SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JULY 2, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________ TO _________________
COMMISSION FILE NUMBER 0-13941
__________________________
AST RESEARCH, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-3525565
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
16215 ALTON PARKWAY
IRVINE, CALIFORNIA 92718
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 727-4141
__________________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
TITLE OF EACH CLASS
COMMON STOCK, PAR VALUE $.01
__________________________
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
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. [X]
The aggregate market value of the registrant's voting Common Stock
held by non-affiliates of the registrant was approximately $504,528,525
(computed using the closing price of $16.94 per share of Common Stock on
August 26, 1994 as reported by NASDAQ). There were 32,352,000 shares of
the registrant's Common Stock, par value $.01 per share, outstanding on
August 26, 1994.
__________________________
Portions of the registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders scheduled to be held on October 27, 1994, which
Proxy Statement will be filed no later than 120 days after the close of the
registrant's fiscal year ended July 2, 1994, are incorporated by reference
in Part III of this Annual Report on
Form 10-K.
PART I
ITEM 1. BUSINESS
GENERAL
AST Research, Inc. ("AST" or the "Company") was incorporated in California
on July 25, 1980 and reincorporated as a Delaware corporation effective July 1,
1987. The Company designs, manufactures, markets, services and supports a broad
line of personal computers including desktop, server and notebook computer
systems marketed under the Advantage!(R), AscentiaTM, BravoTM, PremmiaTM,
ManhattanTM SMP and PowerExecTM brand names. The Company's products feature
advanced design characteristics while remaining compatible with established
industry standards. The Company currently markets its products through an
extensive worldwide distribution network of retail computer dealers, consumer
retailers, international and regional distributors, value added dealers
("VADs"), value added resellers ("VARs"), original equipment manufacturers
("OEMs") and U.S. Government ("GSA") approved dealers. See further discussions
under Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition and "Additional Factors That May Affect Future Results"
included therein.
SIGNIFICANT BUSINESS DEVELOPMENTS IN FISCAL 1994
Effective September 1, 1993, the Company completed the purchase of certain
assets and assumption of certain liabilities of Tandy/GRiD France. Assets
acquired consist primarily of inventory, equipment and leased real property in
France. In addition, the Company purchased additional Tandy/GRiD inventory in
Europe and other certain assets in the United States. The purchase price for
the Tandy/GRiD France acquisition and the additional European inventory and U.S.
assets was $6.7 million and was paid through an increase of the principal amount
in the three-year promissory note payable to Tandy Corporation from $90 million
to $96.7 million.
On December 14, 1993, the Company issued $315 million par value of Liquid
Yield Option Notes ("LYONs") due December 14, 2013. The LYONs are zero coupon
convertible subordinated notes which were sold at a significant discount from
par value with a yield to maturity of 5.25% and a total value at maturity of
$315 million. Total proceeds received from the sale of the LYONs were
approximately $111.7 million, which have been utilized for working capital,
including the financing of expected increases in accounts receivable and
inventories, repayment of bank borrowings under the Company's revolving credit
facilities, new product development, and other general corporate purposes.
In May 1994, the Company amended its $225 million unsecured revolving
credit facility to increase the amount to $300 million while keeping the
termination date of September 30, 1996. On August 31, 1994, the Company
announced that it expects its first quarter fiscal 1995 revenues to be flat
relative to the first quarter of fiscal 1994 and down from the previous fiscal
1994 fourth quarter resulting in a net loss for the first quarter of fiscal
1995. Depending on the size of the projected loss for the first quarter of
fiscal 1995, the Company then could be in default of specific covenants in its
committed $300 million revolving credit facility. See further discussion
included in "Liquidity and Capital Resources" under Item 7. Management's
Discussion and Analysis of Results of Operations and Financial Condition.
In June 1994, the Company completed an agreement for the sale and leaseback
of its Hong Kong manufacturing facility. The Company realized a pretax gain of
$6.0 million of which $4.3 million was recognized and included in "Other income
(expense), net" in the accompanying Consolidated Statement of Operations for the
year ended July 2, 1994. The leaseback period is for one year fixed plus one
additional year at the option of the Company.
During fiscal 1994, the Company increased its international presence by
forming wholly-owned subsidiaries in Norway, Denmark, Ireland, Korea and
Malaysia. As part of the Company's worldwide manufacturing restructuring plan,
the Company opened a new European manufacturing facility in Limerick, Ireland.
The Company's Scotland facility, which was acquired as part of the Company's
purchase of Tandy Corporation's personal computer operations, terminated
operations during the fourth fiscal 1994 quarter. The Company also established
a new sales and manufacturing subsidiary in Tianjin, China through a joint
venture with a corporation affiliated with the Chinese government.
INDUSTRY SEGMENTS AND GEOGRAPHIC INFORMATION
AST operates in one industry segment: the manufacture and sale of personal
computers, including desktop, server, and notebook computer systems. A summary
of the Company's operations by geographic area including net sales, operating
income (loss) and identifiable assets is incorporated herein by reference from
Note 11 of Notes to Consolidated Financial Statements.
BUSINESS STRATEGY AND MARKET
The Company's business strategy is to utilize its technological expertise,
worldwide manufacturing capabilities, brand name recognition and distribution
channels to offer its customers a broad range of personal computers to meet a
variety of user needs. The Company believes that its success depends upon the
ability to identify products and product features required by customers and to
design and produce high quality, innovative products compatible with industry
standards on a timely basis and at competitive prices. As new technology and
faster, more powerful microprocessors have become available, the Company has
concentrated its efforts in the higher performance end of the personal computer
market. In pursuing this strategy, the Company has developed a multi-channel
and multi-brand distribution approach which targets a variety of price points
and user requirements. These include the Advantage! computer product line which
is designed for the consumer retail market, the value oriented Bravo computer
product line, the high performance Premmia and Manhattan SMP computer product
lines, and the PowerExec and Ascentia lines of notebook computers. Within the
various brands, the Company offers a full range of products, including desktop
systems from the entry level 80386SX-based systems to high-end PentiumTM systems
and servers, monochrome and color notebooks and the fully symmetric
multiprocessor line. The Company's personal computers incorporate either
Industry Standard Architecture ("ISA"), Extended Industry Standard Architecture
("EISA"), or Peripheral Component Interconnect ("PCI") Bus Architecture and are
compatible with major industry standard operating systems including MS-DOS(R),
UNIX/XENIX, SCO UNIX, Novell NetWare(R) and OS/2(R). The Company pursues a
strategy whereby its products retain their compatibility with new major industry
standards as they are developed.
The personal computer industry is characterized by intense price
competition and the Company believes that the price and performance features of
its products are key factors in the purchase decisions of its customers and, as
a result, has developed a series of product lines each specifically targeted at
certain market segments that are served through various channels of the
Company's distribution network. Price reductions are often determined with
reference to then existing competitive factors, including the prevailing pricing
strategy of other major computer manufacturers. The Company's business strategy
includes the introduction of new products that are priced aggressively to
highlight the price and performance advantages of AST products. The Company
intends for its products to remain competitively priced and will adjust its
prices as needed to maintain or grow its market share. These adjustments may
negatively impact the Company's profitability.
The Company believes that its strategy of establishing a worldwide presence
in countries with developing markets for computer products and providing
products that meet local needs, such as customized systems and local language
documentation, has provided significant opportunity for revenue growth.
International market expansion has been a factor in the Company's growth during
fiscal 1994. Overseas revenues increased 46% in fiscal 1994 over the prior year
and contributed 36% of total worldwide revenues. International revenues
contributed 41% and 44% of total revenues in fiscal 1993 and 1992, respectively.
During fiscal 1995, the Company intends to continue pursuing developing markets
in both Russia and India while concurrently focusing on its Northern Europe and
Pacific Rim markets.
PRODUCTS
The Company's products range from portable systems to superservers under
the Advantage!, Ascentia, Bravo, PowerExec, Premmia and Manhattan brand names.
The Company also manufactures certain custom desktop system and board-level
products for OEM customers. The Company offers a complete family of personal
computer systems products designed to meet various performance levels and price
points. During fiscal year 1995, the Company intends to enhance its desktop
computer product lines with faster processing power and deluxe features to
satisfy the complex needs of the home, small-business and corporate user. The
Company also plans to expand its mobile computing solutions under the Ascentia
brand name with high-performance, value-oriented and subnotebook models. In
addition, the Company intends to expand its server products under its Manhattan
brand name and will continue to introduce new products, technologies and
computing solutions for the network environment.
Advantage!
AST's Advantage! family, sold primarily through the consumer retail market,
offers low-cost, ready-to-use desktop and notebook systems designed for
educational, entertainment, home office or business applications. The
Advantage! line is designed to offer a total solution-based package with pre-
installed software, to enhance the system's "ease of use."
The Advantage! family is highlighted by the Adventure multimedia system
that features AST WorksTM software, considered one of the industry's most
comprehensive and easy-to-use interfaces that combines video help, numerous
productivity tools and telephony capabilities. The numerous pre-installed
software titles and features available on Advantage! models include Microsoft's
EncartaTM, an electronic encyclopedia; a built-in fax/modem; PRODIGY(R), America
Online(R) and CompuServe(R) on-line information service software starter kits;
and personal finance, home management and graphics programs. Other models in
the pre-configured product line include Advantage! Pro desktop, Advantage! Plus
mini-tower and Advantage! Explorer notebook computers. The Advantage! line
supports a wide range of processing power including 486SX/33, 486SX2/50,
486DX2/66, 486DX4/100 and 60MHz Pentium processors. In addition, these products
are covered by a one year on-site service program and a 24 hour hotline.
Ascentia
The Ascentia family consists of high performance notebook computers which
encompass mobile computing solutions with extensive pre-loaded business and
communications software. These notebook computers also have high performance
processing capabilities with Intel DX2 50MHz and DX4 75MHz CPUs/processors. In
addition to the connectivity and communication solutions provided through
compatibility with more than 150 PCMCIA cards, the Ascentia notebook computer
has among the industry's largest color displays and up to eight hours of battery
life with intelligent power management. The Ascentia 900N high performance
model is the successor to the PowerExec notebook computer. Other models include
the Ascentia 500S subnotebook and Ascentia 800N value notebook. These products
include a three year worldwide warranty with a one year ExeCareSM service
program and a 48 hour rapid repair service.
Bravo
The Bravo family is AST's value desktop line that provides both small
businesses and large corporate users with a range of computing options. As the
Company's price leader, the value line offers a wide range of processing speeds
focused on business-oriented applications, such as word processing, electronic
mail, graphics and animation programs. The Bravo line was the first AST brand
to offer energy-efficient computers that meet the EPA's "Energy Star"
requirements and now also comply with the Video Electronic Standards Association
("VESA") standard for power management.
The family has multiple lines of computers to satisfy the diverse needs of
the home office and business user. They include the mid-size Bravo LC desktop,
which offers a multimedia model; the Bravo LP low-profile desktop, winner of
PC/Computing's 1993 Most Valuable Product Award; the Bravo NB notebook, which
includes color and color plus local bus enhanced graphics for fast video
performance; the Bravo MT high-performance mini-tower desktop; and the recently
introduced Bravo MS desktop, which incorporates the latest advances in bus
architecture and cache along with the `plug-and-play'/PCI configuration and
Pentium Overdrive(R) Technology. The new Bravo models, which offer enhanced
video performance, accelerated graphics capabilities and greater expandability
than previous Bravo systems, utilize processors ranging from the 486/25 through
the 60MHz Pentium. In addition, all Bravo systems are covered with a three year
warranty, which includes a one year on-site service program.
Premmia Desktops
The Premmia high-performance desktop line, which includes Pentium and 486-
based models, incorporates advanced technologies to suit complex computing
needs. The systems utilize the highest performing standard PCI local bus I/O
architecture and support the `plug-and-play' configuration. In addition, the
Premmia line offers high-performance multimedia systems which combine
accelerated full-motion video, support for 32-bit operating systems, 8MB of
memory expandable to 128MB, up to 512KB of secondary cache, five EISA bus master
expansion slots and five drive bays. The Premmia desktop models include the
4/66d, LX P/60, GX and MX and support Pentium processors up to 90 and 100MHz.
Premmia 486 models also feature high-end video, expandability and
upgradeability. These products include a three year warranty which includes a
one year on-site and two year depot service program.
Premmia Servers
AST's Premmia server line is designed to meet a diverse level of price and
performance requirements in the growing server marketplace. The new line
includes the Premmia MTE, a full-featured, cost-effective server in a mini-tower
enclosure, highly suitable for work groups and small to mid-sized networks.
Also included is the Premmia SE, a high-powered, highly expandable, full-size
system ideal for large departments or client/server computing. Both models are
EISA-based servers with stringent security and upgradeability features which
utilize 486DX/33, 486DX2/66 and 60MHz Pentium processors. During fiscal year
1995, the Company intends to introduce all server products under the Manhattan
brand name.
Manhattan SMP
The Manhattan SMP computer is AST's fully symmetric multiprocessor, highly
effective as a mini-computer alternative or application server. It also can be
used to consolidate large LAN environments. It was designed to be run with the
Pentium processor and is the Company's most powerful system to date. It can run
up to five Pentium processors and its fully symmetric design allows the system
to scale easily with the simple addition of processors. The Manhattan SMP
computer provides high-availability through features important in today's
mission critical environments: ECC memory that corrects memory while the system
is running; optional redundant power supplies to provide continued system
operation and a hardware disk array subsystem for redundancy.
PowerExec
The PowerExec notebook family gives users maximum levels of computing
flexibility and enhanceability. The PowerExec incorporates a 9 1/2" active
matrix screen and allows up to 6 3/4 hours of battery life for non-stop
computing. Corporate professionals and business travelers alike benefit from
the PowerExecs 386SL, 486/25SL and 486/33SL microprocessor, PCMCIA support,
removable and upgradeable hard drive, DOS 6.0, Windows 3.1 and upgradeable
display and memory. These products also include the ExeCare Plus one year
warranty. During fiscal year 1995, the Company intends to have the Ascentia
notebook computer line supersede the PowerExec notebook computer line.
GRiD/Victor
During fiscal year 1994, as part of the Company's acquisition of Tandy's
personal computer operations, the Company acquired the GRiD ConvertibleTM, GRiD
PalmPAD(R) and PalmPAD SL, and GRiDPAD(R) 2390 pen-based systems. These GRiD
products utilized the pen-based technology which was also acquired from Tandy
Corporation. During the first and second quarters of fiscal 1994, the Company
focused its efforts on integrating its existing product lines with the acquired
Tandy/GRiD and Victor product lines. Beginning in the third quarter of fiscal
1994, the Company commenced a reassessment of the GRiD product line and product
capabilities, the current and future customer prospects for GRiD products and
the costs involved in continuing the GRiD brand name. Based upon this review,
the Company decided in the fourth quarter of fiscal 1994, to alter its product
line integration strategy to eventually discontinue all manufacturing, marketing
and sales efforts related to the acquired GRiD product line. The Company's
current strategy is to continue to market the Victor(R) product line, also
acquired from Tandy Corporation, in various European countries.
Other Markets
The Company's monitor line includes the ASTVisionTM 4N, 4L, 5L, 7L, 4I and
4V models. These monitors consist of low-radiation, multi-sync color and are
designed to VESA DPMS (Display Power Management Signaling) standards. ASTVision
offers personal computer users who operate with graphic-intensive Windows-based
applications a choice of high quality displays available in 17, 15 and 14 inch
formats. In addition to the ergonomic design, their multi-synchronous operation
delivers enhanced flexibility in graphics resolutions and refresh rates, along
with user-controlled definition of the horizontal and vertical image size and
positioning.
AST's enhancement product line provides various combinations of increased
memory, additional input/output ports and other features. AST
memory/multifunction products include the SixPak and Rampage Plus lines for both
ISA and MCA-based computers. Graphics products include AST-VGA Plus (16-bit).
AST micro-to-mini communications products allow personal computers to function
as terminals for minicomputers or mainframes, while at the same time retaining
the PC's ability to act as a stand alone desktop computer. In addition, the AST
FourPort AT Plus offers multi-user connectivity for attaching up to four
additional ports.
PRODUCT DEVELOPMENT
Due to the rapid pace of advances in personal computer technology, the
Company's continued success depends on the timely introduction of new products
that are accepted in the marketplace. Accordingly, the Company is actively
engaged in the design and development of new products and the enhancement of
existing products. During the fiscal years ended July 2, 1994, July 3, 1993 and
June 27, 1992, the Company's engineering and development expenses were
$38,858,000, $31,969,000 and $30,461,000, respectively.
The Company's long standing relationships with major software and hardware
developers such as Banyan Systems Inc., IBM, Intel Corporation, Microsoft
Corporation, Novell Inc. and SCO Inc. assist the Company in bringing new
technologies to the marketplace. Working with these developers in both
compatibility testing and software support programs allows the Company to
introduce products incorporating the latest hardware technology and the
capability to operate the most current software available in the marketplace.
AST is firmly committed to the establishment of industry standards and
actively participates in their development. The Company was one of the nine
original high technology companies which participated in the development of
EISA. In addition, AST's Bravo product line complies with the VESA and Energy
Star programs for power management and energy efficient systems. AST has also
incorporated two of the industries latest technologies, the Pentium processor
and PCI bus, within the Premmia, Bravo and Advantage! product lines.
The Company believes that its technical expertise is a key factor in its
development of new and innovative products. The Company's engineering staff
uses computer-aided design techniques which assist in the development of new
products and enable faster adaptation of printed circuit board layouts for the
manufacturing process. In addition to keeping with AST's philosophy of
providing its customers with the latest technology, the new line of business
desktop computers contain AST FlashBIOS, which is firmware/software written by
AST engineers. The use of AST FlashBIOS simplifies the upgrade process when
required. AST Works software is also a new package developed by AST, included
in both the Advantage! and Ascentia product lines, which encompasses instant
video help, telephony and productivity tools. In addition, these business
desktop computers contain the `plug-and-play' peripheral standard which is a new
means for automatic card configurations.
Fiscal year 1994 product development efforts resulted in the introduction
of numerous new products, including the high performance Ascentia notebook
computer line and new generations and enhancements within the Advantage!, Bravo
and Premmia product lines. These new generations and enhancements included the
Pentium processor, PCI local bus, energy-efficiency, and multi-media strategies
that appeal to the wide range of computer users.
MANUFACTURING
AST's manufacturing operations include procurement and inspection of
components, assembly and testing of printed circuit boards ("PCB") and assembly,
testing and packaging of finished products. The Company's manufacturing and
warehouse facilities include over 1.5 million square feet of capacity and are
located in Fountain Valley, California; Fort Worth, Texas; Hong Kong; People's
Republic of China ("PRC"); Taiwan and Limerick, Ireland.
In its goal to achieve increased operating efficiencies and improve
worldwide product delivery and customer response, the Company has initiated
significant changes in its demand fulfillment strategies. Manufacturing centers
for mobile computers, a high-growth segment of the personal computer market,
have been established in Fountain Valley, California and in Taiwan. Fort Worth,
Texas is the Company's worldwide production center for multiprocessor products.
To better serve the Pacific Rim, American, European and the Rest of the World's
desktop and server product demand with lower costs and expedited time-to-market,
desktop and server products are manufactured in facilities located in Hong Kong
and the PRC, Texas, and Ireland, respectively. In support of its worldwide
systems manufacturing, the Company manufactures PCB assemblies in Hong Kong and
the PRC.
As a result of the Tandy/GRiD acquisition, AST acquired four manufacturing
facilities, including three in Fort Worth, Texas and one in East Kilbride,
Scotland. The physical integration of the acquisition, including the transfer
of capital and labor, was substantially completed in fiscal year 1994. As a
result, the Company closed both a Texas facility and the Scotland facility and
has announced the closure of the Texas PCB assembly facility, to be completed in
the first half of fiscal year 1995. The Company has added system and PCB
assembly capacity through its two new facilities in the PRC. The Company
continues to assess its worldwide manufacturing capacity in an effort to
increase efficiencies and improve product deliveries.
The Company currently procures all of its components from outside
suppliers. AST factory sites are in close proximity to many key international
vendors. Source inspections are conducted at the plants of selected strategic
suppliers, while other parts are sampled for inspection upon receipt at the
Company's manufacturing facilities.
The Company has generally been able to obtain parts from multiple sources
without difficulty. However, increases in demand for personal computers have
created industrywide shortages at times resulting in significant price increases
for key components, such as Dynamic Random Access Memories and high quality
liquid crystal display screens. These shortages have occasionally resulted in
the Company's inability to procure these components in sufficient quantities to
meet demand for its products. In the future, there can be no assurance that
such shortages will not re-occur and significantly increase the cost or delay
the shipment of AST's products, thereby having an adverse impact on the revenues
and profitability of the Company.
Nearly all parts used in AST products are available from multiple sources.
To achieve improvements in cost, the Company negotiates with its suppliers to
develop multiple sources for existing sole-source components. Nevertheless,
some key components are still only available through sole-source suppliers due
to technology, availability, price, quality or other considerations. Key
components currently obtained from single sources include active-matrix
displays, CD-ROMs, application specific integrated circuits, and
microprocessors. AST purchases components pursuant to purchase orders placed in
the ordinary course of business and has no guaranteed supply arrangements with
sole-source suppliers. In the event that a supply of a key single-sourced
component were delayed or curtailed, the Company's ability to ship the related
product in needed quantities and in a timely manner could be adversely affected.
The Company attempts to mitigate these potential risks by working closely with
major suppliers on product plans and coordinated product introductions. The
Company has also made a capital investment in the PRC, which has a history of
political instability. The Company attempts to mitigate this potential risk by
maintenance of both primary inventory custody and a management center in Hong
Kong and by alternative sourcing arrangements.
Quality and reliability are emphasized in the development, design and
manufacture of the Company's products. AST continues to focus on successful new
product introductions through a process of concurrent product and process design
efforts which attempt to simplify and streamline the manufacturing process in
the earliest stages of product design. Products undergo quality inspection and
testing throughout the manufacturing process. This is evidenced through
programs which have been implemented for process measurement and improvement,
reduction of the cost structure, maintenance of on-time delivery, increase of
in-process yields and improvement in product field reliability. Additional
manufacturing verification and testing programs include failure analysis, as
well as out-of-box audit programs that consist of extended diagnostic and
software testing and extended early life reliability testing of products taken
from finished goods.
The Company employs a flexible manufacturing line which serves a customer
base that orders non-standard product configurations. This flexible
manufacturing area provides various software/hardware configurations to these
customers.
The Company's strategy is to continuously enhance its manufacturing
procedures to include comprehensive quality management processes. In fiscal
1994, the Company successfully obtained and/or maintained International
Standards Organization ("ISO") 9000 certification at a majority of its sites.
The Company is currently pursuing ISO certification at its remaining non-
certified locations in Texas, Australia, Ireland and the PRC.
MARKETING AND SALES
The Company employs a worldwide multi-channel distribution strategy which
allows it to reach a variety of customers. While each channel provides AST with
access to a specific target market, the Company's strategy is to differentiate
itself from others in the industry by continuing to realize significant revenues
through its established network of authorized dealers and resellers. The
Company believes that its success in building its network of dealers and
resellers is largely due to the Company's product line breadth, the quality and
reliability of its products and the high level of service and support provided
by the Company. Despite AST's past success within these channels, the Company
continues to focus on broadening its product distribution channels. In fiscal
1994, the Company realigned its sales organization into four major geographical
groups: The Americas, which includes the U.S., Canada and Latin America;
Europe; Asia/Pacific Rim; and the Rest of the World, which includes the Middle
East, Africa and the Indian subcontinent.
North American Distribution
The Company's North American distribution channels include authorized
independent resellers, dealers, national and regional distributors, OEMs,
consumer retailers and government sales through GSA approved dealers. The
Company sells directly to large VADs and VARs who typically purchase personal
computers from the manufacturer and add enhancement products and software to
assemble a turn-key system which is sold in selected vertical markets. The
Company's VADs and VARs include customers such as CompuCom Systems, MicroAge,
ENTEX Information Services, Inc. and Intelligent Electronics, Inc. The Company
also sells its products to smaller dealers and resellers through major national
distributors including Gates/FA Distributing, Ingram Micro, Merisel and Tech
Data Corporation. In addition, the Company sells to computer store chains such
as Computerland and Inacom Corporation.
The Company's Advantage! line is designed for small office and home use and
is marketed primarily by consumer retail chains including Computer City
Supercenters; Costco Wholesale Club Stores; Circuit City Stores Inc.; Sam's
Wholesale Club, a division of Wal-Mart Stores; CompUSA and Radio Shack(R)
Canada.
The Federal Systems Division of AST focuses on the approximately $3.5
billion federal government personal computer market and supports large
government suppliers such as Electronic Data Systems and Digital Equipment
Corporation. The Federal Systems Division also supports integrators on
proposals requiring customized hardware and software platforms.
Fiscal 1994 North American revenues rose 83% to $1.5 billion from $830
million for fiscal 1993. Sales through the Company's VAD/VAR and consumer
retail channels constituted 45% and 32%, respectively, of total North American
revenues in fiscal year 1994. Fiscal 1994 sales to distributors and through the
OEM channels contributed 12% and 11% of North American revenues, respectively.
International Distribution
The Company operates internationally through subsidiaries and sales offices
in 43 locations worldwide. In countries where the Company does not have
subsidiary operations, products are sold to retail dealers and distributors.
The Company plans to continue to focus on the international arena including
Europe, the Pacific Rim and the Rest of the World during fiscal 1995. In
addition, the Company intends to pursue opportunities within other developing
countries as they arise.
Success and profitability of international operations could be adversely
affected by conditions that differ from conditions in North America, including
local economic conditions, political instability, tax laws and changes in the
value of the U.S. dollar relative to other currencies in which products are
sold. See Item 7. "Management's Discussion and Analysis of Results of
Operations and Financial Condition-Gross Profit."
In fiscal 1994, international revenues rose 46% over the prior year, from
$582 million to $850 million. European revenues were up 79% to $533 million
from $297 million in fiscal 1993 and represented 23% and 21% of total fiscal
1994 and 1993 revenues, respectively. The Company continued to expand its
European business through the establishment of new subsidiaries within the
Nordic region as well as in Limerick, Ireland. Sales in the Company's Pacific
Rim region grew 9% to $261 million and accounted for 11% of total fiscal 1994
worldwide revenue compared to 17% of total fiscal 1993 revenue. This decline in
the fiscal 1994 growth rate was attributable to significantly increased
competition within this region of the world. The Company anticipates that these
competitive pressures will continue. The Company's Rest of World revenues
increased 22% to $56 million in fiscal 1994 and represented 2% of total fiscal
1994 revenue.
Customer Support and Training
AST believes that customer support, service and training are crucial to
maintaining strong relationships with its customers and that the high level of
its service and support helps differentiate it from other manufacturers in the
personal computer industry. The Company has an AST Customer Care program which
is a comprehensive collection of services for its line of file server, desktop
and notebook computers. AST Customer Care offers technical support to
resellers, dealers and end-users through 24-hour access toll-free telephone
lines; AST On-Line!, a 24-hour electronic bulletin board system; AST Info-Fax
which allows access to a broad selection of technical support documentation via
facsimile 24-hours a day; and a technical support alliance with leading network
and operating system suppliers for one-stop support in multi-vendor networked
environments. In addition, the AST On-Line! service has been expanded to be
available through the CompuServe 24 hour on-line information service, Prodigy
interactive network and the bulletin board system which includes Remote Imaging
Protocol (RIPscrip).
Parts and labor warranties on AST computers range from one to three years
in length, depending on product type. Service is provided by AST authorized
dealers, third party maintenance organizations and the Company's in-house
service and support organization. Trained service technicians are available in
more than 1,500 AST authorized service centers. Included among these service
centers, from which on-site service is also available, are more than 800
Authorized Service Centers (ASC), over 100 Advanced System Support Centers
(ASSC) and at least 400 third party maintenance locations. In addition,
international customers can be serviced on a carry-in basis by any of the
authorized AST Service Providers located in more than 30 countries around the
world. AST Customer Care also provides comprehensive protection for notebook
users through the ExeCare Plus service program. Expedited repair or replacement
of any AST notebook product anywhere in the United States is available under the
ExeCare Plus service program. In addition, for ExeCare Plus members traveling
abroad, ExeCare Plus service is honored by all AST international subsidiaries.
In addition, the Company offers AST Premium and Premium Plus Support programs to
end-users who have a large installed base of AST computers and internal
information centers providing service and support within the organization. The
Premium Support program features priority toll-free technical support, a video-
based core service training program, subscription to AST Technical Publications
and the ability to purchase spare parts directly from AST. Premium Plus Support
program subscribers also receive labor reimbursements for warranty repair work
performed on AST systems, discounts on spare parts, expedited spare part cross-
shipments, spare parts inventory balancing and a quarterly newsletter.
Advertising
AST advertises its product domestically and internationally in selected
computer, business and consumer publications. Through the AST cooperative
advertising program, the Company encourages its channel partners to advertise
AST products by funding a portion of joint advertising and promotion efforts.
The Company also participates in major computer and business trade shows around
the world. The Company's advertising targets a wide range of buyers and
influencers including MIS and PC professionals, department managers, corporate
executives, and individual purchasers.
Major Customers
During fiscal 1994, no AST customer accounted for more than 10% of net
sales.
BACKLOG
The Company orders raw materials and components to manufacture products
according to its forecast of near-term demand and maintains inventories of
finished products in advance of receipt of orders from its customers. Orders
from retail accounts are usually placed by the customer on an as-needed basis
and are usually shipped by the Company shortly after receipt. OEMs may place
orders for scheduled deliveries; however, the amount and quantities thereof are
not significant at the present time. Unfilled orders can be, and often are,
canceled or rescheduled with little or no penalty. For these reasons, the
Company's backlog at any particular time is generally not indicative of the
future level of sales. In addition, cancellations and rescheduling can
adversely impact the Company's revenue and profitability.
PATENTS AND LICENSES
The Company relies on a combination of contract, patent, copyright,
trademark and trade secret laws to protect its proprietary interests in its
products. The Company owns several U.S. federal registrations for trademarks,
including "AST", the AST logo, "AST PREMIUM", "AST RESEARCH", "ADVANTAGE!",
"GRiD" and "VICTOR". At July 2, 1994, the Company had acquired through
application and purchase over 200 patents and patent applications throughout the
world relating to various aspects of its products.
AST has license agreements for various products, including operating system
software for its personal computer systems with Microsoft Corporation and IBM
Corporation, for which the Company makes payments. In addition, the Company has
a patent cross-licensing agreement with IBM Corporation dated January 1, 1990,
which expires January 1, 1995, for which the Company makes payments. AST also
has various license agreements for application software which it distributes
with its products, many of which require the Company to make payments to the
licensor.
