beginning of the next
quarter. For these reasons, the amount of backlog is not important
to an understanding of the Company's business.
RAW MATERIALS AND SUBCONTRACT LABOR
Stratus purchases substantially all of its parts and
peripheral devices from other manufacturers. The majority of
printed circuit boards are now purchased from board subcontractors
on a "turnkey" basis under which the subcontractor procures all
components, assembles the board and provides certain levels of
testing. Presently, the Company believes it has adequate supplies
and commitments from vendors to satisfy 1995 forecasted
requirements; no delays in product shipments are expected. Most
peripheral devices, assemblies and parts are available from a
number of different suppliers, but certain integrated circuits,
printed circuit boards, plastic parts, and disk and tape drives are
purchased from single sources of supply. The Company believes that
alternate sources of supply for peripherals, assemblies and other
parts could be found, if necessary. During 1994, the industry
experienced occasional shortages in the availability of memory
devices due to a further tightening of the supply of these
materials. Although this increased the Company's costs for these
devices it did not impair its ability to meet the demands of
production. The Company has not experienced any significant
difficulties in obtaining supplies of integrated circuits,
peripherals, assemblies or parts, but shortages, if any, could
result in production delays that may adversely affect its business.
PRODUCT DEVELOPMENT
Hardware and software development expenditures are expected to
increase in line with the growth in product gross margin dollars
over the next several years. The Company's total research and
development expenditures, which include certain capitalized
software development costs, were $89,633,000 in 1992, $96,200,000
in 1993 and $95,322,000 in 1994. The primary development focus is
the next generation architecture using Hewlett Packard's PA-RISC
microprocessor.
The Company owns patents and has patent applications pending
in the United States and abroad relating to certain of its
products. While the Company believes that the pending applications
relate to patentable devices or concepts, there can be no assurance
that any patents will be issued or that any patents issued can be
successfully defended. The Company believes that patents are less
significant in its industry than such factors as innovative and
creative skills, technical experience and the management ability of
its personnel.
EMPLOYEES
As of January 1, 1995, the Company employed 2,878 persons.
Item 2. Properties
The Company currently occupies three buildings on a 112 acre
site at its corporate headquarters location in Marlborough,
Massachusetts. Two of the three buildings and the underlying land
(approximately 27 acres) plus a sixty five acre adjoining parcel are owned,
while the third building is leased under an operating lease. The
aggregate amount of office, engineering, manufacturing and customer
service space that is owned is approximately 300,749 square feet.
A manufacturing facility, also located in Marlborough,
Massachusetts, was first occupied in 1993, upon relocation from a
similar facility in Hudson, Massachusetts. The lease on this new
facility runs through 1998.
An international manufacturing facility was occupied in 1988
in Dublin, Ireland. This facility was leased until March 1994,
when the Company purchased the property.
Information relating to the above facilities is set forth in
the following table.
<TABLE>
<CAPTION>
Owned/
Floor Leased
Space (Expiration
Plant Location Use (Sq. Ft.) Date) Renewals
---------------- --------------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Marlborough, Office, research and 202,087 Lease - 2000 2 successive
MA development periods of
10 years each.
Marlborough, Office, engineering 198,341 Own
MA and customer service
Marlborough, Office,
MA manufacturing 102,408 Own
and engineering
Dublin, Office and
Ireland manufacturing 75,000 Own
Marlborough, Office and
MA manufacturing 117,200 Lease - 1998 1 successive 5
year period and 1
successive
3 year period.
</TABLE>
The Company's fiscal year 1994 annual rent for the leased
facilities was approximately $2,679,000 plus real estate taxes and
other occupancy expenses.
The Company also leases additional space at 41 locations in
the United States, 2 location in Canada, 10 locations in Europe, 10
locations in the Far East, 2 locations in Japan and 2 locations in
Australia for sales, customer service and education and also leases
warehouse space at 2 locations in the United States and 1 location
in Italy at an aggregate annual rent of approximately $9,965,000
for fiscal year 1994.
Item 3. Legal Proceedings
The Company is subject to legal proceedings and claims which
arise in the ordinary course of its business. Management believes
that the outcome of those matters will not have a material adverse
effect on the Company's financial condition or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters
The approximate number of holders of record of the Company's
common stock at March 13, 1995 was 1,560. Additional information
required by this item is incorporated herein by reference to the
"Common Stock Information" appearing on page 32 of the 1994 Annual
Report to Stockholders.
Item 6. Selected Financial Data
The information required by this item is incorporated herein
by reference to the "Financial History" appearing on pages 14-15 of
the 1994 Annual Report to Stockholders.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information required by this item is incorporated herein
by reference to the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing on pages
16-19 of the 1994 Annual Report to Stockholders.
Item 8. Financial Statements and Supplementary Data
The financial statements listed in the "Index to Consolidated
Financial Statements" filed as part of this Annual Report, together
with the report of Ernst & Young LLP dated January 20, 1995, are
incorporated herein by reference to the "Financial Statements and
Supplementary Data" contained in pages 20-33 of the 1994 Annual
Report to Stockholders.
Item 9. Disagreements on Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
A. Directors of the Company:
The information required by this item is incorporated herein
by reference to the "Election of Directors" appearing on pages 2 -
4 of the Proxy Statement for Annual Meeting of Stockholders on
April 25, 1995.
B. The executive officers of the Company are as follows:
Name Age Position
William E. Foster 50 Chairman and Chief
Executive Officer
Gary E. Haroian 43 President and Chief Operating Officer
Joseph A. D'Angelo 51 Vice President, Market Development
Robert E. Donahue 46 Vice President, Finance and
Chief Financial Officer
Paul R. Jones 45 Vice President and Chief Operating
Officer
ISIS Distributed Systems, Inc.
Stephen Kiely 49 Vice President, Engineering
Kevin P. O'Keefe 40 Vice President, Application Software
J. Donald Oldham 53 Vice President, Worldwide Sales
David M. Weishaar 43 Vice President, Worldwide Operations
and Chief Quality Officer
John F. Young 52 Vice President, Human Resources
Mr. Foster, a founder of the Company, has been, since February
1980, Chairman and Chief Executive Officer of the Company. From
1980 until November 1993, Mr. Foster also served as President of
the Company.
Mr. Haroian joined the Company in 1983 as Corporate Controller
and was elected Vice President, Finance and Administration and
Treasurer in May 1985. In April 1988, he was elected Senior Vice
President, Finance and Administration, Chief Financial Officer and
Treasurer. He served as Vice President and General Manager,
Corporate Operations from October 1990 to December 1991. Mr.
Haroian served as Senior Vice President and General Manager,
Corporate Operations during 1992. From January 1993 to November
1993, he served as Executive Vice President and General Manager,
Corporate Operations. Mr. Haroian has served as President and
Chief Operating Officer since his election in November 1993.
Mr. D'Angelo was, prior to joining the Company in 1991, a
partner in the Strathmore Group (a consulting organization). He
joined the Company in September 1991 as Director, Corporate
Strategy. In October 1993, he was elected Vice President, Market
Development.
Mr. Donahue joined the Company in June 1986 as Corporate
Controller. In June 1988, he was elected Vice President of
Finance. Mr. Donahue has served as Vice President, Finance and
Chief Financial Officer since his election in October 1990.
Mr. Jones was, prior to joining the Company in 1990, Vice
President, Engineering and Manufacturing for Stellar Computer, Inc.
He joined the Company in 1990 as Vice President, Engineering. In
October 1993 he was elected Vice President and Chief Operating
Officer for ISIS Distributed Systems, Inc., a wholly owned
subsidiary of the Company.
Mr. Kiely was, prior to joining the Company in 1994, Vice
President for EON Corporation and prior to that from 1990 through
June 1993 Vice President for Bull HN Information Systems, Inc. He
joined the Company and was elected Vice President, Engineering in
September 1994.
Mr. O'Keefe joined the Company in February 1988 as an Account
Executive and was promoted to District Manager, in September 1988.
In 1992 he was appointed Regional Director for the Company's
Western US operations. In October 1993 he was appointed Vice
President, Financial Services and in September 1994 was elected
Vice President, Application Software.
Mr. Oldham joined the Company in March 1984 as Regional
Director for the Company's Eastern Sales Region. In December 1990
he was appointed Vice President, Telecommunications Sales. In May
1994 he was elected Vice President, Telecommunications. In October
1994 he was elected Vice President Worldwide Sales.
Mr. Weishaar joined the Company in August 1993 and was elected
Vice President, Worldwide Operations. Prior to that time, he was
Vice President of European Operations and prior to that Vice
President, East Coast Operations for Sun Micro Systems.
Mr. Young joined the Company in 1985 as Director, Human
Resources. He was elected Vice President, Human Resources in
October 1990.
Item 11. Executive Compensation
The information required by this item is incorporated herein
by reference to the "Executive Compensation" appearing on pages 7 -
9 of the Proxy Statement for Annual Meeting of Stockholders on
April 25, 1995.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information required by this item is incorporated herein
by reference to the tables on pages 2 and 5 of the Proxy Statement
for Annual Meeting of Stockholders on April 25, 1995.
Item 13. Certain Relationships and Related Transactions
None.
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on
Form 8-K
(a) 1. Financial Statements:
The financial statements are listed in the Index to
Consolidated Financial Statements filed as part of this Annual
Report.
2. Schedules:
The schedules listed in the accompanying Index to
Consolidated Financial Statements are filed as part of this
Annual Report.
3. Exhibits:
The exhibits listed in the accompanying Index to
Exhibits are filed as part of this Annual Report.
(b) Reports on Form 8-K
None.
<TABLE>
FINANCIAL HISTORY
In thousands except per share and employee amounts, unaudited
1994(1) 1993(1) 1992 1991 1990 1989 1988 1987 1986 1985
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Summary of operations
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Revenues $576,556 $513,680 $486,266 $448,632 $403,850 $341,327 $265,314 $184,150 $124,559 $80,164
-----------------------------------------------------------------------------------------------------------------------------------
Product revenue
percent 72% 77% 79% 82% 84% 85% 88% 89% 90% 92%
Service revenue
percent 28% 23% 21% 18% 16% 15% 12% 11% 10% 8%
Gross profit margin 321,961 292,811 289,070 267,312 237,995 207,613 160,787 117,281 81,844 52,029
Gross profit margin
percent to sales 55.8% 57.0% 59.4% 59.6% 58.9% 60.8% 60.6% 63.7% 65.7% 64.9%
Operating expenses 252,283(1) 267,395(1) 220,649 205,241 186,913 153,920 115,671 86,494 59,658 39,670
Operating expenses
percent to sales 44% 52% 45% 46% 46% 45% 44% 47% 48% 49%
Operating income 69,678 25,416 68,421 62,071 51,082 53,693 45,116 30,787 22,186 12,359
Operating income
percent to sales 12% 5% 14% 14% 13% 16% 17% 17% 18% 15%
-----------------------------------------------------------------------------------------------------------------------------------
NET INCOME $60,982 $16,607 $56,945 $49,705 $36,987 $35,393 $29,344 $19,395 $13,519 $8,615
-----------------------------------------------------------------------------------------------------------------------------------
Cash flow data
Net cash provided by
operating activities $140,621 $121,919 $97,445 $81,127 $36,102 $21,622 $12,696 $15,197 $1,780 $9,166
Acquisition of
property, plant
and equipment 53,858 33,668 60,759 31,478 27,395 36,963 17,807 9,801 10,781 9,090
Depreciation of
property, plant
and equipment 40,395 35,111 31,778 28,910 19,893 16,889 10,547 8,056 5,463 2,917
Share data
Average shares and
equivalents
outstanding 24,649 23,769 23,457 22,419 20,894 20,712 20,257 19,974 19,391 19,133
Net income per share $2.47 $0.70 $2.43 $2.22 $1.77 $1.71 $1.45 $0.97 $0.70 $0.45
Common stock price
High $38.50 $41.25 $54.25 $50.62 $29.00 $35.25 $31.50 $40.50 $26.00 $25.50
Low $23.25 $20.25 $29.50 $20.75 $14.62 $19.25 $19.50 $15.25 $17.25 $9.25
Book value per share $20.31 $18.13 $17.03 $14.18 $11.15 $9.12 $7.08 $5.34 $4.05 $3.24
Year end position
Total assets $613,410 $558,531 $467,182 $397,081 $327,574 $274,098 $199,787 $145,429 $107,162 $82,177
Working capital 324,431 299,293 277,600 237,977 170,306 136,257 101,273 77,389 57,279 49,100
Long-term debt and
obligations under
capital leases 7,849 10,879 523 2,552 14,267 29,402 10,170 6,157 5,685 2,623
Stockholders' equity 490,152 435,960 389,663 314,026 230,281 183,972 138,985 102,360 75,698 59,403
Return on average
stockholders' equity 13% 4% 16% 18% 18% 22% 24% 22% 20% 16%
Employees 2,878 2,610 2,622 2,492 2,381 2,147 1,711 1,224 1,069 775
-----------------------------------------------------------------------------------------------------------------------------------
<FN>
Operating expenses in 1994 and 1993 included charges of $7,800 and $36,230 respectively, to write off purchased research
and development acquired in connection with the Company's acquisitions.
</TABLE>
<TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following table summarizes the percentage relationships of income and
expense items included in the Consolidated Statements of Income for the three
years ended January 1, 1995 and the percentage changes in those items when
compared to the preceding year.