COMPETITION
The intense competition in the personal computer industry continued during
the past year and was characterized by frequent product introductions and an
aggressive pricing environment. While some personal computer manufacturers
refocused their channel strategies, the Company broadened its product lines and
channels to further its core strategy of being a price and performance leader.
The Company also expanded its customer service and support programs. The
Company's primary competitors are other computer companies which all offer a
full range of personal computing solutions, including IBM, Compaq Computer
Corporation, Dell Computer Corporation, Gateway 2000, Inc. and Packard Bell.
The Company believes that its main competitive advantage has been and
continues to be the Company's commitment to its channel partners. This channel
focus, in addition to product branding, product line breadth and service and
support, has enabled the Company to enhance its market position in the extremely
competitive personal computer marketplace.
The personal computer market has continued to be highly price competitive.
As a result, price reductions were again made across product lines during fiscal
1994, resulting in a decline in gross profit margins. Characteristic of the
past few years, the Company anticipates significant competitive pricing pressure
to continue. The ongoing introduction of new technologies and full-featured
systems across all of the Company's product lines is intended to enable AST to
keep pace with rapid market changes and to minimize the effect of continued
pricing pressure. However, there can be no assurance that the Company will have
the financial resources, marketing and distribution capability, or technological
knowledge to continue to compete successfully. In addition, the Company's
results of operations could be adversely impacted if it is unable to effectively
implement its technological and marketing alliances with other companies, such
as Microsoft and Intel, and manage the competitive risks associated with these
relationships.
REGULATORY COMPLIANCE
FCC Regulations
The Federal Communications Commission ("FCC") in October 1979 and April
1980 adopted regulations imposing radio frequency emanation standards for
computing equipment. The regulations distinguish between computing devices
marketed for use primarily in a commercial, industrial or business environment
(designated class A) and computing devices marketed for use primarily in a
residential environment (designated class B). All of the Company's products are
designed to comply with applicable FCC standards.
International Standards Organization
The ISO 9000 standard is a quality guideline around which AST has designed
its quality system. This system is designed to help ensure that customer needs
and product specifications are of ongoing quality and consistency. The Company
has achieved and maintained certification and registration under ISO 9000,
section 9002 for the quality systems used in manufacturing operations at its
subsidiary in Taiwan, its Distribution Center in the United Kingdom and for its
Fountain Valley facility in California. In addition, the AST Hong Kong
manufacturing operations have been certified and registered under ISO 9000,
section 9001. In fiscal year 1995, the Company's Australian subsidiary and its
Texas, Ireland and PRC manufacturing operations plan to pursue ISO 9000, section
9002 certification and registration.
Effects of Environmental Laws
Compliance with laws enacted for the protection of the environment to date
has had no material effect upon the Company's capital expenditures, earnings or
competitive position. The Company has successfully been involved in such
programs as the EPA's Energy Star program and a member of the Portable
Rechargeable Battery Association (PRBA) which identifies new regulations in
various areas with regard to labeling, transportation issues and proper
disposal. Although the Company does not anticipate any material adverse effects
in the future based on the nature of its operations, there can be no assurance
that such laws will not have a material adverse effect on the Company. To its
knowledge, the Company was not named as a defendant in any environmental
lawsuits during fiscal 1994.
EMPLOYEES
As of August 26, 1994, the Company had 6,977 employees, 4,085 of whom were
employed in manufacturing, 363 in engineering and 2,529 in the areas of general
management, sales, marketing and administration. Of the total, 3,477 were
employed in North America, 2,603 were employed in the Pacific Rim, 44 were
employed in the Rest of World (Middle East) and 853 were employed by the
Company's European subsidiaries. The Company believes that it has been
successful to date in attracting and retaining qualified personnel, but believes
its future success will depend in part on its continued ability to attract and
retain highly qualified engineers, technicians, marketing and management
personnel. To assist in attracting qualified employees at all levels, the
Company has adopted stock option, performance based incentive compensation,
profit sharing and other benefit plans. The Company considers its employee
relations to be good. No employee of the Company is represented by a union.
BUSINESS SEASONALITY
Although the Company does not consider its business to be highly seasonal,
the Company experienced seasonally higher sales in the second quarter of fiscal
1994 due to the holiday demand for some of its products, as it expanded the
consumer retail channel, and anticipates that this trend will continue.
ITEM 2. PROPERTIES
The Company owns and occupies its worldwide headquarters facility in
Irvine, California. The 232,000 square foot facility accommodates the Company's
executive, finance and administrative, sales, marketing, customer support and
engineering functions. The Company also leases a 246,000 square foot
manufacturing facility in Fountain Valley, California under a ten year lease
agreement, which expires in 1999. As a result of the Tandy/GRiD acquisition,
the Company owns and occupies a 93,000 square foot manufacturing facility in
Fort Worth, Texas and leases an additional 43,000 square feet of manufacturing
space. The Company leases approximately 240,000 square feet for regional sales
offices and 322,000 square feet for warehouse/distribution space for its North
American sales operations.
The Company entered into an agreement for the sale and leaseback of its
68,000 square foot manufacturing facility in Hong Kong effective June 1994. The
leaseback period is for one year fixed plus one additional year at the Company's
option. The Company leases an additional 82,000 and 25,000 square feet for
warehouse/production activities and office space, respectively, in Hong Kong.
The Company's Taiwanese manufacturing facility includes 54,000 square feet of
leased property. During fiscal 1994, the Company leased an aggregate of 389,000
square feet of manufacturing space in the PRC to service the domestic Chinese
and other Pacific Rim markets. The plant is expected to be in full operation by
the end of fiscal 1995. In addition, the Company leases approximately 73,000
square feet for sales, marketing and administration offices and warehouse
facilities in the Pacific Rim.
During fiscal 1994, the Company shifted its European production from the
acquired 113,000 square foot East Kilbride, Scotland manufacturing facility to a
340,000 square foot plant in Limerick, Ireland. The Company began the
centralization of its European, African and Middle Eastern distribution and
European service and support operations in Limerick, Ireland during the third
fiscal 1994 quarter. In addition, the Company has approximately 252,000 square
feet of sales, marketing, administration and warehouse facilities in other
countries in Europe. The Company also leases an additional 32,000 square feet
for warehouse and office space in the Middle East. An additional 182,000 square
feet is leased in the Middle East for planned expansion.
ITEM 3. LEGAL PROCEEDINGS
In June 1989, Texas Instruments Inc. ("TI") advised the Company that it
believed certain AST computer products infringe certain TI patents. On January
4, 1994, the Company initiated litigation (the "California action") in the U.S.
District Court for the Central District of California against TI alleging
certain violations of licensing agreements, federal antitrust laws and the
California Unfair Practices Act. In addition, the Company alleged that TI is
infringing an AST patent and that certain TI patents are invalid or
inapplicable. TI has alleged in the California action that the Company is
infringing patents owned by TI. On August 26, 1994, TI filed a lawsuit in the
U.S. District Court for the Eastern District of Texas against the Company
alleging infringement of patents in addition to those asserted by TI in the
California action. These litigations with TI are proceeding. Management does
not believe that the outcome of these matters will have a material adverse
impact on the Company's consolidated financial position or results of
operations.
On March 3 and March 14, 1994, complaints were filed by two shareholders
against the Company and certain of its officers and directors requesting
certification of class action, asserting claims under state and federal
securities law based on allegations that the Company made inadequate and false
disclosures and seeking unspecified compensatory damages and related fees and
costs. The complaints were filed in the United States District Court of the
Central District of California. On May 9, 1994, the Court consolidated the two
cases under the case name In re AST Securities Litigation. On September 12,
1994, a complaint was filed by a shareholder against the Company and certain of
its officers and directors requesting certification of class action, asserting
claims under state and federal securities law based on allegations that the
Company made inadequate and false disclosures and seeking unspecified
compensatory damages and related fees and costs. The complaint was filed in the
United States District Court of the Central District of California under the
case name Steven A. Kornfeld v. James L. Forquer, et al. Management has
reviewed the allegations contained in the complaints and believes such
allegations are without merit. Management intends to vigorously defend these
litigations. Management does not believe that the outcome of these matters will
have a material adverse impact on the Company's consolidated financial position
or results of operations.
The Internal Revenue Service ("IRS") is currently examining the Company's
1989, 1990 and 1991 federal income tax returns. In addition, the IRS has
completed its examination of the Company's 1987 and 1988 federal income tax
returns and has proposed adjustments to the Company's federal tax liabilities
for such years of approximately $8.3 million, excluding interest. The majority
of such proposed adjustments relate to the allocation of income between the
Company and its foreign subsidiaries. Management believes that the Company's
position has substantial merit and intends to vigorously contest these proposed
adjustments. Management further believes that any liability that may result
upon the final resolution of the proposed adjustments or current examinations
will not have a material adverse effect on the Company's consolidated financial
position or results of operations.
The Company has been named as a defendant or co-defendant, frequently with
other personal computer manufacturers, including IBM, AT&T, Unisys, Digital
Equipment Corporation, NEC, Olivetti, NCR, Panasonic, and Matsushita, in
thirteen similar lawsuits each of which alleges as a factual basis the
occurrence of carpal tunnel syndrome or repetitive stress injuries. Such claims
are being alleged with increasing frequency as a result of the use of various
computer products. The claims total approximately $15 million in compensatory
damages, $130 million in punitive damages, and additional unspecified amounts.
The Company has denied or is in the process of denying the claims and intends to
vigorously defend the suits. The suits naming the Company are just a few of the
many lawsuits of this type which have been filed, often naming IBM and other
major computer companies. The Company is unable at this time to predict the
ultimate outcome of these suits. Ultimate resolution of the litigation against
the Company may depend on progress in resolving this type of litigation overall.
The Company believes that the claims in the suits filed against it will not have
a material impact on the Company's consolidated financial position or results of
operations. The Company has maintained various liability insurance policies
during the periods covering the claims filed above. While such policies may
limit coverage under certain circumstances, the Company believes that it is
adequately protected. Should the Company not be successful in defending against
such lawsuits or not be able to claim compensation under its liability insurance
policies, the Company's profitability and financial condition may be adversely
affected.
The Company is also subject to other legal proceedings and claims which
also arise in the normal course of business. While the outcome of these
proceedings and claims cannot be predicted with certainty, management does not
believe the outcome of any of these matters will have a material adverse effect
on the Company's consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the three
months ended July 2, 1994.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
AST's Common Stock is traded on the over-the-counter market (NASDAQ
National Market System) under the symbol ASTA. The following tables set forth,
for the fiscal 1994 and 1993 periods indicated, the range of high and low prices
for the Company's Common Stock.
1994: High Low
1st Quarter $18 - 1/2 $13 - 3/4
2nd Quarter 25 - 1/2 16 - 3/4
3rd Quarter 33 20 - 1/4
4th Quarter 22 - 1/2 12 - 1/2
1993:
1st Quarter $17 - 3/8 $11 - 1/4
2nd Quarter 23 12 - 3/4
3rd Quarter 24 - 1/4 13
4th Quarter 17 - 1/4 12 - 3/4
There were approximately 1,113 security holders of record as of August 26,
1994. The Company has not paid dividends to date and intends to retain earnings
for use in the business for the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
The following data has been derived from consolidated financial statements
that have been audited by Ernst & Young, independent auditors. The information
set forth below is not necessarily indicative of the results of future
operations and should be read in conjunction with the consolidated financial
statements and notes thereto appearing elsewhere in this Annual Report on Form
10-K.
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------
(In thousands, except
per share amounts) 1994 1993 1992 1991 1990
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $2,367,274 $1,412,150 $ 944,079 $ 688,477 $ 533,814
Gross profit 381,333 285,698 293,260 248,347 173,375
Operating income (loss) 86,681 (2) (64,578) (1) 97,526 94,083 54,427
Net income (loss) 53,501 (53,738) 68,504 64,724 35,067
Net income (loss) per share:
Primary $ 1.64 $ (1.72) $ 2.16 $ 2.13 $ 1.43
Fully diluted $ 1.59 $ * $ * $ * $ 1.21
Shares used in computing net income
(loss) per share:
Primary 32,548 31,289 31,758 30,413 24,530
Fully diluted 34,866 * * * 30,960
- - ---------------------------------------------------------------------------------------------------------------
Cash and short-term investments $ 153,118 $ 121,600 $ 140,705 $ 153,305 $ 92,252
Working capital 434,474 301,046 (3) 332,793 282,678 185,243
Total assets 1,038,312 886,159 (3) 580,613 485,431 324,175
Long-term debt 215,294 92,258 (3) 2,431 30,110 30,126
Total shareholders' equity $ 383,954 $ 318,806 $ 363,267 $ 282,162 $ 193,286
Shares outstanding at end of period 32,334 31,579 30,787 30,228 15,255
- - ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Fully diluted earnings (loss) per share were anti-dilutive or not materially
different from primary earnings (loss) per share.
(1) Includes a $125 million pretax restructuring charge. See Note 2 of
Notes to Consolidated Financial Statements.
(2) Includes a $12.5 million pretax credit from the reversal of excess
restructuring charge amounts not used. See Note 2 of Notes to Consolidated
Financial Statements.
(3) Effective June 30, 1993, the Company purchased certain net assets of
Tandy Corporation's personal computer business. The Company's Consolidated
Statements of Operations do not include the revenues and expenses of the
acquired business until fiscal 1994. See Note 2 of Notes to Consolidated
Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion should be read in conjunction with the
consolidated financial statements.
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
RESULTS OF OPERATIONS 1994 CHANGE 1993 CHANGE 1992
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 2,367,274 68% $ 1,412,150 50% $944,079
Gross profit $ 381,333 33% $ 285,698 (3%) $293,260
Percentage of net sales 16.1% 20.2% 31.1%
Operating expenses (excluding
restructuring costs) $ 307,152 36% $ 225,276 15% $195,734
Percentage of net sales 13.0% 16.0% 20.7%
Restructuring charges (credit) $ (12,500) $ 125,000 $ -
Percentage of net sales (0.5%) 8.9% -
Net income (loss) $ 53,501 200% $ (53,738) (178%) $ 68,504
Net income (loss) per share, fully diluted $ 1.59 192% $ (1.72) (180%) $ 2.16
</TABLE>
NET SALES
Net sales increased to $2.367 billion in fiscal year 1994 from $1.412
billion in fiscal year 1993 and $944 million in fiscal year 1992. These
increases in revenues were due to strong worldwide demand for the Company's
desktop and notebook computer systems. In fiscal 1994, the Company's worldwide
unit shipments increased 78% to 1.432 million, compared with a 69% increase in
unit volume for fiscal 1993. The Company's unit volume growth rate exceeded its
sales growth rate as a result of pricing actions undertaken by the Company due
to continuing industrywide competitive pricing pressures. Price competition
continues to have a significant impact on prices of the Company's products,
especially those aimed at the consumer market, and additional pricing actions
may occur as the Company attempts to maintain its competitive mix of price and
performance characteristics. Going forward, the Company anticipates continued
industrywide competitive pricing and promotional actions. The Company's net
sales (expressed in U.S. dollars) were also reduced by 2.7%, 1.3% and .7% in
fiscal 1994, 1993 and 1992, respectively, due to fluctuations in the average
value of the U.S. dollar relative to its average value in the comparable periods
of the prior years.
Revenues from desktop system products increased 56% to $1.5 billion in
fiscal 1994 from $967 million in fiscal 1993, compared with an increase of 60%
in fiscal 1993. Major contributors to the improved year-over-year revenue
performance were the Company's 486-based desktop systems including the
Advantage! 486SX, 486/66, the Bravo 486SX/25, 486/33, 486/66D, and the entire
Premmia 486 product line. Revenues from sales to Tandy's retail operations and
the acquired GRiD and Victor product lines also contributed to the Company's
fiscal 1994 desktop revenue growth. Sales of the Company's 80386 systems,
reflecting the continuing shift in demand toward higher performance 486-based
systems, declined 58% to $90 million in fiscal 1994, compared to a decline of
42% in fiscal 1993.
Revenues from the Company's notebook computer products increased and
represented 22%, 21% and 24% of net sales for fiscal 1994, 1993 and 1992,
respectively. The Company's notebook computer product revenues rose 79% to $519
million in fiscal 1994 from $290 million in fiscal 1993, compared to an increase
of 28% in fiscal 1993 over fiscal 1992. The increase in net sales of notebook
computers reflects a 74% increase in unit shipments to 268,000 in fiscal 1994
over 154,000 in the same prior year period and a 52% unit volume increase in
fiscal 1993 over fiscal 1992. Fiscal 1994 notebook systems sales growth
occurred in all key notebook product lines including the Bravo, the Advantage!
Explorer, and the PowerExec notebook computer lines. In addition, revenues from
sales to the Company's OEM customers contributed to the Company's fiscal 1994
notebook revenue growth.
North American revenues (including Canada) increased 83% to $1.517 billion
in fiscal year 1994 compared with an increase of 56% in fiscal 1993 over 1992.
The continued revenue growth was the result of strong unit sales of the
Company's desktop and portable computer systems within each of the Company's
North American distribution channels, including independent resellers, dealers,
national distributors, original equipment manufacturers ("OEMs"), U.S.
Government approved dealers and consumer retailers. While revenue growth
occurred in each channel, fiscal 1994 sales to the consumer retail channel,
which includes fiscal 1994 sales made to Tandy's retail operations, rose 218%
over the prior year. Fiscal 1993 consumer retail channel sales rose 436% above
fiscal 1992 as fiscal 1993 represented the first complete year of Company sales
into this new channel. The consumer retail channel, including consumer
electronics, office and computer superstores, increased to 32% of total fiscal
1994 North American revenues versus 19% in fiscal 1993 and 5% in fiscal 1992.
The substantial fiscal 1994 revenue growth within this channel was due largely
to the growing popularity of computer superstores. Sales into this channel,
however, are cyclical with the strongest demand occurring in third and fourth
calendar quarters. As this channel continues to grow, the Company anticipates a
corresponding seasonal impact on the Company's net sales.
International revenues grew 46% to $850 million in fiscal 1994 from $582
million in fiscal 1993, compared to a 42% growth rate in fiscal 1993 over fiscal
1992. International revenues represented 36%, 41%, and 44% of net sales in
fiscal 1994, 1993 and 1992, respectively. European revenues increased 79% over
the prior year, compared with 45% in fiscal 1993 over 1992. The United Kingdom
and Sweden continued to be major contributors of total European revenues with
significant fiscal 1994 revenue growth also occurring in France, Italy and
Switzerland. During fiscal 1994, the Company further expanded its presence
within Europe by establishing new subsidiaries in Denmark, Ireland and Norway.
The Company's Scotland facility, which was acquired as part of AST's purchase of
Tandy Corporation's personal computer operations, terminated operations in the
fourth quarter of fiscal 1994.
Revenues from the Company's Pacific Rim region, which includes Australia,
the People's Republic of China ("PRC"), Hong Kong, Japan, Malaysia, New Zealand,
Singapore and Taiwan, combined to contribute to a 9% increase in fiscal 1994
sales, compared with a 34% increase in fiscal 1993 sales over 1992. The decline
in fiscal 1994 growth rate was attributable to significantly increased
competition within this region of the world. The Company anticipates that these
competitive pressures will continue. During the third quarter of fiscal 1994,
the Company established a new sales and manufacturing subsidiary in Tianjin,
China through a joint venture with a corporation affiliated with the Chinese
government.
A significant portion of the Company's Pacific Rim revenues are derived
from sales to the Hong Kong government and to Hong Kong based dealers who
ultimately market the Company's products within the PRC. Sales into the PRC
accounted for approximately 6% of the Company's total fiscal 1994 revenues,
compared with approximately 11% and 13% in fiscal 1993 and 1992, respectively.
Although the PRC has historically provided the Company with significant revenues
and profitability, future sales of the Company's products into the PRC are
highly dependent upon continuing favorable trade relations between the United
States and the PRC and the general economic and political stability of the
region. Economic factors such as short-term fluctuations in foreign currency
exchange rates, monetary controls, and changes in the PRC tax structure may also
have a negative impact on the region's future sales and operating results.
In the Company's Rest of World region, revenues increased 22% in fiscal
1994 over the prior year, compared with an increase of 60% in fiscal 1993 over
1992. These increases were due primarily to continuing growth within the
Company's Middle East operations.
GROSS PROFIT
The Company's 1994 gross profit margins of 16.1% represent a continued
decline from 20.2% in fiscal 1993 and 31.1% in fiscal 1992. The downward trend
in gross profit margins was primarily due to continued intense industrywide
competitive pressures which have required pricing reductions at a rate faster
than the Company was able to reduce costs. Also contributing to reduced gross
profit margins was the increased percentage of revenues generated by the
consumer retail (including sales to Tandy's retail operations) and OEM channels,
which typically yield lower gross margins. Selected inventory valuation
adjustments, taken in anticipation of shortening product life cycles, have also
contributed to the fiscal 1994 decline in gross profit margins. The Company
believes that the industry will continue to be characterized by rapid
introduction of new products, rapid technological advances and product
obsolescence. If the Company's products become technically obsolete, the
Company's net sales and profitability may be adversely affected. Lower gross
margins could result in decreased liquidity and adversely affect the Company's
financial position. In addition, there can be no assurance that additional
inventory valuation adjustments will not be required, which, if required, would
have an adverse impact on the Company's gross profit margins.
The results of the Company's international operations are subject to
currency fluctuations. As the value of the U.S. dollar strengthens relative to
other currencies, revenues from sales in those currencies converts into fewer
U.S. dollars. This effect on revenue has a corresponding impact on gross
profit, as the Company's production costs are incurred primarily in U.S.
dollars. When comparing fiscal 1994 to fiscal 1993, the U.S. dollar rose
substantially against nearly all European currencies. This year-to-year
currency fluctuation resulted in an approximate two percentage point gross
margin reduction in fiscal 1994 compared to fiscal 1993, compared to an
approximate one percentage point decline in fiscal 1993 compared to fiscal 1992.
The personal computer industry continues to experience significant pricing
pressures and the Company believes that industry consolidation and restructuring
will continue to result in an aggressive pricing environment and continued
pressure on the Company's gross profit margins during fiscal 1995. During
fiscal 1994, the Company and the majority of its competitors continued to
introduce new, lower-priced higher performance personal computers resulting in
continued pricing pressures on both new and older technology products. There
can be no assurance that future pricing actions by the Company and its
competitors will not adversely impact the Company's gross margins or
profitability.
<TABLE>
<CAPTION>
OPERATING EXPENSES 1994 CHANGE 1993 CHANGE 1992
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Selling and marketing $ 193,053 36% $ 141,752 18% $120,072
Percentage of net sales 8.2% 10.0% 12.7%
</TABLE>
While total fiscal 1994 selling and marketing spending rose by $51.3
million, it represented only 8.2% of sales compared to 10.0% in fiscal 1993 and
12.7% in fiscal 1992. Expanded worldwide sales and marketing efforts in both
new and existing subsidiary locations resulted in higher payroll related
expenses while increased sales levels resulted in higher sales commissions.
Entry into new domestic and international markets, new product introductions,
expansion of the Company's distribution channels and a greater emphasis on
advertising, sales and marketing programs contributed to increased marketing
promotion and cooperative advertising expenses. Additionally, the Company's
continued focus on increasing brand name awareness led to an increase in media
advertising expense. Part of the Company's increased fiscal 1994 selling and
marketing expenses, however, was mitigated by reduced performance-based employee
benefits which were accrued during fiscal 1994 and adjusted in the fourth
quarter of fiscal 1994 due to reduced corporate profitability. The Company
anticipates that fiscal 1995 selling and marketing expenses may increase in
absolute dollars as the Company continues to expand its marketing and sales
programs and focuses on continued growth in its international markets.
<TABLE>
1994 Change 1993 Change 1992
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
General and administrative $ 75,241 46% $ 51,555 14% $ 45,201
Percentage of net sales 3.2% 3.7% 4.8%
</TABLE>
In fiscal 1994, general and administrative expenses increased in absolute
dollars but declined as a percentage of net sales to 3.2% from 3.7% in fiscal
1993 and 4.8% in fiscal 1992. During fiscal 1994, the Company expanded its
domestic and international operations, including those acquired through the
purchase of Tandy's computer operations in Norway, Scotland and Texas, and the
Company established new subsidiaries in China, Malaysia, Denmark and Ireland.
Costs associated with these new facilities resulted in increased expenses for
staffing, occupancy, insurance, and outside professional services. Depreciation
and amortization expenses increased in fiscal 1994 due primarily to the expanded
fixed asset base resulting from the acquisition and integration of Tandy's
personal computer business. Part of the Company's increased fiscal 1994 general
and administrative expenses, however, was mitigated by reduced performance-based
employee benefits which were accrued during fiscal 1994 and adjusted in the
fourth quarter of fiscal 1994 due to reduced corporate profitability. The
Company anticipates that fiscal 1995 general and administrative costs may
increase in absolute dollars due to possible growth and expansion into new
global markets.
<TABLE>
1994 Change 1993 Change 1992
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Engineering and development $ 38,858 22% $ 31,969 5% $ 30,461
Percentage of net sales 1.6% 2.3% 3.2%
</TABLE>
Engineering and development costs increased in absolute dollars due to net
additions to the Company's engineering staff and higher costs for engineering
materials as the Company continues to invest in the development of new products
and in enhancements to existing products. Engineering and development
expenditures as a percentage of sales have continued to decrease since fiscal
1992 as a result of revenue growth during fiscal 1993 and 1994. Products
introduced in fiscal 1994 included additions to the Advantage!, Bravo, Premmia,
PowerExec, and Manhattan SMP product lines and the Ascentia 900N notebook
computer.
The personal computer industry is characterized by increasingly rapid
product life cycles. Accordingly, timely development of new and enhanced
products with favorable price/performance features are critical to the Company's
future growth and competitive position in the marketplace. Therefore, the
Company remains committed to continue its investment in research and development
activities and anticipates that fiscal 1995 engineering and development spending
may increase in absolute dollars. There can be no assurance that the Company's
products will continue to be commercially successful or technically advanced, or
that it will be able to deliver commercial quantities of new products in a
timely manner.
<TABLE>
1994 Change 1993 Change 1992
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Restructuring charges (credits) $ (12,500) - $ 125,000 - -
Percentage of net sales (0.5%) 8.9% -
</TABLE>
In the fourth quarter of fiscal 1993 and in connection with the Company's
acquisition of Tandy's personal computer manufacturing and engineering
operations and GRiD's North American and European sales and marketing
operations, the Company recorded a pretax restructuring charge of $125 million.
The estimated restructuring costs included $68 million in asset write-downs and
$57 million in estimated future cash expenditures. The charge reflected
estimated expenses to combine and restructure the Company's existing worldwide
manufacturing capacity ($34 million), as well as its marketing, engineering,
distribution, sales, and service operations ($41 million). Also included within
the restructuring charge were selected inventory valuation adjustments ($33
million) necessary to realign existing AST product lines in relation to the
acquired Tandy/GRiD and Victor products and to curtail production of certain AST
product offerings as a result of competing Tandy/GRiD product lines. These
estimated restructuring costs represented the Company's best assessment of the
proposed restructuring plans; however, the Company expected that some of these
original plans would be revised as the Company continued to identify the best
means of achieving reductions in its cost structure.
During fiscal 1994, the Company completed most of its previously identified
restructuring activities and incurred asset write-downs of $50 million and cash
expenditures of $47 million related directly to its fiscal 1994 restructuring
activities. The Company's manufacturing operations were realigned to integrate
the combined operations along product and geographic boundaries and included the
shift of nearly all the Americas desktop production to Texas and the
establishment of a new European manufacturing, distribution and service
operation in Limerick, Ireland. During fiscal 1994, the Company realigned and
centralized its European distribution and service operations in connection with
establishing the new Ireland facilities. The Company also realigned its
engineering and marketing organizations into strategic business units in order
to improve the Company's ability to provide dedicated focus on each of its key
product groups: desktops, servers and notebooks. During the first and second
fiscal quarters, the Company focused its efforts on integrating its existing
product lines with those of the acquired Tandy/GRiD operations, resulting in
price realignments of existing AST products as well as the acceleration of
certain AST end-of-life product cycles caused primarily by the introduction of
the newly acquired Tandy/GRiD products.
The Company established the restructuring reserve as a result of the Tandy
acquisitions and incurred costs related to the impact of the acquisitions on
AST's existing operations and the resulting requirement to realign the new and
larger combined Company's operations. These costs included asset write-downs,
provisions and cash expenditures. Furthermore, the Company used its
restructuring provisions for activities that were either identifiable with the
restructuring plan or that could be reasonably estimated in accordance with
provisions of Financial Accounting Standards Board Statement No. 5, "Accounting
for Contingencies."
In the fourth quarter of fiscal 1994, after concluding that most of its
restructuring activities had been completed or were adequately provided for
within the remaining restructuring accrual, the Company determined that the
total restructuring cost estimate could be lowered. As a result, the Company
took a fourth quarter restructuring credit in the amount of $12.5 million, or
ten percent of the original $125 million charge taken in the comparable prior
year fourth quarter. At July 2, 1994, the Company continues to hold
approximately $15 million in accrued restructuring provisions for the final
restructuring activities, which the Company expects to be completed during the
first half of fiscal 1995. The Company expects most of these costs to represent
future cash expenditures to be incurred to further combine and restructure
existing worldwide manufacturing and distribution capacity.
The Company believes that its fiscal 1994 restructuring activities were
necessary in order to redeploy and reorganize its worldwide operations after the
June 1993 acquisition of Tandy Corporation's personal computer operations. No
assurances can be given that the restructuring actions will be successful or
that similar actions will not be required in the future.
<TABLE>
<CAPTION>
OTHER INCOME AND EXPENSE 1994 CHANGE 1993 CHANGE 1992
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest and other income (expense), net $(7,677) (1,063%) $(660) (124%) $2,758
</TABLE>
In fiscal 1994, the Company had net interest expense of $7.8 million
compared to net interest income of $2.1 million in fiscal 1993 and $4.6 million
in fiscal 1992. Interest expense increased as a result of the note payable to
Tandy Corporation issued in July 1993, the Liquid Yield Option Notes issued in
December 1993, and increased utilization of the Company's bank credit facilities
during the first six months of fiscal 1994.
In fiscal 1994, the Company recognized net other income of $.1 million
compared to net other expense of $2.7 million in fiscal 1993 and $1.8 million in
fiscal 1992. The fiscal 1994 reversal was attributable to the one-time revenues
received from the completion of the sale of the Company's Hong Kong
manufacturing facility in June 1994, which resulted in a pretax gain of $4.3
million. This amount was partially offset by an increase in the cost of hedging
certain foreign currency exposures due to increases in the outstanding dollar
amounts of forward exchange contracts. Other expenses relate primarily to
foreign currency transaction and remeasurement gains and losses and the costs
associated with the Company's foreign currency hedging activities. The Company
adheres to a limited hedging strategy which is designed to minimize the effect
of remeasuring the local currency balance sheets of its foreign subsidiaries on
the Company's consolidated financial position and results of operations. See
further discussion included under "Liquidity and Capital Resources."
<TABLE>
<CAPTION>
PROVISION (BENEFIT) FOR INCOME TAXES 1994 CHANGE 1993 CHANGE 1992
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Provision (benefit) for income taxes $25,503 322% $(11,500) (136%) $31,780
Effective tax rate 32.3% (17.6%) 31.7%
</TABLE>
In fiscal 1994, 1993 and 1992, the Company recorded an effective income tax
provision (benefit) of 32.3%, (17.6%) and 31.7%, respectively. The decrease in
the 1993 effective tax rate was due primarily to the Company's inability to
provide tax benefit on a portion of the Company's fiscal 1993 restructure
charge. The increase in the 1994 tax rate is attributable to the one percent
increase in the federal income tax rate and changes in the proportion of income
earned within various taxing jurisdictions.
During fiscal 1993, the Company adopted Financial Accounting Standards
Board Statement No. 109 "Accounting for Income Taxes" ("SFAS 109"). The
adoption did not have a material effect on the net loss that was previously
reported for fiscal 1993. In accordance with SFAS 109, the Company recorded
total deferred tax assets of $78 million and $83 million, and total deferred tax
liabilities of $4 million and $2 million at July 2, 1994 and July 3, 1993,
respectively. Realization of the deferred tax assets, which primarily relate to
inventory reserves, restructuring reserves, other accrued liabilities and
foreign net operating loss carryforwards, is in part dependent on future
earnings from new and existing products. The timing and amount of these future
earnings may be impacted by a number of factors, including those discussed below
under "Additional Factors That May Affect Future Results." In recognition
thereof, the Company has established a deferred tax asset valuation reserve of
$35 million and $33 million at July 2, 1994 and July 3, 1993, respectively.
ACQUISITIONS
In the fourth quarter of fiscal 1993, the Company acquired certain assets
and assumed certain liabilities relating to Tandy Corporation's personal
computer manufacturing operations and the GRiD North American and European sales
divisions. On September 1, 1993, the Company also purchased certain assets and
assumed certain liabilities of Tandy/GRiD France. Assets acquired in the fiscal
1993 fourth quarter purchase included four manufacturing facilities, three of
which were located in Fort Worth, Texas and one in East Kilbride, Scotland.
Other tangible assets acquired consisted primarily of inventory and property,
plant and equipment. As part of the purchase agreement, the Company also
received the right to supply personal computers to Tandy's Radio Shack, Computer
City and Incredible Universe retail operations under a three-year supply
agreement. The total purchase price (including Tandy/GRiD France) was $111.7
million and included a cash payment of $15 million and a three-year promissory
note in the principal amount of $96.7 million.
The preliminary estimate of the excess of the purchase price over the fair
value of the net assets acquired (goodwill) was $20 million relating to
valuation adjustments to inventory ($15 million) and certain accrued liabilities
($5 million). During fiscal 1994, the Company refined the fair value estimates
of the assets acquired and liabilities assumed and, as a result, increased the
recorded goodwill by $45 million to $65 million. The increase in goodwill is
comprised of valuation adjustments to inventory, other assets and certain
accrued liabilities of $33.6 million, $5 million and $6.4 million, respectively.
The Company's original assessment of fair value was predicated on integrating
the acquired Tandy/GRiD and Victor product lines within the Company's existing
product offerings. During the first and second quarters of fiscal 1994, the
Company focused its efforts on integrating its existing product lines with the
acquired Tandy/GRiD and Victor product lines. Beginning in the third quarter of
fiscal 1994, the Company commenced a reassessment of the GRiD product line and
product capabilities, the current and future customer prospects for GRiD
products and the costs involved in continuing the GRiD brand name. Based upon
this review, the Company decided in the fourth quarter of fiscal 1994, to alter
its product line integration strategy to eventually discontinue all
manufacturing, marketing and sales efforts related to the acquired GRiD product
line. As a result of terminating this product line, the Company reassessed the
fair value of the related inventory originally acquired from Tandy.
The acquisitions have been accounted for in accordance with the purchase
method of accounting and, accordingly, the net assets acquired have been
included in the Company's consolidated balance sheets based upon their estimated
fair values at the transactions' effective dates. The Company's consolidated
statements of operations include the revenues and expenses of the acquired
businesses after the effective dates of the respective transactions.
<TABLE>
<CAPTION>
LIQUIDITY AND CAPITAL RESOURCES 1994 1993 1992
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and cash equivalents $ 153,118 $ 121,600 $ 87,874
Short-term investments - - $ 52,831
Working capital $ 434,474 $ 301,046 $ 332,793
Cash provided by (used in):
Operating activities $ (40,260) $ (68,418) $ 32,193
Investing activities $ (35,856) $ 32,523 $ (69,100)
Financing activities $ 107,798 $ 63,010 $ (25,653)
</TABLE>
Increased July 2, 1994 cash and cash equivalents were due primarily to the
December 1993 Liquid Yield Option Note issuance in which the Company raised
$111.7 million. The increase in working capital is due primarily to increased
accounts receivable levels which were consistent with the higher sales levels
achieved in fiscal 1994.
In fiscal 1994, net cash used in operating activities declined to $40.3
million from $68.4 million in fiscal 1993. This decline was due primarily to
increased operating profit and lower inventory levels. Improvement in cash flow
from operations in fiscal 1995 will depend on the Company's ability to improve
profit levels and further reduce inventory levels.
Net cash used in investing activities increased during fiscal 1994 compared
with fiscal 1993, primarily due to increases in capital expenditures. Capital
expenditures totaled $30.0 million in fiscal 1994 and consisted of additions to
plant and engineering equipment, office furniture and fixtures, and worldwide
information systems. Included in total fiscal 1994 capital additions are land
and an existing manufacturing plant purchased for $4.6 million and machinery and
equipment purchased for $3.0 million in Limerick, Ireland. The Company expects
its fiscal 1995 capital expenditures to be consistent with those incurred in
fiscal 1994.
The Company's ability to fund its activities from operations is directly
dependent upon its rate of growth, ability to effectively manage its inventory,
the terms under which it extends credit to its customers, the manner in which it
finances any capital expansion, and the Company's ability to access external
sources of financing. The Company intends to fund its fiscal 1995 cash
requirements through a combination of cash on hand, cash provided by operations,
available borrowings under its committed revolving credit facilities and
uncommitted money market lines, and possible future public or private debt
and/or equity offerings. At July 2, 1994, the Company had available a $300
million unsecured committed revolving credit facility with a final maturity date
of September 30, 1996. This revolving credit agreement allows the Company to
borrow, subject to certain leverage and total debt restrictions, at rates based
upon the bank's reference rate, or a spread of .625% over the LIBOR rate, .75%
over the domestic certificate of deposit rate, or at a rate bid by a bank, as
selected by the Company. At July 2, 1994, there was $45 million outstanding as
drawings under this credit facility and $67.7 million outstanding in the form of
a letter of credit issued to Tandy Corporation in support of the acquisition
note payable. The Company also had $5 million outstanding under an uncommitted
money market line of credit. The Company expects that it will continue to incur
short-term borrowings from time to time in order to finance working capital and
capital expenditure requirements. The Company also has various additional
letter of credit facilities and uncommitted money market credit facilities
available for use by the Company and its subsidiaries.
On August 31, 1994, the Company announced that it expects its first quarter
fiscal 1995 revenues to be flat relative to the first quarter of fiscal 1994,
which was $514 million, and down from the previous fourth quarter fiscal 1994
revenue of $585 million. This shortfall in expected sales volume and lower
gross margins will result in a net loss for the first quarter of fiscal 1995.
Depending on the size of the projected loss for the first quarter of fiscal
1995, the Company then could be in default of specific financial covenants in
its committed $300 million revolving credit facility. The Company is currently
in negotiations with the bank participants in the revolving credit facility and
expects to have a waiver of certain financial covenants in place prior to any
event of default occurring. The Company currently has no reason to believe that
it will not be able to negotiate waivers to cure any potential defaults under
its revolving credit facility due to the expected loss for the first quarter of
fiscal 1995; however, no assurance can be given that such waivers will be
obtained.
In connection with the Tandy acquisition, the Company issued a $96.7
million promissory note to Tandy Corporation which is due on July 11, 1996.
Interest due the first year was paid on July 11, 1994 at an initial rate of
3.75% per annum. The interest rate has been adjusted to 4.94% per annum,
effective July 11, 1994 and will be adjusted once more on July 11, 1995 to the
lower of either 5% or the "lowest three month rate" within the meaning of
Section 1274(d)(2) of the Internal Revenue Code of 1986 as of July 11, 1995.
There are no sinking fund requirements. The note also requires the Company to
maintain a standby letter of credit payable to Tandy in the amount of 70% of the
face value of the note or $67.7 million. Upon maturity of the note, up to 50%
of the initial principal amount of the promissory note may be converted, at the
option of the Company, into common stock of the Company based upon its then fair
market value, as defined in the promissory note.
Net cash provided by financing activities increased during fiscal 1994
compared with fiscal 1993 and 1992, mainly because of proceeds received in
connection with the issuance of the Liquid Yield Option Notes ("LYONs"). On
December 14, 1993, the Company issued $315 million par value of LYONs due
December 14, 2013. The LYONs are zero coupon convertible subordinated notes
which were sold at a significant discount from par value with a yield to
maturity of 5.25% and a total value at maturity of $315 million. There are no
periodic payments of interest on the LYONs. Each $1,000 principal amount at
maturity of LYONs is convertible into 12.993 shares of the Company's common
stock at any time. Upon conversion of a LYON, the Company may elect to deliver
shares of common stock at the conversion rate or cash equal to the market value
of the shares of common stock into which the LYONs are convertible. Total
proceeds received from the sale of the LYONs were approximately $111.7 million,
which have been utilized for working capital, including the financing of
expected increases in accounts receivable and inventories,
repayment of bank borrowings under the Company's revolving credit facilities,
new product development, and other general corporate purposes. The holder of a
LYON may require the Company to purchase its LYONs on December 14, 1998,
December 14, 2003 and December 14, 2008 (the "Purchase Dates"), and such
payments may reduce the liquidity of the Company. However, the Company may,
subject to certain exceptions, elect to pay the purchase price on any of the
three Purchase Dates in cash or shares of common stock or any combination
thereof. The Company has made no decision as to whether it will meet future
purchase obligations in cash, common stock, or any combination thereof. Such
decision will be based on market conditions at the time a decision is required,
as well as management's view of the liquidity of the Company at such time.
The Company attempts to minimize its exposure to foreign currency
transaction and remeasurement gains and losses due to the effect of remeasuring
the local currency balance sheets of its foreign subsidiaries on the Company's
consolidated financial position and results of operations. The Company utilizes
a limited hedging strategy which includes the use of foreign currency
borrowings, netting of foreign currency assets and liabilities as well as
forward exchange contracts to hedge its exposure to exchange rate fluctuations
in connection with its subsidiaries' monetary assets and liabilities held in
foreign currencies. The carrying amounts of the forward exchange contracts
equal their fair value and are adjusted at each balance sheet date for changes
in exchange rates. Realized and unrealized gains and losses on the forward
contracts are recognized currently in the consolidated statements of operations.
The Company held forward exchange contracts with a face value of approximately
$143.0 million at July 2, 1994 and $57.5 million at July 3, 1993, which
approximates the Company's net monetary asset exposure to foreign currency
fluctuations at those respective dates. Unrealized losses associated with these
forward contracts totaling $4.8 million at July 2, 1994 and unrealized gains
totaling $1.1 million at July 3, 1993, are included in the Company's
consolidated statements of operations for those periods. Foreign currency
borrowings totaled $3.8 million at July 2, 1994 and $9.1 million at July 3,
1993.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
Future operating results may be impacted by a number of factors, including
worldwide economic and political conditions, industry specific factors, the
availability and cost of components, the Company's ability to timely develop and
produce commercially viable products, the Company's ability to manage expense
levels in response to decreasing gross profit margins, the continued financial
strength of the Company's dealers and distributors, the Company's ability to
accurately anticipate customer demand, and the Company's ability to successfully
complete the integration of the acquired Tandy/GRiD operations into the
Company's business model.
The Company's future success is highly dependent upon its ability to
continue to timely develop and market products that incorporate new technology,
are priced competitively and achieve significant market acceptance. There can
be no assurance that the Company's products will continue to be commercially
successful or technically advanced due to the rapid improvements in computer
technology and resulting product obsolescence. There is also no assurance that
the Company will be able to deliver commercial quantities of new products in a
timely manner, or that such products will receive favorable market acceptance.
The Company regularly introduces new products designed to replace existing
products. While the Company closely monitors new product introductions and
product obsolescence, there can be no assurance that such transitions will occur
without adversely affecting the Company's net sales and profitability. In
addition, if the Company is unable to accurately anticipate the customer demand
shift from 486-based systems to systems utilizing Pentium processors, the life
cycles of the Company's 486-based systems could be shortened which may result in
inventory valuation reserves and could have a material adverse effect on the
Company's net sales and profitability.
Increases in demand for personal computers have created industrywide
shortages, which at times have resulted in premium prices being paid for key
components, such as Dynamic Random Access Memories and high quality liquid
crystal display screens. These shortages have occasionally resulted in the
Company's inability to procure these components in sufficient quantities to meet
demand for its products. In addition, a number of the Company's products
include certain components, such as active-matrix displays, CD-ROMs, application
specific integrated circuits, and microprocessors, that are currently purchased
from single sources due to availability, price, quality or other considerations.
The Company purchases components pursuant to purchase orders placed in the
ordinary course of business and has no guaranteed supply arrangements with
single source suppliers. While the Company is working with its suppliers to
minimize component part shortages, there can be no assurance that future
disruptions in delivery of components will not occur. Should delays or
shortages occur or component costs significantly increase, the Company's net
sales and profitability could be adversely affected.
The Company participates in a highly volatile industry that is
characterized by dynamic customer demand patterns, rapid introduction of new
products, rapid technological advances, and industrywide competition resulting
in an extremely competitive pricing environment with downward pressure on gross
margins. The Company anticipates that the personal computer industry will
continue to experience intense price competition and dramatic price reductions
during fiscal 1995. There can be no assurance that future pricing actions by
the Company and its competitors will not adversely impact the Company's net
sales and profitability.
Consistent with industry practice, the Company provides certain of its
larger distributors, consumer retailers and dealers with stock balancing and
price protection rights that permit these distributors, retailers and dealers to
return slow-moving products to the Company for credit or to receive price
adjustments if the Company lowers the price of selected products within certain
time periods. There can be no assurance that the Company will not experience
rates of return or price protection adjustments that could have a material
adverse impact on the Company's net sales and profitability in the future.
The Company believes that, with the acquisition of additional manufacturing
facilities from Tandy Corporation and the acquisition of manufacturing
facilities both in the PRC and Ireland, production capacity should be sufficient
to support anticipated increases in unit volumes. The Company also expects to
increase inventory levels to support higher production volumes. However, if the
Company is unable to obtain certain key components, or to effectively forecast
customer demand or manage its inventory, these higher inventory levels may
result in increased obsolescence and adversely impact the Company's gross
margins and results of operations. Additionally, if the Company is unable to
timely ramp up its manufacturing operations in Texas and Ireland, it could
adversely impact the Company's net sales, gross profit and profitability.
The Company's overall operating income varies within each geographic
region. Historically, the Company's North/Latin Americas and Pacific Rim
regions have made the primary contributions to the Company's profitability.
Therefore, should the Company experience significant revenue and/or
profitability declines in either region, this could significantly impact the
Company's overall net sales and profitability.
The Company's international operations are affected by foreign currency
fluctuations. The financial statements of the Company's foreign subsidiaries
are remeasured into the United States dollar functional currency for
consolidated reporting purposes. Gains and losses resulting from this
remeasurement process are recognized currently in the consolidated results of
operations. The Company attempts to minimize the impact of these remeasurement
gains and losses by adhering to a hedging strategy utilizing forward exchange
contracts and, to a lesser extent, foreign currency borrowings. The Company's
exposure to currency fluctuations will continue to increase as a result of the
expansion of its international operations. Significant fluctuations in currency
values could have an adverse effect on the Company's net sales, gross margins
and profitability.
The Company's international operations may also be affected by changes in
United States trade relationships and the economic stability of the locations in
which sales occur. The Company operates in foreign locations, such as the PRC,
where future sales may be dependent upon continuing favorable trade relations.
Additionally, foreign locations such as the PRC may experience changes in their
general economic stability due to such factors as increased inflation and
political turmoil. Any significant change in United States trade relations or
the economic stability of foreign locations in which the Company sells its
products could have an adverse effect on the Company's net sales and
profitability.
The personal computer industry presents risks for claims of infringement of
patents, trademarks and copyrights. From time to time, the Company may be
notified that certain of its products may infringe upon the intellectual
property rights of others. The Company generally evaluates all such notices on
a case-by-case basis to determine whether licenses are necessary or desirable.
If such claims are made, there can be no assurance that licenses will be
available on commercially reasonable terms or that retroactive royalty payments
on sales of the Company's computers will not be required. In addition,
substantial costs may be incurred in disputing such claims. The Company
believes that the actions it takes to avoid or minimize the impact to the
Company of such claims are prudent, however, there can be no assurance that such
claims will not occur and, if successful, would not have a material adverse
effect on the Company's business operations and profitability.
The Company continued to broaden its product distribution into new
geographic locations and new sales channels. Certain of the Company's sales
were to newly appointed resellers and new locations for sale of the Company's
products. Offering its products in an increasing number of geographic locations
and through a variety of distribution channels, including distributors,
electronics superstores, and other mass merchandise stores, requires the Company
to increase its geographic presence and to provide direct sales and support
interface with customers. There can be no assurance, however, that this
distribution strategy will be effective, or that the requisite service and
support to ensure the success of the Company's operations in new locations or
through new channels can be achieved without significantly increasing overall
expenses. While the Company anticipates that its geographic expansion will
continue and the number of outlets for its products will increase in fiscal
1995, a reduction in this growth could affect sales and profitability.
The Company's primary means of distribution remains third-party computer
resellers and consumer channels. While the Company continuously monitors and
manages the credit it extends to resellers to limit its credit risk, the
Company's business could be adversely affected in the event that the generally
weak financial condition of third-party computer resellers worsens. In the
event of the financial failure of a major reseller, the Company would experience
disruptions in its distribution as well as the loss of the unsecured portion of
any outstanding accounts receivable.
The Company's corporate headquarters facility, at which the majority of its
research and development activities are conducted, and certain manufacturing
operations are located near major earthquake faults which have experienced
earthquakes in the past. While the Company does carry insurance at levels
management believes is prudent, in the event of a major earthquake affecting one
or more of the Company's facilities, it is likely that insurance proceeds would
not cover all of the costs incurred and, therefore, the operations and operating
results of the Company could be adversely affected.
Because of these and other factors affecting the Company's operating
results, past financial performance should not be considered a reliable
indicator of future performance, and investors should not use historical trends
to anticipate results or trends in future periods. In addition, the Company's
participation in the highly dynamic personal computer industry often results in
significant volatility in the Company's common stock price.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements:
Report of Independent Auditors.
Consolidated Balance Sheets at July 2, 1994 and July 3, 1993.
Consolidated Statements of Operations for the years ended July 2, 1994,
July 3, 1993 and June 27, 1992.
Consolidated Statements of Shareholders' Equity for the years ended July
2, 1994, July 3, 1993 and June 27, 1992.
Consolidated Statements of Cash Flows for the years ended July 2, 1994,
July 3, 1993 and June 27, 1992.
Notes to Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
AST Research, Inc.
We have audited the accompanying consolidated balance sheets of AST
Research, Inc. as of July 2, 1994 and July 3, 1993, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended July 2, 1994. Our audits also included the
financial statement schedules listed in the Index at Item 14(a). These
financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of AST Research,
Inc. at July 2, 1994 and July 3, 1993, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
July 2, 1994, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedules, when considered
in relation to the basic financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
Ernst & Young LLP
Orange County, California
July 26, 1994
AST RESEARCH, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------
July 2, July 3,
(In thousands, except share amounts) 1994 1993
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 153,118 $ 121,600
Accounts receivable, net of allowance for
doubtful accounts of $17,564 ($11,671 in 1993) 326,057 236,020
Inventories 333,729 342,307
Deferred income taxes 43,266 46,058
Other current assets 9,797 15,230
- - ----------------------------------------------------------------------------------------------------------
Total current assets 865,967 761,215
Property and equipment 159,530 134,422
Accumulated depreciation and amortization (56,089) (39,500)
- - ----------------------------------------------------------------------------------------------------------
Net property and equipment 103,441 94,922
Goodwill, net of accumulated amortization
of $4,387 ($606 in 1993) 61,912 20,693
Other assets 6,992 9,329
- - ----------------------------------------------------------------------------------------------------------
$ 1,038,312 $ 886,159
==========================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 50,000 $ 59,217
Accounts payable 209,579 157,996
Accrued salaries, wages and employee benefits 21,465 19,042
Other accrued liabilities 112,096 178,835
Income taxes payable 37,955 44,832
Current portion of long-term debt 398 247
- - ----------------------------------------------------------------------------------------------------------
Total current liabilities 431,493 460,169
Long-term debt 215,294 92,258
Deferred income taxes and other non-current liabilities 7,571 14,926
Commitments and contingencies
Shareholders' equity:
Common stock, par value $.01; 70,000,000 shares
authorized, 32,333,750 shares issued and
outstanding in 1994 (31,579,115 in 1993) 323 316
Additional capital 141,424 129,784
Retained earnings 242,207 188,706
- - ----------------------------------------------------------------------------------------------------------
Total shareholders' equity 383,954 318,806
- - ----------------------------------------------------------------------------------------------------------
$ 1,038,312 $ 886,159
==========================================================================================================
</TABLE>
See accompanying notes.
AST RESEARCH, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------
Fiscal Year
----------------------------------------
(In thousands, except per share amounts) 1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 2,367,274 $ 1,412,150 $ 944,079
Cost of sales 1,985,941 1,126,452 650,819
- - --------------------------------------------------------------------------------------------------------------
Gross profit 381,333 285,698 293,260
Selling and marketing expenses 193,053 141,752 120,072
General and administrative expenses 75,241 51,555 45,201
Engineering and development expenses 38,858 31,969 30,461
Restructuring charge (credit) (12,500) 125,000 -
- - --------------------------------------------------------------------------------------------------------------
Total operating expenses 294,652 350,276 195,734
- - --------------------------------------------------------------------------------------------------------------
Operating income (loss) 86,681 (64,578) 97,526
Interest income 2,125 3,341 7,009
Interest expense (9,937) (1,269) (2,439)
Other income (expense), net 135 (2,732) (1,812)
- - --------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 79,004 (65,238) 100,284
Provision (benefit) for income taxes 25,503 (11,500) 31,780
- - --------------------------------------------------------------------------------------------------------------
Net income (loss) $ 53,501 $ (53,738) $ 68,504
==============================================================================================================
Net income (loss) per share:
Primary $ 1.64 $ (1.72) $ 2.16
Fully diluted $ 1.59 $ (1.72) $ 2.16
==============================================================================================================
Shares used in computing net income
(loss) per share:
Primary 32,548 31,289 31,758
Fully diluted 34,866 31,289 31,774
==============================================================================================================
</TABLE>
See accompanying notes.
AST RESEARCH, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------
Common Stock Additional Retained
(In thousands) Shares Amount Capital Earnings
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at June 28, 1991 30,228 $302 $107,920 $173,940
Exercise of stock options 607 6 2,771 -
Tax benefit related to employee stock options - - 9,042 -
Vesting of restricted stock - - 782 -
Cancellation of restricted stock (48) - - -
Net income - - - 68,504
- - -------------------------------------------------------------------------------------------------------------
Balance at June 27, 1992 30,787 308 120,515 242,444
Exercise of stock options 867 9 4,939 -
Tax benefit related to employee stock options - - 3,980 -
Vesting of restricted stock - - 450 -
Cancellation of restricted stock (75) (1) (100) -
Net loss - - - (53,738)
- - --------------------------------------------------------------------------------------------------------------
Balance at July 3, 1993 31,579 316 129,784 188,706
Exercise of stock options and warrants 755 7 9,554 -
Tax benefit related to employee stock options - - 1,823 -
Vesting of restricted stock - - 263 -
Net income - - - 53,501
- - -------------------------------------------------------------------------------------------------------------
Balance at July 2, 1994 32,334 $323 $141,424 $242,207
=============================================================================================================
</TABLE>
See accompanying notes.
AST RESEARCH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal Year
- - -------------------------------------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 2,274,978 $ 1,322,831 $ 906,319
Cash paid to suppliers and employees (2,294,380) (1,373,528) (846,023)
Interest received 2,052 4,583 6,388
Interest paid (3,149) (1,373) (2,610)
Income tax refunds received 1,989 - -
Income taxes paid (22,210) (13,008) (29,405)
Other cash received (paid) 460 (7,923) (2,476)
- - -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (40,260) (68,418) 32,193
Cash flows from investing activities:
Purchases of short-term investments - (35,155) (120,566)
Proceeds from short-term investments - 87,986 67,735
Payment related to Tandy/GRiD acquisition (15,000) - -
Purchases of capital equipment (30,045) (20,894) (17,811)
Proceeds from disposition of capital equipment 10,673 1,146 1,923
Purchases of other assets (1,484) (560) (381)
- - -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (35,856) 32,523 (69,100)
Cash flows from financing activities:
Short-term borrowings, net (9,217) 58,417 -
Repayment of long-term debt (520) (355) (28,430)
Proceeds from issuance of long-term debt 107,974 - -
Proceeds from issuance of common stock 9,561 4,948 2,777
- - -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 107,798 63,010 (25,653)
Effect of exchange rate changes on cash and cash equivalents (164) 6,611 (2,871)
- - -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 31,518 33,726 (65,431)
Cash and cash equivalents at beginning of year 121,600 87,874 153,305
- - -------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 153,118 $ 121,600 $ 87,874
=============================================================================================================
</TABLE>
See accompanying notes.
AST RESEARCH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
Fiscal Year
- - -------------------------------------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME (LOSS) TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income (loss) $ 53,501 $ (53,738) $ 68,504
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 26,769 13,222 11,793
Provision (benefit) for deferred income taxes 8,983 (55,438) 1,499
Gain on sale of capital equipment (4,286) - -
Change in operating assets and liabilities, net
of effects of acquisition:
Accounts receivable (86,290) (97,059) (37,164)
Inventories (19,808) (59,809) (54,367)
Other current assets 3,317 (552) (4,985)
Accounts payable and accrued expenses (14,093) 137,496 42,862
Income taxes payable (6,877) 28,230 (7,757)
Other current liabilities (3,573) 19,785 9,850
Exchange (gains) losses 2,097 (555) 1,958
- - -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities $ (40,260) $ (68,418) $ 32,193
=============================================================================================================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
The Company purchased certain assets relating to Tandy
Corporation's personal computer operations effective
June 30, 1993. In addition, the Company purchased certain
assets relating to Tandy/GRiD France's personal computer
operations effective September 1, 1993. In conjunction with
the acquisitions, liabilities were assumed as follows:
Fair value of assets acquired $ 16,571 $ 151,000
Note payable and cash due Tandy (6,720) (105,000)
- - -------------------------------------------------------------------------------------------------------------
Liabilities assumed $ 9,851 $ 46,000
=============================================================================================================
Tax benefit of employee stock options $ 1,823 $ 3,980 $ 9,042
=============================================================================================================
</TABLE>
See accompanying notes.
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
AST Research, Inc. (the "Company") and its wholly and majority owned
subsidiaries. All intercompany accounts and transactions have been eliminated
in consolidation.
Fiscal Year
The Company operates within a conventional 52/53 week accounting fiscal
year. The Company's fiscal year ends on the Saturday closest to June 30th, with
the exception of certain foreign subsidiaries which operate on a June 30th
fiscal year end. The fiscal years ended July 2, 1994, July 3, 1993 and June 27,
1992 included 52, 53 and 52 weeks, respectively.
Business
The Company designs, manufactures, markets, services and supports a broad
line of personal computers, including desktop, server, and notebook systems
marketed under the Advantage!, Ascentia, Bravo, Premmia and Manhattan SMP brand
names.
Cash and Cash Equivalents
Cash and cash equivalents generally consist of cash, certificates of
deposit, time deposits, commercial paper, money market preferred stocks, short-
term government obligations and other money market instruments. The Company
invests its excess cash in deposits with major international banks, in
government securities and money market securities of investment grade companies
from a variety of industries and, therefore, bears minimal risk. These
securities have original maturity dates not exceeding three months. Such
investments are stated at cost, which approximates fair value, and are
considered cash equivalents for purposes of reporting cash flows.
Inventories
Inventories are stated at the lower of cost, determined on a first-in
first-out basis, or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
are provided on the straight-line method over the following estimated useful
lives:
<TABLE>
- - ------------------------------------------------------------------------------------------------
<S> <S>
Buildings 40 years
Machinery and equipment 3-5 years
Furniture and fixtures 3-5 years
Leasehold improvements Shorter of 5 years or remaining term of the lease
- - ------------------------------------------------------------------------------------------------
</TABLE>
Goodwill
Goodwill, representing the excess of the purchase price over the fair value
of the net assets of the acquired entities, is being amortized on a straight-
line basis over the period of expected benefit of ten years. Total amortization
of goodwill recorded for fiscal years 1994, 1993 and 1992 was $3.8 million, $.1
million and $.1 million, respectively. The carrying value of goodwill will be
reviewed periodically based on the undiscounted cash flows of the entity
acquired over the remaining amortization period. Should this review indicate
that goodwill will not be recoverable, the Company's carrying value of the
goodwill will be reduced by the estimated shortfall of undiscounted cash flows.
Revenue Recognition
The Company recognizes revenue from product sales at the time of shipment.
The Company has established programs which, under specified conditions, provide
price protection rights and/or enable its customers to return product. The
effect of these programs is estimated and current period sales and cost of sales
are reduced accordingly.
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Warranty Costs
The Company provides, by a current charge to income, an amount it estimates
will be needed to cover future warranty obligations for products sold during the
year. The accrued liability for warranty costs is included in the caption
"Other accrued liabilities" in the accompanying consolidated balance sheets.