<CAPTION>
Percentage of total revenues Percentage increase (decrease)
1994 1993 1992 1994 1993 1992
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Product sales 72% 77% 79% 6% 2% 5%
Service revenue 28% 23% 21% 34% 20% 24%
---------------------------------------------------------------------------------------------
Total revenues 100% 100% 100% 12% 6% 8%
Product cost of sales 29% 30% 29% 9% 13% 2%
SERVICE EXPENSE 15% 13% 12% 30% 10% 27%
Research and development expense 15% 16% 16% 5% 2% 13%
Selling, general and
administrative expenses 28% 29% 29% 6% 6% 5%
Charge for purchased research
and development 1% 7% -- (78%) NA --
---------------------------------------------------------------------------------------------
Total costs and expenses 88% 95% 86% 4% 17% 8%
---------------------------------------------------------------------------------------------
Operating income 12% 5% 14% 174% (63%) 10%
Other income, including
interest income
and interest expense 1% 1% 1% 42% 43% 10%
INCOME BEFORE PROVISION
FOR INCOME TAXES 13% 6% 15% 152% (57%) 10%
Provision for income taxes 2% 3% 3% 15% (7%) (4%)
---------------------------------------------------------------------------------------------
Net income 11% 3% 12% 267% (71%) 15%
</TABLE>
Overview
Stratus' business objective is to be the leading supplier of
comprehensive hardware, software and service solutions where
computer availability is a critical need. To achieve this goal,
the Company will continue to execute its strategy for growth by:
Continuing to invest in the Company's core product line of
fault-tolerant computer systems that provides continuous
availability. During 1994 the Company's development efforts
focused on the Continuum product family, announced on February
6, 1995. This family of products uses the Hewlett-Packard PA-
RISC microprocessor technology for a significant performance
increase. The successful deployment of the Continuum product
family will enable the Company to make progress on the first
point of its strategy by replacing the current product line
with a new line that delivers significantly improved
price/performance.
Offering a new set of products and services that delivers
continuous availability for distributed computing. Isis
Distributed Systems, Inc. ("Isis"), which Stratus acquired in
1993, will enable the Company to fulfill this point of the
strategy by improving its strategic position in distributed
computing through development of distributed software offerings
to run on both Stratus and non-Stratus hardware.
Delivering application software and professional services to
high-growth vertical industries that require continuous
availability. A number of strategic acquisitions and
investments in software companies and products during 1993 and
1994 will enable the Company to improve and expand the scope of
its product offerings in high-growth vertical markets. These
acquisitions and investments included Shared Systems
Corporation and SoftCom Systems, Inc., in 1993, which were
merged in 1994 to form S2 Systems, Inc. The Company has also
continued to invest in telecommunications
products such as SINAP, an integrated platform for developing new
intelligent network applications, and a range of solutions for
delivering new services in the wireless and wireline markets.
In 1994, the Company acquired the TCAM Group of companies, a
leading provider of application software and services to the
worldwide securities industry and the UM-20 electronic funds
transfer and credit card processing software business of
AST/Transact, Ltd., a developer of retail banking application
software and professional services to customers in the United
Kingdom and continental Europe.
In January 1995, the Company acquired FEMCON Associates, Inc., a
firm that specializes in the development and marketing of
software applications and services for the automation of stock
exchanges and securities trading firms worldwide.
Operating results
The Company's 1994 net income of $61.0 million, or $2.47 per
share, increased $44.4 million, or 267%, from 1993 net income of
$16.6 million, or $0.70 per share. Net income in 1993 declined
71% from 1992 net income of $56.9 million, or $2.43 per share.
Operating results from the Company's 1994 acquisitions were
slightly above break-even.
Included in 1994 and 1993 results were non-recurring charges of
$7.8 million and $36.2 million, or $0.32 and $1.52 per share,
respectively, to write off purchased research and development
acquired in connection with the Company's acquisitions. Excluding
these write-offs, 1994 net income would have been $68.8 million,
or $2.79 per share, up 30% from 1993 and up 21% from 1992.
Revenues
Total 1994 revenues increased $62.9 million to $576.6 million,
12% higher than 1993. This compares with an increase of $27.4
million, or 6%, from 1992 to 1993. The increase in 1994 was
primarily due to increased software license and professional
services revenues from the 1993 and 1994 acquisitions, as well as
an 18% increase in the Company's hardware maintenance revenues.
The following table details the percentage of product sales for
each of the Company's distribution channels:
percent of total
1994 1993 1992
Domestic direct 46 50 42
International direct 35 31 33
IBM 0 5 11
Olivetti 4 2 6
NEC 6 4 2
Distributors 9 8 6
Total 100 100 100
The Company's product sales grew 6% in 1994 compared with 1993.
This compares to 2% growth in 1993 and 5% growth in 1992. In
1994, direct international product sales increased 12% over 1993,
compared to a decline of 4% in 1993 and an increase of 7% in
1992. The increase in 1994 was favorably impacted by the effects
of foreign exchange fluctuations, accounting for two percentage
points of the 12% growth, particularly in Japan and the United
Kingdom. International direct sales in 1994 were strong in Japan,
the United Kingdom and France with year over year growth of 33%,
27% and 75%, respectively, including the effects of foreign
exchange. The Company's 1994 direct product sales in the U.S.
declined by 2% from 1993 representing a 10% reduction in the
Company's hardware business due to increased competitive
pressures in the U.S., partially offset by software revenue from
acquisitions. This compares to growth of 22% and 39% in 1993 and
1992, respectively. Revenue from the Company's indirect channels
grew by 14% in 1994 from 1993. Distributor sales increased 26%,
while revenues from NEC and Olivetti increased 62% and 123%,
respectively, compared to 1993. Indirect product revenue was
adversely impacted by 94% and 60% declines in product sales to
International Business Machines Corporation (IBM), in 1994 and
1993, respectively.
The Company's service revenues grew 34% in 1994 compared with
1993. This compares to growth of 20% in 1993 and 24% in 1992.
This increased growth was due primarily to professional services
and maintenance revenues from acquisitions, which contributed
sixteen percentage points of the growth, and an increase in the
number of installed systems in the hardware business, which drove
the remaining growth.
Cost of goods sold
Product sales generated a gross margin of 59% in 1994 compared
with 60% in 1993 and 64% in 1992. The continued decline of
product gross margin in 1994 was primarily the result of
increased discounts due to the competitive economic environment,
a migration to the Company's low-end product line and repricing
actions throughout the year to remain competitive. The decline in
product margins was partially offset by component cost reductions
and improved operating efficiencies in the Company's
manufacturing plants. Management believes that this downward
pressure on product margins will continue.
Service gross margin was 47%, 46% and 41% of service revenues in
1994, 1993 and 1992, respectively. The increase in margins during
each of the years was principally due to service revenue growth
rates exceeding expense growth rates, as a result of improved
efficiencies in the service organization.
Research and development
Stratus' investment in research and development increased $3.8
million, or 5%, in 1994 to $84.3 million, compared with an
increase of $1.7 million, or 2%, in 1993. As a percentage of
total revenues, R&D expenses were 15% in 1994, and 16% in both
1993 and 1992.
These investments reflect the Company's long-standing commitment
to provide leading edge hardware and software products to the
critical online computing marketplace. Management considers these
expenditures vital to the Company's future growth and position in
a global marketplace that is becoming increasingly competitive
and complex, and will continue to target its research and
development investment strategically in areas providing the most
opportunity for future growth. In 1994, the Company's research
and development efforts were focused on developing the Continuum
system, its new line of fault-tolerant computers based on the
Hewlett-Packard PA-RISC microprocessor technology. These systems
will greatly enhance the Company's competitive position in 1995
from a price/performance standpoint. Also during the year, the
Company continued to invest in distributed computing through its
Isis subsidiary as well as application software aimed at its
targeted vertical industries. The Company expects to continue to
invest in these technologies in the normal course of its business
cycle, to bring competitive products to market, and to realize
the benefits of purchased research and development.
Selling, general and administrative
Selling, general and administrative expenses increased $9.5
million, or 6%, in 1994 to $160.2 million, compared with an
increase of $8.8 million, or 6%, in 1993. As a percentage of
total revenues, SG&A expenses were 28% in 1994, down slightly
from 29% in both 1993 and 1992.
Other income
Interest income increased due to higher interest rates, as well
as higher cash balances. Interest expense increased in 1994 due
to the outstanding debt related to the payment terms of the 1993
acquisition of Isis. Through the use of forward foreign exchange
contracts, the Company substantially negates the effects of
foreign currency fluctuations on foreign currency denominated
intercompany receivables and payables. The cost of hedging the
Company's currency exposures is included in other income and will
tend to increase in line with international growth.
Income taxes
The Company's effective tax rate was 20.9% in 1994, 45.8% in 1993
and 21.0% in 1992. The decline in the 1994 rate from 1993 was due
to a reduced level of non-deductible purchased research and
development write-offs in connection with acquisitions. The
increase from 1992 to 1993 was due to purchased research and
development write-offs in connection with the acquisitions made in 1993.
Financial condition and liquidity
The Company had cash and short-term investments of $230.0 million
at the end of 1994. Corresponding balances were $191.0 million
and $135.0 million at the end of 1993 and 1992, respectively.
Total assets at year end increased to $613.4 million, compared
with $558.5 million in 1993. Stockholders' equity grew to $490.2
million in 1994 from $436.0 million in 1993.
Cash generated from operating activities was $140.6 million in
1994 compared to $121.9 million in 1993 and $97.4 million in
1992. Cash generated from operating activities in 1994 is
attributable to profitable operations and a decrease in accounts
receivable.
In 1994, the Company used net cash of $20.7 million in the
acquisitions of businesses.
Capital expenditures were $67.0 million in 1994 compared to $51.2
million in 1993 and $71.6 million in 1992. The Company continues
to invest in capital improvements and other long-term assets,
principally software technology aimed at targeted vertical
markets, in amounts sufficient to support future growth and
enhance operations so as to maintain the highest standards of
overall quality. In 1995, the Company plans to spend
approximately $95.0 million in capital improvements and software
technologies.
Net proceeds and benefits from the Employee Stock Purchase Plan
and the Company's stock option plans were $19.9 million in 1994,
$14.4 million in 1993 and $15.6 million in 1992. In April 1994,
the Board of Directors authorized the purchase of up to 1.2
million shares of the Company's common stock in the open market.
Approximately 0.9 million shares were repurchased under this
authorization in 1994 for $31.4 million; the remaining 0.3
million shares were purchased in January 1995 for approximately
$8.0 million. In January 1995, the Board of Directors authorized
the purchase of an additional 1.2 million shares of the Company's
common stock on the open market. The purchases will be funded by
normal working capital and will take place from time to time as
market conditions warrant.
The Company believes that funds necessary to support its
operations in the foreseeable future will be generated by cash
flow from operations, supplemented by continued stock issuance
from the Employee Stock Purchase Plan and stock option plans.
These sources can be augmented by short-term borrowings and
revolving credit arrangements which currently total $50.0
million. The Company will continue to seek out potential
acquisition candidates to expand its offerings of software
solutions in line with its three-point strategy.
Outlook and risks
Future operating results of the Company will be dependent, in
part, upon its ability to continue to execute its three-point
strategy for growth adopted in 1993. The strategy requires that
the Company execute the following steps: continue to invest in
its core product line of fault-tolerant computer systems that
provides continuous availability by developing and introducing
new products such as the Continuum system family; offer a new set
of products and services that delivers reliable application and
database management in a distributed computing environment, such
as the products from the Company's Isis subsidiary; and deliver
application software and professional services to high-growth
markets that require continuous availability. The Company's
targeted markets include: telecommunications, banking, brokerage,
retail, travel and transportation, healthcare, gaming, computer
based services and government.
The Company historically recognizes a large percentage of its
revenues in the latter part of each quarter. This makes revenue
forecasting unpredictable, and could subject the Company to
fluctuations in revenues and earnings. Management believes that
the introduction of the Continuum product line, and the timely
future release of lower priced products now under development
will position the Company competitively in the marketplace.
Revenue growth, however, will be dependent upon the migration of
customers to the new products, and successfully winning new
accounts in a competitive and fast changing marketplace.
Management believes that the shift in product mix to the more
price competitive lower end products will have an unfavorable
impact on product margins. The Company's goal is to offset this
trend with increased unit volumes, and by broadening its
traditional hardware offerings with comprehensive software
solutions and distributed computing products, while continuing to
focus on controlling the cost structure of the Company.