Engineering and Development
Engineering and development costs are expensed as incurred. Substantially
all engineering and development expenses are related to developing new products
and designing significant improvements to existing products.
Deferred Grants
During fiscal 1994, the Company secured various grants from the Industrial
Development Authority of the Republic of Ireland. These grants include
employment, training and capital grants and extend through December 1996.
Employment grants are amortized into income over a period of one year. Employee
training grants are recognized in income in the period in which the training
costs are incurred by the Company. Grants for the acquisition of property and
equipment are deferred and recognized in income on the same basis as the related
property and equipment is depreciated. During fiscal 1994, the Company recorded
approximately $5.1 million in grant funds received or receivable and at July 2,
1994, $4.5 million of this amount remains as a deferred credit and is included
in "Other accrued liabilities" in the accompanying consolidated balance sheet.
The Company has a ten year contingent liability to repay, in whole or in
part, grants received under certain circumstances pursuant to the Capital and
Employment Grant Agreements which began February 1994. In addition, the Company
has a five year contingent liability under the Employment Grant Agreement from
date of first payment to repay employment grants paid in respect to any job if
such job remains vacant for a period in excess of six calendar months. At July
2, 1994, the Company also has a one million Irish pounds (U.S. $1.5 million) ten
year contingent liability related to the purchase of the manufacturing facility
which began in November 1993 and is payable in the event that the Company
terminates operations in Ireland.
Foreign Currency
The financial statements of the Company's foreign subsidiaries are
remeasured into the U.S. dollar functional currency for consolidation and
reporting purposes. Current rates of exchange are used to remeasure monetary
assets and liabilities and historical rates of exchange are used for nonmonetary
assets and related elements of expense. Revenue and other expense elements are
remeasured at rates which approximate the rates in effect on the transaction
dates. Gains and losses resulting from this remeasurement process are
recognized currently in the consolidated statements of operations.
The Company utilizes forward exchange contracts and local currency
borrowings to hedge its exposure to exchange rate fluctuations in connection
with monetary assets and liabilities held in foreign currencies. The carrying
amounts of the forward exchange contracts equal their fair value and are
adjusted at each balance sheet date for changes in exchange rates. Realized and
unrealized gains and losses on the forward contracts are recognized currently in
income, and any premium or discount is recognized over the life of the contract.
The Company held forward exchange contracts maturing at various dates through
January 1995 with a face value of approximately $143.0 million at July 2, 1994
and $57.5 million at July 3, 1993. Unrealized losses associated with these
forward contracts aggregating $4.8 million at July 2, 1994 and unrealized gains
aggregating $1.1 million at July 3, 1993 are included in the Company's
consolidated statements of operations for those periods. For the years ended
July 2, 1994, July 3, 1993 and June 27, 1992, a net foreign currency transaction
loss of $2,097,000, gain of $555,000 and loss of $1,958,000, respectively, is
included in the caption "Other expense, net" in the accompanying consolidated
statements of operations.
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The provision (benefit) for income taxes is computed on the pretax income
(loss) of the consolidated entities located within each taxing country based on
the current tax law. Deferred taxes result from the future tax consequences
associated with temporary differences between the amount of assets and
liabilities recorded for tax and financial accounting purposes. Incremental
United States income taxes have not been provided on $198 million of cumulative
undistributed earnings of the Company's foreign subsidiaries. These earnings,
which reflect full provision for non-U.S. income taxes, are expected to be
reinvested indefinitely in non-U.S. operations or to be remitted substantially
free of additional tax. Accordingly, no material provision has been made for
taxes that might be payable upon remittance of such earnings nor is it
practicable to determine the amount of this liability.
During fiscal 1993, the Company elected the early adoption of the asset and
liability method of accounting for income taxes pursuant to Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" ("SFAS
109"). This change had no material effect on the net loss previously reported
in fiscal 1993.
Per Share Information
Primary earnings (loss) per common share have been computed based upon the
weighted average number of common and common equivalent shares outstanding.
Common equivalent shares result from the assumed exercise of outstanding stock
options that have a dilutive effect when applying the treasury stock method.
The fully diluted per share calculation assumes, in addition to the above, (i)
that the Company's Liquid Yield Option Notes were converted from the date of
issuance with earnings being increased for interest expense, net of taxes, that
would not have been incurred had conversion taken place, and (ii) the potential
additional dilutive effect of stock options.
Capital Stock
The Company follows the practice of recording amounts received upon the
exercise of options by crediting common stock and additional capital. No
charges are reflected in the consolidated statements of operations as a result
of the grant or exercise of stock options. The Company realizes an income tax
benefit from the exercise or early disposition of certain stock options. This
benefit results in a decrease in current income taxes payable and an increase in
additional capital.
Reclassification
Certain previously reported amounts have been reclassified to conform with
the current period presentation.
NOTE 2. ACQUISITIONS AND RESTRUCTURING
Acquisitions
In the fourth quarter of fiscal 1993, the Company acquired certain assets
and assumed certain liabilities relating to Tandy Corporation's personal
computer manufacturing operations and the GRiD North American and European sales
divisions. On September 1, 1993, the Company also purchased certain assets and
assumed certain liabilities of Tandy/GRiD France. Assets acquired in the fiscal
1993 fourth quarter purchase included four manufacturing facilities, three of
which were located in Fort Worth, Texas and one in East Kilbride, Scotland.
Other tangible assets acquired consisted primarily of inventory and property,
plant and equipment. As part of the purchase agreement, the Company also
received the right to supply personal computers to Tandy's Radio Shack, Computer
City and Incredible Universe retail operations under a three-year supply
agreement. The total purchase price (including Tandy/GRiD France) was $111.7
million and included a cash payment of $15 million and a three-year promissory
note in the principal amount of $96.7 million.
The preliminary estimate of the excess of the purchase price over the fair
value of the net assets acquired (goodwill) was $20 million relating to
valuation adjustments to inventory ($15 million) and certain accrued liabilities
($5 million). During fiscal 1994, the Company refined the fair value estimates
of the assets acquired and liabilities assumed and, as a result, increased the
recorded goodwill by $45 million to $65 million. The increase in goodwill is
comprised of valuation adjustments to inventory, other assets and certain
accrued liabilities of $33.6 million, $5
NOTE 2. ACQUISITIONS AND RESTRUCTURING (CONTINUED)
million and $6.4 million, respectively. The Company's original assessment of
fair value was predicated on integrating the acquired Tandy/GRiD and Victor
product lines within the Company's existing product offerings. During the first
and second quarters of fiscal 1994, the Company focused its efforts on
integrating its existing product lines with the acquired Tandy/GRiD and Victor
product lines. Beginning in the third quarter of fiscal 1994, the Company
commenced a reassessment of the GRiD product line and product capabilities, the
current and future customer prospects for GRiD products and the costs involved
in continuing the GRiD brand name. Based upon this review, the Company decided
in the fourth quarter of fiscal 1994, to alter its product line integration
strategy to eventually discontinue all manufacturing, marketing and sales
efforts related to the acquired GRiD product line. As a result of terminating
this product line, the Company reassessed the fair value of the related
inventory originally acquired from Tandy.
The acquisitions have been accounted for in accordance with the purchase
method of accounting and, accordingly, the net assets acquired have been
included in the Company's consolidated balance sheets based upon their estimated
fair values at the transactions' effective dates. The Company's consolidated
statements of operations include the revenues and expenses of the acquired
businesses after the effective dates of the respective transactions.
Supplemental Pro Forma Results of Operations (Unaudited)
The following unaudited pro forma summary presents the consolidated results
of operations as if the acquisitions had occurred at the beginning of the period
presented and does not purport to be indicative of what would have occurred had
the acquisitions been made as of such date or of results which may occur in the
future.
<TABLE>
- - -----------------------------------------------------------------------------------------------------------------
1993
- - -----------------------------------------------------------------------------------------------------------------
<S> <C>
Net sales $ 1,982,511
Net loss $ (41,440)
Net loss per share $ (1.32)
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
Adjustments made in arriving at pro forma unaudited results of operations
include the elimination of sales transactions between the Company and acquired
operations, reduction of payroll expenses, increased interest expense on
acquisition debt, amortization of goodwill and related tax adjustments. Pro
forma 1993 net loss excludes restructuring charges and a loss recognized by
Tandy associated with the sale of assets to AST. However, no effect has been
given in the pro forma information for synergistic benefits that are expected to
be realized. The pro forma results for fiscal 1994, assuming Tandy/GRiD France
had been acquired at the beginning of the fiscal year, would not differ
significantly from the financial information presented in the consolidated
statement of operations.
Restructuring
In the fourth quarter of fiscal 1993 and in connection with the Company's
acquisition of Tandy's personal computer manufacturing and engineering
operations and GRiD's North American and European sales and marketing
operations, the Company recorded a pretax restructuring charge of $125 million.
The estimated restructuring costs included $68 million in asset write-downs and
$57 million in estimated future cash expenditures. The charge reflected
estimated expenses to combine and restructure the Company's existing worldwide
manufacturing capacity ($34 million), as well as its marketing, engineering,
distribution, sales, and service operations ($41 million). Also included within
the restructuring charge were selected inventory valuation adjustments ($33
million) necessary to realign existing AST product lines in relation to the
acquired Tandy/GRiD and Victor products and to curtail production of certain AST
product offerings as a result of competing Tandy/GRiD product lines. These
estimated restructuring costs represented the Company's best assessment of the
proposed restructuring plans; however, the Company expected that some of these
original plans would be revised as the Company continued to identify the best
means of achieving reductions in its cost structure.
NOTE 2. ACQUISITIONS AND RESTRUCTURING (CONTINUED)
During fiscal 1994, the Company completed most of its previously identified
restructuring activities and incurred asset write-downs of $50 million and cash
expenditures of $47 million related directly to its fiscal 1994 restructuring
activities. The Company's manufacturing operations were realigned to integrate
the combined operations along product and geographic boundaries and included the
shift of nearly all the Americas desktop production to Texas and the
establishment of a new European manufacturing, distribution and service
operation in Limerick, Ireland. During fiscal 1994, the Company realigned and
centralized its European distribution and service operations in connection with
establishing the new Ireland facilities. The Company also realigned its
engineering and marketing organizations into strategic business units in order
to improve the Company's ability to provide dedicated focus on each of its key
product groups: desktops, servers and notebooks. During the first and second
fiscal quarters, the Company focused its efforts on integrating its existing
product lines with those of the acquired Tandy/GRiD operations, resulting in
price realignments of existing AST products as well as the acceleration of
certain AST end-of-life product cycles caused primarily by the introduction of
the newly acquired Tandy/GRiD products.
The Company established the restructuring reserve as a result of the Tandy
acquisitions and incurred costs related to the impact of the acquisitions on
AST's existing operations and the resulting requirement to realign the new and
larger combined Company's operations. These costs included asset write-downs,
provisions and cash expenditures. Furthermore, the Company used its
restructuring provisions for activities that were either identifiable with the
restructuring plan or that could be reasonably estimated in accordance with
provisions of Financial Accounting Standards Board Statement No. 5, "Accounting
for Contingencies."
In the fourth quarter of fiscal 1994, after concluding that most of its
restructuring activities had been completed or were adequately provided for
within the remaining restructuring accrual, the Company determined that the
total restructuring cost estimate could be lowered. As a result, the Company
took a fourth quarter restructuring credit in the amount of $12.5 million, or
ten percent of the original $125 million charge taken in the comparable prior
year fourth quarter. At July 2, 1994, the Company continues to hold
approximately $15 million in accrued restructuring provisions for the final
restructuring activities, which the Company expects to be completed during the
first half of fiscal 1995. The Company expects most of these costs to represent
future cash expenditures to be incurred to further combine and restructure
existing worldwide manufacturing and distribution capacity.
The Company believes that its fiscal 1994 restructuring activities were
necessary in order to redeploy and reorganize its worldwide operations after the
June 1993 acquisition of Tandy Corporation's personal computer operations. No
assurances can be given that the restructuring actions will be successful or
that similar actions will not be required in the future.
NOTE 3. INVENTORIES
Inventories consist of the following:
<TABLE>
- - ---------------------------------------------------------------------------------------------------------------
July 2, July 3,
(In thousands) 1994 1993
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Purchased parts $ 99,959 $ 146,565
Work in process 53,765 30,890
Finished goods 180,005 164,852
- - ---------------------------------------------------------------------------------------------------------------
Total $ 333,729 $ 342,307
===============================================================================================================
</TABLE>
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
- - ---------------------------------------------------------------------------------------------------------------
July 2, July 3,
(In thousands) 1994 1993
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 15,729 $ 12,786
Buildings 35,547 31,382
Machinery and equipment 84,004 69,869
Furniture and fixtures 11,926 10,790
Leasehold improvements 12,324 9,595
- - ---------------------------------------------------------------------------------------------------------------
Total $ 159,530 $ 134,422
===============================================================================================================
</TABLE>
NOTE 5. FINANCING ARRANGEMENTS
At July 2, 1994, the Company had available a $300 million unsecured
committed revolving credit facility with a final maturity date of September 30,
1996. This revolving credit agreement is provided by 13 major domestic and
international banks and allows the Company to borrow, subject to certain
leverage and total debt restrictions, at rates based upon the bank's reference
rate, or a spread of .625% over the LIBOR rate, .75% over the domestic
certificate of deposit rate, or at a rate bid by a bank, as selected by the
Company. The Company is required to pay a facility fee equal to .375% per annum
based on the total committed amount available under the facility. The fee is
payable quarterly in arrears. At July 2, 1994, there was $45.0 million
outstanding as drawings under this credit facility at an interest rate of 7.25%
and $67.7 million outstanding in the form of a letter of credit issued to Tandy
Corporation in support of the acquisition note payable (Note 6). In addition,
there was $5 million outstanding at July 2, 1994 as borrowings under an
uncommitted money market line of credit available to the Company. The interest
rate on this borrowing was 4.875% and there are no other fees required under
this agreement. The Company also has various additional letter of credit and
money market facilities available for use by the Company and its subsidiaries.
The Company's Taiwan subsidiary has separate letter of credit facilities
aggregating $2 million with a major Taiwanese bank expiring June 22, 1995. At
July 2, 1994, there were no letters of credit outstanding under these
facilities.
Certain of the Company's credit facilities require that the Company
maintain a minimum level of tangible net worth and certain financial ratios. At
July 2, 1994, the Company was in compliance with the covenants and conditions of
these credit facilities.
NOTE 6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
- - ---------------------------------------------------------------------------------------------------------------
July 2, July 3,
(In thousands) 1994 1993
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Liquid Yield Option Notes (zero coupon convertible subordinated notes) due
2013, less original issue discount of $200,334, 5.25% yield to maturity $ 114,666 $ -
Promissory note payable, interest due annually at current rate
of 4.94%, principal due July 1996 96,720 90,000
Other notes payable due in various installments through April 2002 4,306 2,505
- - ---------------------------------------------------------------------------------------------------------------
215,692 92,505
Less current portion of long-term debt (398) (247)
- - ---------------------------------------------------------------------------------------------------------------
Long-term debt $ 215,294 $ 92,258
===============================================================================================================
</TABLE>
NOTE 6. LONG-TERM DEBT (CONTINUED)
On December 14, 1993, the Company issued $315 million par value of Liquid
Yield Option Notes ("LYONs") due December 14, 2013. The LYONs are zero coupon
convertible subordinated notes which were sold at a significant discount from
par value with a yield to maturity of 5.25% and a total value at maturity of
$315 million. There are no periodic payments of interest on the LYONs. Each
$1,000 principal amount at maturity of LYONs is convertible into 12.993 shares
of the Company's common stock at any time. Upon conversion of a LYON, the
Company may elect to deliver shares of common stock at the conversion rate or
cash equal to the market value of the shares of common stock into which the
LYONs are convertible. Total proceeds received from the sale of the LYONs were
approximately $111.7 million, which have been utilized for working capital,
including the financing of expected increases in accounts receivable and
inventories, repayment of bank borrowings under the Company's revolving credit
facilities, new product development, and other general corporate purposes. The
holder of a LYON may require the Company to purchase its LYONs on December 14,
1998, December 14, 2003 and December 14, 2008 (the "Purchase Dates"), and such
payments may reduce the liquidity of the Company. However, the Company may,
subject to certain exceptions, elect to pay the purchase price on any of the
three Purchase Dates in cash or shares of common stock or any combination
thereof.
In connection with the Tandy acquisition, the Company issued a $96.7
million promissory note to Tandy Corporation which is due on July 11, 1996.
Interest due the first year was paid on July 11, 1994 at an initial rate of
3.75% per annum. The interest rate has been adjusted to 4.94% per annum,
effective July 11, 1994 and will be adjusted once more on July 11, 1995 to the
lower of either 5% or the "lowest three month rate" within the meaning of
Section 1274(d)(2) of the Internal Revenue Code of 1986 as of July 11, 1995.
There are no sinking fund requirements. The note also requires the Company to
maintain a standby letter of credit payable to Tandy in the amount of 70% of the
face value of the note or $67.7 million. Upon maturity of the note, up to 50%
of the initial principal amount of the promissory note may be converted, at the
option of the Company, into common stock of the Company based upon its then fair
market value, as defined in the promissory note. This standby letter of credit
was issued under the terms of the Company's revolving credit agreement.
Principal repayments on long-term debt required in fiscal years 1995, 1996,
1997, 1998 and 1999 are $398,000, $2,260,000, $97,167,000, $324,000 and
$272,000, respectively.
Based upon the borrowing rates currently available to the Company for loans
with similar terms or maturity, the fair value of long-term debt is not
significantly different from the carrying value.
NOTE 7. INCOME TAXES
The provision (benefit) for income taxes consists of the following:
<TABLE>
- - ----------------------------------------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
- - ----------------------------------------------------------------------------------------------------------------
Deferred
Liability Method Method
---------------- --------
<S> <C> <C> <C>
Current:
Federal $ 6,092 $ 36,461 $ 14,700
State 1,426 1,116 3,950
Foreign 9,002 6,361 11,631
- - ----------------------------------------------------------------------------------------------------------------
16,520 43,938 30,281
- - ----------------------------------------------------------------------------------------------------------------
Deferred:
Federal 8,532 (54,424) 2,413
State 105 (3,108) 349
Foreign 346 2,094 (1,263)
- - ----------------------------------------------------------------------------------------------------------------
8,983 (55,438) 1,499
- - ----------------------------------------------------------------------------------------------------------------
$ 25,503 $ (11,500) $ 31,780
================================================================================================================
</TABLE>
NOTE 7. INCOME TAXES (CONTINUED)
As discussed in Note 1, the Company adopted SFAS No. 109 in fiscal 1993.
This change had no material effect on the previously reported fiscal 1993 net
loss. Deferred taxes in 1994 and 1993 reflect the impact of future tax
consequences associated with temporary differences between the amount of assets
and liabilities recorded for tax and financial accounting purposes. These
temporary differences are determined in accordance with SFAS No. 109 and are
more inclusive in nature than "timing differences" as determined under
previously applicable accounting principles. Temporary differences and
carryforwards which give rise to a significant portion of deferred tax assets
and liabilities as of July 2, 1994 and July 3, 1993 are as follows:
<TABLE>
- - ---------------------------------------------------------------------------------------------------------------
1994 1993
(In thousands) Assets Liabilities Assets Liabilities
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inventory reserves $ 16,968 $ - $ 4,109 $ -
Returns and allowances 3,679 - 3,481 -
Other accrued liabilities 7,176 - 3,199 -
Restructuring charge 5,365 - 49,541 -
Warranty reserves 5,201 - - -
State income taxes - (914) - -
Depreciation - - - (1,522)
Goodwill - (2,524) - -
Deferred intercompany profit 1,985 - 2,659 -
Net operating loss carryforwards 27,366 - 14,719 -
Other 10,736 (274) 5,001 (100)
- - ---------------------------------------------------------------------------------------------------------------
Total deferreds 78,476 (3,712) 82,709 (1,622)
Valuation allowance (34,524) - (32,889) -
- - ---------------------------------------------------------------------------------------------------------------
$ 43,952 $ (3,712) $ 49,820 $ (1,622)
===============================================================================================================
</TABLE>
During 1992, deferred income taxes were provided for significant timing
differences in the recognition of revenue and expenses for tax and financial
accounting purposes. Principally, these items consisted of the following:
$2,774,000 for earnings not currently taxable in the U.S., ($1,015,000) for
accrued liabilities, ($757,000) for reserves for returns and allowances,
$198,000 for inventory reserves, ($159,000) for bad debt reserves, and $458,000
for all other.
The provision (benefit) for income taxes differs from the amounts computed
by applying the statutory federal income tax rate as follows:
<TABLE>
- - ---------------------------------------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal income tax provision (benefit) $ 27,651 $(22,181) $ 34,097
Increase (decrease) in taxes resulting from:
State income taxes, net of federal benefit 921 (1,312) 3,531
Foreign income taxed at different rates (10,037) (7,635) (9,973)
Losses producing no current tax benefit 7,539 8,307 4,590
Adjustment to deferred assets and liabilities for
change in tax rate (1,266) - -
Restructuring charge producing no current tax benefit - 12,748 -
Other, net 695 (1,427) (465)
- - ---------------------------------------------------------------------------------------------------------------
$ 25,503 $(11,500) $ 31,780
===============================================================================================================
</TABLE>
NOTE 7. INCOME TAXES (CONTINUED)
The Company's manufacturing operations in Taiwan and the PRC operate
under complete or partial tax holidays which expire in 1997 and 1999,
respectively. The aggregate dollar amount and per share effect of these tax
holidays were immaterial for 1994, 1993 and 1992.
Pretax earnings from foreign operations were approximately $2,057,000,
$29,738,000 and $50,287,000 in 1994, 1993 and 1992, respectively. The Company
has $85 million of net operating loss carryforwards in various foreign countries
which can be utilized to offset the Company's future taxable income.
Approximately $34 million of such carryforwards expire from 1995 through 2001.
The remaining carryforwards of $51 million have no expiration date.
The Internal Revenue Service ("IRS") is currently examining the
Company's 1989, 1990 and 1991 federal income tax returns. In addition, the IRS
has completed its examination of the Company's 1987 and 1988 federal income tax
returns and has proposed adjustments to the Company's federal tax liabilities
for such years of approximately $8.3 million, excluding interest. The majority
of such proposed adjustments relate to the allocation of income between the
Company and its foreign subsidiaries. Management believes that the Company's
position has substantial merit and intends to vigorously contest these proposed
adjustments. Management further believes that any liability that may result
upon the final resolution of the proposed adjustments or the current
examinations will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
NOTE 8. BENEFIT PLANS
Profit Sharing Plan
During 1983, the Company established the Profit Sharing Plan for all
employees. The plan is a noncontributory, defined contribution plan that
provides for contributions from the Company based on eligible compensation. The
Company's contributions are determined at the discretion of the Board of
Directors and are not to exceed income before provision for income taxes and
profit sharing expense. The Company did not contribute to the plan for the
years ended July 2, 1994 and July 3, 1993. The Company's contribution for the
year ended June 27, 1992 was $1,621,000.
In 1987, the Company approved a modification to the profit sharing plan
that added a 401(k) employee savings program. Under the 401(k) plan, the
Company is obligated to contribute matching amounts for employee contributions
equal to 100% on the first 2% of employee salary contributions and 50% on the
next 4% of employee salary contributions. Company contributions generally vest
over five years from the date of the employee's eligibility to participate. The
Company contributed approximately $2,064,000 to the plan for the year ended July
2, 1994, of which approximately $175,000 is included in accrued salaries, wages
and employee benefits in the accompanying July 2, 1994 consolidated balance
sheet. The Company's contributions for the years ended July 3, 1993 and June
27, 1992 amounted to $1,679,000 and $1,322,000, respectively.
Employee Bonus Plans
Pursuant to the Employee Bonus Plan, all employees of the Company are
eligible to receive, on a quarterly basis, a percentage of their base
compensation as a cash bonus. The percentage paid is at the discretion of
management and is limited to a maximum of 15% of the respective employees' base
quarterly compensation. For fiscal 1994, the Company paid bonuses aggregating
$1,954,000 under the plan, of which $679,000 is included in accrued salaries,
wages and employee benefits in the accompanying July 2, 1994 consolidated
balance sheet. Bonuses paid for the years ended July 3, 1993 and June 27, 1992
were $1,568,000 and $2,528,000, respectively.
The Company also has a performance-based management incentive plan for
officers and key employees. Bonuses under the plan are distributed to officers
and key employees of the Company based upon performance related criteria
determined at the discretion of the Compensation Committee of the Board of
Directors. For fiscal 1994, the Company paid bonuses aggregating $1,920,000
under this plan that is included in accrued salaries, wages and employee
benefits in the accompanying consolidated balance sheet at July 2, 1994.
Bonuses paid for the years ended July 3, 1993 and June 27, 1992 were $3,928,000
and $5,084,000, respectively.
NOTE 8. BENEFIT PLANS (CONTINUED)
Stock Plans
The Company has three employee stock plans, adopted in 1983, 1985 and
1989. The Incentive Stock Option, Non-Qualified Stock Option and Restricted
Stock Purchase Plan - 1983 (the "1983 Plan"), as amended in 1984, 1985 and 1987,
provides for the granting of options or rights to purchase up to an aggregate of
3,600,000 shares of the Company's common stock to officers, directors, employees
and others. The Plan also provides for the granting of stock appreciation
rights. Under the Plan, options granted become exercisable subject to the
discretion of the Board of Directors or Compensation Committee and generally
expire five years from the date of grant. For the year ended July 2, 1994,
86,799 shares were exercised under the 1983 Plan at prices ranging from $3.44 to
$21.50 per share.
In 1985, the Company adopted the Chief Executives' Plan (the "CE Plan").
The CE Plan, as amended in 1987, provides for an aggregate of 1,200,000 shares
of the Company's common stock to be available to the chief executive officers,
which include the president and executive vice presidents of the Company, and
such other officers that the Board of Directors might specifically designate as
a "chief executive officer" for purposes of the CE Plan. At July 2, 1994, non-
statutory options covering 800,000 shares have been granted to certain officers
at exercise prices of $3.50 per share of which 350,000 shares remain
outstanding. No shares were exercised under the CE Plan for the year ended July
2, 1994.
The 1989 Long-Term Incentive Program (the "1989 Program"), as amended in
1992, provides for the granting of stock options, stock appreciation rights,
restricted stock and performance units. The amendment, as adopted by the Board
and approved by a shareholder vote, annually increases shares authorized to be
issued by 2% of the number of common shares outstanding at each fiscal year end.
At July 2, 1994, an aggregate of 5,893,993 shares of common stock is authorized
to be issued under the 1989 Program. Under the 1989 Program, options granted
become exercisable subject to the discretion of the Board of Directors or
Compensation Committee and expire ten years from the date of grant. During
fiscal 1994, an aggregate of 609,336 shares were exercised at prices ranging
from $4.06 to $22.75 per share. No stock appreciation rights or performance
units have been granted under this program.
The Company's 1991 Stock Option Plan for Non-Employee Directors (the
"Non-Employee Option Plan") provides for an initial grant of options to purchase
20,000 shares of the Company's common stock to each newly appointed non-employee
director. In addition, on January 1 each year, each participant will receive an
option to purchase 12,000 shares of common stock. The aggregate number of
shares that may be issued under the plan is 250,000. Options vest and become
exercisable at the rate of 25% per year commencing on the first anniversary of
the date of grant. Each option is exercisable at 100% of the common stock's
fair market value on the date of grant. During fiscal 1994, 6,000 shares were
exercised at $16.75 per share.
In January 1994, the Company adopted, subject to shareholder approval,
the AST Research, Inc. 1994 One-Time Grant Stock Option Plan for Non-Employee
Directors. The plan provides that each member of the Company's Board of
Directors on July 1, 1994 who is not an employee of the Company be granted an
option covering 50,000 shares of common stock. All such option grants are
subject to the limitation that not more than 250,000 shares of common stock be
issued under the Plan and that no participant may receive options covering more
than 50,000 shares of common stock in any calendar year. Options are
exercisable at 100% of the fair market value on the date of grant of the option,
and vest over a period of eight years from the date of grant, with acceleration
of vesting possible in the event of certain stock performance. At July 2, 1994,
50,000 shares had been granted to each of the Company's four non-employee
directors at an exercise price of $14.25 per share.
NOTE 8. BENEFIT PLANS (CONTINUED)
The following table summarizes 1994 stock option activity under all of the stock
plans:
<TABLE>
- - ----------------------------------------------------------------------------------------------------------------
Number Available for
of options future grant
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at July 3, 1993 3,504,380 2,052,143
Authorized - 896,675
Granted 1,624,400 (1,624,400)
Exercised (702,135) -
Canceled (380,425) 380,425
Plan shares expired - (99,275)
- - ---------------------------------------------------------------------------------------------------------------
Outstanding at July 2, 1994 4,046,220 1,605,568
===============================================================================================================
</TABLE>
Options exercised during fiscal 1994 were at prices ranging from $3.44 to
$22.75 per share. Outstanding options at July 2, 1994 were at prices ranging
from $3.50 to $31.63 per share and options for 1,351,661 shares were
exercisable. At July 2, 1994, 5,651,788 shares of the Company's common stock
were reserved for issuance under the Plans.
In December 1990, the Board of Directors authorized the issuance of
warrants to purchase an aggregate of 80,000 shares of the Company's common stock
to certain non-employee directors. The warrants carry an exercise price of
$13.875 per share and vested over a three year period. During fiscal 1994,
40,000 of these warrants were exercised and at July 2, 1994, 40,000 of these
warrants were exercisable. On July 27, 1992, the Board of Directors authorized
the issuance of warrants to purchase 50,000 shares of the Company's common stock
to the Company's then Chairman of the Board. These warrants carry an exercise
price of $13.50 per share and vest over a four year period. During fiscal 1994,
12,500 of these warrants were exercised and at July 2, 1994, none of the
remaining warrants were exercisable.
Post Employment Benefits
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 112 "Employers Accounting for Postemployment Benefits"
("SFAS 112") requiring accrual basis accounting for post employment benefits.
The Company does not offer post employment benefits subject to guidelines
established by SFAS 112. Accordingly, no provisions have been reflected in the
Company's consolidated financial statements at July 2, 1994.
NOTE 9. SHAREHOLDER RIGHTS PLAN
On June 30, 1989, the Board of Directors adopted a Shareholder Rights Plan
which is intended to protect stockholders from unfair takeover practices. Under
the Plan, each share of common stock carries one right to obtain additional
stock or other property according to terms provided in the Plan. The rights, as
amended, will not be exercisable or separable from the common stock until
another party acquires at least 15% of the Company's then outstanding common
stock or commences a tender offer for at least 15% of the Company's then
outstanding common stock.
In the event the Company is acquired in a merger or other business
combination transaction in which the Company is not the surviving corporation or
50% or more of its consolidated assets or earning power are sold or
transferred, each right will entitle its holder to receive, at the then current
exercise price, common stock of the acquiring company having a market value
equal to two times the exercise price of the right. If a person or entity were
to acquire 15% or more of the outstanding shares of the Company's common stock,
or if the Company is the surviving corporation in a merger and its common stock
is not changed or exchanged, each right will entitle the holder to receive, at
the then current exercise price, common stock having a market value equal to two
times the exercise price of the right. Until a right is exercised, the holder
of a right, as such, will have no rights as a stockholder of the Company,
including, without limitation, the rights to vote as a stockholder or receive
dividends.
NOTE 9. SHAREHOLDER RIGHTS PLAN (CONTINUED)
The rights, which expire on June 30, 1999, may be redeemed by the Company at a
price of $0.01 per right. At July 2, 1994, 500,000 of the 1,000,000 authorized
but unissued preferred shares of the Company are reserved for issuance upon
exercise of these rights.
NOTE 10. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases its field offices, certain equipment, automobiles and
most of its operating facilities under operating lease agreements. The Company
also has capital leases for certain equipment. Future minimum lease payments
under these leases approximate the following amounts:
<TABLE>
- - ---------------------------------------------------------------------------------------------------------------
(In thousands) Lease Obligations
-----------------
Fiscal Year Capital Operating
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1995 $ 531 $ 13,310
1996 484 10,417
1997 470 6,613
1998 323 5,822
1999 265 4,738
Thereafter 739 14,711
- - ---------------------------------------------------------------------------------------------------------------
Total minimum lease payments $ 2,812 $ 55,611
===============================================================================================================
</TABLE>
At July 2, 1994, the net present value of obligations under capital leases
total $2,467,000 and are included in long-term and current portion of long-term
debt in the accompanying consolidated balance sheet. At July 2, 1994, the
assets held under capital leases total $4,114,000, net of $1,250,000 in
accumulated depreciation, and are included in buildings and machinery and
equipment in the accompanying consolidated balance sheet.
Rent expense was approximately $10,588,000, $9,215,000 and $8,958,000 for
the years ended July 2, 1994, July 3, 1993 and June 27, 1992, respectively.
Royalty Commitments
The Company has commitments for minimum guaranteed royalties under various
licensing agreements which are payable over periods ranging from one to four
years. The Company has been notified that certain of its products may also
require licenses under patents held by others. The Company evaluates these
licensing proposals on a case-by-case basis to determine whether licenses are
necessary or desirable. Although these evaluations continue, management is
accruing amounts that, in its judgment, represent the potential royalties and/or
legal costs of resolving these claims.
Concentrations of Credit Risk
The Company distributes its products through various distribution channels,
including independent resellers, dealers, national distributors, OEMs, U.S.
Government approved dealers and consumer retailers. Concentrations of credit
risk are generally limited due to the Company's broad range of distribution
channels and the Company's geographically diverse customer base. However, sales
into the PRC are to a limited customer base comprised primarily of larger
entitities which are affected by the economic conditions or political
occurrences within the PRC. No single customer accounted for more than 10% of
the Company's net sales for fiscal years 1994, 1993 and 1992. In addition, the
Company's sales are primarily to customers whose activities are related to the
retail, consumer electronics or personal computer industries. Therefore, the
Company's ability to collect trade receivables may be adversely impacted by
changes in these industries. Credit limits, ongoing credit evaluations and
account monitoring procedures are utilized to minimize the risk of loss.
NOTE 10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Employment Contracts
The Company has entered into Severance Compensation Agreements with each of
its executive officers. Such agreements provide for severance compensation
equal to two years' salary and bonus and certain other benefits upon a "change
in control" of the Company and termination of the officer for reasons specified
in the contract. In addition, effective July 27, 1993, the Company entered into
a separate employment contract ("Founder's Agreement") with founder, Chairman
and Chief Executive Officer, Safi U. Qureshey. The Founder's Agreement provides
for five years of salary, health and welfare benefits, two years of bonus and
certain other benefits if active employment is terminated by the Company or by
Mr. Qureshey under specified conditions.
The Company has a severance policy for its executive officers which, in the
event of an involuntary termination, other than in connection with a "change in
control", requires the Company to pay its President severance equal to two years
salary and its other executive officers severance equal to six months salary
plus an additional month of salary for each year of employment with the Company,
up to a maximum of 12 months. Benefits are also continued during this period.
Other Contingencies
In June 1989, Texas Instruments Inc. ("TI") advised the Company that it
believed certain AST computer products infringe certain TI patents. On January
4, 1994, the Company initiated litigation (the "California action") in the U.S.
District Court for the Central District of California against TI alleging
certain violations of licensing agreements, federal antitrust laws and the
California Unfair Practices Act. In addition, the Company alleged that TI is
infringing an AST patent and that certain TI patents are invalid or
inapplicable. TI has alleged in the California action that the Company is
infringing patents owned by TI. On August 26, 1994, TI filed a lawsuit in the
U.S. District Court for the Eastern District of Texas against the Company
alleging infringement of patents in addition to those asserted by TI in the
California action. These litigations with TI are proceeding. Management does
not believe that the outcome of these matters will have a material adverse
impact on the Company's consolidated financial position or results of
operations.
On March 3 and March 14, 1994, complaints were filed by two shareholders
against the Company and certain of its officers and directors requesting
certification of class action, asserting claims under state and federal
securities law based on allegations that the Company made inadequate and false
disclosures and seeking unspecified compensatory damages and related fees and
costs. The complaints were filed in the United States District Court of the
Central District of California. On May 9, 1994, the Court consolidated the two
cases under the case name In re AST Securities Litigation. On September 12,
1994, a complaint was filed by a shareholder against the Company and certain of
its officers and directors requesting certification of class action, asserting
claims under state and federal securities law based on allegations that the
Company made inadequate and false disclosures and seeking unspecified
compensatory damages and related fees and costs. The complaint was filed in the
United States District Court of the Central District of California under the
case name Steven A. Kornfeld v. James L. Forquer, et al. Management has
reviewed the allegations contained in the complaints and believes such
allegations are without merit. Management intends to vigorously defend these
litigations. Management does not believe that the outcome of these matters will
have a material adverse impact on the Company's consolidated financial position
or results of operations.
The Company has been named as a defendant or co-defendant, frequently with
other personal computer manufacturers, including IBM, AT&T, Unisys, Digital
Equipment Corporation, NEC, Olivetti, NCR, Panasonic, and Matsushita, in
thirteen similar lawsuits each of which alleges as a factual basis the
occurrence of carpal tunnel syndrome or repetitive stress injuries. Such claims
are being alleged with increasing frequency as a result of the use of various
computer products. The claims total approximately $15 million in compensatory
damages, $130 million in punitive damages, and additional unspecified amounts.
The Company has denied or is in the process of denying the claims and intends to
vigorously defend the suits. The suits naming the Company are just a few of the
many lawsuits of this type which have been filed, often naming IBM and other
major computer companies. The Company is unable at this time to predict the
ultimate outcome of these suits. Ultimate resolution of the litigation against
the
NOTE 10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Company may depend on progress in resolving this type of litigation overall.
The Company believes that the claims in the suits filed against it will not have
a material impact on the Company's consolidated financial position or results of
operations. The Company has maintained various liability insurance policies
during the periods covering the claims filed above. While such policies may
limit coverage under certain circumstances, the Company believes that it is
adequately protected. Should the Company not be successful in defending against
such lawsuits or not be able to claim compensation under its liability insurance
policies, the Company's profitability and financial condition may be adversely
affected.
The Company is also subject to other legal proceedings and claims which
also arise in the normal course of business. While the outcome of these
proceedings and claims cannot be predicted with certainty, management does not
believe the outcome of any of these matters will have a material adverse effect
on the Company's consolidated financial position or results of operations.
NOTE 11. SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in one industry segment: the manufacture and sale of
personal computers, including desktop, server, and notebook computer systems.
A summary of the Company's operations by geographic area is as follows:
<TABLE>
<CAPTION>
Fiscal year ended July 2, 1994
- - ----------------------------------------------------------------------------------------------------------------
North/Latin Pacific Rest of
(In thousands) America Europe Rim World Eliminated Consolidated
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales to unaffiliated
customers $ 1,546,010 $ 532,921 $ 260,700 $ 27,643 $ - $ 2,367,274
Transfers between
geographic areas 404,582 251,605 901,106 3,098 (1,560,391) -
- - ----------------------------------------------------------------------------------------------------------------
Net sales $ 1,950,592 $ 784,526 $ 1,161,806 $ 30,741 $(1,560,391) $ 2,367,274
================================================================================================================
Operating income (loss) $ 83,199 $ (41,596) $ 36,577 $ 1,296 $ 7,205 $ 86,681
================================================================================================================
Identifiable assets $ 574,161 $ 257,098 $ 191,976 $ 15,077 $ - $ 1,038,312
================================================================================================================
Fiscal year ended July 3, 1993
- - ----------------------------------------------------------------------------------------------------------------
North/Latin Pacific Rest of
(In thousands) America Europe Rim World Eliminated Consolidated
- - ----------------------------------------------------------------------------------------------------------------
Sales to unaffiliated
customers $ 854,929 $ 297,312 $ 238,974 $ 20,935 $ - $ 1,412,150
Transfers between
geographic areas 234,815 55,690 751,511 897 (1,042,913) -
- - ----------------------------------------------------------------------------------------------------------------
Net sales $ 1,089,744 $ 353,002 $ 990,485 $ 21,832 $(1,042,913) $ 1,412,150
================================================================================================================
Operating income (loss) $ (101,398) $ (20,000) $ 47,772 $ 838 $ 8,210 $ (64,578)
================================================================================================================
Identifiable assets $ 574,801 $ 173,028 $ 122,165 $ 16,165 $ - $ 886,159
================================================================================================================
</TABLE>
NOTE 11. SEGMENT AND GEOGRAPHIC INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Fiscal year ended June 27, 1992
- - ----------------------------------------------------------------------------------------------------------------
North/Latin Pacific Rest of
(In thousands) America Europe Rim World Eliminated Consolidated
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales to unaffiliated
customers $ 550,887 $ 204,623 $ 177,796 $ 10,773 $ - $ 944,079
Transfers between
geographic areas 168,346 61,409 432,563 647 (662,965) -
- - -----------------------------------------------------------------------------------------------------------------
Net sales $ 719,233 $ 266,032 $ 610,359 $ 11,420 $ (662,965) $ 944,079
=================================================================================================================
Operating income (loss) $ 40,090 $ (10,632) $ 59,087 $ 781 $ 8,200 $ 97,526
=================================================================================================================
Identifiable assets $ 359,550 $ 124,332 $ 91,380 $ 5,351 $ - $ 580,613
=================================================================================================================
</TABLE>
In determining operating income (loss) for each geographic area, sales and
purchases between geographic areas have been accounted for on the basis of
internal transfer prices set by the Company. Identifiable assets are those
tangible and intangible assets used in operations in each geographic area. The
fiscal 1993 restructuring charge of $125 million and the fiscal 1994 restructure
credit of $12.5 million are included in North/Latin America operating income
(loss) in the respective periods. In addition, the reversals of the restructure
reserve to offset actual restructure costs incurred on a worldwide basis,
aggregating approximately $97.5 million, are included in North/Latin America
operating income (loss). However, the actual restructuring costs incurred are
included in operating income (loss) in the geographic areas in which they
occurred.
NOTE 12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The tables below set forth selected quarterly financial information for
fiscal years 1994 and 1993 (in thousands, except per share amounts).
<TABLE>
- - ---------------------------------------------------------------------------------------------------------------
1994 First Quarter Second Quarter Third Quarter Fourth Quarter
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 514,409 $ 677,011 $ 591,349 $ 584,505
Gross profit 85,900 114,566 101,106 79,761
Net income 8,232 17,933 13,214 14,122
Net income per share:
Primary $ .26 $ .55 $ .40 $ .43
Fully diluted $ .26 $ .54 $ .38 $ .41
- - ---------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------
1993 First Quarter Second Quarter Third Quarter Fourth Quarter
- - ---------------------------------------------------------------------------------------------------------------
Net sales $ 286,353 $ 346,338 $ 370,251 $ 409,208
Gross profit 65,015 76,185 71,821 72,677
Net income (loss) 7,641 14,581 11,045 (87,005)
Net income (loss) per share:
Primary $ .24 $ .46 $ .35 $ (2.76)
- - ---------------------------------------------------------------------------------------------------------------
</TABLE>
In the fourth quarter of fiscal 1993, the Company recorded a pretax
restructuring charge of $125 million which is reflected in the fiscal 1993
fourth quarter net loss. In the fourth quarter of fiscal 1994, the Company
recorded a pretax restructuring credit of $12.5 million which is reflected in
the fiscal 1994 fourth quarter net income (Note 2).
NOTE 12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (CONTINUED)
In fiscal 1993, fully diluted per share information is anti-dilutive or
does not differ materially from primary net income (loss) per share in any
quarterly period. In fiscal 1993, the quarterly primary net income (loss) per
share amounts do not sum to the primary net loss for the year due to the
dilutive effect of common stock equivalents used in computing income per share
in the first three quarters.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth on pages 2 through 3 and 5 through 6 of the 1994
Proxy Statement under the captions "Election of Directors" and "Executive
Officers", respectively, is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
To the extent required, the information set forth on pages 6 through 12 of
the 1994 Proxy Statement under the captions "Compensation of Directors",
"Compensation Committee Interlocks and Insider Participation", "Executive
Compensation" and "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements" is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth on page 4 of the 1994 Proxy Statement under the
caption "Security Ownership of Certain Beneficial Owners and Management" is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth on page 12 of the 1994 Proxy Statement under the
caption "Certain Transactions" is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
See Index to Consolidated Financial Statements at Item 8 on Page 25 of
this report.
(2) Financial Statement Schedules
II - Amounts Receivable from Related Parties and Underwriters,
Promoters, and Employees Other than Related Parties
VIII - Consolidated Valuation and Qualifying Accounts and Reserves
IX - Consolidated Short-Term Borrowings
X - Consolidated Supplementary Income Statement Information
Financial statement schedules other than those listed above have been
omitted since they are either not required, not applicable, or the
information is otherwise included.
(3) Exhibits
Exhibit
Number Description
2.1 Agreement for Purchase and Sale of Assets dated June 30, 1993 between
AST Research, Inc. and Tandy Corporation, TE Electronics, Inc. and GRiD
Systems Corporation. The Schedules have been omitted and are as
described in the Agreement (incorporated by reference to referenced
exhibit number of the Company's report on Form 8-K, No. 0-13941).
2.1.1 Agreement of Sale of Going Business (English translation) between AST
Research France and Tandy GRiD France, effective September 1, 1993
(incorporated by reference to referenced exhibit number of the Company's
report on Form 8-K, No. 0-13941).
3.1 Restated Certificate of Incorporation of AST Research, Inc., a Delaware
corporation (incorporated by reference to referenced exhibit number in
the Company's Annual Report on Form 10-K for the fiscal year ended June
27, 1992).
3.2 Bylaws of AST Research, Inc., a Delaware corporation, as amended to
date.
4.1 Form of Amended and Restated Rights Agreement dated as of January 28,
1994 between the Company and American Stock Transfer & Trust Co., as
Successor Rights Agent (incorporated by reference to referenced exhibit
number of the Company's report on Form 10-Q for the fiscal quarter ended
January 1, 1994), and Certificate of Designation of Preferred Stock and
Rights Certificate and Summary of Terms of the Company's Shareholder
Rights Plan which were included as exhibits to the original Rights
Agreement dated as of August 15, 1989 (incorporated by reference to
Exhibit 1 to the Company's registration statement on Form 8-A, No. 0-
13941, dated August 14, 1989).
10.2* Incentive Stock Option, Nonqualified Stock Option and Restricted Stock
Purchase Plan - 1983 (the "Plan") (incorporated by reference to
referenced exhibit number of the Company's registration statement on
Form S-1, No. 2-91089).
10.3* Form of Nonqualified Stock Option Agreement pertaining to the Plan
(incorporated by reference to referenced exhibit number of the Company's
registration statement on Form S-1, No. 2-91089).
10.4* Form of Incentive Stock Option Agreement pertaining to the Plan
(incorporated by reference to referenced exhibit number of the Company's
registration statement on Form S-1, No. 2-91089).
10.5* Form of Restricted Stock Purchase Agreement pertaining to the Plan
(incorporated by reference to referenced exhibit number of the Company's
registration statement on Form S-1, No. 2-91089).
10.6* AST Research, Inc. Profit Sharing Plan (incorporated by reference to
referenced exhibit number of the Company's registration statement on
Form S-1, No. 2-91089).
Exhibit
Number Description
10.26* Chief Executives' Plan (comprised of resolutions adopted by the Board of
Directors on July 30, 1985) (incorporated by reference to Exhibit 4.1
to the Company's registration statement on Form S-8, No.
33-1111).
10.27* Form of Nonstatutory Option Agreement pertaining to the Chief
Executives' Plan (incorporated by reference to Exhibit 4.2 to the
Company's registration statement on Form S-8, No. 33-1111).
10.28* 1987 Employee Bonus Plan (incorporated by reference to referenced
exhibit number of the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1986).
10.29 Lease Agreement dated November 1, 1985 pertaining to AST Europe Limited
premises at Goat Wharf, Brentford in the London Borough of Hounslow
(incorporated by reference to referenced exhibit number of the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1986).
10.34 Lease commencing September 29, 1986 pertaining to AST Europe Limited's
premises in Brentford, Middlesex (incorporated by reference to
referenced exhibit number of the Company's registration statement on
Form S-1, No. 33-14131).
10.35* First Amendment to the AST Research, Inc. Profit Sharing Plan, effective
October 1, 1986 (incorporated by reference to referenced exhibit number
of the Company's registration statement on Form S-1, No.
33-14131).
10.36* Amendments to Incentive Stock Option, Nonqualified Stock Option and
Restricted Stock Purchase Plan - 1983 related to Internal Revenue Code
of 1986 (incorporated by reference to referenced exhibit number of the
Company's registration statement on Form S-1, No. 33-14131).
10.37* Amendments to Incentive Stock Option, Nonqualified Stock Option and
Restricted Stock Purchase Plan - 1983 related to Stock Appreciation
Rights (incorporated by reference to referenced exhibit number of the
Company's registration statement on Form S-1, No. 33-14131).
10.38* Amendments to Incentive Stock Option, Nonqualified Stock Option and
Restricted Stock Purchase Plan - 1983 related to the exercise of options
by delivery of promissory notes (incorporated by reference to referenced
exhibit number of the Company's registration statement on Form S-1, No.
33-14131).
10.39* Amendment to Chief Executives' Plan (comprised of resolutions adopted by
the Board of Directors on January 5, 1987) (incorporated by reference to
referenced exhibit number of the Company's registration statement on
Form S-1, No. 33-14131).
10.41* Form of Indemnification Agreement, as amended to date.
10.42* Form of Indemnification Trust Agreement (incorporated by reference to
referenced exhibit number of the Company's Registration of Securities of
Certain Successor Issuers on Form 8-B, No. 0-13941).
10.48 Agreement dated September 5, 1987 for the purchase of AST Research (Far
East) Limited's premises in Hong Kong and Mortgage of such premises to
Bank of China, Hong Kong Branch, dated September 11, 1987 (incorporated
by reference to referenced exhibit number of the Company's registration
statement on Form S-2, No. 33-21729).
10.52 License Agreement dated November 23, 1987 with Microsoft Corporation, as
amended January 1, 1988 (incorporated by reference to referenced exhibit
number of the Company's registration statement on Form S-2, No. 33-
21729).
10.59* 1989 Long-Term Incentive Program (incorporated by reference to exhibit
number S 4.1, 4.2, 4.3 and 4.4 of the Company's registration statement
on Form S-8, No. 33-29345).
10.60* Supplemental Medical Plan for Executives of AST Research, Inc.
(incorporated by reference to referenced exhibit number of the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1989).
10.61 Amendment to License Agreement with Microsoft Corporation dated April 5,
1989 (incorporated by reference to referenced exhibit number of the
Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1989).
10.62 Lease dated August 11, 1989, pertaining to premises located in Fountain
Valley, California (incorporated by reference to referenced exhibit
number of the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1989).
10.63 Credit Agreement dated as of November 16, 1988 with Bank of America NT &
SA, Sanwa Bank California, Shawmut Bank, N.A., Manufacturers Hanover
Trust Company and National Westminster Bank PLC (incorporated by
reference to referenced exhibit number of the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1989).
Exhibit
Number Description
10.66 First Amendment to Credit Agreement dated February 28, 1989 with Bank of
America NT & SA, Sanwa Bank California, Shawmut Bank, N.A.,
Manufacturers Hanover Trust Company and National Westminster Bank PLC
(incorporated by reference to referenced exhibit number of the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1989).
10.68 Second Amendment to Credit Agreement dated May 30, 1989 with Bank of
America NT & SA, Sanwa Bank California, Shawmut Bank, N.A.,
Manufacturers Hanover Trust Company and National Westminster Bank PLC
(incorporated by reference to referenced exhibit number of the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1989).
10.69 Construction Loan Agreement dated November 28, 1988 between Aetna Life
Insurance Company and Birtcher Campbell AST Partners for the AST
Research Corporate Headquarters in Irvine, California (incorporated by
reference to referenced exhibit number of the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1989).
10.70 Option to Purchase General Partnership Interest dated July 25, 1989 with
Birtcher Campbell DDA, Ltd. (incorporated by reference to referenced
exhibit number of the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1989.)
10.71 Multicurrency Line of Credit dated December 1, 1988 with Bank of America
NT & SA (incorporated by reference to referenced exhibit number of the
Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1989).
10.72 Waiver of Multicurrency Line of Credit dated February 28, 1989 with Bank
of America NT & SA (incorporated by reference to referenced exhibit
number of the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1989).
10.73 Waiver of Multicurrency Line of Credit dated May 10, 1989 with Bank of
America NT & SA (incorporated by reference to referenced exhibit number
of the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1989).
10.74 Reduction of Credit Agreement dated February 28, 1989 with Bank of
America NT & SA as Agent (incorporated by reference to referenced
exhibit number of the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1989).
10.75 Reduction in Multicurrency Agreement dated February 28, 1989 with Bank
of America NT & SA (incorporated by reference to referenced exhibit
number of the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1989).
10.76 Amendment to Multicurrency Agreement dated June 30, 1989 with Bank of
America NT & SA (incorporated by reference to referenced exhibit number
of the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1989).
10.77 Facility Letter Agreement dated July 10, 1989 with National Westminster
Bank PLC (incorporated by reference to referenced exhibit number of the
Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1989).
10.78 Press release dated June 12, 1990 pertaining to redemption of 8 1/2
percent convertible subordinate debentures (incorporated by reference to
referenced exhibit number of the Company's report on Form 8-K, No. 0-
13941).
10.79 Notice of redemption dated June 13, 1990 of 8 1/2 percent convertible
subordinate debentures (incorporated by reference to referenced exhibit
number of the Company's report on Form 8-K, No.
0-13941).
10.80 Amendment VI to License Agreement with Microsoft Corporation dated April
20, 1990 (incorporated by reference to referenced exhibit number of the
Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1990).
10.81 License Agreement with Tomcat Computer Corporation, dated October 16,
1989 (incorporated by reference to referenced exhibit number of the
Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1990).
10.82 Cross-License Agreement with International Business Machines (IBM)
Corp., dated January 1, 1990 (incorporated by reference to referenced
exhibit number of the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1990).
Exhibit
Number Description
10.83 Third Amendment dated November 8, 1989 to the Credit Agreement dated
November 16, 1988 between the Company and Bank of America NT & SA,
Manufacturers Hanover Trust Company, National Westminster Bank PLC and
Sanwa Bank California (incorporated by reference to referenced exhibit
number of the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1990).
10.84 Credit Agreement dated as of June 27, 1990 between the Company and Bank
of America NT & SA, National Westminster Bank PLC and Sanwa Bank
California (incorporated by reference to referenced exhibit number of
the Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1990).
10.85 First Amendment dated July 30, 1990 to the Credit Agreement dated June
27, 1990 between the Company and Bank of America NT & SA, National
Westminster Bank PLC and Sanwa Bank California (incorporated by
reference to referenced exhibit number of the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1990).
10.86 Multicurrency Agreement dated December 22, 1989 with Bank of America NT
& SA (incorporated by reference to referenced exhibit number of the
Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1990).
10.87 Amendment to Facility Letter Agreement dated December 18, 1989 with
National Westminster Bank PLC (incorporated by reference to referenced
exhibit number of the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1990).
10.88 Renewal to Facility Letter Agreement dated July 10, 1990 with National
Westminster Bank PLC (incorporated by reference to referenced exhibit
number of the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1990).
10.89 Agreement for Purchase and Sale of Partnership Interest in Birtcher
Campbell AST Partners dated February 21, 1990 with Birtcher Campbell
DDA, Ltd. (incorporated by reference to referenced exhibit number of the
Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1990).
10.90 Assignment and Assumption of Agreement for Purchase and Sale of
Partnership Interest dated February 21, 1990 between AST Realty, Inc.
and AST Research, Inc. (incorporated by reference to referenced exhibit
number of the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1990).
10.91 Letter of Agreement dated February 21, 1990 between the Company, AST
Realty, Inc. and Birtcher Campbell DDA, Ltd. (incorporated by reference
to referenced exhibit number of the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1990).
10.92 License Agreement dated January 1, 1991 with Microsoft Corporation
(incorporated by reference to referenced exhibit number of the Company's
Annual Report on Form 10-K for the fiscal year ended June 28, 1991).
10.93 Amendment to Facility Letter Agreement dated September 10, 1990 with
National Westminster Bank PLC (incorporated by reference to referenced
exhibit number of the Company's Annual Report on Form 10-K for the
fiscal year ended June 28, 1991).
10.94 Renewal of Facility Letter Agreement dated June 28, 1991 with National
Westminster Bank PLC (incorporated by reference to referenced exhibit
number of the Company's Annual Report on Form 10-K for the fiscal year
ended June 28, 1991).
10.95* Form of Warrant Certificate issued to Non-employee directors in December
1990 (incorporated by reference to referenced exhibit number of the
Company's Annual Report on Form 10-K for the fiscal year ended June 28,
1991).
10.96* 1991 Stock Option Plan for Non-employee Directors (incorporated by
reference to referenced exhibit number of the Company's Annual Report on
Form 10-K for the fiscal year ended June 28, 1991).
10.97* Form of Nonqualified Stock Option agreement under 1991 Stock Option Plan
for Non-employee Directors (incorporated by reference to referenced
exhibit number of the Company's Annual Report on Form 10-K for the
fiscal year ended June 28, 1991).
10.98 Amendment to Facility Letter Agreement dated June 27, 1992 with National
Westminster Bank PLC (incorporated by reference to referenced exhibit
number in the Company's Annual Report on Form 10-K for the fiscal year
ended June 27, 1992).
10.99 Amendment to License Agreement with Microsoft Corporation dated
September 18, 1991 (incorporated by reference to referenced exhibit
number in the Company's Annual Report on Form 10-K for the fiscal year
ended June 27, 1992).
Exhibit
Number Description
10.100 Credit Agreement dated April 2, 1992, among AST Research, Inc., Bank of
America NT & SA as co-agent and National Westminster Bank PLC as co-
agent (incorporated by reference to referenced exhibit number in the
Company's Annual Report on Form 10-K for the fiscal year ended June 27,
1992).
10.101*Form of Warrant Certificate issued to Non-employee Director in July 1992
(incorporated by reference to referenced exhibit number in the Company's
Annual Report on Form 10-K for the fiscal year ended June 27, 1992).
10.102*Amendment to 1989 Long-Term Incentive Program related to increase in
number shares (incorporated by reference to referenced exhibit number in
the Company's Annual Report on Form 10-K for the fiscal year ended June
27, 1992).
10.103*Form of Nonqualified Common Stock Option Agreement for officers under
the 1989 Long-Term Incentive Program, approved by Compensation Committee
January 23, 1992 pursuant to administrative authority under such plan
(incorporated by reference to referenced exhibit number in the Company's
Annual Report on Form 10-K for the fiscal year ended June 27, 1992).
10.104*Form of Amendment to Officers Nonqualified Common Stock Option
Agreement, approved by Compensation Committee January 23, 1992 pursuant
to administrative authority under such plan (incorporated by reference
to referenced exhibit number in the Company's Annual Report on Form 10-K
for the fiscal year ended June 27, 1992).
10.105*Amendment of Incentive Stock Option, Nonqualified Stock Option and
Restricted Stock Purchase Plan - 1983 approved by the Board of Directors
April 23, 1992 pursuant to administrative authority under such plan
(incorporated by reference to referenced exhibit number in the Company's
Annual Report on Form 10-K for the fiscal year ended June 27, 1992).
10.106*Amended form of Nonqualified Common Stock Option Agreement under the
Incentive Stock Option, Nonqualified Stock Option and Restricted Stock
Purchase Plan - 1983 with amended provisions approved by the
Compensation Committee January 23, 1992 and by the Board of Directors
April 23, 1992 pursuant to administrative authority under such plan
(incorporated by reference to referenced exhibit number in the Company's
Annual Report on Form 10-K for the fiscal year ended June 27, 1992).
10.107 Amendment to License Agreement with Microsoft Corporation dated February
15, 1993 (incorporated by reference to referenced exhibit number of the
Company's report on Form 10-Q for the fiscal quarter ended April 3,
1993).
10.108 Promissory Note dated as of July 12, 1993 between AST Research, Inc. and
Tandy Corporation (incorporated by reference to referenced exhibit
number of the Company's report on Form 8-K, No.
0-13941).
10.108.1 First Amendment dated September 22, 1993 to Promissory Note dated
July 12, 1993 between AST Research, Inc. and Tandy Corporation
(incorporated by reference to referenced exhibit number in the Company's
Annual Report on Form 10-K for the fiscal year ended July 3, 1993).
10.108.2 Second Amendment dated October 14, 1993 to Promissory Note dated
July 12, 1993 between AST Research, Inc. and Tandy Corporation
(incorporated by reference to referenced exhibit number of the Company's
report on Form 8-K, No. 0-13941).
10.108.3 Third Amendment dated December 30, 1993 to Promissory Note dated
July 12, 1993 between AST Research, Inc. and Tandy Corporation
(incorporated by reference to referenced exhibit number of the Company's
report on Form 8-K, No. 0-13941).