CONSOLIDATED STATEMENTS OF INCOME
For the years ended January 1, 1995, January 2, 1994 and January 3, 1993
In thousands except per share amounts 1994 1993 1992
Revenues
Product sales $416,112 $393,804 $386,262
Service 160,444 119,876 100,004
Total revenues 576,556 513,680 486,266
Costs and expenses
PRODUCT COST OF SALES 170,044 155,604 137,995
Service expense 84,551 65,265 59,201
Research and development expense 84,263 80,494 78,768
Selling, general and administrative expenses 160,220 150,671 141,881
Charge for purchased research and development 7,800 36,230 --
Total costs and expenses 506,878 488,264 417,845
Operating income 69,678 25,416 68,421
Interest income 7,408 4,613 4,272
Interest expense (1,057) (567) (1,002)
Other income 1,087 1,190 391
------- ------- -------
INCOME BEFORE PROVISION FOR INCOME TAXES 77,116 30,652 72,082
Provision for income taxes 16,134 14,045 15,137
------- ------- -------
Net income $60,982 $16,607 $56,945
------- ------- -------
Earnings per share $2.47 $0.70 $2.43
------- ------- -------
Shares used to compute earnings per share 24,649 23,769 23,457
CONSOLIDATED BALANCE SHEETS
At January 1, 1995 and January 2, 1994
In thousands except share and per share amounts
1994 1993
--------- ---------
Assets
Current assets
Cash and cash equivalents $230,010 $191,005
Accounts receivable, net 140,212 151,105
Inventories 43,237 39,906
Prepaid expenses 7,587 6,830
Other current assets 16,493 19,275
-------- --------
Total current assets 437,539 408,121
Property, plant and equipment,
less accumulated depreciation 116,802 102,683
OTHER ASSETS, NET 59,069 47,727
-------- ---------
Total assets $613,410 $558,531
Liabilities and stockholders' equity
Current liabilities
Accounts payable $20,020 $17,178
Accrued expenses:
Payroll 18,777 15,401
Other 28,167 21,957
Total accrued expenses 46,944 37,358
Income taxes payable 27,887 30,103
Short-term borrowings and obligations 5,783 4,372
Deferred revenue 12,474 19,817
------- -------
Total current liabilities 113,108 108,828
Long-term obligations and deferrals 10,150 13,743
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 150,000,000
shares authorized, 25,017,414 and
24,047,391 shares issued and outstanding
in 1994 and 1993, respectively 250 240
Junior common stock, $.01 par value,
500,000 shares authorized NA NA
Additional paid-in capital 191,971 168,095
Retained earnings 330,566 269,584
Cumulative translation adjustment (1,233) (1,959)
------- --------
SUBTOTAL 521,554 435,960
Less: shares in treasury, at cost
(888,200 shares) (31,402) NA
Total stockholders' equity 490,152 435,960
-------- --------
Total liabilities and stockholders' equity $613,410 $558,531
-------- --------
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the period December 29, 1991, to January 1, 1995
<CAPTION>
Additional Cumulative Total
Common paid-in Retained Treasury translation stockholders'
in thousands, except share amounts stock capital earnings stock adjustment equity
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 29, 1991 $ 222 $ 117,333 $196,032 $ -- $ 439 $ 314,026
Repurchase of 691 shares of
common stock -- -- -- (31) -- (31)
EXERCISE OF 489,420 OPTIONS ISSUED
UNDER EMPLOYEE STOCK OPTION PLANS 5 7,787 -- 31 -- 7,823
Issuance of 237,514 shares of
common stock under employee
stock purchase plan 2 7,712 -- -- -- 7,714
Foreign currency translation adjustment -- -- -- -- (2,061) (2,061)
Tax benefit from non-qualified
stock options -- 5,128 -- -- -- 5,128
Compensation expense associated with
grant of stock options -- 119 -- -- -- 119
Net income for the year ended
January 3, 1993 -- -- 56,945 -- -- 56,945
----------------------------------------------------------------------------------------------------------------------------
Balance at January 3, 1993 229 138,079 252,977 -- (1,622) 389,663
REPURCHASE OF 413 SHARES OF COMMON STOCK -- -- -- (12) -- (12)
Exercise of 519,456 options issued
under employee stock option plans 5 8,032 -- 12 -- 8,049
Issuance of 242,660 shares of
common stock under employee stock
purchase plan 2 6,285 -- -- -- 6,287
Foreign currency translation adjustment -- -- -- -- (337) (337)
Tax benefit from non-qualified
stock options -- 3,585 -- -- -- 3,585
Compensation expense associated with
grant of stock options -- 118 -- -- -- 118
Issuance of 410,607 shares of common
stock related to the acquisition of
Isis Distributed Systems, Inc. 4 11,996 -- -- 12,000
Net income for the year
ended January 2, 1994 -- -- 16,607 -- -- 16,607
-------------------------------------------------------------------------------------------------------------------------------
Balance at January 2, 1994 240 168,095 269,584 -- (1,959) 435,960
Repurchase of 888,523 shares of
common stock -- -- -- (31,408) -- (31,408)
Exercise of 641,881 options issued
under employee stock option plans 7 12,291 -- 6 -- 12,304
Issuance of 329,272 shares of
common stock under employee stock
purchase plan 3 7,481 -- -- -- 7,484
Foreign currency translation adjustment -- -- -- -- 726 726
Tax benefit from non-qualified
stock options -- 4,029 -- -- -- 4,029
Compensation expense associated with
grant of stock options -- 75 -- -- -- 75
Net income for the year ended
January 1, 1995 -- -- 60,982 -- -- 60,982
-----------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 1995 $250 $191,971 $ 330,566 $(31,402) $ (1,233) $490,152
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended January 1, 1995, January 2, 1994 and January 3, 1993
in thousands 1994 1993 1992
-------------------------------------------------------------------------
Operating activities
Cash flows from operating activities:
Net income $60,982 $16,607 $56,945
Adjustments to reconcile net income
to net cash provided
by operating activities:
Depreciation and amortization 58,233 44,199 36,517
Charge for purchased research
and development 7,800 36,230 --
Add (deduct) changes in working capital:
(INCREASE) DECREASE IN ACCOUNTS RECEIVABLE 20,756 (16,006) 2,664
(Increase) decrease in inventory (2,439) 24,001 (8,371)
Increase in accounts payable and
accrued liabilities 2,751 1,767 3,122
Increase (decrease) in income
tax payables (48) 6,394 7,188
Net increase (decrease) in other
working capital items (7,414) 8,727 (620)
-------------------------------------------------------------------------
Net cash provided by operating activities 140,621 121,919 97,445
Investing activities
Cash flows from investing activities:
Acquisition of property, plant and
equipment (53,858) (33,668) (60,759)
Acquisition of businesses,
net of cash acquired (20,659) (26,787) --
Acquisition of other assets (13,106) (17,498) (10,826)
----------------------------------------------------------------------------
Net cash used in investing activities (87,623) (77,953) (71,585)
Financing activities
Cash flows from financing activities:
Net proceeds and benefits from
employee stock plans 19,863 14,443 15,626
Acquisition of treasury stock (31,408) -- --
Reduction of long-term debt (2,684) -- --
Reduction of obligations under
capital lease (514) (2,039) (3,826)
Net cash (used in) provided by
financing activities (14,743) 12,404 11,800
EFFECT OF EXCHANGE RATE CHANGES ON CASH 750 (327) (1,118)
-------------------------------------------------------------------------
Net increase in cash and cash equivalents 39,005 56,043 36,542
Cash and cash equivalents at
beginning of year 191,005 134,962 98,420
-------------------------------------------------------------------------
Cash and cash equivalents at end of year $230,010 $191,005 $134,962
1. Significant accounting policies
Principles of consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries, all of which are wholly-owned. All
intercompany transactions and balances have been eliminated in
consolidation. Certain amounts in the consolidated financial
statements of the prior years have been reclassified to conform
to the current year presentation. Such reclassifications had no
effect on previously reported results of operations.
Cash equivalents
Cash equivalents include highly liquid investments with original
maturities generally of three months or less at time of
acquisition and are comprised primarily of government securities,
commercial paper and bank notes carried at cost, which
approximates fair value.
In 1994, the Company adopted Statement of Financial Accounting
Standards No. 115, (Accounting for Certain Investments in Debt
and Equity Securities.) Adoption of this standard did not have a
material effect on the Company's financial position or results of
operations.
Translation of foreign currencies
The Company translates the assets and liabilities of its foreign
subsidiaries at the exchange rates in effect at the balance sheet
date. Revenues and expenses are translated at average exchange
rates for the period.
Gains and losses from foreign currency translation are recorded
in (cumulative translation adjustment), a separate component of
stockholders' equity.
Accounts receivable
The Company states its accounts receivable at their estimated net
realizable value. The allowance for doubtful accounts was $8.6
million at January 1, 1995, and $6.1 million at January 2, 1994.
Inventories
Inventories are valued at the lower of cost (first-in, first-out)
or market.
Property, plant and equipment
Property, plant and equipment is stated at cost. Depreciation
expense is calculated using the straight-line method based upon
the following estimated useful lives:
Land improvements 15 years
Buildings and improvements 15-31 1/2 years
Machinery and equipment 2-5 years
Leasehold improvements terms of leases
Service and spare parts 3-5 years
Software
Costs related to the conceptual formulation and design of
software are expensed as research and development. Costs incurred
subsequent to attaining technological feasibility to produce the
finished product are generally capitalized. These costs are
amortized over the lesser of three years or the estimated product
life cycle. (See Note 6.)
Intangible assets
The Company has classified as goodwill the cost in excess of fair
value of net assets acquired in purchase transactions.
Unamortized goodwill costs, included in other assets on the
consolidated balance sheets, were $10.5 million at January 1,
1995 and $4.4 million at January 2, 1994. Goodwill is being
amortized using the straight-line method over a period of seven
years.
Revenue recognition
Revenue from product sales is generally recognized at the time of
shipment. Software revenue is recognized at the time of delivery.
Service and product support revenues are recognized over the
contractual period or as the services are provided.
Income taxes
The Company provides deferred taxes to recognize temporary
differences between financial reporting and tax accounting.
Research and development tax credits are accounted for using the
flow-through method. The Company's practice is to reinvest the
earnings of its foreign subsidiaries in those operations and to
repatriate retained earnings only when it is advantageous to do
so. Through the end of 1994, there was approximately $176.2
million of unremitted earnings from the Irish manufacturing
subsidiary. Additional U.S. taxes resulting from the incremental
U.S. tax rate over the Irish tax rate will be provided if these
earnings are remitted.
Foreign exchange contracts
The Company enters into forward foreign exchange contracts to
hedge foreign currency transactions on a continuing basis for
periods consistent with its committed exposures. The Company's
foreign exchange contracts do not subject the Company to risk due
to exchange rate movements because gains and losses on these
contracts offset losses and gains on the assets, liabilities and
transactions being hedged. As of January 1, 1995 and January 2,
1994, the Company had $62.1 million and $59.5 million,
respectively, of net foreign exchange contracts outstanding,
predominantly in European currencies and Japanese yen. The
maturities of foreign exchange contracts generally do not exceed
six months. Foreign currency transaction gains and losses, which
are included in other income, as well as unrealized gains and
losses on forward foreign exchange contracts, are not material to
the Company's consolidated financial statements.
Concentration of credit risk
The Company sells its products to customers in diversified
industries, primarily in the United States, Europe and the
Pacific/Americas. The Company performs ongoing credit evaluations
of its customers and generally does not require collateral. The
Company maintains reserves for potential credit losses and such
losses have been within management's expectations.
The Company invests its excess cash principally in deposits with
major banks and in money market securities of companies and
municipal government entities with strong credit ratings. These
companies are from a variety of industries. These securities
typically mature within three months of their purchase date and,
therefore, are subject to minimal risk. The Company has not
experienced losses related to these investments.
Employee stock plans
Proceeds from the sale of common stock issued under the employee
stock option and purchase plans are credited to common stock at
the par value. The excess of the share price over par value is
credited to additional paid-in capital. Income tax benefits
arising from employees' premature disposition of purchased shares
and exercise of non-qualified stock options are credited to
additional paid-in capital.
Net income per share
Primary earnings per share is based on the weighted average
number of shares of common stock and common stock equivalents
outstanding. Fully diluted earnings per share has not been
presented as the amount does not differ significantly from
primary earnings per share.
2. Acquisitions
In November 1994, the Company acquired all of the outstanding
stock of the TCAM Group of companies ("TCAM") for approximately
$16.0 million in cash plus additional consideration of up to
$33.0 million based upon TCAM's attainment of planned objectives
over the next three years. The TCAM Systems Group includes TCAM
Systems, Inc. in New York and TCAM Systems (U.K.) Ltd. in London
and Edinburgh, Scotland. TCAM provides system integration and
customized software solutions to the worldwide securities
industry, and offers a broad range of application solutions on
PC, client/server, distributed and continuously available
computing environments. As part of this acquisition, the Company
became aware of a pending action filed against TCAM by Applebee
Technologies, Inc. alleging breach of contract, unfair
competition and violation of anti-trust laws. Prior to completing
the acquisition, the Company diligently investigated the claim
and determined that there were strong defenses. The Company
believes that the outcome will not materially affect its
business.
In December 1994, the Company acquired certain assets of
AST/Transact Ltd. of London ("AST") for $2.9 million in cash.
AST's primary product acquired by the Company is its UM-20
electronic funds transfer (EFT) and credit card processing
software for retail banking. AST develops and markets retail
banking application software and professional services to
customers in the United Kingdom and continental Europe.
In October 1993, the Company acquired all of the outstanding
stock of Shared Financial Systems, Inc. ("Shared") for
approximately $14.6 million in cash. Shared develops and markets
an extensive line of software and professional services to the
financial services, retail and healthcare industries.
In October 1993, the Company acquired substantially all of the
assets and certain liabilities of BellSouth Systems Integration,
Inc. for approximately $16.8 million in cash. These assets and
liabilities were placed into a wholly-owned subsidiary of the
Company, known as SoftCom Systems, Inc. ("SSI"). SSI develops and
markets communications middleware and related professional
services.