10.109*Amendment to Officer's Restricted Common Stock Grant Agreement approved
by the Board of Directors October 29, 1992 (incorporated by reference to
referenced exhibit number in the Company's Annual Report on Form 10-K
for the fiscal year ended July 3, 1993).
10.110 First Amendment dated April 20, 1993 to Credit Agreement dated April 2,
1992 among AST Research, Inc., Bank of America NT & SA as co-agent and
National Westminster Bank PLC as co-agent (incorporated by reference to
referenced exhibit number in the Company's Annual Report on Form 10-K
for the fiscal year ended July 3, 1993).
10.111 Second Amendment dated June 30, 1993 to Credit Agreement dated April 2,
1992 among AST Research, Inc., Bank of America NT & SA as co-agent and
National Westminster Bank PLC as co-agent (incorporated by reference to
referenced exhibit number in the Company's Annual Report on Form 10-K
for the fiscal year ended July 3, 1993).
Exhibit
Number Description
10.112*First Amendment to the AST Research, Inc. Profit Sharing Plus Plan,
effective June 27, 1992 (incorporated by reference to referenced exhibit
number in the Company's Annual Report on Form 10-K for the fiscal year
ended July 3, 1993).
10.113*Second Amendment to the AST Research, Inc. Profit Sharing Plus Plan,
effective June 30, 1993 (incorporated by reference to referenced exhibit
number in the Company's Annual Report on Form 10-K for the fiscal year
ended July 3, 1993).
10.114 Licensing Agreement with International Business Machines (IBM) Corp. re:
OS/2, dated July 28, 1993 (incorporated by reference to referenced
exhibit number in the Company's Annual Report on Form 10-K for the
fiscal year ended July 3, 1993).
10.115*Employment Agreement dated July 27, 1993 between Safi U. Qureshey and
AST Research, Inc. (incorporated by reference to referenced exhibit
number in the Company's Annual Report on Form 10-K for the fiscal year
ended July 3, 1993).
10.116 Sales Agreement dated July 13, 1993 between AST Research, Inc. and Tandy
Corporation pursuant to the Agreement for the Purchase and Sale of
Assets dated June 30, 1993 (incorporated by reference to referenced
exhibit number in the Company's Annual Report on Form 10-K for the
fiscal year ended July 3, 1993).
10.117 Circuit Board Purchase Agreement dated July 13, 1993 between AST
Research, Inc. and TE Electronics Inc. pursuant to the Agreement for the
Purchase and Sale of Assets dated June 30, 1993 (incorporated by
reference to referenced exhibit number in the Company's Annual Report on
Form 10-K for the fiscal year ended July 3, 1993).
10.118*Form of Severance Compensation Agreement (incorporated by reference to
referenced exhibit number in the Company's Annual Report on Form 10-K
for the fiscal year ended July 3, 1993).
10.119 Credit Agreement dated September 30, 1993, among AST Research, Inc.,
Bank of America NT & SA as co-agent (incorporated by reference to
referenced exhibit number of the Company's report on Form 10-Q for the
fiscal quarter ended October 2, 1993).
10.120*AST Research, Inc. 1994 One-Time Grant Stock Option Plan for Non-
Employee Directors (incorporated by reference to referenced exhibit
number of the Company's report on Form 10-Q for the fiscal quarter ended
January 1, 1994).
10.121*Form of Option Agreement Under 1994 One-Time Grant Stock Option Plan for
Non-Employee Directors of AST Research, Inc. (incorporated by reference
to referenced exhibit number of the Company's report on Form 10-Q for
the fiscal quarter ended January 1, 1994).
10.122*Amendment to AST Research, Inc. 1989 Long-Term Incentive Program
(incorporated by reference to referenced exhibit number of the Company's
report on Form 10-Q for the fiscal quarter ended January 1, 1994).
10.123*Amendment to AST Research, Inc. 1991 Stock Option Plan for Non-Employee
Directors (incorporated by reference to referenced exhibit number of the
Company's report on Form 10-Q for the fiscal quarter ended January 1,
1994).
10.124 First Amendment dated March 30, 1994 to Credit Agreement dated September
30, 1993 among AST Research, Inc., Bank of America NT & SA as co-agent
and National Westminster Bank Plc as co-agent (incorporated by reference
to referenced exhibit number of the Company's report on Form 10-Q for
the fiscal quarter ended April 2, 1994).
10.125 Second Amendment dated April 27, 1994 to Credit Agreement dated
September 30, 1993 among AST Research, Inc., Bank of America NT & SA as
co-agent and National Westminster Bank Plc as co-agent (incorporated by
reference to referenced exhibit number of the Company's report on Form
10-Q for the fiscal quarter ended April 2, 1994).
10.126 Joint Venture Contract dated September 7, 1993 between Tianjin Economic
- Technological Development Area Business Development Co. and AST
Research (Far East) Limited (incorporated by reference to referenced
exhibit number of the Company's report on Form 10-Q for the fiscal
quarter ended April 2, 1994).
10.127*Involuntary Termination Policy dated September 2, 1994.
10.128*Performance Based Annual Management Incentive Plan.
10.129 Employment Grant Agreement dated November 9, 1993 between the Industrial
Development Authority, AST Ireland Limited and AST Research, Inc.
(Confidential treatment is requested with respect to portions of this
exhibit).
Exhibit
Number Description
10.130 Capital Grant Agreement dated November 9, 1993 between the Industrial
Development Authority, AST Ireland Limited and AST Research, Inc.
(Confidential treatment is requested with respect to portions of this
exhibit).
11. Statement re computation of per share earnings.
21. Subsidiaries of the registrant.
23. Consent of Independent Auditors.
24. Power of Attorney (included on the signature pages of this Annual Report
on Form 10-K).
27. Financial Data Schedule.
*Indicates a management contract or compensatory plan or arrangement required
to be filed as an exhibit to this Annual Report on Form 10-K pursuant to
Item 14 (c).
(b) Reports on Form 8-K
AST Research, Inc. was not required to file any reports on Form 8-K for the
quarter ended July 2, 1994.
AST, Advantage!, GRiDPAD, GRiD, Victor and PalmPad are registered trademarks of
AST Research, Inc. The AST Computer logo, AST Works, Ascentia, ASTVision,
Bravo, Convertible, ExeCare, Manhattan, PowerExec, and Premmia are trademarks of
AST Research, Inc. OverDrive is a registered trademark and Pentium is a
trademark of Intel Corporation. OS/2 is a registered trademark of International
Business Machines Corporation. NetWare is a registered trademark of Novell,
Inc. MS-DOS is a registered trademark and Encarta is a trademark of Microsoft
Corporation. Radio Shack is a registered service mark of Tandy Corporation.
Prodigy is a registered trademark of the Prodigy Services Corporation. America
Online is a registered service mark of America Online, Inc. CompuServe is a
registered service mark of CompuServe, Inc. All other product or service names
mentioned herein may be trademarks or registered trademarks of their respective
owners. Reference to the "Energy Star" program does not represent EPA
endorsement of any product or service. Copyright (C)1994 AST Research, Inc.
All Rights Reserved.
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, in the City of Irvine,
State of California, on September 22, 1994.
AST RESEARCH, INC.
Date: September 22, 1994 By: /s/Safi U.Qureshey
Safi U. Qureshey
Chief Executive Officer and
Chairman of the Board
POWER OF ATTORNEY
We, the undersigned directors and officers of AST Research, Inc., do hereby
constitute and appoint Safi U. Qureshey our true and lawful attorney and agent,
with full power of substitution to do any and all acts and things in our name
and behalf in our capacities as directors and officers and to execute any and
all instruments for us and in our names in the capacities indicated below, which
said attorney and agent may deem necessary or advisable to enable said
corporation to comply with the Securities Exchange Act of 1934, as amended, and
any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Annual Report on Form 10-K, including
specifically but without limitation, power and authority to sign for us or any
of us in our names in the capacities indicated below, any and all amendments
(including post-effective amendments) hereto; and we do hereby ratify and
confirm all that said attorney and agent, shall do or cause to be done by virtue
hereof.
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 in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <S> <S>
Safi U. Qureshey Chief Executive Officer and September 22, 1994
Chairman of the Board
(Principal Executive Officer)
Chief Financial Officer,
Bruce C. Edwards Executive Vice President and Director September 22, 1994
(Principal Financial and Accounting Officer)
Chief Operating Officer,
James T. Schraith President and Director September 22, 1994
Richard J. Goeglein Director September 22, 1994
Carmelo J. Santoro,Ph.D. Director September 22, 1994
Delbert W. Yocam Director September 22, 1994
Jack W. Peltason Director September 22, 1994
</TABLE>
S-1
SCHEDULE II
AST RESEARCH, INC.
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS, AND EMPLOYEES
OTHER THAN RELATED PARTIES
FOR THE YEARS ENDED JULY 2, 1994,
JULY 3, 1993 AND JUNE 27, 1992
(IN THOUSANDS)
<TABLE>
- - --------------------------------------------------------------------------------------------------------------
Balance at Amounts Balance at
Name of Debtor Beginning of Period Additions Collected End of Period
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
YEAR ENDED JULY 2, 1994
Scott A. Smith (1) $ - $ 100 $ - $ 100
YEAR ENDED JULY 3, 1993
None - - - -
YEAR ENDED JUNE 27, 1992
Wai S. Szeto (2) $ 304 $ - $ 304 $ -
</TABLE>
(1)On September 21, 1993, the Company loaned Vice President Scott A. Smith
$100,000 for the purchase of a primary residence, evidenced by a promissory
note secured by a deed of trust. The loan was issued interest free and is
payable in full on September 21, 1996.
(2)On December 3, 1990, Vice President Wai S. Szeto exercised stock options
issued under the 1983 and 1989 Plans to purchase 50,000 shares of common
stock and issued promissory notes to the Company in the aggregate of
$177,813. The notes included interest at 10% per annum and were due and
payable on December 1, 1991. The notes were paid in full with interest on
August 8, 1991. On April 24, 1991, the Company loaned Mr. Szeto $125,000 for
a six month period to purchase a primary residence. The loan was evidenced
by a promissory note secured by a pledge agreement covering his restricted
stock and bore interest at 10% per annum. The note was paid in full with
interest on August 8, 1991.
SCHEDULE VIII
AST RESEARCH, INC.
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED JULY 2, 1994
JULY 3, 1993 AND JUNE 27, 1992
(IN THOUSANDS)
<TABLE>
- - --------------------------------------------------------------------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Balance, beginning of period $ 11,671 $ 9,831 $ 6,132
Additions charged to expense 13,219 6,089 5,253
Reductions (7,326) (4,249) (1,554)
Balance, end of period $ 17,564 $ 11,671 $ 9,831
- - --------------------------------------------------------------------------------------------------------
ALLOWANCE FOR SALES RETURNS
Balance, beginning of period $ 9,120 $ 10,109 $ 7,038
Net additions (reductions) charged to sales 6,017 (989) 3,071
Balance, end of period $ 15,137 $ 9,120 $ 10,109
- - --------------------------------------------------------------------------------------------------------
RESERVE FOR EXCESS OR OBSOLETE INVENTORY
Balance, beginning of period $ 35,595 $ 14,529 $ 13,775
Inventory acquired in the Tandy acquisition 14,171 20,535 -
Allocation of restructure reserves to
identified inventory exposure 693 - -
Net additions charged to expense 14,809 531 754
Balance, end of period $ 65,268 $ 35,595 $ 14,529
</TABLE>
SCHEDULE IX
AST RESEARCH, INC.
CONSOLIDATED SHORT-TERM BORROWINGS
FOR THE YEARS ENDED JULY 2, 1994
JULY 3, 1993 AND JUNE 27, 1992
(DOLLARS IN THOUSANDS)
<TABLE>
- - --------------------------------------------------------------------------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Amount outstanding at end of period
Short-term bank borrowings $ 50,000 $ 59,217 $ 1,374
Interest rate on amount outstanding
Short-term bank borrowings 7.01% 6.13% 10.43%
Maximum amount outstanding during the period
Short-term bank borrowings $ 108,781 $ 59,572 $ 1,399
Average amount outstanding during the period
Short-term bank borrowings $ 29,714 $ 5,243 $ 1,281
Average interest rate on borrowings during the period
Short-term bank borrowings 4.40% 6.95% 9.87%
</TABLE>
The average amount of short-term borrowings outstanding during the period and
the average interest rate on such borrowings during the period were calculated
using the daily balances outstanding and the interest rates in effect on those
dates.
SCHEDULE X
AST RESEARCH, INC.
CONSOLIDATED SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED JULY 2, 1994
JULY 3, 1993 AND JUNE 27, 1992
(IN THOUSANDS)
<TABLE>
- - --------------------------------------------------------------------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Royalty Expense $56,987 $28,209 $18,059
Advertising $41,138 $28,582 $21,398
</TABLE>
All other expenses required by this Schedule either are not applicable, or are
disclosed in the consolidated financial statements or notes thereto included
elsewhere in this Annual Report on Form 10-K.
BYLAWS
OF
AST RESEARCH, INC.
A Delaware Corporation
(as amended, through August 1, 1994)
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
ARTICLE I. OFFICES 1
Section 1. Registered Office 1
Section 2. Other Offices 1
Section 3. Books 1
ARTICLE II. MEETINGS OF STOCKHOLDERS 1
Section 1. Place of Meetings 1
Section 2. Annual Meetings 1
Section 3. Special Meetings 1
Section 4. Notification of Business to be Transacted at Meeting 1
Section 5. Notice; Waiver of Notice 2
Section 6. Quorum; Adjournment 2
Section 7. Voting 2
Section 8. Stockholder Action by Written Consent Without a Meeting 2
Section 9. List of Stockholders Entitled to Vote 3
Section 10. Stock Ledger 3
Section 11. Inspectors of Election 3
Section 12. Organization 3
Section 13. Order of Business 3
ARTICLE III. DIRECTORS 3
Section 1. Powers 3
Section 2. Number and Election of Directors 4
Section 3. Vacancies 4
Section 4. Time and Place of Meetings 4
Section 5. Annual Meeting 4
Section 6. Regular Meetings 5
Section 7. Special Meetings 5
Section 8. Quorum; Vote Required for Action; Adjournment 5
Section 9. Action by Written Consent 5
Section 10. Telephone Meetings 5
Section 11. Committees 5
Section 12. Compensation 6
Section 13. Interested Directors 6
ARTICLE IV. OFFICERS 6
Section 1. Executive Officers 6
Section 2. Election; Term of Office and Remuneration 7
Section 3. Subordinate Officers 7
Section 4. Removal 7
Section 5. Resignations 7
Section 6. Powers and Duties 7
ARTICLE V. STOCK 7
Section 1. Form of Certificates 7
Section 2. Signatures 7
Section 3. Lost Certificates 8
Section 4. Transfers 8
Section 5. Registered Owners 8
ARTICLE VI. LIMITATION OF LIABILITY 8
ARTICLE VII. INDEMNIFICATION 8
Section 1. Action Other Than by or in the Right of the Corporation 8
Section 2. Action by or in the Right of the Corporation 9
Section 3. Determination of Right of Indemnification 9
Section 4. Indemnification Against Expenses of Successful Party 9
Section 5. Advances of Expenses 9
Section 6. Right of Agent to Indemnification upon Application;
Procedure Upon Application 10
Section 7. Other Rights and Remedies 10
Section 8. Insurance 10
Section 9. Indemnity Fund 11
Section 10. Constituent Corporations 11
Section 11. Other Enterprises, Fines, and Serving at Corporation's Request 11
Section 12. Indemnification of Other Persons 11
Section 13. Savings Clause 11
ARTICLE VIII. RECORDS 12
Section 1. Maintenance and Inspection of Share Register 12
Section 2. Maintenance and Inspection of Bylaws 12
ARTICLE IX. GENERAL PROVISIONS 12
Section 1. Dividends 12
Section 2. Disbursements 12
Section 3. Fiscal Year 13
Section 4. Corporate Seal 13
Section 5. Record Date 13
Section 6. Voting of Stock Owned by the Corporation 13
Section 7. Construction and Definitions 13
Section 8. Amendments 13
</TABLE>
BYLAWS
OF
AST RESEARCH, INC.
A Delaware Corporation
ARTICLE I
OFFICES
Section 1. Registered Office. The address of the registered office
of the Corporation in the State of Delaware shall be 1209 Orange Street,
Wilmington, New Castle County, Delaware, 19801, and the name of its registered
agent at such address is The Corporation Trust Company.
Section 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
Section 3. Books. The books of the Corporation may be kept within
or without the State of Delaware as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. All meetings of the stockholders
shall be held at such place either within or without the State of Delaware and
on such date and at such time as may be designated from time to time by the
Board of Directors. If the Board of Directors shall fail to fix such place, the
meetings shall be held at the principal executive office of the Corporation.
Section 2. Annual Meetings. Annual meetings of stockholders shall
be held at a time and date designated by the Board of Directors for the purpose
of electing directors and transacting such other business as may properly be
brought before the meeting.
Section 3. Special Meetings. Special meetings of stockholders, for
any purpose or purposes, may be called by the Board of Directors, the Chairman
of the Board of Directors, the President, or the holders of shares entitled to
cast not less than a majority of the votes at such meeting. Special meetings
may not be called by any other person.
Section 4. Notification of Business to be Transacted at Meeting. To
be properly brought before a meeting, business must be (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (b) otherwise properly brought before the meeting by or
at the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder entitled to vote at the meeting.
Section 5. Notice; Waiver of Notice. Whenever stockholders are
required or permitted to take any action at a meeting, a written notice of the
meeting shall be given which shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise required by law, such notice
shall be given not less than ten nor more than 60 days before the date of the
meeting to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be given when deposited in the mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the Corporation. A written waiver of any such notice signed by the
person entitled thereto, whether before or after the time stated therein, shall
be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends
the meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.
Section 6. Quorum; Adjournment. Except as otherwise required by law
or provided by the Certificate of Incorporation, the holders of a majority of
the capital stock issued and outstanding and entitled to vote thereat, present
in person or represented by proxy, shall constitute a quorum for the transaction
of business at all meetings of the stockholders. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting of the time and place of the adjourned
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. If after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
entitled to vote at the meeting.
Section 7. Voting. Except as otherwise required by law, or provided
by the Certificate of Incorporation or these Bylaws, any question brought before
any meeting of stockholders shall be decided by the vote of the holders of a
majority of the stock represented and entitled to vote thereat. Unless
otherwise provided in the Certificate of Incorporation, each stockholder
represented at a meeting of stockholders shall be entitled to cast one vote for
each share of the capital stock entitled to vote thereat held by such
stockholder. Such votes may be cast in person or by proxy, but no proxy shall
be voted on or after three years from its date, unless such proxy provides for a
longer period. Elections of directors need not be by ballot unless the Chairman
of the meeting so directs or unless a stockholder demands election by ballot at
the meeting and before the voting begins.
Section 8. Stockholder Action by Written Consent Without a Meeting.
Any action which may be taken at any annual or special meeting of stockholders
may be taken without a meeting and without prior notice, if a consent in
writing, setting forth the action so taken, is signed by the holders of all of
the outstanding shares of the Corporation. All such consents shall be filed
with the Secretary of the Corporation and shall be maintained in the corporate
records. Any stockholder giving a written consent, or the stockholder's proxy
holders, or a transferee of the shares or a personal representative of the
stockholder or their respective proxy holders, may revoke the consent by a
writing received by the Secretary of the Corporation before written consents of
the number of shares required to authorize the proposed action have been filed
with the Secretary.
Section 9. List of Stockholders Entitled to Vote. The officer who
has charge of the stock ledger of the Corporation shall prepare and make, at
least ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder of the Corporation who is present.
Section 10. Stock Ledger. The stock ledger of the Corporation shall
be the only evidence as to who are the stockholders entitled to examine the
stock ledger, the list required by Section 9 of this Article II or the books of
the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 11. Inspectors of Election. In advance of any meeting of
stockholders, the Board of Directors may appoint one or more persons (who shall
not be candidates for office) as inspectors of election to act at the meeting.
If inspectors are not so appointed, or if an appointed inspector fails to appear
or fails or refuses to act at a meeting, the Chairman of any meeting of
stockholders may, and on the request of any stockholder or his proxy shall,
appoint inspectors of election at the meeting. In the event of any dispute
between or among the inspectors, the determination of the majority of the
inspectors shall be binding.
Section 12. Organization. At each meeting of stockholders the
Chairman of the Board of Directors, if one shall have been elected, (or in his
absence or if one shall not have been elected, the President) shall act as
Chairman of the meeting. The Secretary (or in his absence or inability to act,
the person whom the Chairman of the meeting shall appoint secretary of the
meeting) shall act as secretary of the meeting and keep the minutes thereof.
Section 13. Order of Business. The order and manner of transacting
business at all meetings of stockholders shall be determined by the Chairman of
the meeting.
ARTICLE III
DIRECTORS
Section 1. Powers. Except as otherwise required by law or provided
by the Certificate of Incorporation, the business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors.
Section 2. Number and Election of Directors. Unless otherwise
provided by the Certificate of Incorporation, the Board of Directors shall
consist of not less than 5 nor more than 9 members. The exact number of
authorized directors shall initially be 7 and, thereafter, shall be fixed from
time to time, within the foregoing limits, by resolution of the Board of
Directors. Directors shall be elected at each annual meeting of stockholders
and each director so elected shall hold office until his successor is duly
elected and qualified, or until his earlier death, resignation or removal. Any
director may resign at any time effective upon giving written notice to the
Board of Directors, unless the notice specifies a later time for such
resignation to become effective. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective. If
the resignation of a director is effective at a future time, the Board of
Directors may elect a successor prior to such effective time to take office when
such resignation becomes effective. Directors need not be stockholders.
Section 3. Vacancies. Vacancies in the Board of Directors may be
filled by a majority of the remaining directors, though less than a quorum, or
by a sole remaining director, except that a vacancy created by the removal of a
director by the vote or written consent of the stockholders may be filled only
by the vote of a majority of the shares entitled to vote represented at a duly
held meeting at which a quorum is present, or by the written consent of holders
of a majority of the outstanding shares entitled to vote. Each director so
elected shall hold office until the next annual meeting of the stockholders and
until a successor has been elected and qualified.
A vacancy or vacancies in the Board of Directors shall be deemed to
exist in the event of the death, resignation, or removal of any director, or if
the authorized number of directors is increased, or if the stockholders fail, at
any meeting of stockholders at which any director or directors are elected, to
elect the number of directors to be voted for at that meeting.
The stockholders may elect a director or directors at any time to
fill any vacancy or vacancies not filled by the directors, but any such election
by written consent shall require the consent of a majority of the outstanding
shares entitled to vote.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
Section 4. Time and Place of Meetings. The Board of Directors shall
hold its meetings at such place, either within or without the State of Delaware,
and at such time as may be determined from time to time by the Board of
Directors.
Section 5. Annual Meeting. The Board of Directors shall meet for
the purpose of organization, the election of officers and the transaction of
other business, as soon as practicable after each annual meeting of
stockholders, on the same day and at the same place where such annual meeting
shall be held. Notice of such meeting need not be given. In the event such
annual meeting is not so held, the annual meeting of the Board of Directors may
be held at such place, either within or without the State of Delaware, on such
date and at such time as shall be specified in a notice thereof given as
hereinafter provided in Section 7 of this Article III or in a waiver of notice
thereof.
Section 6. Regular Meetings. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware at
such date and time as the Board of Directors may from time to time determine
and, if so determined by the Board of Directors, notices thereof need not be
given.
Section 7. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President, by any Vice
President, the Secretary or by any two directors. Notice of the date, time and
place of special meetings shall be delivered personally or by telephone to each
director or sent by first-class mail or telegram, charges prepaid, addressed to
each director at the director's address as it is shown on the records of the
Corporation. In case the notice is mailed, it shall be deposited in the United
States mail at least five days before the time of the holding of the meeting.
In case the notice is delivered personally or by telephone or telegram, it shall
be delivered personally or by telephone or to the telegraph company at least
48 hours before the time of the holding of the meeting. The notice need not
specify the purpose of the meeting.
Section 8. Quorum; Vote Required for Action; Adjournment. Except as
otherwise required by law, or provided in the Certificate of Incorporation or
these Bylaws, a majority of the directors shall constitute a quorum for the
transaction of business at all meetings of the Board of Directors and the
affirmative vote of not less than a majority of the directors present at any
meeting at which there is a quorum shall be the act of the Board of Directors.
If a quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting, from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
A meeting at which a quorum is initially present may continue to transact
business, notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum to conduct that meeting.
When a meeting is adjourned to another time or place (whether or not a quorum is
present), notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken.
At the adjourned meeting, the Board of Directors may transact any business which
might have been transacted at the original meeting.
Section 9. Action by Written Consent. Unless otherwise restricted
by the Certificate of Incorporation, any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 10. Telephone Meetings. Unless otherwise restricted by the
Certificate of Incorporation, members of the Board of Directors of the
Corporation, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors or such committee, as the
case may be, by conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this Section 10 shall constitute presence
in person at such meeting.
Section 11. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board of Directors may designate one or more directors as alternate members of
any such committee, who may replace any absent or disqualified member at any
meeting of the committee. In the event of absence or disqualification of a
member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the committee member or members present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
the absent or disqualified member. Any committee, to the extent allowed by law
and as provided in the resolution establishing such committee, shall have and
may exercise all the power and authority of the Board of Directors in the
management of the business and affairs of the Corporation. Each committee shall
report to the Board of Directors when required.
Section 12. Compensation. The directors may be paid such
compensation for their services as the Board of Directors shall from time to
time determine.
Section 13. Interested Directors. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or the committee thereof
which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose if: (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
ARTICLE IV
OFFICERS
Section 1. Executive Officers. The executive officers of the
Corporation shall be a President, a Chief Executive Officer, a Chief Financial
Officer and a Secretary. The Secretary shall have the duty, among other things,
to record the proceedings of the meetings of stockholders and directors in a
book kept for that purpose. The Corporation may also have such other executive
officers, including one or more Vice Presidents, as the Board may in its
discretion appoint. The Board of Directors, if it so determines, may appoint a
Chairman of the Board and a Vice Chairman of the Board from among its members,
but such titles shall not confer upon such Board members executive officer
status. Any number of offices may be held by the same person.
Section 2. Election, Term of Office and Remuneration. The executive
officers of the Corporation shall be elected annually by the Board of Directors
at the annual meeting or a regular meeting thereof. Each such officer shall
hold office at the discretion of the Board of Directors until his successor is
elected and qualified, or until his earlier death, resignation or removal. The
remuneration of all officers of the Corporation shall be fixed by the Board of
Directors. Any vacancy in any office shall be filled in such manner as the
Board of Directors shall determine.
Section 3. Subordinate Officers. In addition to the executive
officers enumerated in Section 1 of this Article IV, the Corporation may have
one more assistant treasurers and assistant secretaries and such other
subordinate officers, agents and employees as the Board of Directors may deem
necessary, each of whom shall hold office for such period as the Board of
Directors may from time to time determine. The Board of Directors may delegate
to any executive officer the power to appoint and to remove any such subordinate
officers, agents or employees.
Section 4. Removal. Except as otherwise delegated to an executive
officer with respect to subordinate officers, any officer may be removed, with
or without cause, at any time, by resolution adopted by the Board of Directors.
Such removal shall be without prejudice to the contractual rights of such
officer, if any, with the Corporation.
Section 5. Resignations. Any officer may resign at any time by
giving written notice to the Board of Directors (or to a principal officer if
the Board of Directors has delegated to such principal officer the power to
appoint and to remove such officer). The resignation of any officer shall take
effect upon receipt of notice thereof or at such later time as shall be
specified in such notice; unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 6. Powers and Duties. The Board of Directors may designate
an officer as the Chief Executive Officer. The Chief Executive Officer shall,
subject to the direction and control of the Board of Directors, be the general
manager of, and supervise and direct, the business and affairs of the
Corporation and the conduct of the officers of the Corporation. The other
officers of the Corporation shall have such powers and perform such duties
incident to each of their respective offices and such other duties as may from
time to time be conferred upon or assigned to them by the Board of Directors or
the Chief Executive Officer.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by him in the Corporation.
Section 2. Signatures. Any, or all, of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
Section 3. Lost Certificates. The Corporation may issue a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation, alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate to be lost,
stolen or destroyed. The Corporation may, in its discretion and as a condition
precedent to the issuance of such new certificate, require the owner of such
lost, stolen, or destroyed certificate, or his legal representative, to give the
Corporation a bond (or other security) sufficient to indemnify it against any
claim that may be made against the Corporation (including any expense or
liability) on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 4. Transfers. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these Bylaws or in any
agreement with the stockholder making the transfer. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by his attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be cancelled before a new certificate shall be
issued.
Section 5. Registered Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise required by
law.
ARTICLE VI
LIMITATION OF LIABILITY
No person shall be liable to the Corporation for any loss or damage
suffered by it on account of any action taken or omitted to be taken by him as a
director or officer of the Corporation if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation or, with respect to any criminal matter, had no reasonable cause to
believe that his conduct was unlawful.
ARTICLE VII
INDEMNIFICATION
Section 1. Action Other Than by or in the Right of the Corporation.
Subject to Section 3 of this Article VII, the Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether external or internal to
the Corporation, (other than a judicial action or suit brought by or in the
right of the Corporation) by reason of the fact that he is or was a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise (all such persons being referred to hereafter
as an "Agent"), against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, that he had
reasonable cause to believe that his conduct was unlawful.
Section 2. Action by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed judicial action or suit
brought by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was an Agent (as defined in Section 1)
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the Corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or other such court shall deem proper.
Section 3. Determination of Right of Indemnification. Any
indemnification under Sections 1 or 2 (unless ordered by a court) shall be made
by the Corporation unless a determination is reasonably and promptly made (i) by
the Board by a majority vote of a quorum consisting of directors who are or were
not parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable, if a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders, that such person acted in bad faith and in a manner that such
person did not believe to be in or not opposed to the best interests of the
Corporation, or, with respect to any criminal proceeding, that such person
believed or had reasonable cause to believe that his conduct was unlawful.
Section 4. Indemnification Against Expenses of Successful Party.
Notwithstanding the other provisions of this Article, to the extent that an
Agent has been successful on the merits or otherwise, including the dismissal of
an action without prejudice or the settlement of an action without admission of
liability, in defense of any proceeding or in defense of any claim, issue or
matter therein, such Agent shall be indemnified against all expenses incurred in
connection therewith.