In December 1993, the Company acquired all of the outstanding
stock of Isis Distributed Systems, Inc. ("Isis") for an aggregate
purchase price of approximately $24.0 million, consisting of
410,607 shares of the Company's common stock valued at $12.0
million, $7.5 million in promissory notes, $4.1 million in
deferred compensation payments to Isis stock option holders and
$0.4 million in cash. Isis develops advanced middleware products
involving networked desktop computers and shared systems. As part
of this acquisition, the Company became aware of a claim of
patent infringement filed against Isis by Teknekron Software
Systems, Inc. Prior to completing the acquisition, the Company
diligently investigated the claim and determined that there were
strong defenses. The Company believes that the outcome will not
materially affect its business.
Each of the Company's acquisitions has been accounted for using
the purchase method of accounting. The excess cost over the fair
value of the net assets is $11.4 million, which is being
amortized on a straight-line basis over seven years. In
connection with its acquisitions, the Company incurred non-
recurring charges of $7.8 million in 1994 and $36.2 million in
1993 for purchased research and development. These amounts were
charged to operations because, in management's opinion,
technological feasibility for this purchased research and
development had not been established.
3. Investments
Management determines the appropriate classification of debt
securities at the time of purchase and reevaluates such
designation as of each balance sheet date. Available-for-sale
securities of $196.8 million included within cash and cash
equivalents are carried at fair value. Unrealized gains and
losses are not material. The amortized cost of debt securities in
this category is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization is included
in other income. The cost of securities sold is based on the
specific identification method. Interest and dividends on
securities classified as available-for-sale are included in other
income.
The following is a summary of available-for-sale securities at
January 1, 1995:
estimated
in thousands fair value
-------------------------------------------------------------------------
Time deposits at banks $138,460
Obligations of states and political subdivisions 32,145
Commercial paper 26,150
-------------------------------------------------------------------------
Total debt securities $196,755
4. Inventories
Inventories consisted of the following:
in thousands 1994 1993
-------------------------------------------------------------------------
Finished products $24,802 $16,854
Work in process 2,836 10,899
Parts and assemblies 15,599 12,153
-------------------------------------------------------------------------
Total $43,237 $39,906
5. Property, plant and equipment
Property, plant and equipment consisted of the following:
in thousands 1994 1993
-------------------------------------------------------------------------
Land and improvements $ 3,241 $ 3,241
Buildings 31,403 25,498
Machinery and equipment 220,317 178,706
Leasehold improvements 24,711 22,948
Service and spare parts 17,071 13,306
Construction in progress 3,419 2,594
-------------------------------------------------------------------------
Total 300,162 246,293
Less accumulated depreciation 183,360 143,610
-------------------------------------------------------------------------
Total $116,802 $102,683
6. Capitalized software development costs
Unamortized software development costs, included in other assets
on the consolidated balance sheets, were $31.2 million and $29.8
million at January 1, 1995 and January 2, 1994, respectively.
Amortization expense, along with adjustments to net realizable
value, is included in product cost of sales, and amounted to
$16.7 million in 1994, $8.8 million in 1993 and $4.7 million in
1992.
7. Income taxes
The components of income (loss) before provisions for income
taxes consisted of the following:
in thousands 1994 1993 1992
-------------------------------------------------------------------------
Domestic $13,010 $ (18,771) $ 37,579
Foreign 64,106 49,423 34,503
Total $77,116 $ 30,652 $ 72,082
The provisions (benefits) for income taxes consisted of the
following:
in thousands 1994 1993 1992
-------------------------------------------------------------------------
Current
Federal $6,612 $ 10,620 $ 8,350
State 1,216 736 1,148
Foreign 9,666 10,444 5,683
-------------------------------------------------------------------------
Total 17,494 21,800 15,181
-------------------------------------------------------------------------
Deferred
Federal (759) (5,235) 456
State (192) (312) 124
Foreign (409) (2,208) (624)
-------------------------------------------------------------------------
Total (1,360) (7,755) (44)
Total $16,134 $ 14,045 $ 15,137
The following table reconciles the Federal income tax rate to the
tax rate used in the calculation of the provisions for income
taxes as reported in the financial statements:
1994 1993 1992
-------------------------------------------------------------------------
Income tax at U.S.
Federal statutory rate 35.0% 35.0% 34.0%
State income taxes,
net of Federal benefit 0.9% 0.9% 1.2%
Foreign sales corporation
exempt income (0.3%) (0.5%) (0.4%)
Loss from foreign subsidiaries 1.6% 3.3% --
Research and development
credits (1.0%) (9.2%) (1.9%)
Non-deductible charge in
connection with acquisitions 3.5% 29.1% --
U.S. Federal statutory rate
greater than foreign rate (18.9%) (11.0%) (11.4%)
Other, net 0.1% (1.8%) (0.5%)
-------------------------------------------------------------------------
Effective tax rate 20.9% 45.8% 21.0%
The Company paid income taxes of $18.4 million in 1994, $10.7
million in 1993 and $10.1 million in 1992.
The earnings from products manufactured and sold by the Company's
Ireland manufacturing subsidiary are subject to a 10% tax rate
through December 2010.
Significant components of the Company's deferred tax assets and
(liabilities) as of January 1, 1995 and January 2, 1994 were as
follows:
in thousands 1994 1993
-------------------------------------------------------------------------
Deferred tax assets
Depreciation/amortization $ 6,453 $ 6,240
Inventory/other reserves 13,427 10,891
Carryforward losses and state tax credits 5,804 4,141
Deferred gain on sale of building 1,151 1,378
Intercompany profit elimination 826 1,687
Deferred compensation 1,541 2,028
Other 2,810 2,996
-------------------------------------------------------------------------
Total deferred tax assets 32,012 29,361
Valuation allowance for deferred tax asset (3,947) (5,140)
-------------------------------------------------------------------------
Net deferred tax assets $ 28,065 $ 24,221
The components of the provision for deferred taxes for the year
ended January 3, 1993 were as follows:
in thousands 1992
-------------------------------------------------------------------------
Net increase in intercompany profits in
foreign inventories $397
Foreign currency transactions (1,359)
Gain on sale-leaseback of
land and building 221
Non-deductible reserves 815
Depreciation (1,091)
Other, net 973
-------------------------------------------------------------------------
Total $ (44)
8. Debt
The Company has a Multicurrency Revolving Credit Agreement
providing for up to $50 million in borrowings on a revolving
basis through March 1997, at the lower of the bank's base rate
(8.5% at January 1, 1995) or the domestic Certificate of Deposit
rate plus 0.50 of 1% per annum or at the London Interbank Offered
Rate plus 0.375 of 1% per annum. There have never been any
borrowings against this Agreement. This Agreement requires the
Company to maintain stated minimum fixed charge coverage, debt to
net worth and quick ratio levels. At January 1, 1995 and January
2, 1994, the Company was in compliance with these covenants.
In 1993, the Company issued $7.5 million of promissory notes and
$4.1 million of deferred compensation obligations in connection
with the Isis acquisition. The promissory notes are payable in
four annual installments of $1.6 million in each January of 1995,
1996, 1997 and 1998. These notes accrue interest at a floating
rate equal to the sum of .00465 plus the applicable federal rate
for mid-term obligations. The remaining deferred compensation is
payable in annual installments in January of each of the
following years: $1.0 million in 1995, $1.0 million in 1996 and
$0.8 million in 1997. These payments are not interest bearing and
thus have been discounted to net present value using a 6.5%
discount rate.
Certain subsidiaries have entered into credit arrangements with
local banks, principally in the form of overdraft borrowings, for
the purpose of short-term liquidity management. Borrowings under
these agreements, whose carrying amounts approximated fair value,
were $1.5 million and $1.3 million at January 1, 1995 and January
2, 1994, respectively, with weighted average interest rates of
3.2% in 1994 and 6.0% in 1993.
The Company paid interest of approximately $0.3 million in 1994,
$0.5 million in 1993 and $0.9 million in 1992.
9. Stock plans
Employee option plans
The Company maintains two active stock option plans: the 1983
Stock Option Plan and the Non-Qualified Stock Option Plan. The
1983 Stock Option Plan provides for the granting of both
incentive stock options and non-statutory (non-qualified) stock
options. The Plans have a maximum authorized number of shares
available for grant of 8,780,200 and limit the number of shares
for which options may be granted to any person in any fiscal year
to a maximum of 100,000 shares. The option prices for non-
qualified grants under each plan are determined by the
Compensation and Stock Option Committee of the Board of
Directors, subject to a minimum option price of not less than 50%
of the fair market value of the stock at the time of grant for
options issued under the 1983 Stock Option Plan. The option price
for grants intended to qualify as incentive stock options under
Section 422A of the Internal Revenue Code, as amended, shall not
be less than 100% of the fair market value of the stock on the
date of grant. The terms of exercise of the options are also
determined by the Committee. All options granted to date become
exercisable in full not later than one year from the date of
grant and vest over a five year period from the date of grant.
At January 1, 1995 and January 2, 1994, a combined total of
1,556,025 and 1,417,547 shares, respectively, were available for
future grants under both Plans. Substantially all options have
been issued at the fair market value of the stock on the date of
grant.
Stock option activity was as follows:
Option price
Shares per share Shares per share
Outstanding, December 29, 1991 3,308,359 $ .75-46.25
Granted 85,432 24.00-53.37
Exercised (489,420) .75-40.00
Canceled (187,134) 14.12-46.25
-----------------------------------------------------------------------------
Outstanding, January 3, 1993 2,717,237 $1.50-53.37
Granted 1,637,083 11.62-35.37
Exercised (519,456) 1.50-38.00
Canceled (1,008,990) 12.44-53.37
-----------------------------------------------------------------------------
Outstanding, January 2, 1994 2,825,874 $8.75-51.25
Granted 1,236,475 18.69-38.25
Exercised (641,881) 8.75-30.75
Canceled (274,953) 15.25-51.25
----------------------------------------------------------------------------
Outstanding, January 1, 1995 3,145,515 $8.94-46.37
-----------------------------------------------------------------------------
Exercisable, January 1, 1995 3,145,515 $8.94-46.37
During 1993, the Board of Directors authorized the Company to
offer holders of all outstanding, unexercised stock options
granted between March 1, 1991 and January 20, 1993 under the
Company's stock option plans ("old options") the opportunity to
exchange such options for an equal number of options ("new
options") under the 1983 Stock Option Plan and the Non-Qualified
Stock Option Plan. Approximately 651,000 shares were exchanged,
with all new options issued at the fair market value ($23.25) of
the Company's common stock on the date of the exchange (September
8, 1993). These new options were non-qualified and began a new
five year vesting schedule.
Employee purchase plan
Under the Company's Employee Stock Purchase Plan, employees may
purchase the Company's common stock, at a price equal to 85% of
the fair market value of the stock, as defined. In April 1991,
the Board of Directors authorized an increase in the number of
shares which may be issued under the Plan from 1,700,000 to
2,700,000. On April 19, 1994, the shareholders approved the
amendment adopted by the Board of Directors to extend the Plan to
December 31, 2004. Common stock reserved for future grants
aggregated 285,347 and 614,619 shares at January 1, 1995 and
January 2, 1994, respectively. There were 329,272 shares issued
at an average price of $22.76 in 1994, 242,660 shares issued at
an average price of $25.91 in 1993 and 237,514 shares at an
average price of $32.48 in 1992.
Stockholder rights plan
In December 1990, the Company adopted a Stockholder Rights Plan
and declared a distribution of Rights under the Plan to holders
of record of common stock on December 20, 1990. The Plan is
designed to assure that all Stratus Computer, Inc. stockholders
receive fair and equal treatment in the event of any unsolicited
attempt to acquire control of the Company. Under the Plan, each
share of common stock carries one Right to purchase additional
stock at a purchase price of $110.00 subject to adjustment in
certain circumstances. The Rights are not exercisable or
transferable apart from the common stock until ten days after,
(i) another person or group of persons has acquired, or obtained
the right to acquire, at least 20% of the common stock, (ii)
notice of a tender or exchange offer that would result in another
person or group of persons beneficially owning at least 20% of
the outstanding shares of common stock or (iii) determination by
the Board of Directors of the Company that a 15% stockholder is
an "Adverse Person".
On the occurrence of certain Triggering Events, as described in
the Plan, holders of Rights become entitled, upon exercise, to
purchase shares of the Company's common stock at a substantial
discount. The Rights are redeemable by the Company for $0.01 per
Right and expire on December 4, 2000.
Common stock repurchase program
In April 1994, the Board of Directors approved a plan to
repurchase up to 1.2 million shares of common stock on the open
market. The purpose of this program is to fund the 1983 Stock
Option Plan and the Employee Stock Purchase Plan. In fiscal 1994,
the Company repurchased 888,200 shares at a cost of approximately
$31.4 million under the program.
10. Employee benefit plans
Stratus employee capital accumulation plan (SECAP)
The Company has a benefit plan available to all domestic
employees which qualifies as a deferred compensation plan under
Section 401(k) of the Internal Revenue Code. Employees may
contribute to the plan from 2% to 15% of their salary, on a pre-
tax basis, subject to certain statutory limitations ($9,240 in
1994). The Company matches up to 100% of the first 3% of pre-tax
contributions based on performance criteria established by the
Board of Directors. Contributions are invested at the direction
of the employee in one or more investment funds. Company
contributions to the plan were $3.3 million in 1994, $2.7 million
in 1993 and $2.8 million in 1992.
11. Commitments
Lease obligations
The Company leases under operating leases one of three buildings
at its headquarters location in Marlboro, MA (the other two were
purchased in October 1992), and its manufacturing facility in
Marlboro, MA. The leases range from one to seven years and have
various renewal options. Leases of branch sales offices, also
operating leases, expire at various times through 2001. These
leases generally contain renewal options for periods ranging from
one to twenty years and require the Company to pay all executory
costs.
The following is a schedule of required future minimum lease
payments under operating leases at January 1, 1995:
Operating
in thousands leases
-------------------------------------------------
1995 $15,180
1996 12,025
1997 10,214
1998 7,620
1999 5,622
Subsequent years 3,972
-------------------------------------------------
Total minimum lease payments $54,633
Total rental expense was $16.3 million in 1994, $17.5 million in
1993 and $20.3 million in 1992.
12. Segment, geographic and customer information
The Company operates in one industry segment: the design,
manufacture, marketing and service of continuously available
online transaction processing systems and related software.
Geographic information for 1994, 1993 and 1992 was
as follows:
in thousands 1994 1993 1992
-------------------------------------------------------------
Revenues
United States $310,864 $ 287,813 $ 271,692
Intercompany 27,377 27,673 37,619
-------------------------------------------------------------
Total 338,241 315,486 309,311
Europe 178,669 151,017 146,746
Intercompany 89,909 80,563 82,597
-------------------------------------------------------------
Total 268,578 231,580 229,343
Other international 87,023 74,850 67,828
Eliminations (117,286) (108,236) (120,216)
-------------------------------------------------------------
Total revenues $ 576,556 $ 513,680 $ 486,266
Operating income
United States $ 9,010 $ (24,968) $ 33,768
Europe 49,760 47,161 33,738
Other international 9,302 1,298 978
Eliminations 1,606 1,925 (63)
-------------------------------------------------------------
Total operating
income $ 69,678 $ 25,416 $ 68,421
Assets
United States $ 458,551 $ 413,252 $ 353,579
Europe 109,067 100,292 101,945
Other international 38,155 33,575 31,584
Corporate assets
(cash and
equivalents) 230,010 191,005 134,962
Eliminations (222,373) (179,593) (154,888)
-------------------------------------------------------------
Total assets $613,410 $ 558,531 467,182
Intercompany transactions are accounted for at prices that
approximate arm's length transactions. The Company has
distribution agreements with various companies, including
IBM. During 1992, product and service revenues from IBM accounted
for 13% of net sales.
UNAUDITED QUARTERLY FINANCIAL DATA
in thousands, except per share amounts and stock prices
<TABLE>
<CAPTION>
Net income
Total Gross Net income (Loss) Stock Prices
revenues profit (loss) per share High Low
<S> <C> <C> <C> <C> <C> <C>
Fiscal 1994
First quarter $135,407 $ 71,806 $ 11,389 $ 0.46 $ 31.75 $ 25.00
Second quarter 144,379 79,946 17,367 0.71 30.38 23.25
Third quarter 145,746 81,782 18,807 0.76 38.50 27.75
Fourth quarter 151,024 88,427 13,419 0.54 38.50 33.75
---------------------------------------------------------------------------------------------------------
Total $576,556 $ 321,961 $ 60,982 $ 2.47
Fiscal 1993
First quarter $114,648 $ 64,797 $ 8,820 $ 0.37 $ 36.50 $ 29.75
Second quarter 124,104 71,312 13,498 0.57 41.25 29.62
Third quarter 126,785 72,116 11,359 0.48 33.12 20.25
Fourth quarter 148,143 84,586 (17,070) (0.72) 32.25 24.62
---------------------------------------------------------------------------------------------------------
Total $513,680 $ 292,811 $ 16,607 $ 0.70
Fiscal 1992
First quarter $110,168 $ 64,973 $ 11,366 $ 0.49 $ 54.25 $ 43.00
Second quarter 117,424 71,667 13,508 0.58 49.50 38.87
Third quarter 123,811 74,038 14,895 0.63 48.37 40.25
Fourth quarter 134,863 78,392 17,176 0.73 44.50 29.50
---------------------------------------------------------------------------------------------------------
Total $486,266 $ 289,070 $ 56,945 $ 2.43
<FN>
Fourth quarter 1994 results include a non-recurring charge of $7.8 million to write off purchased research
and development acquired in connection with the Company's acquisitions.
Third quarter 1993 results include a non-recurring pre-tax charge of $3.8 million to cover the cost of
a 6% workforce reduction.
Fourth quarter 1993 results include a non-recurring charge of $36.2 million to write off purchased
research and development acquired in connection with the Company's acquisitions.
Stratus Computer, Inc. Common Stock is traded via the New York Stock Exchange, the Boston Stock Exchange,
the Boston Stock Exchange and the Midwest Stock Exchange under the trading symbol SRA. No dividends
have been declared on the Common Stock.
</TABLE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Stratus Computer, Inc.
We have audited the accompanying consolidated balance sheets of Stratus
Computer, Inc. as of January 1, 1995 and January 2, 1994, and the related
consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended January 1, 1995. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Stratus Computer, Inc. at January 1, 1995 and January 2, 1994
and the consolidated results of its operations and its cash flows for
each of the three years in the period ended January 1, 1995 in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
January 20, 1995
STRATUS COMPUTER, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
COVERED BY REPORT OF INDEPENDENT AUDITORS
Item 14(a) Reference
(page)
Form Annual Report
10-K to
Stockholders
Data incorporated by reference to the
attached 1994 Annual Report to
Stockholders:
Consolidated Balance Sheets at
January 2, 1994 and
January 1, 1995 21
For the years ended January 3, 1993,
January 2, 1994 and
January 1, 1995:
Consolidated Statements of
Income 20
Consolidated Statements of
Stockholders' Equity 22
Consolidated Statements of
Cash Flows 23
Notes to Consolidated Financial
Statements 24-31
Supplementary information for the years ended
January 2, 1994 and January 1, 1995:
Quarterly Financial Data (unaudited) 32
Consolidated schedules for the year ended
January 1, 1995:
II - Valuation and qualifying accounts F-1
All other schedules have been omitted since the required
information is not applicable or not present in amounts sufficient
to require submission of the schedule, or because the information
required is included in the Consolidated Financial Statements or
the Notes thereto.
The financial statements listed in the preceding index which
are included in the 1994 Annual Report to Stockholders are hereby
incorporated by reference. With the exception of the pages listed
in the preceding index, and pages 14 - 19 and 32 noted in items 5
through 7, the 1994 Annual Report to Stockholders is not to be
deemed filed as part of this report.
<TABLE>
STRATUS COMPUTER, INC.
SCHEDULE II.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED JANUARY 1, 1995
<CAPTION>
ACCOUNTS BALANCE AT BALANCE AT
RECEIVABLE BEGINNING OF END OF
ALLOWANCE PERIOD ADDITIONS DEDUCTIONS(1) PERIOD
<S> <C> <C> <C> <C>
FISCAL
YEAR 1992 $ 5,791,839 3,026,040 (3,028,877) $5,789,002
FISCAL
YEAR 1993 $ 5,789,002 2,372,966 (2,029,129) $6,132,839
FISCAL
YEAR 1994 $ 6,132,839 4,547,856 (2,087,061) $8,593,634
<FN>
(1) Write-offs of uncollectible accounts net of recoveries.
</TABLE>
INDEX TO EXHIBITS
3.1 - Articles of Organization of Registrant. (1)
3.1 (a) - Amendments to Articles of Organization. (2) (4)
3.2 (b) - By-Laws of Registrant, as amended through January 31, 1995, (1)
filed herewith.
4.11 - Stock Option Plan (January 1983). (3)
4.11(a) - Restatement of Employee Stock Option Plan dated January 24, 1992.(9)
4.11(b) - Amendment to Option Plans da 4ted January 25, 1994. (7).
4.11(c) - Amendment to Option Plans dated January 31, 1995, filed
herewith.
4.13 - Employee Stock Purchase Plan. (3)
4.13(a) - Amended and Restated Employee Stock Purchase Plan dated
April 21, 1992. (9)
4.13(b) - Amendment to Employee Stock Purchase Plan dated January 25, 1994.
(7)
4.13(c) - Amendment to Employee Stock Purchase Plan dated January 31, 1995,
filed herewith.
4.15 - Non-Qualified Stock Option Plan (November 1984). (3)
4.15(a) - Restatement of Non-Qualified Common Stock Option Plan
dated January 28, 1992. (9)
4.17 - Multicurrency Revolving Credit Agreement between
Registrant and National Westminster Bank PLC. (2)
4.18 - Rights Agreement dated December 4, 1990. (5)
4.19 - Multicurrency Revolving Credit Agreement between Registrant and
The First National Bank of Boston, N.A., National Westminster
Bank PLC, and Banque Nationale de Paris. (8)
10.6 - Equipment Lease Agreement, dated November 12, 1981, among
Firstbank Financial Corporation, FFC Boston Leasing Corporation
and Registrant. (1)
10.17 - Lease dated March 23, 1989, between Registrant
and Industrial Development Authority, Ireland,
Blanchardstown, Ireland. (6)
10.18 - Lease dated January 30, 1990 between Registrant and LePercq
Corporate Income Fund, L.P. (2)
10.19 - Sublease, dated October 16, 1992, between Registrant and Loral
Infrared & Imaging Systems, Inc., New York City, New York. (10)
10.21 - Employment Contract for Richard Tarulli, filed herewith.
13.0 - 1994 Annual Report to Stockholders (which is not deemed to be
"filed" except to the extent that portions thereof are expressly
incorporated by reference in this Annual Report on Form 10-K).
22.1 - Subsidiaries of the Registrant, filed herewith.
23.0 - Consent of Ernst & Young LLP, filed herewith.
(1) Incorporated herein by reference to same exhibit number of
Item 16 to Registration Statement on Form S-1 (No. 2-85169)
filed with the Securities and Exchange Commission on July 15,
1983 as amended on August 25, 1983 and August 26, 1983.
(2) Incorporated herein by reference to same exhibit number of
Item 14 to Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 28, 1990.
(3) Incorporated herein by reference to Items 4 through 13 of
Registration Statements on Form S-8 (No. 33-2174,
No. 33-11864 and No. 33-28742) filed with the Securities and
Exchange Commission on December, 16, 1985, February 17, 1987
and May 15, 1989, respectively.
(4) Incorporated herein by reference to same exhibit number of
Item 14 to Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March 31,
1988.
(5) Incorporated herein by reference to Exhibit 1 to Registration
Statement on Form 8-A filed with the Securities and Exchange
Commission on December 6, 1990.
(6) Incorporated herein by reference to same exhibit number of
Item 14 to Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1989.
(7) Incorporated herein by reference to same exhibit number of
Item 14 to Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 30, 1994.
(8) Incorporated herein by reference to same exhibit number of
Item 14 to Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 28, 1991.
(9) Incorporated herein by reference to Exhibit 28 of Registration
Statement on form S-8 (33-67758) filed with the Securities and
Exchange Commission on August 23, 1993.
(10) Incorporated herein by reference to same exhibit number of Item
14 to Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 30, 1993.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 30th day of March 1995.
Stratus Computer, Inc.
BY:
ROBERT E. DONAHUE
--------------------
Robert E. Donahue,
Vice President, Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Name Title Date
WILLIAM E. FOSTER Chief Executive Officer March, 1995
(William E. Foster) & Director
(Principal Executive Officer)
GARY E. HAROIAN President & Chief Operating March, 1995
(Gary E. Haroian) Officer, Director
(Principal Executive Officer)
ROBERT E. DONAHUE Vice President, Finance March, 1995
(Robert E. Donahue) and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
ARTHUR CARR Director March, 1995
(Arthur Carr)
ALEXANDER V. D'ARBELOFF Director March, 1995
(Alexander V. d'Arbeloff)
PAUL J. FERRI Director March, 1995
(Paul J. Ferri)
GARDNER C. HENDRIE Director March, 1995
(Gardner C. Hendrie)
ROBERT M. MORRILL Director March, 1995
(Robert M. Morrill)
CANDY M. OBOURN Director March, 1995
(Candy M. Obourn)
As amended through January 31, 1995
BY-LAWS
of
STRATUS COMPUTER, INC.
ARTICLE I
Stockholders
1. Annual Meeting. The annual meeting of stockholders shall
be held within six months after the end of the fiscal year
of the corporation at such date and hour as may be fixed by
the Directors and stated in the notice of the meeting.
Purposes for which the annual meeting is to be held, in
addition to those prescribed by law, by the Articles of
Organization or by these Bylaws, may be specified by the
Directors or the President and shall be included in the
notice of the meeting. If no annual meeting is held in
accordance with the foregoing provisions, a special meeting
may be held in lieu thereof, and any action taken at such
meeting shall have the same effect as if taken at the annual
meeting.
2. Special Meeting. Special meetings of stockholders may be
called by the President or by the Directors. Upon written
application of one or more stockholders who hold at least
10% 40%1 of the capital stock entitled to vote at the
meeting, special meetings shall be called by the Clerk, or
in case of the death, absence, incapacity or refusal of the
Clerk, by another officer. The date and hour for any
special meeting of stockholders shall be as fixed by the
Directors or, in the event not fixed by the Directors, by
the President, Clerk or other officer calling the meeting.