Section 5. Advances of Expenses. Except as limited by Section 6 of
this Article VII, expenses incurred in defending or investigating any action,
suit, proceeding or investigation shall be paid by the Corporation in advance of
the final disposition of such matter, if the Agent shall undertake to repay such
amount in the event that it is ultimately determined, as provided herein, that
such person is not entitled to indemnification. However, no advance shall be
made by the Corporation if a determination is reasonably and promptly made by
the Board of Directors by a majority vote of a quorum of disinterested
directors, or (if such a quorum is not obtainable or, even if obtainable, a
quorum of disinterested directors so directs) by independent legal counsel in a
written opinion, that, based upon the facts known to the Board or counsel at the
time such determination is made, such person acted in bad faith and in a manner
that such person did not believe to be in or not opposed to the best interest of
the Corporation, or, with respect to any criminal proceeding, that such person
believed or had reasonable cause to believe his conduct was unlawful. In no
event shall any advance be made in instances where the Board or independent
legal counsel reasonably determines that such person deliberately breached his
duty to the Corporation or its stockholders.
Section 6. Right of Agent to Indemnification Upon Application;
Procedure Upon Application. Any indemnification under Sections 2, 3, and 4, or
advance under Section 5 of this Article VII, shall be made promptly and in any
event within 45 days, upon the written request of the Agent, unless with respect
to applications under Sections 2, 3, or 5, a determination is reasonably and
promptly made by the Board of Directors by a majority vote of a quorum of
disinterested directors that such Agent acted in a manner set forth in such
Sections as to justify the Corporation's not indemnifying or making an advance
to the Agent. In the event no quorum of disinterested directors is obtainable,
the Board of Directors shall promptly direct that independent legal counsel
shall decide whether the Agent acted in the manner set forth in such Sections as
to justify the Corporation's not indemnifying or making an advance to the Agent.
The right to indemnification or advances as granted by this Article VII shall be
enforceable by the Agent in any court of competent jurisdiction if the Board or
independent legal counsel denies the claim, in whole or in part, or if no
disposition of such claim is made within 45 days. The Agent's expenses incurred
in connection with successfully establishing his right to indemnification, in
whole or in part, in any such proceeding shall also be indemnified by the
Corporation.
Section 7. Other Rights and Remedies. The indemnification provided
by this Article VII shall not be deemed exclusive of any other rights to which
an Agent seeking indemnification may be entitled under any Bylaw, agreement,
vote of stockholders or disinterested directors, court order or otherwise, both
as to action in his official capacity and as to action in another capacity while
holding such office, since it is the policy of the Corporation that
indemnification of Agents shall be made to the fullest extent permitted by law.
The indemnification provided by this Article shall continue as to a person who
has ceased to be an Agent and shall inure to the benefit of the heirs, executors
and administrators of such a person. All rights to indemnification under this
Article shall be deemed to be provided by a contract between the Corporation and
the Agent who serves in such capacity at any time while these Bylaws and other
relevant provisions of the General Corporation Law of the State of Delaware and
other applicable law, if any, are in effect. Any repeal or modification thereof
shall not affect any rights or obligations then existing.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was an Agent against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article.
Section 9. Indemnity Fund. Upon resolution passed by the Board, the
Corporation may establish a trust or other designated account, grant a security
interest or use other means (including, without limitation, a letter of credit),
to ensure the payment of certain of its obligations arising under this Article
and/or agreements which may be entered into between the Company and its officers
and directors from time to time.
Section 10. Constituent Corporations. For the purposes of this
Article, references to "the Corporation" include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation, so that any person who is or was a director or officer of such a
constituent corporation or is or was serving at the request of such constituent
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise shall stand in the same position under the
provisions of this Article with respect to the resulting or surviving
corporation as he would had he served such constituent corporation in the same
capacity.
Section 11. Other Enterprises, Fines, and Serving at Corporation's
Request. For purposes of this Article, references to "other enterprise" in
Sections 1 and 10 shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director or officer of the Corporation which
imposes duties on, or involves services by, such director or officer with
respect to any employee benefit plan, its participants, or beneficiaries; and a
person who acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" as referred to in this Article.
Section 12. Indemnification of Other Persons. The provisions of
this Article VII shall not be deemed to preclude the indemnification of any
person who is not an Agent (as defined in Section 1), but whom the Corporation
has the power or obligation to indemnify under the provisions of the General
Corporation Law of the State of Delaware or otherwise. The Corporation may, in
its sole discretion, indemnify an employee, trustee or other agent as permitted
by the General Corporation Law of the State of Delaware. The Corporation shall
indemnify an employee, trustee or other agent where required by law.
Section 13. Savings Clause. If this Article or any portion thereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each Agent against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
with respect to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, and whether internal or external, including a
grand jury proceeding and an action or suit brought by or in the right of the
Corporation, to the full extent permitted by any applicable portion of this
Article that shall not have been invalidated, or by any other applicable law.
ARTICLE VIII
RECORDS
Section 1. Maintenance and Inspection of Share Register. The
Corporation shall keep at its principal executive office, or at the office of
its transfer agent or registrar, if either be appointed and as determined by
resolution of the Board of Directors, a record of its stockholders, giving the
names and addresses of all stockholders and the number and class of shares held
by each stockholder.
A stockholder or stockholders of the Corporation holding at least 5%
in the aggregate of the outstanding voting shares of the Corporation or who hold
at least 1% of such voting shares and have filed a Schedule 14B with the United
States Securities and Exchange Commission relating to the election of directors
of the Corporation may (i) inspect and copy the records of stockholders' names
and addresses and stockholdings during usual business hours on 5 days' prior
written demand on the Corporation, or (ii) obtain from the transfer agent of the
Corporation, on written demand and on the tender of such transfer agent's usual
charges for such list, a list of the stockholders' names and addresses, who are
entitled to vote for the election of directors, and their stockholdings, as of
the most recent record date for which that list has been compiled or as of a
date specified by the stockholder after the date of demand. This list shall be
made available to any such stockholder by the transfer agent on or before the
later of 5 days after the demand is received or the date specified in the demand
as the date as of which the list is to be compiled. The record of stockholders
shall also be open to inspection on the written demand of any stockholder or
holder of a voting trust certificate, at any time during usual business hours,
for a purpose reasonably related to the holder's interests as a stockholder or
as the holder of a voting trust certificate. Any inspection and copying under
this Section 1 may be made in person or by an agent or attorney of the
stockholder or holder of a voting trust certificate making the demand.
Section 2. Maintenance and Inspection of Bylaws. The Corporation
shall keep at its principal executive office, the original or a copy of these
Bylaws, as amended, to date, which shall be open to inspection by the
stockholders at all reasonable times during office hours.
ARTICLE IX
GENERAL PROVISIONS
Section 1. Dividends. Subject to limitations contained in the
General Corporation Law of the State of Delaware and the Certificate of
Incorporation, the Board of Directors may declare and pay dividends upon the
shares of capital stock of the Corporation, which dividends may be paid either
in cash, securities of the Corporation or other property.
Section 2. Disbursements. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The Corporation shall have a corporate
seal in such form as shall be prescribed by the Board of Directors.
Section 5. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than 60 days nor less than ten days
before the date of such meeting, nor more than 60 days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting. Stockholders on the record date are entitled to notice and
to vote or to receive the dividend, distribution or allotment of rights or to
exercise the rights, as the case may be, notwithstanding any transfer of any
shares on the books of the Corporation after the record date, except as
otherwise provided by agreement or by applicable law.
Section 6. Voting of Stock Owned by the Corporation. The Board of
Directors may authorize any person, on behalf of the Corporation, to attend,
vote and grant proxies to be used at any meeting of stockholders of any
corporation (except this Corporation) in which the Corporation may hold stock.
Section 7. Construction and Definitions. Unless the context
requires otherwise, the general provisions, rules of construction and
definitions in the General Corporation Law of the State of Delaware shall govern
the construction of these Bylaws.
Section 8. Amendments. Subject to the General Corporation Law of
the State of Delaware, the Certificate of Incorporation and these Bylaws, the
Board of Directors may by majority vote of those present at any meeting at which
a quorum is present amend or repeal these Bylaws, or enact other Bylaws as in
their judgment may be advisable for the regulation of the conduct of the affairs
of the Corporation. Unless otherwise restricted by the Certificate of
Incorporation, these Bylaws may be altered, amended or repealed at any annual
meeting of the stockholders (or at any special meeting thereof duly called for
that purpose) by a majority of the combined voting power of the then outstanding
shares of capital stock of all classes and series of the Corporation entitled to
vote generally in the election of directors, voting as a single class, provided
that, in the notice of any such special meeting, notice of such purpose shall be
given.
INVOLUNTARY TERMINATION POLICY
AST OFFICERS
POLICY:
AST provides a defined severance benefit for the involuntary termination of
Corporate Officers.
PURPOSE:
The main purpose of severance pay is to provide economic help to certain
terminated employees while they seek other employment.
ELIGIBILITY:
Officers will be eligible for this benefit at termination because of
reduction in force, job elimination, insufficient aptitude (not attributable
to willful cause), acceptance of company initiated early retirement program.
Officers will not be eligible for severance because of voluntary
resignation, termination due to gross misconduct, retirement, death, nor change
of control which is covered under separate contracts.
This policy may be superseded by a specific employment contract
BENEFITS:
CEO/COO incumbents will receive 24 months salary continuance of current pay
and allowances.
Other officers will receive 6 months of salary/allowances continuance plus
1 additional month for each year of service up to a total maximum of 12 months.
Benefit coverage will continue for the continuance period as long as
required contributions are made.
No vacation will accrue during the continuance period.
The salary continuance period will not be considered for any bonus
eligibility.
Any options that vest during the continuance period may be exercised.
All other programs (401K, options, annual bonus, quarterly bonus, etc.)
will be governed by plan documents.
Should new employment be started, benefits will be stopped in coordination
with benefits start-up of new employer.
REVISED 9/2/94
AST RESEARCH, INC.
PERFORMANCE BASED ANNUAL MANAGEMENT INCENTIVE PLAN
Section 1. Purpose
The purpose of the Performance Based Annual Management
Incentive Plan is to promote the interests of AST Research, Inc., by
attracting, motivating, rewarding, and retaining an outstanding
management staff. Under the Plan, incumbents in stipulated positions
may receive Awards that vary with the success of the Company, and/or
the Business Unit as appropriate, and individual performance.
Section 2. Definitions
(a) "Award" refers to a contingent right to receive cash
at the end of a Plan Year.
(b) "Base Salary" refers to a Participant's Plan Year June
30 monthly salary times twelve.
(c) "Committee" refers to the Compensation Committee of
the Board of the Directors.
(d) "Company" refers to AST Research, Inc.
(e) "Business Unit" refers to any profit center so
designated by the Committee.
(f) "Participant" refers to a Company officer who has been
designated by the Committee as eligible to participate in the Plan or
a Key Manager who has been designated by the Chief Executive Officer
as eligible to participate in the Plan.
(g) "Plan" refers to the AST Research, Inc. Performance
Based Annual Management Incentive Plan.
- Base Formula refers to the primary incentive which
has both a specified stated minimum level of performance before any
incentive is paid and a stated maximum level of performance at which
the maximum incentive opportunity is earned.
- Top Hat Formula refers to that portion of an Award
earned by a Participant based on performance achievement above the
maximum of the Base Formula. Such formula is set by the Committee
each year.
(h) "Plan Year" refers to each fiscal year of the Company.
(i) "Key Manager" refers to a full-time non-officer
employee of the Company or any subsidiary of the Company, determined
by the Chief Executive Officer to have a direct, significant, and
measurable impact on the attainment of the Company's or Business
Unit's annual performance goals.
(j) "Performance Measure" refers to the revenue growth and
financial earnings measures established by the Committee.
Section 3. Administration
Overall responsibility for Plan administration will be
retained by the Committee. The Committee will: approve the
Participants eligible to receive Awards under the Plan with respect
to each Plan Year; approve the performance measures; and approve the
amount of Awards subject to the terms and conditions set forth in the
Plan and to other terms and conditions consistent with the purpose
and provision of the Plan. The Committee, at its discretion, may
delegate certain administrative responsibilities to the Chief
Executive Officer of the Company including selection of Participants
below the level of company officer, determination of Award levels to
such Key Managers and evaluation of Key Manager performance under the
Plan.
The Committee may prescribe, amend, or rescind such
rules, regulations, policies, interpretations, and guides as deemed
appropriate for proper and effective administration of the Plan. In
addition, only the Board of Directors may suspend or terminate the
Plan - if such action is taken by the Board of Directors it will
affect future Plan Years only.
No member of the Committee, Board of Directors, or
employee of the Company will be personally liable for any action,
failure to act, determination, or interpretation made in good faith
with respect to the Plan or any transaction under the Plan.
All decisions, determinations, and interpretations of
the Committee will be final and binding.
Section 4. Eligibility and Participation
The employees eligible to participate in the Plan will
be designated by the Committee (with respect to Company officers) and
the Chief Executive Officer (with respect to Key Managers) who,
through their position and performance, have a significant impact on
the performance of the Company and/or its Business Units.
The Committee and the Chief Executive Officer will
designate Participants who are to be granted Awards for an Award year
and, at their discretion, may designate additional Participants
during any Award year as deemed appropriate. The Committee and the
Chief Executive Officer, through a designee, will notify Participants
of their eligibility. The Committee or the Chief Executive Officer
will not be bound by selections made for prior Plan years.
Section 5. Determination and Allocation of Awards
For each Plan Year, the Committee and the Chief
Executive Officer will approve each Participant's Award potential.
Such Award potentials will not exceed 50% of the Participant's Base
Salary for goal achievement (the "target" incentive level) and 200%
of the target incentive amount for maximum achievement under the Base
Formula in any Plan Year. The maximum under the Top Hat Formula
inclusive of the Base Formula maximum can not exceed $3,000,000 for
the Chief Executive Officer and $1,500,000 for any other Participant
in any Plan Year.
Awards earned pursuant to the Plan will be based on
achievement of preestablished annual performance objectives inclusive
of incentive payments. Upon establishing the performance objectives
(Base Formula and Top Hat Formula) for a specific Plan Year, which
will be documented in writing before commencement of services (as
defined in applicable I.R.S. regulations), the Committee and the
Chief Executive Officer will notify each Officer in writing, through
a designee, of the established objectives. The objective formula
awards may be limited based upon the overall assessment of the
individuals contribution.
If the Committee determines the established
performance measures are no longer suitable to Company objectives due
to change in the Company's business, operations, organization
structure, capital structure, or other conditions deemed by the
Committee to be material, the Committee will have sole discretion
during the Plan Year to modify the performance objectives as
considered appropriate and equitable. However, no adjustment will be
inconsistent with Section 10.
Section 6. Payment of Awards Earned
All payments referenced under Section 6 are subject to
contingencies set forth in Sections 8.
The basis of Awards for a given Plan Year will be
linked to the achievement of the performance objectives. If the
minimum performance objective, as deemed by the Committee each year,
is not attained for a Plan Year, no payment will be made to
Participants and all contingent rights under the Plan will cease for
such participants.
If the minimum performance objective is achieved, the
Award earned by each Participant will be paid in cash, as soon as
administratively possible following the close of the applicable Plan
Year and annual audit. The Committee will document in writing
whether the performance objectives were met before the payment of
awards. The Committee may reduce an individual's award otherwise
payable under this plan at its sole discretion.
Section 7. Termination of Employment
In the event of a Participant's death, disability, or
retirement (defined as a minimum age of 62 and five years of Company
employment) during a Plan Year, payment of the Award earned will be
prorated unless otherwise determined by the Committee. Such Awards
will then be paid to the Participant, the Participant's estate, or
legal representative as determined by the Committee.
In the event of a Participant's death, disability, or
retirement after the end of a Plan Year but before payment of an
Award to which the Participant is entitled, such Award will be paid
to the Participant, the Participant's estate, or legal
representative.
In the event of termination of employment of a
Participant, voluntarily or by the Company, with or without cause,
for reasons other than those specified above at any time before
payment for the applicable fiscal year, the Participant will forfeit
all rights to any Award.
Section 8. Adjustments Upon Changes in Capitalization
In the event of a reorganization, merger, or
consolidation of which the Company is not the surviving corporation,
or upon the sale of substantially all the assets of the Company to
another corporation, or upon the dissolution or liquidation of the
Company, the Plan will terminate on the effective date of such
transaction. Provision will be made for determining the amount of
cash payable for all Awards for a Plan Year that will end after such
event unless provisions are made for the continuance of the Plan and
the assumption or substitution for such Awards of an equivalent value
by the successor corporation.
Adjustments under this section will be made by the
Committee whose determination as to what adjustments will be made and
the extent will be final, binding, and conclusive.
Section 9. General Provisions
(a) No Right to Participate: Nothing in the Plan will be
deemed to give a Participant or a Participant's legal representative
or any other person or entity claiming under or through a Participant
any contract or right to participate in the benefits of the Plan.
(b) No Employment Right: Participation in the Plan will
not be construed as constituting a commitment, guarantee, contract,
or understanding of any kind that the Company will continue to employ
any individual.
(c) Nontransferability: A Participant or any designated
beneficiary has no right to assign, transfer, attach, or hypothecate
any benefits or payments of the Plan.
(d) Withholding: The Company has the right to deduct any
taxes required to be withheld with respect to the payment of any
Award.
(e) Restricted Liability: Payments held by the Company
before distribution are not liable for the debts, contracts, or
obligations of any Participant or beneficiary, and are not to be
taken in execution by attachment or garnishment, or by any other
legal or equitable proceeding.
Section 10. Amendment, Suspension, or Termination of Plan
The Board of Directors may amend, suspend, or
terminate the Plan at any time. Such amendment, suspension, or
termination will not adversely alter or affect any right or
obligation to any award made before this action. The Committee will
determine the effect on any Awards that may be effected by such event
and make adjustments and/or payments as it, in it sole discretion,
determines appropriate.
Section 11. Effective Date
This Plan is effective upon approval of the Committee.
GRANT AGREEMENT made the 9th day of November, 1993 BETWEEN THE INDUSTRIAL
DEVELOPMENT AUTHORITY having its principal place of business at Wilton Park
House, Wilton Place, Dublin 2 ("the Authority") of the first part, AST IRELAND
LIMITED having its registered office at 1 Earlsfort Centre, Hatch Street, Dublin
2 ("the Company") of the second part and AST RESEARCH, INC. having its principal
place of business at 16215 Alton Parkway, Irvine, California 92718 ("the
Promoters") of the third part.
WHEREAS:
(a) The Company which is indirectly controlled by the Promoters has been
incorporated with the principal object of establishing in two phases (the
commencement of Phase 2 being entirely at the option of the Company), and
carrying on at Castletroy, Co. Limerick an industrial undertaking for the
production, sale, distribution, and/or repair of personal computers
including support services ("the Undertaking"), in accordance with
proposals furnished to the Authority by the Promoters and has applied to
the Authority for financial assistance towards the cost of establishing the
Undertaking in two Phases which is intended to give employment to XXXXX
persons;
(b) The Company and the Promoters having made all necessary inquiries are
satisfied and represent to the Authority that to the best of their belief
there will be available to the Undertaking the raw materials, business and
technical personnel, knowledge, and facilities required for its proper
commercial establishment and efficient operation;
(c) The Promoters have represented to the Authority that the Undertaking will
contribute to the regional development of Ireland;
IT IS HEREBY AGREED that in consideration of the Company implementing the said
proposals and carrying on Phase 1 of the Undertaking substantially in accordance
with this Agreement the Authority agrees to grant to the Company the sum of
PoundsXXXXXXXXX Irish Pounds in respect of Phase 1 for the employment of XXX
people or the aggregate of XXXXXX Irish Pounds for each job created in Phase 1
of the Undertaking in accordance with Paragraph 1 of the Schedule hereto
whichever is the lesser and if the Company at its option proceeds to Phase 2 of
the Undertaking in consideration of the Company carrying on such Phase the sum
of XXXXXXXXX Irish Pounds in respect of Phase 2 for the employment of XXX people
or the aggregate of XXXXXX Irish Pounds for each job created in Phase 2 of the
Undertaking in accordance with Paragraph 1 of the Schedule hereto whichever is
the lesser ("the Grant") on the following terms and conditions. For the purpose
of this Agreement, "job" shall mean a full-time permanent position in the
Undertaking created in accordance with Paragraph 1 of the Schedule hereto.
1. DEVELOPMENT OF THE UNDERTAKING:
The development of the Undertaking and in particular the provision of employment
shall be substantially in accordance with the particulars given in the said
proposals it being understood and agreed by the parties hereto that the decision
to proceed with Phase 2 of the Undertaking shall be entirely at the option of
the Company and any failure on its part to exercise such option shall not be
regarded as a breach of this Agreement or in any way entitle the Authority to
repayment of any grants paid or to withhold any grant payable hereunder.
2. CONTROL OF THE COMPANY:
The controlling interest in the Company shall be held directly or indirectly by
the Promoters unless otherwise agreed to in writing by the Authority.
3. PROMOTERS INVESTMENT:
The Company shall provide or procure finance for Phase 1 (and if the Company
decides at its option to proceed with Phase 2) for Phase 2 as specified in the
Schedule for the purposes of the Undertaking.
4. PLANNING PERMISSION AND PREVENTION OF POLLUTION:
The Company shall:
4-1 Obtain all necessary permissions prescribed by Local and/or National
Authorities and shall comply with all requirements of such permissions and
with all Building Regulations and Statutory requirements (if any) required
for the Undertaking;
4-2 Comply with all Statutory, Local, and/or National Authority requirements in
relation to environmental controls and the prevention of pollution.
5. INSURANCE:
The Company shall:
5-1 Keep all the fixed assets insured in accordance with good and customary
commercial practice to their full cost of re-instatement against loss or
damage by fire and explosion;
5-2 Obtain on commencement of production and in accordance with good commercial
practice Consequential Loss Insurance to adequately indemnify the Company
against losses and costs resulting from fire and explosion, and
5-3 Make arrangements to ensure that the Authority will be notified of any
failure to renew the insurance specified at clauses (5-1) and (5-2) hereof
and also of any substantial change in such insurance.
6. RESTORATION OF FIXED ASSETS:
If there should be damage to or loss of fixed assets including buildings under
construction through fire or explosion or any other cause the insurance as
maintained under Clause 5 or other compensation received by the Company shall be
used forthwith to restore to the reasonable satisfaction of the Authority the
property so damaged or lost and in the event of such compensation being
insufficient for that purpose the Company shall make good the deficiency out of
its own funds.
7. GUARANTEES:
The Company shall not give a guarantee in respect of any borrowings other than
borrowings for the purposes of the Undertaking without the prior written consent
of the Authority.
8. NON-DISTRIBUTION OF THE GRANT:
The Company shall not distribute by way of dividend on the share capital of the
Company or otherwise any sum received in respect of the grant.
9. ROYALTIES OR SIMILAR PAYMENTS:
The Company may only make royalty or similar payments on the following terms and
conditions:-
9-1 That to the extent that the said royalty and/or similar payments exceed XXX
of the Company's net annual sales, such excess shall not be payable except
out of the profits of the Company which would otherwise be available for
dividend, and
9-2 That in the event of the winding up of the Company the amount of any such
excess accrued or accruing for payment but unpaid shall be subordinated to
the claims of the unsecured creditors, including the Authority, of the
Company.
10. PAYMENT OF GRANT:
10-1 The grant for Phase 1 shall be paid subject to the following terms and
conditions and the Company shall provide evidence satisfactory to the
Authority:-
10-1-1 That the Company has been properly incorporated and that
its Memorandum and Articles of Association empower the Company to
implement this Agreement;
10-1-2 That the Company has title acceptable to the Authority to
all land and buildings required for the Undertaking including the
buildings purchased from Wang Laboratories Ireland B.V.;
10-1-3 That the necessary arrangements have been made for the
provision of all capital required for Phase 1 of the Undertaking as
specified at Paragraph 2 of the Schedule;
10-1-4 That all Planning Permissions as aforesaid have been obtained and
complied with;
10-1-5 That all requirements for the control of the environment and
prevention of pollution as aforesaid have been complied with;
10-1-6 That insurance arrangements in respect of Phase 1 eligible assets as
aforesaid have been made;
10-1-7 That the Company has obtained a tax number in the relevant tax
district; that it is up to date in its tax affairs with the Revenue
Commissioners and prior to total payments from the grant exceeding
IRPoundsXXXXX and to each subsequent payment from the grant it shall
submit an up to date tax clearance certificate from the Revenue
Commissioners;
10-1-8 That the fixed assets in respect of Phase 1 have been provided in
accordance with the proposals;
10-1-9 That the jobs in Phase 1 of the Undertaking in respect of which the
grant is payable are occupied by Irish nationals;
10-1-10 That the Company has substantially complied up to date with all
the provisions of this Agreement;
10-2 The grant for Phase 2 shall be paid subject to the following terms and
conditions:-
10-2-1 That the Authority has formerly reviewed Phase 1 of the
Undertaking and is satisfied with same;
10-2-2 That the Company has indicated in writing to the Authority that
it wishes to exercise its option to commence Phase 2 of the
Undertaking;
10-2-3 That the Company shall provide evidence satisfactory to the
Authority that the necessary arrangements have been made for the
provision of all capital required for Phase 2 of the Undertaking as
specified at Paragraph 2 of the Schedule;
10-2-4 That all Planning Permissions as aforesaid have been obtained and
complied with;
10-2-5 That all requirements for the control of the environment and
prevention of pollution as aforesaid have been complied with;
10-2-6 That insurance arrangements in respect of Phase 2 eligible assets
as aforesaid have been made;
10-2-7 That the Company has obtained a tax number in the relevant tax
district; that it is up to date in its tax affairs with the Revenue
Commissioners and prior to total payments from the grant exceeding
IRPoundsXXXXX and to each subsequent payment from the grant it shall
submit an up to date tax clearance certificate from the Revenue
Commissioners;
10-2-8 That the fixed assets in respect of Phase 2 have been provided in
accordance with the proposals;
10-2-9 That the jobs in Phase 2 of the Undertaking in respect of which
the grant is payable are occupied by Irish nationals;
10-2-10 That the Company has substantially complied up to date with all
the provisions of this Agreement;
10-2-11 That the Company shall provide evidence satisfactory to the
Authority that it has complied up to date with all the provisions of this
Agreement.
10-3 Subject to 10-1 and 10-2 and in particular to Paragraph 2-3 of the Schedule
the grant in respect of each Phase shall be paid to the Company in two
moieties. The first moiety shall be payable when the job has been created
(a job shall be deemed to be created when a contract of employment has been
signed and payment has been made to an employee in respect of work done in
the job) and the second moiety shall be payable when permanent full-time
employment in the job for a twelve-month period has been completed. Claims
for payment of the employment grant may be submitted monthly and shall be
certified by the Company's auditors in a satisfactory format.
11. FURNISHING OF INFORMATION:
11-1 The Company shall if required by the Authority, submit an Auditor's
Certificate giving such details as the Authority may require in relation to
the employment history of the Company and shall permit the officers and
agents of the Authority to inspect the fixed assets and to inspect
employment and other records of the Company at all reasonable times during
the term of this Agreement and shall furnish to the Authority whenever
requested in writing all such information and documentary evidence as the
Authority may from time to time reasonably require to vouch compliance by
the Company with any of the terms and conditions of this Agreement.
11-2 The Company acknowledges the right of the Authority to consult with
relevant third parties to obtain any information it requires relating to
the affairs of the Company and/or the Promoters prior to any payment from
the grant and to withhold grant payments in the event of such information
being unsatisfactory to the Authority. The Authority undertakes to inform
the Company of the source and nature of any such unsatisfactory
information. The Company and/or the Promoters hereby undertake to instruct
such third parties to furnish any such information to the Authority on
request.
11-3 The Company shall submit Annual Audited Accounts satisfactory to the
Authority in all material respects in connection with the Undertaking and
the Company's obligations under this Agreement for the duration of this
Agreement within six months from the end of the relevant financial year.
12. NOTICES:
12-1 The Certificate of an Officer of the Authority certifying any decision of
the Authority taken or made hereunder shall be conclusive evidence of any
such decision save in the case of manifest error;
12-2 Any notice by the Authority to the Company or to the Promoters under this
Agreement shall be sent by registered post to the Registered Office of the
Company and the last notified registered office of the Promoters.
13. CONSENTS:
13-1 Circumstances requiring the consent, approval, or permission of any party
hereto shall be interpreted to mean that such consents, approvals, or
permissions shall not be unreasonably withheld. This provision shall not
apply to the provisions of Clause 2 hereof.
13-2 Any variation or modification of any of the terms or conditions herein made
at the request of or with the agreement of the Company and with the consent
of the Authority shall not in any way determine or prejudice the Promoters'
liability hereunder PROVIDED ALWAYS that such a variation or modification
involving an amount in excess of XXXXXXXXXX Irish Pounds shall not be made
without the express consent of the Promoters and PROVIDED FURTHER that the
financial amount of the Promoters' said liability shall not be increased
without their express agreement in writing.
14. ACHIEVEMENT OF PROJECTED PERFORMANCE:
The Authority may at any time within XXXX years from the date of payment of the
first moiety of the Employment Grant in respect of any job revoke the Employment
Grant paid in respect of that job if the job should become vacant and remain
vacant for a period in excess of XXX calendar months.
15. TERMINATION OF AGREEMENT:
This Agreement shall terminate on the date being ten years from the date of the
first claim from the grant PROVIDED ALWAYS that if the Company should request
and the Authority should consent to an extension of a period specified herein or
in the Capital Grant Agreement of even date entered into between the parties
hereto in relation to fulfillment by the Company of a condition in either
Agreement the duration of this Agreement shall be extended correspondingly.
16. CANCELLATION AND REVOCATION OF GRANT:
The Authority may stop payment of the grant and/or revoke and cancel or reduce
the grant or so much thereof as shall not then have been actually paid to the
Company if any one or more of the following events should occur:-
16-1 If there be any breach of the terms or conditions of Clause 2 hereof;
16-2 If the Company should to a material extent be in breach of any of the terms
and conditions of this Agreement other than those specified in Clause 16-1
hereof and having failed to establish to the reasonable satisfaction of the
Authority that such breach was due to force majeure and shall not have
rectified such breach within 30 days after written notice thereof has been
served on the Company;
16-3 If an order is made or an effective resolution is passed for the winding up
of the Company except in the case of a bona fide amalgamation or
reconstruction;
16-4 If a Receiver is appointed over any of the property of the Company or if a
distress or execution is levied or served upon any of the property of the
Company and is not paid off within 30 days;
16-5 If the Company should cease to carry on the Undertaking.