Purposes for which a special meeting is to be held, in
addition to those prescribed by law, by the Articles of
Organization or by these Bylaws, may be specified by the
Directors or the President and shall be stated in the call
and included in the notice of the meeting.
3. Place of Meeting. All meetings of stockholders shall be
held at the principal office of the corporation unless a
different place within The Commonwealth of Massachusetts or
in any other state in the United States is fixed by the
Directors or the President and stated in the notice of the
meeting.
4. Notice of Meetings. A written notice of every meeting of
stockholders, stating the place, date and hour thereof, and
the purposes for which the meeting is to be held, shall be
given by the Clerk, or in case of death, absence, incapacity
or refusal of the Clerk, by an other officer or person
designated by the Clerk, at least seven days before the
meeting to each stockholder entitled to vote thereat and to
each stockholder, who by law, by the Articles of
Organization or by these Bylaws is entitled to such notice,
by leaving such notice with him or at this residence or
usual place of business, or by mailing it postage prepaid
and addressed to each stockholder at this address as it
appears upon the books of the corporation. No notice need
be given to any stockholder if a written waiver of notice,
executed before or after the meeting by the stockholder or
his attorney thereunto authorized, is filed with the records
of the meeting.
5. Quorum. The holders of a majority in interest of all stock
issued, outstanding and entitled to vote at a meeting shall
constitute a quorum, but holders of a lesser interest may
adjourn any meeting from time to time without further
notice; except that, if two or more classes of stock are
outstanding and entitled to vote as separate classes, then
in the case of each such class, a quorum shall consist of
the holders of a majority in interest of the stock of that
class issued, outstanding and entitled to vote. Stock owned
directly or indirectly by the corporation, if any, shall not
be deemed outstanding for the purposes of determining a
quorum.
6. Voting and Proxies. Each stockholder shall have one vote for
each share of stock entitled to vote held by him or record
according to the records of the corporation, unless
otherwise provided by the Articles of Organization.
Stockholders may vote either in person or by written proxy
dated not more than six months before the meeting named
therein. Proxies shall be filed with the Clerk of the
meeting, or of any adjournment thereof, before being voted.
Except as otherwise limited therein, proxies shall entitle
the persons named therein to vote at any adjournment of such
meeting but shall not be valid after final adjournment of
such meeting. A proxy with respect to stock held in the
name of two or more persons shall be valid if executed by
one of them unless at or prior to exercise of the proxy the
corporation receives a specific written notice to the
contrary from any one of them. A proxy purporting to be
executed by or on behalf of a stockholder shall be deemed
valid unless challenged at or prior to its exercise and the
burden of proving invalidity shall rest on the challenger.
7. Action at Meeting. When a quorum is present, the holders of
a majority of the stock present or represented and voting on
a matter (or if there are two or more classes of stock
entitled to vote as separate classes, then in the case of
each such class, the holders of a majority of the stock of
that class present or represented and voting on a matter),
shall decide any matter to be voted on by the stockholders,
except where a larger vote is required by law, the Articles
of Organization or these Bylaws. Any election by
stockholders shall be determined by a plurality of the votes
cast by the stockholders entitled to vote at the election.
No ballot shall be required for such election unless
requested by a stockholder present or represented at the
meeting and entitled to vote in the election. The
corporation shall not directly or indirectly vote any share
of its stock. If the Board of Directors determines that, in
the interest of an informed stockholder vote on any matter,
it is appropirate to adjourn any session of a meeting of
stockholders to a later date in order to make available
information materially relevant to consideration of such
matter, the President or other officer presiding at such
meeting may defer any action on such matter and, without a
stockholder vote on the matter of adjournment, adjourn the
meeting for the purpose of considering and acting on such
matter at a session to be convened either at a certain date,
time and place announced at the adjourned session, in which
event no further notice need be given, or at a date, time
and place to be later determined by the Board of Directors
or the President, in which event notice of the session to be
held by adjournment shall be given in the manner provided by
Section 4 of this Article I.
8. Action without Meeting. Any action required or permitted to
be taken at any meeting of stockholders may be taken without
a meeting if all stockholders entitled to vote on the matter
consent to the action in writing and the written consents
are filed with the records of the meetings of stockholders.
Such consent shall be treated for all purposes as a vote at
a meeting.
ARTICLE II
Directors
1. Powers. The business of the corporation shall be managed by
a Board of Directors who may exercise all the powers of the
corporation except as otherwise provided by law, by the
Articles of Organization or by these Bylaws. The Board of
Directors may from time to time issue and sell, or cause to
be issued and sold, for cash or other lawful consideration
all or any part of the authorized and unissued capital stock
of the corporation, including additional shares which may
hereafter be authorized by vote of the stockholders, as well
as any shares which may have been repurchased or otherwise
acquired by the corporation. In the event of a vacancy in
the Board of Directors, the remaining Directors, except as
otherwise provided by law, may exercise the powers of the
full Board until the vacancy is filled.
1A. Classified Board. During such time as the corporation shall
be subject to the provisions of Section 50A(a) of Chapter
156B of the General Laws of the Commonwealth of
Massachusetts and related provisions of said 50A with
respect to the classification of directors, all provisions
of Section 2 through 6 of this Article II which are
inconsistent with the provisions of said Section 50A shall
be subject to and superseded by the respective applicable
provisions of said Section 50A.
2. Election. A Board of Directors of such number, not less
than three (except that whenever there shall be only two
stockholders the number of Directors shall not be less than
two and whenever there shall be only one stockholder, or
prior to the issuance of any stock, the number of Directors
shall not be less than one), nor more than eight, as shall
be fixed by the stockholders, shall be elected by the
stockholders at the annual meeting.
3. Vacancies. Any vacancy in the Board of Directors, including
a vacancy resulting from the enlargement of the Board, may
be filled by the stockholders or, in the absence of
stockholder action, by the Directors.
4. Enlargement of the Board. The number of the Board of
Directors may be increased, to not more than the maximum
number specified in Section 2 of this Article II, at any
special meeting of the stockholders or by vote of a majority
of the directors then in office.
5. Tenure. Except as otherwise provided by law, by the
Articles of Organization or by these Bylaws, each Director
shall hold office until the next annual meeting of
stockholders and thereafter until his successor is chosen
and qualified or until he sooner dies, resigns, is removed
or becomes disqualified. Any Director may resign by
delivering his written resignation to the corporation at its
principal office or to the President, Clerk or Secretary.
Such resignation shall be effective upon receipt unless it
is specified to be effective at some other time or upon the
happening of some other event.
6. Removal. A Director may be removed from office (a) with or
without cause by vote of the holders of a majority of stock
entitled to vote in the election of Directors, provided that
the Directors of a class elected by a particular class of
stockholders may be removed only by the vote of the holders
of a majority of the shares of such class or (b) for cause
by vote of a majority of the Directors then in office. A
Director may be removed for cause only after reasonable
notice and opportunity to be heard before the body proposing
to remove him.
7. Meetings. Regular meetings of the Directors may be held
without call or notice at such places within or without The
Commonwealth of Massachusetts and at such times as the
Directors may from time to time determine, provided that any
Director who is absent when such determination is made shall
be given notice of the determination. A regular meeting of
the Directors may be held without a call or notice at the
same place as the annual meeting of stockholders, or the
special meeting held in lieu thereof, following such meeting
of stockholders.
8. Notice of Meetings. Reasonable notice of all special
meetings of the Directors shall be given to each Director by
the Secretary or if there be no Secretary, by the Clerk, or
Assistant Clerk, or in the case of the death, absence,
incapacity or refusal of such persons, by the officer or one
of the Directors calling the meeting. In any case, the
sending of notice to each Director in person or by telephone
or by telegram sent to his business or home address at least
twenty-four hours in advance of the meeting, or by written
notice mailed to his business or home address at least forty-
eight hours in advance of the meeting shall be deemed
reasonable notice. Notice need not be given to any Director
if a written waiver of notice, executed by him before or
after the meeting, is filed with the records of the meeting,
or to any Director who attends the meeting without
protesting prior thereto or at its commencement the lack of
notice to him. A notice or waiver of notice of a Directors'
meeting need not specify the purposes of the meeting.
9. Quorum. At any meeting of the Directors, a majority of the
Directors then in office shall constitute a quorum (except
that whenever there shall be fewer than three Directors, one
Director then in office shall constitute a quorum). Less
than a quorum may adjourn any meeting from time to time
without further notice.
10. Action at Meeting. At any meeting of the Directors at which
a quorum is present, the vote of a majority of those
present, unless the vote of a larger number is specified by
law, by the Articles of Organization or by these Bylaws,
shall be sufficient to decide any matter.
11. Action by Consent. Any action required or permitted to be
taken at any meeting of the Directors may be taken without a
meeting if all the Directors consent to the action in
writing and the written consents are filed with the records
of the Directors' meetings. Such consents shall be treated
for all purposes as a vote of the Directors at a meeting.
12. Committees. The directors, by vote of a majority of the
Directors then in office, may elect from its number an
Executive Committee or other committees and may delegate
thereto some or all of its powers except those which by law,
by the Articles of Organization or by these Bylaws may not
be delegated.
Except as the Directors may otherwise determine, any such
committee may make rules for the conduct of its business,
but unless otherwise provided by the Directors or in such
rules, its business shall be conducted so far as possible in
the same manner as is provided by these Bylaws for the
Directors. All members of such committees shall hold office
at the pleasure of the Directors. The Directors may abolish
any such committee at any time. Any committee to which the
Directors delegates any of its powers or duties shall keep
records of its meetings and shall upon request report its
action to the Directors. The Directors shall have power to
rescind any action of any committee, but no such rescission
shall have retroactive effect.
ARTICLE III
Officers
1. Enumeration. The officers of the corporation shall consist
of a President, a Treasurer, a Clerk, and such other
officers, including a Chairman of the Board of Directors, a
Secretary, one or more Vice Presidents, Assistant
Treasurers, Assistant Clerks and Assistant Secretaries as
the Directors may determine.
2. Election. The President, Treasurer, and Clerk shall be
elected annually by the Directors at their first meeting
following the annual meeting of stockholders. Other
officers may be chosen by the Directors at such meeting or
at any other meeting. If the office of any officer becomes
vacant, the Directors may elect or appoint a successor by
vote of a majority of the Directors present at the meeting
at which such election or appointment is made. Each such
successor shall hold office for the unexpired term of his
predecessor and until his successor shall be elected or
appointed and qualified, or until he sooner dies, resigns,
is removed or becomes disqualified.
3. Qualification. The President may, but need not be, a
Director. No officer need be a stockholder. Any two or
more offices may be held by the same person, provided that
the President and Clerk shall not be the same person. The
Clerk shall be a resident of Massachusetts unless the
corporation has a resident agent appointed for the purpose
of service of process. Any officer may be required by the
Directors to give bond for the faithful performance of his
duties to the corporation in such amount and with sureties
as the Directors may determine. The premiums for such bonds
may be paid by the corporation.
4. Tenure. Except as otherwise provided by law, by the
Articles of Organization or by these Bylaws, the President,
Treasurer and Clerk shall hold office until the first
meeting of the Directors following the annual meeting of
stockholders and thereafter until his successor is chosen
qualified or until he sooner dies, resigns, is removed or
becomes disqualified; and all other officers shall hold
office until the first meeting of the Directors following
the annual meeting of stockholders, unless a shorter term is
specified in the vote choosing or appointing them or until
he sooner dies, resigns, is removed or becomes disqualified.
Any officer may resign by delivering his written resignation
to the corporation at its principal office or to the
President, Clerk or Secretary, and such resignation shall be
effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some
other event.
5. Removal. The Directors may remove any officer with or
without cause by a vote of a majority of the entire number
of Directors then in office, provided, that an officer may
be removed for cause only after reasonable notice and
opportunity to be heard by the Directors prior to action
thereon.
6. Chairman of the Board; President; Vice Presidents. If a
Chairman of the Board of Directors is elected he shall
preside at all meetings of the Board of Directors at which
he is present and, if so designated by the Directors, shall
be the chief executive officer of the corporation.
The president shall be chief executive officer of the
corproation unless the Chairman of the Board of Directors is
so designated, in which event the president shall have such
powers and duties as may be assigned by the Directors.
The chief executive officer shall, subject to the direction
of the Directors, have general supervision and control of
the business of the corporation. He shall preside, when
present, at all meetings of stockholders.
Any Vice President shall have such powers as the Directors
may from time to time designate.
7. Treasurer and Assistant Treasurer. The Treasurer shall,
subject to the direction of the Directors, have general
charge of the financial affairs of the corporation and shall
cause to be kept accurate books of account, which shall be
the property of the corporation. He shall have custody of
all funds, securities, and valuable documents of the
corporation, except as the Directors may otherwise provide.
Any Assistant Treasurer shall have such power as the
Directors may from time to time designate.
8. Clerk and Assistant Clerks. The Clerk shall keep a record
of the meetings of stockholders. The Clerk shall also keep,
or cause to be kept, in Massachusetts, the original or
attested copies, of the Articles of Organization, Bylaws and
records of all meetings of incorporators and stockholders
for inspection by stockholders. Unless a Transfer Agent is
appointed, the Clerk shall keep or cause to be kept in
Massachusetts, at the principal office of the corporation,
or at his office, the stock and transfer records of the
corporation, in which are contained the names of all
stockholders and the record address, and the amount of stock
held by each.
In case a Secretary is not elected, the Clerk shall keep a
record of the meetings of the Directors.
Any Assistant Clerk shall have such powers as the Directors
may from time to time designate. In the absence of the
Clerk from any meeting of stockholders, an Assistant Clerk,
if one be elected, otherwise a Temporary Clerk designated by
the person presiding at the meeting, shall perform the
duties of the Clerk.
9. Secretary and Assistant Secretaries. If a Secretary is
elected, he shall keep a record of the meetings of the
Directors and in his absence, an Assistant Secretary, if one
is elected, otherwise a Temporary Secretary designated by
the person presiding at the meeting, shall keep a record of
the meetings of the Directors.
Any Assistant Secretary shall have such powers as the
Directors may from time to time designate.
10. Other Powers and Duties. Each officer shall, subject to
these Bylaws, have in addition to the duties and powers
specifically set forth in these Bylaws, such duties and
powers as are customarily incident to his office, and such
duties and powers as the Directors may from time to time
designate.
ARTICLE IV
Capital Stock
1. Certificates of Stock. Each stockholder shall be entitled
to a certificate of the capital stock of the corporation in
such form as may be prescribed from time to time by the
Directors. The certificate shall be signed by the President
or a Vice President, and by the Treasurer or an Assistant
Treasurer, but when a certificate is countersigned by a
Transfer Agent or a Registrar, other than a Director,
officer or employee of the corporation, such signatures may
be facsimiles. In case any officer who has signed or whose
facsimile signature has been placed on such certificate
shall have ceased to be such officer before such certificate
is issued, it may be issued by the corporation with the same
effect as if he were such officer at the time of its issue.
Every certificate for shares of stock which are subject to
any restriction on transfer pursuant to the Articles of
Organization, the Bylaws or any agreement to which the
corporation is a party, shall have the restriction noted
conspicuously on the certificate and shall also set forth on
the face or back either the full text of the restriction or
a statement of the existence of such restriction and a
statement that the corporation will furnish a copy to the
holder of such certificate upon written request and without
charge. Every certificate issued when the corporation is
authorized to issue more than one class or series of stock
shall set forth on its face or back either the full text of
the preferences, voting powers, qualifications and special
and relative rights of the shares of each class and series
authorized to be issued or a statement of the existence of
such preferences, powers, qualifications and rights, and a
statement that the corporation will furnish a copy thereof
to the holder of such certificate upon written request and
without charge.
2. Transfer. Subject to the restrictions, if any, stated or
noted on the stock certificates, shares of stock may be
transferred on the books of the corporation by the surrender
to the corporation or its transfer agent of the certificate
therefor properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with
necessary transfer stamps affixed, and with such proof of
the authenticity of signature as the corporation or its
transfer agent may reasonable require. Except as may be
otherwise required by law, by the Articles of Organization
or by these Bylaws, the corporation shall be entitled to
treat the record holder of stock as shown on its books as
the owner of such stock for all purposes, including the
payment of dividends and the right to vote with respect
thereto, regardless of any transfer, pledge or other
disposition of such stock, until the shares have been
transferred on the books of the corporation in accordance
with the requirements of these Bylaws.
It shall be the duty of each stockholder to notify the
corporation of his post office address.
3. Record Date. The Directors may fix in advance a time of not
more than sixty days preceding the date of any meeting of
stockholders, or the date for the payment of any dividend or
the making of any distribution to stockholders, or the last
day on which the consent or dissent of stockholders may be
effectively expressed for any purpose, as the record date
for determining the stockholders having the right to notice
of and to vote at such meeting, and any adjournment thereof,
or the right to receive such dividend or distribution or the
right to give such consent or dissent. In such case only
stockholders of record on such record date shall have such
right, notwithstanding any transfer of stock on the books of
the corporation after the record date. Without fixing such
record date the Directors may for any such purposes close
the transfer books for all or any part of such period.
If no record date is fixed and the transfer books are not
closed, then the record date for determining stockholders
having the right to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day
next preceding the day on which notice is given, and the
record date for determining stockholders for any other
purpose shall be at the close of business on the day on
which the Directors act with respect thereto.
4. Replacement of Certificates. In case of the alleged loss or
destruction or the mutilation of a certificate of stock, a
duplicate certificate may be issued in place thereof, upon
such terms as the Directors may prescribe. The Directors
may, in their discretion, require the owner of a lost,
mutilated or destroyed certificate, or his legal
representative, to give a bond, sufficient in their opinion,
with or without surety, to indemnify the corporation against
any loss or claim which may arise by reason of the issue of
a certificate in place of such lost, mutilated or destroyed
stock certificate.
ARTICLE V
Provisions Relative to Directors, Officers, Stockholders and
Employees
1. Certain Contracts and Transactions. In the absence of fraud
or bad faith, no contract or transaction by this corporation
shall be void, voidable or in any way affected by reason of
the fact that the contract or transaction is (a) with one or
more of its officers, directors, stockholders or employees,
(b) with a person who is in any way interested in this
corporation or (c) with a corporation, organization or other
concern in which an officer, director, stockholder or
employee of this corporation is an officer, director,
stockholder, employee or in any way interested and no such
officer, director, stockholder or employee shall be held
liable to account to the corporation or to any creditor or
stockholder of the corporation for any profit or benefit
realized by him through any such contract or transaction nor
by reason of any fiduciary relationship of such officer,
director, stockholder or employee to the corporation arising
out of such stock ownership. The provisions of this section
shall apply notwithstanding the fact that the presence of a
director or stockholder, with whom a contract or transaction
is made or entered into or who is an officer, director,
stockholder or employee of a corporation, organization or
other concern with which a contract or transaction is made
or entered into or who is in any way interested in such
contract or transaction, was necessary to constitute a
quorum at the meeting of directors (or any authorized
committee thereof) or stockholders at which such contract or
transaction was authorized and/or that the vote of such
director or stockholder was necessary for the adoption of
such contract or transaction provided that if said interest
was material, it shall have been known or disclosed to the
directors or stockholders voting at said meeting on said
contract or transaction. Ownership or beneficial interest
in a minority of the stock or securities of another
corporation, joint stock company, trust, firm or association
shall not be deemed to constitute material interest for
purposes of this section and need not be disclosed. A
general notice to any person voting on said contract or
transaction that an officer, director, stockholder or
employee has a material interest in any corporation,
organization or other concern shall be sufficient disclosure
as to such officer, director, stockholder or employee with
respect to all contracts and transactions with such
corporation, organization or other concern. This section
shall be subject to amendment or repeal only by action of
the stockholders.
2. Indemnification. Subject to the exceptions and limitation
set forth below,
(a) every person who is, or has been, a director or officer
of the corporation shall be indemnified by the corporation
to the fullest extent permitted by law against liability and
against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue
of his being or having been a director or officer and
against amounts paid or incurred by him in the settlement
thereof;
(b) the words "claim", "action", "suit", or "proceeding"
shall apply to all claims, actions, suits or proceedings
(civil, criminal or other, including appeals), actual or
threatened, whether or not based on any action or omission
antedating adoption of this Article V; and the words
"liability" and "expenses:" shall include, without
limitation attorneys' fees, costs, judgments, amounts paid
in settlement, fines, penalties and other liabilities.
No indemnification shall be provided hereunder to a director
or officer:
(y) with respect to any matter as to which he shall have
been finally adjudicated not to have acted in good faith in
the reasonable belief that his action was in the best
interests of the corporation;
(z) in the event of a settlement involving a payment by the
officer or director unless there has been a determination
that such director or officer is entitled to indemnification
pursuant to this Article V:
(i) by the court or other body approving the settlement; or
(ii) by vote of stockholders of the corporation; or
(iii) by vote of two-thirds (2/3) of those directors of
the corporation who are not themselves involved in the
claim, action, suit or proceeding, provided that a
majority of the directors consists of members not so
involved; or
(iv) by written opinion of independent counsel. The rights
of indemnification herein provided may be insured
against by policies maintained by the corporation,
shall be severable, shall not affect any other rights
to which any director or officer may now or hereafter
be entitled, shall continue as to a person who has
ceased to be such director or officer and shall insure
to the benefit of the heirs, executors and
administrators of such a person. Nothing contained
herein shall affect any rights to indemnification to
which corporate personnel other than directors and
officers may be entitled by contract or otherwise under
law.
Expenses incurred with respect to any claim, action, suit or
proceeding of the character described in the first paragraph
of this section may be advanced by the corporation prior to
final disposition thereof upon receipt of an undertaking by
or on behalf of the recipient secured by a surety or other
suitable insurance issued by a company authorized to conduct
such business in the Commonwealth of Massachusetts to repay
such amount if it is ultimately determined that he is not
entitled to indemnification under this Article V.
ARTICLE VI
Miscellaneous Provisions
1. Fiscal Year. Except as from time to time otherwise
determined by the Directors, the fiscal year of the
corporation shall end on the Sunday closest to December 31st
of each year.
2. Seal. The seal of the corporation shall, subject to
alteration by the Directors, bear its name, the word
"Massachusetts", and the year of its incorporation.
3. Execution of Instruments. All deeds, leases, transfers,
contracts, bonds, notes and other obligations authorized to
be executed by an officer of the corporation in its behalf
shall be signed by the President or the Treasurer except as
the Directors may generally or in particular cases otherwise
determine.
4. Voting of Securities. Except as the Directors may otherwise
designate, the President or Treasurer may waive notice of,
and appoint any person or persons to act as proxy or
attorney in fact for this corporation (with or without power
of substitution) at any meeting of stockholders or
shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
5. Corporate Records. The original, or attested copies, of the
Articles of Organization, Bylaws and records of all meetings
of the incorporators and stockholders, and the stock and
transfer records, which shall contain the names of all
stockholders and the record address and the amount of stock
held by each, shall be kept in Massachusetts at the
principal office of the corporation, or at an office of its
transfer agent or of the Clerk. Said copies and records
need not all be kept in the same office. They shall be
available for any proper purpose but not to secure a list of
stockholders for the purpose of selling said list or copies
thereof or of using the same for a purpose other than in the
interests of the applicant, as a stockholder, relative to
the affairs of the corporation.
Except as specifically authorized by statute, no stockholder
shall have any right to examine any other property or any
other books, accounts or other writings of the corporation.
6. Articles of Organization. All references in these Bylaws to
the Articles of Organization shall be deemed to refer to the
Articles of Organization of the corporation, as amended and
in effect from time to time.
7. Evidence of Authority. A certificate by the Clerk or
Secretary or an Assistant or Temporary Clerk or Secretary as
to any matter relative to the Articles of Organization,
Bylaws, records of the proceedings of the incorporators,
stockholders, Board of Directors, or any committee of the
Board of Directors, or stock and transfer records or as to
any action taken by any person or persons as an officer or
agent of the corporation, shall as to all persons who rely
thereon in good faith be conclusive evidence of the matters
so certified.
8. Amendments. These Bylaws, except as hereinbelow provided,
may be amended or repealed, in whole or in part, and new
Bylaws adopted either (a) by the stockholders at any meeting
of the stockholders by the affirmative vote of the holders
of at least a majority in interest of the capital stock
present and entitled to vote, provided that notice of the
proposed amendment or repeal or of the proposed making of
new Bylaws shall have been given in the notice of such
meeting, and (b) if so authorized by the Articles of
Organization, by the Board of Directors at any meeting of
the Board by the affirmative vote of a majority of the
Directors then in office, but no amendment or repeal of a
Bylaw shall be made by the Board of Directors which changes
the date fixed by the Bylaws for the annual meeting of the
stockholders or which alters the provisions of these Bylaws
with respect to removal of Directors, or the election of
committees by Directors and the delegation of powers
thereto, nor shall the Board of Directors make, amend or
repeal any provision of the Bylaws which by law the Articles
of Organization or the Bylaws requires action by the
stockholders. No change in the date fixed by the Bylaws for
the annual meeting of stockholders shall be made within
sixty (60) days before the date fixed by the Bylaws for the
annual meeting, and if any change of that date is made,
notice of such change shall be given to all stockholders at
least twenty (20) days before the new date fixed for such
meeting. Not later than the time of giving notice of the
meeting of stockholders next following the making, amending,
or repealing by the Directors of any Bylaw, notice thereof
stating the substance of such change shall be given to all
stockholders entitled to vote on amending the Bylaws. Any
Bylaw or amendment of a Bylaw made by the Board of Directors
may be amended or repealed by the stockholders by
affirmative vote as above provided in this Section 8 of this
Article VI.
ARTICLE VII2
Non Applicability of Control Share Acquisition Statute
The provisions of Chapter 110D of the Massachusetts General Laws
regulating control share acquisitions, as may be amended from
time to time and any successor law, shall not apply to any
"control share acquisition", as defined in Chapter 110D of the
corporation.
_______________________________
Exhibit 4.11(c)
STRATUS COMPUTER, INC.
Employee Stock Option Plan
Non-Qualified Common Stock Option Plan
_____
Amendments Effective January 31, 1995
_____
The following amendments to the Stratus Computer, Inc.
Employee Stock Option Plan (as set forth in Restatement
Number Three effective January 28, 1992) and Non-Qualified
Common Stock Option Plan (as set forth in Restatement Number
Three effective January 28, 1992) were approved by the Board
of Directors on January 31, 1995 and are effective as of
that date subject to the stockholder approval requirements
of the respective plans:
Section 4 of each plan is amended to delete the
number "8,780,200" and insert in its place the number "9,380,200".
Exhibit 4.13(c)
STRATUS COMPUTER, INC.
Employee Stock Purchase Plan
_____
Amendment Effective January 31, 1995
_____
The following amendment to the Stratus Computer, Inc.
Employee Stock Purchase Plan was approved by the Board of
Directors on January 31, 1995 and is effective as of that
date subject to the stockholder approval requirements of the
Plan:
Section 7 of the Plan is hereby amended to delete
the words and figures "two million seven hundred thousand (2,700,000) and
insert in their place the words and figures "three million one hundred
thousand (3,100,000)".
EMPLOYMENT AGREEMENT
AND
RELEASE
ISSUE DATE: NOVEMBER 18, 1994
The following is an agreement between RICHARD L. TARULLI, the
undersigned employee (hereinafter referred to as "you" or
"your"), and Stratus Computer, Inc. ("Company") regarding your
employment with the Company.
A. EMPLOYMENT
(1) EMPLOYMENT. Your regular employment with the
Company shall continue until 5:00 PM, EST, on
December 31, 1995, or, when you begin full time
employment elsewhere, whichever date is earlier
("Termination Date"). For the purposes of this
Agreement "full time employment" shall be defined
to mean your accepting any position for which a W-
2 form will be submitted to the Internal Revenue
Service and for which the average weekly hours to
be worked by you can reasonably be expected to
exceed thirty (30) hours per week. From the Issue
Date until December 31, 1994, inclusive, you shall
continue to be paid in accordance with your
current salary structure, including the right to
any bonuses that you might earn. Beginning January
1, 1994 through the Termination Date, inclusive,
you shall be paid a salary, in accordance with
the Company's standard practices and pay periods,
based on an annual salary rate of $280,000. In
the event that you begin full time employment
prior to June 30, 1995, you will receive a lump
sum payment equal to the number of months between
the date you began said full time employment and
June 30, 1995, times your monthly rate, less any
amount paid to you by the Company after you began
said full time employment, less all appropriate
federal, state and local tax withholdings.
You will stop accruing vacation hours as of
December 31, 1994. Stratus shall cash-out any
accrued, unused vacation balance existing as of
December 31, 1994, not to exceed 240 hours.
Payment of this vacation cash-out shall be
included in the first regular payroll check
distributed to employees in 1995.
Beginning on the Issue Date through the
Termination Date, inclusive, you will be on
special assignment to the Company's Chief
Operating Officer ("COO"). It is further agreed
that you will have no duties except those
specifically requested by the COO. All requests
made by the COO must be reasonable from a
business and professional context. You agree to
call the COO from time to time and to ensure the
Company has available to it a telephone number
where you can be reasonably reached.
(2) STOCK OPTIONS. It is agreed that, that portion of
options to purchase Stratus common stock which you
have been previously granted which by the terms of
the your option agreements become fully vested
through December 31, 1995 and which have not been
exercised by you as of your Termination Date,
shall have their vesting date accelerated so that
they vest on the Termination Date. You shall have
thirty (30) days from the Termination Date to
exercise any and all vested options.
(3) REFERENCE. The Company will, at your request,
prepare a letter of reference, which is reasonably
acceptable to you. You acknowledge that this
letter of reference is being prepared pursuant to
this Agreement and may not be used or produced in
any action involving the Company. The request for
this letter must by made no later than the
Termination Date.
(4) OUT PLACEMENT SERVICES. If you require, the
Company will make available to you appropriate and
reasonable out placement and counseling services
in support of a job search. Expenses, up to a
maximum of twenty thousand dollars ($20,000) which
you incur for such services will be reimbursed to
you or paid directly to the out placement service,
but only against actual receipts or invoices and
only for out placement and counseling services
provided up to June 30, 1995.
(5) EQUIPMENT. The Company agrees that you may
retain, as your personal property the personal
computer, modem and facsimile machine currently
installed at your Dover, Massachusetts home and
that you may also take with you, as your personal
property, the Macintosh personal computer
currently installed in your office.
With the exception of the right to exercise stock
options, and life insurance benefits, if any, all rights
of Employee under this Agreement shall terminate upon
your death.
B. NONCOMPETITION
You agree, until December 31, 1995 that you will not,
directly or indirectly, without the prior written consent
of the COO provide consultative service ,with or without
pay, own, manage, operate, join, control, participate in,
or be connected as a material stockholder, partner, or
otherwise with any business, individual, partner, firm,
corporation, or other entity (i) which is then in
competition with the fault tolerant businesses of the
Company or any affiliate of the Company or (ii) involving
a transaction or business venture which is then in
competition with the telecommunications or finance
business of the Company or any affiliate of the Company.
You further agreed and acknowledge that the Company will
or would suffer irreparable injury if Employee were to
compete with said businesses of Company or any
subsidiary or affiliate of the Company in violation of
this Agreement and that Company would by reason of such
competition be entitled to injunctive relief in a court
of appropriate jurisdiction, and you further consent and
stipulate to the entry of such injunctive relief in such
a court prohibiting you from competing with the Company
or any subsidiary or affiliate of the Company, in the
area of business set forth above, in violation of this
Agreement.
C. ANTISOLICITATION
You promise and agree, until December 31, 1995, that you
will not influence or attempt to influence customers of
the Company or any of its subsidiaries or affiliates,
either directly or indirectly, to divert their business
in the fault tolerant, telecommunications or financial
services area to any individual, partnership, firm,
corporation or other entity then in competition with the
business of the Company, or any subsidiary or affiliate
of the Company for the business of the customer.
D. SOLICITING EMPLOYEES
You promise and agree that you will not, until December
31, 1995, directly or indirectly solicit any of the
Company employees to work for any business, individual,
partnership, firm corporation, or other entity.
E. SAVINGS CLAUSE
Should any valid federal or state law or final
determination of any administration agency or court of
competent jurisdiction affect any provision of this
Agreement, the provision or provisions so affected shall
be automatically conformed to the law or determination
and otherwise this Agreement shall continue in full force
and effect.
F. ELECTION OF EMPLOYMENT AGREEMENT
You understand, notwithstanding anything to the contrary,
that you have TWENTY-ONE (21) DAYS from the Issue Date,
as stated above, to execute this Agreement, but are under
no obligation to do so.
G. PROPRIETARY INFORMATION
You have previously signed a Proprietary Information
Agreement with the Company. Included among the materials
the Company considers to be trade secrets or otherwise
confidential, and thus covered by that Proprietary
Information Agreement, and which you agree not to
disclose to anyone else without the Company's written
consent signed by a Company officer, are customer lists
and marketing and product strategies; this list is not
all encompassing.
H. RELEASE
In consideration of the foregoing Sections A(1) through
A(5) of this Employment Agreement YOU HEREBY RELEASE AND
DISCHARGE THE COMPANY AND ITS OFFICERS, DIRECTORS,
STOCKHOLDERS, EMPLOYEES, AGENTS, SUBSIDIARIES AND
AFFILIATES FROM ANY AND ALL CLAIMS, DEMANDS OR
LIABILITIES WHATSOEVER, WHETHER KNOWN OR UNKNOWN OR
SUSPECTED TO EXIST BY YOU, WHICH YOU EVER HAD OR MAY NOW
HAVE AGAINST THE COMPANY, OR ANY OF THEM, INCLUDING,
WITHOUT LIMITATION, ANY CLAIMS, DEMANDS OR LIABILITIES IN
CONNECTION WITH YOUR EMPLOYMENT WITH THE COMPANY AND THE
TERMINATION OF THAT EMPLOYMENT, OR PURSUANT TO ANY
FEDERAL, STATE, OR LOCAL EMPLOYMENT OR DISCRIMINATION
LAWS, REGULATIONS, EXECUTIVE ORDERS, OR OTHER
REQUIREMENTS, INCLUDING ANY ACTIONS RELATED TO AGE
(INCLUDING ANY CLAIMS RELATED TO THE ADEA), SEX, SEXUAL
ORIENTATION, RACE OR HANDICAP DISCRIMINATION. In addition
you agree not to bring any action against the Company or
any employee, director, officer, agent, subsidiary or
affiliate of the Company, based on any of the foregoing.
I. DISCONTINUANCE OF EMPLOYMENT/SEVERANCE
It is understood that if you violate any of your
commitments under this Agreement, the Company may
discontinue your employment and/or all of the post-
termination severance it is hereby agreeing to pay to you
in addition to exercising all other rights it may have
under the law. Without limiting the foregoing, should
this Agreement be terminated by Stratus pursuant to this
Section I, you will receive further payments, nor will
any stock options have their vesting date accelerated.
J. ENTIRE AGREEMENT
It is expressly understood that there is no agreement or
understanding between you and the Company about or
pertaining to the termination or reinstatement of your
employment with the Company, or the Company's obligations
to you with respect to such termination, except what is
set forth in this Agreement. It is specifically agreed
that in any event such employment shall cease on the
Termination Date.
K. ARBITRATION/GOVERNING LAW
You and the Company agree to arbitrate any disputes that
might arise under this Agreement. Such arbitration shall
take place in front of one arbitrator, before the
American Arbitration Association (AAA), in Massachusetts.
The arbitrator may award legal fees if deemed
appropriate.
This Agreement shall be construed, enforced and governed
by the Laws of the Commonwealth of Massachusetts.
L. BINDING EFFECT
This Agreement shall be binding upon and inure to the
benefit of any successor of the Company and any such
successor shall be deemed substituted for the Company
for all purposes. As used herein, "successor" shall
include any person, firm, corporation or other business
entity which at any time, whether by purchase, merger or
otherwise, directly or indirectly acquires the assets or
business or stock of the Company.
M. INDEPENDENT REVIEW
You acknowledge that you have read the foregoing, has
been given the opportunity to have the agreement reviewed
by an attorney of your choice and you agree to the
conditions and obligations as set forth. You understand
that you have seven (7) days from the date of execution
to revoke this Agreement.
Dated: December 2, 1994 RICHARD L. TARULLI
Richard L. Tarulli
Dated: December 2, 1994 JOHN F. YOUNG
On Behalf of the Company
EXHIBIT 22.1
SUBSIDIARIES:
The following is a list of the Company's current
subsidiaries, all of which are wholly-owned:
ORGANIZED
UNDER LAWS OF
Stratus Securities Corp. Massachusetts
Stratus World Trade Corp. Delaware
Stratus International, Inc. Massachusetts
Stratus F.S.C., Inc. U.S. Virgin Islands
Isis Distributed Systems, Inc. New York
S2 Systems, Inc. Delaware
TCAM Systems, Inc. New York
The following is a list of subsidiaries of Stratus World
Trade Corp., all of which are wholly-owned:
ORGANIZED
UNDER LAWS OF
Stratus Computer S.A. Belgium
Stratus Computer GmbH Federal
Republic of Germany
Stratus Computer B.V. Netherlands
Stratus Holding & Finance, B.V. Netherlands
Stratus Computer (H.K.) Ltd. Hong Kong
Stratus Computer Corporation Canada
Stratus Computer Japan Co., Ltd. Japan
Stratus Computer S.A. France
Stratus Computer PTY, Ltd. Australia
Stratus Holding & Finance Company, Ltd. Ireland
Stratus Computer AB Sweden
Stratus Computer AG Switzerland
Stratus Computer (Singapore) Pte. Ltd. Singapore
Stratus Computer (NZ) Limited New Zealand
Stratus Computer Luxembourg Luxembourg
The following are wholly-owned subsidiary companies of
Stratus Holding & Finance Company Ltd:
Stratus Computer Limited Ireland
Stratus Investments Limited Bermuda
Stratus UK Holding and Finance Limited United Kingdom
The following is wholly-owned subsidiary companies of
Stratus Computer Limited:
Stratus Computer Ireland Ireland
The following is a wholly-owned subsidiary company of
Stratus Holding & Finance B.V.:
Stratus Computer S.A. Spain
The following is an 80% owned subsidiary company of
Stratus Holding & Finance B.V and a 20% owned subsidiary of
Stratus World Trade Corp.:
Stratus Italia S.R.L. Italy
The following are wholly-owned subsidiary companies of
Stratus UK Holding & Finance Company Limited:
Stratus Computer Ltd. United Kingdom
S2 Systems International Limited United Kingdom
The following is an 90% owned subsidiary company of
Stratus UK Holding & Finance Company Limited and a
10% owned subsidiary of Stratus World Trade Corp.:
TCAM Systems (UK), Ltd. United Kingdom
Exhibit 23.0
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual
Report (Form 10-K) of Stratus Computer, Inc. of our report
dated January 20, 1995, included in the 1994 Annual Report
to Stockholders of Stratus Computer, Inc.
Our audits also included the financial statement schedule
of Stratus Computer, Inc. listed in Item 14(a). This
schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion
based on our audits. In our opinion, the financial
statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
We also consent to the incorporation by reference in the
Registration Statements (Forms S-8 Nos. 2-88104, 2-89901, 1-
10405, 33-2174, 33-11864, 33-28742 and 33-67758 and Form S-3
No. 33-77764) of our report dated January 20, 1995, with
respect to the consolidated financial statements incorporated
herein by reference, and our report included in the preceding
paragraph with respect to the financial statement schedule
included in this Annual Report (Form 10-K) of Stratus
Computer, Inc.
ERNST & YOUNG LLP
Boston, Massachusetts
March 29, 1995
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