If the grant be revoked, the Company and/or the Promoters shall repay to the
Authority on demand all sums received in respect of the grant and if the grant
be reduced the Company and/or the Promoters shall repay to the Authority on
demand all sums received in excess of the amount of the reduced grant and in
either case in default of such repayment such sums shall be recoverable by the
Authority from the Company and/or the Promoters as a joint and several simple
contract debt PROVIDED ALWAYS that if the Company at its option commences Phase
2 of the Undertaking, any failure by it to comply with its obligations in
respect of that Phase shall not be construed as or considered to be a breach of
its obligations under Phase 1 of this Agreement and PROVIDED FURTHER that it is
understood by and between the parties hereto that any failure by the Company to
commence Phase 2 shall not entitle the Authority to stop payment of the Grant
and/or revoke or cancel or reduce the Grant or so much thereof as shall not then
have actually been paid to the Company in respect of Phase 1.
17. GOVERNING LAW:
This Agreement shall be governed by and be construed in accordance with the Laws
of Ireland and the parties hereto expressly and irrevocably submit to the
jurisdiction of the Irish courts and the Promoters hereby irrevocably appoint
the Company to be its attorney for the purpose of accepting service on its
behalf of any notice, document, or legal process with respect to the Promoters'
obligations pursuant to the provisions of Clause 14 or 16 hereof and service of
any such document on such attorney shall be deemed for all purposes to be good
service.
SCHEDULE
1. CUMULATIVE PROVISION OF EMPLOYMENT
PHASE 1 PHASE 2
Job Description Year 1 Year 2 Year 3 Year 4 Year 5
Administration XX XX XX XX XX
Distribution XX XX XX XX XX
Repair/Technical XX XX XX XX XXX
Services
Indirects XX XX XX XXX XXX
Direct Labor
Manufacturing XXX XXX XXX XXX XXX
TOTAL: XXX XXX XXX XXX XXXXX
2. PROMOTERS INVESTMENT:
2-1 The Company shall procure or provide for the purposes of Phase 1 of the
Undertaking:-
Equity Equivalent of IRPoundsXXXXXXXXX;
For the purposes of this Agreement, "Equity Equivalent" shall mean the
total monies obtained by the Company as follows:-
2-1-1 Cash received directly or indirectly by the Company from the
Promoters in consideration for the issue at par of fully paid-up
Ordinary Shares in the Company or for the issue at a premium of fully
paid up Ordinary Shares in the Company PROVIDED ALWAYS that
notwithstanding the provisions of Section 62 of the Companies Act 1963
no part of the funds standing to the credit of the Company's Share
Premium Account (arising from the issue of Shares at a premium) shall
be distributed or otherwise dealt with during the term of this
Agreement other than in paying up at par unissued shares in the
capital of the Company; and/or
2-1-2 Retained earnings of the Company capitalized at par as fully
paid-up Ordinary Shares in the Company; and/or
2-1-3 Retained earnings of the Company transferred to a special non-
distributable reserve account which shall be maintained at the
appropriate level for the duration of this Agreement; and/or
2-1-4 Loans from the Promoters or wholly owned subsidiaries thereof or
agreed third parties on the following terms and conditions ("Subordinated
Loans"):-
2-1-4-1 That no interest on such loans shall be payable by
the Company except out of profits which would otherwise be
available for dividend;
2-1-4-2 That no such loans shall be repaid except out of profits of
the Company which would otherwise be available for dividend or
out of a new loan obtained on the same terms for this purpose, or out
of the proceeds of a new issue at par of fully paid-up Ordinary
Shares in the Company made for this purpose;
2-1-4-3 That where any such loans are repaid out of profits, there
shall be transferred out of profits which would otherwise have been
available for dividend to a special non-distributable reserve
account a sum equal to the amount of the loan repaid, and that
there shall be no reduction in the amount of such special non-
distributable reserve account during the term of this Agreement;
2-1-4-4 That where any such loans are repaid out of a new loan
obtained for this purpose, the new loan shall be subject to these
conditions as if it were the original loan;
2-1-4-5 That in the event of the winding up of the Company the
amount of any such loans still outstanding shall be subordinated to
the claims of the unsecured creditors of the Company;
PROVIDED ALWAYS that not less than 25% of the Equity Equivalent shall be
Ordinary Shares in the Company as specified at sub-paragraphs 2-1-1 and/or 2-1-2
above and PROVIDED FURTHER that retained earnings utilized as Equity Equivalent
as aforesaid shall not include any sum received in respect of the grant or
derived from a revaluation of the fixed assets of the Company.
2-2 The Company shall procure or provide for the purposes of Phase 2 of the
Undertaking:-
Equity Equivalent of IRPoundsXXXXXXXXX;
For the purposes of this Agreement, "Equity Equivalent" shall mean the
total monies obtained by the Company as follows:-
2-2-1 Cash received directly or indirectly by the Company from the
Promoters in consideration for the issue at par of fully paid-up
Ordinary Shares in the Company or for the issue at a premium of fully
paid up Ordinary Shares in the Company PROVIDED ALWAYS that
notwithstanding the provisions of Section 62 of the Companies Act 1963
no part of the funds standing to the credit of the Company's Share
Premium Account (arising from the issue of Shares at a premium) shall
be distributed or otherwise dealt with during the term of this
Agreement other than in paying up at par unissued shares in the
capital of the Company; and/or
2-2-2 Retained earnings of the Company capitalized at par as fully
paid-up Ordinary Shares in the Company; and/or
2-2-3 Retained earnings of the Company transferred to a special non-
distributable reserve account which shall be maintained at the
appropriate level for the duration of this Agreement; and/or
2-2-4 Loans from the Promoters or wholly owned subsidiaries thereof or
agreed third parties on the following terms and conditions ("Subordinated
Loans"):-
2-2-4-1 That no interest on such loans shall be payable by the
Company except out of profits which would otherwise be available
for dividend;
2-2-4-2 That no such loans shall be repaid except out of profits of
the Company which would otherwise be available for dividend or
out of a new loan obtained on the same terms for this purpose, or out
of the proceeds of a new issue at par of fully paid-up Ordinary
Shares in the Company made for this purpose;
2-2-4-3 That where any such loans are repaid out of profits, there
shall be transferred out of profits which would otherwise have been
available for dividend to a special non-distributable reserve
account a sum equal to the amount of the loan repaid, and that
there shall be no reduction in the amount of such special non-
distributable reserve account during the term of this Agreement;
2-2-4-4 That where any such loans are repaid out of a new loan
obtained for this purpose, the new loan shall be subject to these
conditions as if it were the original loan;
2-2-4-5 That in the event of the winding up of the Company
the amount of any such loans still outstanding shall be
subordinated to the claims of the unsecured creditors of the
Company;
PROVIDED ALWAYS that not less than 25% of the Equity Equivalent shall be
Ordinary Shares in the Company as specified at sub-paragraphs 2-1-1 and/or 2-1-2
above and PROVIDED FURTHER that retained earnings utilized as Equity Equivalent
as aforesaid shall not include any sum received in respect of the grant or
derived from a revaluation of the fixed assets of the Company.
2-3 The total amount paid from the grant shall at no time exceed the total
amount of Equity Equivalent of which at all times not less than 25% shall
comprise an amount for issued Ordinary Shares in the Company as aforesaid
PROVIDED ALWAYS that the Company may substitute one form of Equity
Equivalent for another.
IN WITNESS whereof the parties hereto have caused their respective Seals to be
affixed hereto the day and year first herein written.
PRESENT when the Seal of THE
INDUSTRIAL DEVELOPMENT AUTHORITY
was affixed hereto:-
_______________________
Authorized Officer
_______________________
Authorized Officer
PRESENT when the Seal of
AST IRELAND LIMITED
was affixed hereto:-
________________________
________________________
SIGNED for and on behalf of
AST RESEARCH, INC.
by:-
James S. Forquer
Senior Vice President,
Worldwide Operations
Dated 9th day of November, 1993
INDUSTRIAL DEVELOPMENT AUTHORITY
First Part
AST IRELAND LIMITED
Second Part
- and -
AST RESEARCH, INC.
Third Part
__________________________________________
EMPLOYMENT GRANT AGREEMENT
__________________________________________
INDUSTRIAL DEVELOPMENT AUTHORITY
Wilton Park House
Wilton Place
Dublin 2
GRANT AGREEMENT made the 9th day of November, 1993 BETWEEN the INDUSTRIAL
DEVELOPMENT AUTHORITY having its principal place of business at Wilton Park
House, Wilton Place, Dublin 2 ("the Authority") of the first part, AST IRELAND
LIMITED having its registered office at 1 Earlsfort Centre, Hatch Street, Dublin
2 ("the Company") of the second part and AST RESEARCH, INC. having its principal
place of business at 16215 Alton Parkway, Irvine, California 92718 ("the
Promoters") of the third part.
WHEREAS:
a) The Company which is indirectly controlled by the Promoters has been
incorporated with the principal object of establishing, in two Phases, (the
commencement of Phase 2 being entirely at the option of the Company) and
carrying on at Castletroy, Co Limerick an industrial undertaking for the
production, sale, distribution, and/or repair of personal computers including
support services ("the Undertaking"), in accordance with proposals furnished
to the Authority by the Promoters and has applied to the Authority for
financial assistance towards the cost of the fixed assets required for each
Phase of the Undertaking;
b) The Company and the Promoters having made all necessary inquiries are
satisfied and represent to the Authority that to the best of their belief there
will be available to the Undertaking the raw materials, business and technical
personnel, knowledge and facilities required for its proper commercial
establishment and efficient operation;
c) The Promoters have represented to the Authority that the Undertaking will
contribute to the regional development of Ireland.
IT IS HEREBY AGREED that in consideration of the Company implementing the said
proposals and carrying on Phase 1 of the Undertaking substantially in accordance
with this Agreement, the Authority agrees to grant to the Company the sum of
XXXXXXXXX Irish Pounds in respect of Phase 1 and if the Company at its option
proceeds to Phase 2 of the Undertaking in consideration of the Company carrying
on such phase the sum of XXXXXXX Irish Pounds in respect of Phase 2 or XXX of
the actual expenditure on the provision of lands, factory buildings, building
modifications, building services and facilities and new machinery and equipment
in two separate phases for the Undertaking ("the eligible assets"), whichever is
the lesser, (such sum being hereinafter called "the grant") on the following
terms and conditions including those contained in the Schedule hereto ("the
Schedule");
1. DEVELOPMENT OF THE UNDERTAKING:
The development of the Undertaking and in particular the provision of employment
shall be substantially in accordance with the particulars given in the said
proposals it being understood and agreed by the parties hereto that the decision
to proceed with Phase 2 of the Undertaking shall be entirely at the option of
the Company and any failure on its part to exercise such option shall not be
regarded as a breach of this Agreement or in any way entitle the Authority to
repayment of any grants paid or to withhold any grant payable hereunder.
2. CONTROL OF THE COMPANY:
The controlling interest in the Company shall be held directly or indirectly by
the Promoters unless otherwise agreed to in writing by the Authority.
3. PROMOTERS INVESTMENT:
The Company shall provide or procure finance for Phase 1 (and if the Company
decides at its option to proceed with Phase 2) for Phase 2 as specified in the
Schedule for the purposes of the Undertaking.
4. ELIGIBLE EXPENDITURE AND PROVISION OF ELIGIBLE ASSETS:
Unless otherwise agreed to in writing by the Authority, the expenditure in each
phase eligible for the grant and the provision of the eligible assets shall be
substantially as set forth in the Schedule.
5. PLANNING PERMISSION AND PREVENTION OF POLLUTION:
The Company shall:
5-1 Obtain all necessary permissions prescribed by Local and/or National
Authorities and shall comply with all requirements of such permissions and
with all Building Regulations and Statutory requirements (if any) required
for the Undertaking;
5-2 Comply with all Statutory, Local, and/or National Authority requirements in
relation to environmental controls and the prevention of pollution.
6. PLACING OF CONTRACTS:
6-1 Subject to the specialized requirements of the Undertaking which shall have
been notified to and approved in writing by the Authority, the Company
shall ensure in relation to the placing of contracts for the eligible
assets that:-
6-1-1 Prior to appointment of Architects and/or Consultants, the
Company will obtain the approval of the Authority on the proposed
composition of the Design Team for the implementation of the
Undertaking;
6-1-2 Before tenders are invited on building works and building
services, the Company will consult with the Construction Advisory Unit
of the Authority;
6-1-3 A minimum of three competitive quotations is sought for any
contract for eligible assets having a value of XXXXXX Irish Pounds or more
and that none but the lowest is accepted without the prior written consent
of the Authority;
6-1-4 No arrangements are made for the direct hire of labor in the
construction of the said factory buildings, building services, and
facilities except with the prior written consent of the Authority.
6-2 In the placing of contracts for the construction of the said factory
buildings, building services, and facilities, any contractors appointed by
the Company in the aforesaid construction shall at the date of such
appointments possess an up to date tax clearance certificate or a current
C2 certificate from the Revenue Commissioners. The Company shall retain
copies of such certificates for inspection by the Authority as evidence of
compliance with this sub-Clause.
7. INSURANCE:
The Company shall:-
7-1 Keep all the eligible assets insured in accordance with good and customary
commercial practice to their full cost of re-instatement against loss or
damage by fire and explosion;
7-2 Obtain on commencement of production and in accordance with good commercial
practice Consequential Loss Insurance to adequately indemnify the Company
against losses and costs resulting from fire and explosion, and
7-3 Make arrangements to ensure that the Authority will be notified of any
failure to renew the insurance specified at clauses (7-1) and (7-2) hereof
and also of any substantial change in such insurance.
8. RESTORATION OF ELIGIBLE ASSETS:
If there should be damage to or loss of eligible assets including buildings
under construction through fire or explosion or any other cause the insurance as
maintained under Clause 7 or other compensation received by the Company shall be
used forthwith to restore to the reasonable satisfaction of the Authority the
property so damaged or lost and in the event of such compensation being
insufficient for that purpose the Company shall make good the deficiency out of
its own funds.
9. ALIENATION OF ASSETS:
The Company shall not alienate, assign, part with the possession of or otherwise
dispose of or remove (save for the purpose of normal repair, renewal,
replacement, substitution or alienation due to obsolescence) or mortgage or
charge (except for the purpose of securing finance for the Undertaking) the
eligible assets or any part thereof without the prior written consent of the
Authority. The provisions of this Agreement shall apply also to assets which
are substituted for eligible assets.
10. USE OF ELIGIBLE ASSETS:
The Company shall not without the prior written consent of the Authority use or
permit the use of the eligible assets or any part thereof except for the
purposes of the Undertaking.
11. GUARANTEES:
The Company shall not give a guarantee in respect of any borrowings other than
borrowings for the purposes of the Undertaking without the prior written consent
of the Authority.
12. NON-DISTRIBUTION OF THE GRANT:
The Company shall not distribute by way of dividend on the share capital of the
Company or otherwise any sum received in respect of the grant.
13. ROYALTIES OR SIMILAR PAYMENTS:
The Company may only make royalty of similar payments on the following terms and
conditions:-
13-1 That to the extent that the said royalty and/or similar payments exceed 10%
of the Company's net annual sales, such excess shall not be payable except
out of the profits of the Company which would otherwise be available for
dividend, and
13-2 That in the event of the winding up of the Company the amount of any such
excess accrued or accruing for payment but unpaid shall be subordinated to
the claims of the unsecured creditors, including the Authority, of the
Company.
14. PAYMENT OF GRANT:
14-1 The grant for Phase 1 shall be paid subject to the following terms and
conditions and the Company shall provide evidence satisfactory to the
Authority:-
14-1-1 That the Company has been properly incorporated and that its
Memorandum and Articles of Association empower the Company to implement
this Agreement;
14-1-2 That the Company has title acceptable to the Authority to all
land and buildings required for the Undertaking including the buildings
purchased from Wang Laboratories Ireland B.V.;
14-1-3 That the necessary arrangements have been made for the provision
of all capital required for Phase 1 of the Undertaking as specified at
Paragraph 3 of the Schedule;
14-1-4 That all Planning Permissions as aforesaid have been obtained and
complied with;
14-1-5 That all requirements for the control of the environment and
prevention of pollution as aforesaid have been complied with;
14-1-6 That insurance arrangements in respect of Phase 1 eligible assets
as aforesaid have been made;
14-1-7 That the Company has obtained a tax number in the relevant tax
district; that it is up to date in its tax affairs with the Revenue
Commissioners and prior to total payments from the grant exceeding
IRPoundsXXXXX and to each subsequent payment from the grant it shall
submit an up to date tax clearance certificate from the Revenue
Commissioners;
14-1-8 That all expenditure on the eligible assets in respect of Phase 1
has been necessarily incurred, save where the specialized requirements
of the Undertaking have already been approved in accordance with the
provisions of Clause 6 hereof;
14-1-9 That all expenditure on the eligible assets for Phase 1 has been
paid and that value has been obtained therefore;
14-1-10 That the Company has substantially complied up to date with all
the provisions of this Agreement
14-2 The grant for Phase 2 shall be paid subject to the following conditions:-
14-2-1 That the Authority has formally reviewed Phase 1 of the
Undertaking and is satisfied with same;
14-2-2 That the Company has indicated in writing to the Authority that
it wishes to exercise its option to commence Phase 2 of the
Undertaking.
14-2-3 That the Company shall provide evidence satisfactory to the
Authority that the necessary arrangements have been made for the
provision of all capital required for Phase 2 of the Undertaking as
specified at Paragraph 3 of the Schedule;
14-2-4 That all Planning Permissions as aforesaid have been obtained and
complied with;
14-2-5 That all requirements for the control of the environment and
prevention of pollution as aforesaid have been complied with;
14-2-6 That insurance arrangements in respect of Phase 2 eligible assets
as aforesaid have been made;
14-2-7 That the Company has obtained a tax number in the relevant tax
district; that it is up to date in its tax affairs with the Revenue
Commissioners and prior to total payments from the grant exceeding
IRPoundsXXXXX and to each subsequent payment from the grant it shall
submit an up to date tax clearance certificate from the Revenue
Commissioners;
14-2-8 That all expenditure on the eligible assets in respect of Phase 2
has been necessarily incurred, save where the specialized requirements
of the Undertaking have already been approved in accordance with the
provisions of the Clause 6 hereof;
14-2-9 That all expenditure on the eligible assets for Phase 2 has been
paid and that value has been obtained therefor;
14-2-10 That the Company has substantially complied up to date with all
the provisions of this Agreement.
14-2-11 That the Company shall provide evidence satisfactory to the
Authority that it has complied up to date with all the provisions of this
Agreement;
14-3 Subject to 14-1 and to 14-2 and in particular to Paragraph 3-3 of the
Schedule, the grant shall be paid to the Company for each Phase in
instalments of XXX of each sum of not less than XXXXXXX Irish Pounds
expended by the Company as set forth in the Schedule on the eligible assets
when installed and commissioned PROVIDED ALWAYS that all such expenditure
shall be vouched and examined in such manner as the Authority may
reasonably require.
15. FURNISHING OF INFORMATION:
15-1 The Company shall permit the officers and agents of the Authority to
inspect the eligible assets at all reasonable times during the term of this
Agreement and shall promptly furnish to the Authority whenever requested in
writing, all such information and documentary evidence as the Authority may
from time to time reasonably require to vouch compliance by the Company
with any of the terms and conditions of this Agreement.
15-2 The Company acknowledges the right of the Authority to consult with
relevant third parties to obtain any information it requires relating to
the affairs of the Company and/or the Promoters prior to any payment from
the grant and to withhold grant payments in the event of such information
being unsatisfactory to the Authority. The Authority undertakes to inform
the Company of the source and nature of any such unsatisfactory
information. The Company and/or the Promoters hereby undertake to instruct
such third parties to furnish any such information to the Authority on
request.
15-3 The Company shall submit Annual Audited Accounts satisfactory to the
Authority in all material respects in connection with the Undertaking and
the Company's obligations under this Agreement for the duration of this
Agreement within six months from the end of the relevant financial year.
16. NOTICES:
16-1 The Certificate of an Officer of the Authority certifying any decision of
the Authority taken or made hereunder shall be conclusive evidence of any
such decision, save in the case of manifest error;
16-2 Any notice by the Authority to the Company or to the Promoters under this
Agreement shall be sent by registered post to the registered office of the
Company and to the last notified registered office of the Promoters.
17. CONSENTS:
17-1 Circumstances requiring the consent, approval, or permission of any party
hereto shall be interpreted to mean that such consents, approvals, or
permissions shall not be unreasonably withheld. This provision shall not
apply to the provisions of Clause 2 and Clause 9 hereof.
17-2 Any variation or modification of any of the terms or conditions herein made
at the request of or with the agreement of the Company and with the consent
of the Authority shall not in any way determine or prejudice the Promoters'
liability hereunder PROVIDED ALWAYS that such a variation or modification
involving an amount in excess of XXXXXXXXX Irish Pounds shall not be made
without the express consent of the Promoters and PROVIDED FURTHER that the
financial amount of the Promoters' said liability shall not be increased
without their express agreement in writing.
18. TERMINATION OF AGREEMENT:
This Agreement shall terminate on the date being XXX years from the date of the
first claim from the grant PROVIDED ALWAYS that if the Company should request
and the Authority should consent to an extension of a period specified herein or
in the Employment Grant Agreement of even date entered into between the parties
hereto in relation to fulfillment by the Company of a condition in either
Agreement the duration of this Agreement shall be extended correspondingly.
19. CANCELLATION AND REVOCATION OF GRANT:
The Authority may stop payment of the grant and/or revoke and cancel or reduce
the grant or so much thereof as shall not then have been actually paid to the
Company if any one or more of the following events should occur:-
19-1 If there be any breach of the terms or conditions of Clause 2 and/or 9
hereof;
19-2 If the Company should to a material extent be in breach of any of the terms
and conditions of this Agreement other than those specified in Clause 19-1
hereof and having failed to establish to the reasonable satisfaction of the
Authority that such breach was due to force majeure and shall not have
rectified such breach within 30 days after written notice thereof has been
served on the Company;
19-3 If an order is made or an effective resolution is passed for the winding up
of the Company except in the case of a bona fide amalgamation or
reconstruction;
19-4 If a Receiver is appointed over any of the property of the Company or if a
distress or execution is levied or served upon any of the property of the
Company and is not paid off within 30 days;
19-5 If the Company should cease to carry on the Undertaking.
If the grant be revoked, the Company and/or the Promoters shall repay to the
Authority on demand all sums received in respect of the grant and if the grant
be reduced in accordance with Paragraph 6 of the Schedule hereto the Company
and/or the Promoters shall repay to the Authority on demand all sums received in
excess of the amount of the reduced grant and in either case in default of such
repayment such sums shall be recoverable by the Authority from the Company
and/or the Promoters as a joint and several simple contract debt PROVIDED ALWAYS
that if the Company at its option commences Phase 2 of the Undertaking, any
failure by it to comply with its obligations in respect of that Phase should not
be construed as, or considered to be a breach of its obligations under Phase 1
of this Agreement and PROVIDED FURTHER that it is understood by and between the
parties hereto that any failure by the Company to commence Phase 2 shall not
entitle the Authority to stop payment of the grant and or revoke or cancel or
reduce the grant or so much thereof as shall not then have actually been paid to
the Company in respect of Phase 1.
20. UNDERTAKING OF ADDITIONAL LIABILITY:
If the Grant be revoked in accordance with Clause 19 hereof, the Company and the
Promoters undertake to repay to the Authority on demand the sum of
PoundsXXXXXXXX in addition to the sum to be repaid in accordance with Clause 19
hereof and in default of such repayment such sums shall be recoverable by the
Authority from the Company and/or the Promoters as a joint and several simple
contract debt.
21. GOVERNING LAW:
This Agreement shall be governed by and be construed in accordance with the Laws
of Ireland and the parties hereto expressly and irrevocably submit to the
jurisdiction of the Irish courts and the Promoters hereby irrevocably appoint
the Company to be its attorney for the purpose of accepting service on its
behalf of any notice, document, or legal process with respect to the Promoters'
obligations pursuant to the provisions of Clause 19 and 20 hereof (and/or
Paragraph 5 of the Schedule hereto) and service of any such document on such
attorney shall be deemed for all purposes to be good service.
SCHEDULE
1. ELIGIBLE ASSETS & EXPENDITURE
<TABLE>
<CAPTION>
PHASE 1 PHASE 2
<S> <C> <C>
1-1 Land, factory buildings
building modifications and
building services and facilities XXXXXXXXX XXXXXXXXX
1-2 New machinery and equipment XXXXXXXXX XXXXXXXXX
Total PoundsXXXXXXXXXX PoundsXXXXXXXXX
</TABLE>
2. THE PROVISION OF FIXED ASSETS FOR THE UNDERTAKING:
The Company shall:-
2-1 Have purchased the said factory buildings for the Undertaking and have the
building modifications for Phase 1 commenced to the satisfaction of the
Authority not later than 1 April, 1994 and completed in a proper and
satisfactory manner not later than 31 December 1996;
2-2 Purchase and have installed in a proper and workmanlike manner ready for
operation in the said factory buildings all machinery and equipment
suitable in all respects required for Phase 1 of the Undertaking by 31
December 1996;
2-3 Should the Company at its option decide to proceed to Phase 2 have the
building modifications for Phase 2 of the Undertaking completed in a
satisfactory manner not later than five years from the date hereof;
2-4 Should the Company at its option decide to proceed to Phase 2 purchase and
have installed in a proper and workmanlike manner ready for operation in
the said factory buildings all machinery and equipment suitable in all
respects required for Phase 2 of the Undertaking not later than five years
from the date hereof;
2-5 Have commenced production in the Undertaking by 1 July 1994;
3. PROMOTERS INVESTMENT:
3-1 The Company shall procure or provide for the purposes of Phase 1 of the
Undertaking Equity Equivalent of IRPoundsXXXXXXXXX;
For the purposes of this Agreement "Equity Equivalent" shall mean the total
monies obtained by the Company as follows;
3-1-1 Cash received directly or indirectly by the Company from the
Promoters in consideration for the issue at par of fully paid-up
Ordinary Shares in the Company or for the issue at a premium of fully
paid up Ordinary Shares in the Company PROVIDED ALWAYS that
notwithstanding the provisions of Section 62 of the Companies Act 1963
no part of the funds standing to the credit of the Company's Share
Premium Account (arising from the issue of shares at a premium) shall
be distributed or otherwise dealt with during the term of this
Agreement other than in paying up at par unissued shares in the
Capital of the Company; and/or
3-1-2 Retained earnings of the Company capitalized at par as fully
paid-up Ordinary Shares in the Company; and/or
3-1-3 Retained earnings of the Company transferred to a special
non-distributable reserve account which shall be maintained at the
appropriate level for the duration of this Agreement; and/or
3-1-4 Loans from the Promoters or wholly owned subsidiaries
thereof or agreed third parties on the following terms and conditions
("Subordinated Loans"):-
3-1-4-1 That no interest on such loans shall be payable by
the Company except out of profits which would otherwise be
available for dividend;
3-1-4-2 That no such loans shall be repaid except out of
profits of the Company which would otherwise be available for
dividend or out of a new loan obtained on the same terms for
this purpose, or out of the proceeds of a new issue at par of
fully paid-up Ordinary Shares in the Company made for this
purpose;
3-1-4-3 That where any such loans are repaid out of profits,
there shall be transferred out of profits which would otherwise
have been available for dividend to a special non-distributable
reserve account a sum equal to the amount of the loan repaid,
and that there shall be no reduction in the amount of such
special non-distributable reserve account during the term of
this Agreement;
3-1-4-4 That where any such loans are repaid out of a new
loan obtained for this purpose, the new loan shall be subject
to these conditions as if it were the original loan;
3-1-4-5 That in the event of the winding up of the Company
the amount of any such loans still outstanding shall be
subordinated to the claims of the unsecured creditors of the
Company;
PROVIDED ALWAYS that not less than 25% of the Equity Equivalent shall be
Ordinary Shares in the Company as specified at sub-paragraphs 3-1-1 and/or 3-1-2
above and PROVIDED FURTHER that retained earnings utilized as Equity Equivalent
as aforesaid shall not include any sum received in respect of the grant or
derived from a revaluation of the fixed assets of the Company.
3-2 The Company shall procure or provide for the purposes of Phase 2 of the
Undertaking Equity Equivalent of IRPoundsXXXXXXXXX;
For the purposes of this Agreement "Equity Equivalent" shall mean the total
monies obtained by the Company as follows:
3-2-1 Cash received directly or indirectly by the Company from the
Promoters in consideration for the issue at par of fully paid-up
Ordinary Shares in the Company or for the issue at a premium of fully
paid up Ordinary Shares in the Company PROVIDED ALWAYS that
notwithstanding the provisions of Section 62 of the Companies Act 1963
no part of the funds standing to the credit of the Company's Share
Premium Account (arising from the issue of shares at a premium) shall
be distributed or otherwise dealt with during the term of this
Agreement other than in paying up at par unissued shares in the
Capital of the Company; and/or
3-2-2 Retained earnings of the Company capitalized at par as fully
paid-up Ordinary Shares in the Company; and/or
3-2-3 Retained earnings of the Company transferred to a special non-
distributable reserve account which shall be maintained at the
appropriate level for the duration of this Agreement; and/or
3-2-4 Loans from the Promoters or wholly owned subsidiaries thereof or
agreed third parties on the following terms and conditions
("Subordinated Loans"):-
3-2-4-1 That no interest on such loans shall be payable by
the Company except out of profits which would otherwise be
available for divided;
3-2-4-2 That no such loans shall be repaid except out of
profits of the Company which would otherwise be available for
dividend or out of a new loan obtained on the same terms for
this purpose, or out of the proceeds of a new issue at par of
fully paid-up Ordinary Shares in the Company made for this
purpose;
3-2-4-3 That where any such loans are repaid out of profits,
there shall be transferred out of profits which would otherwise
have been available for dividend to a special non-distributable
reserve account a sum equal to the amount of the loan repaid,
and that there shall be no reduction in the amount of such
special non-distributable reserve account during the term of
this Agreement;
3-2-4-4 That where any such loans are repaid out of a new
loan obtained for this purpose, the new loan shall be subject
to these conditions as if it were the original loan;
3-2-4-5 That in the event of the winding up of the Company
the amount of any such loans still outstanding shall be
subordinated to the claims of the unsecured creditors of the
Company;
PROVIDED ALWAYS that not less than 25% of the Equity Equivalent shall be
Ordinary Shares in the Company as specified at sub-paragraphs 3-2-1 and/or 3-2-2
above and PROVIDED FURTHER that retained earnings utilized as Equity Equivalent
as aforesaid shall not include any sum received in respect of the grant or
derived from a revaluation of the fixed assets of the Company.
3-3 Such further sums, including working capital, as may be required for the
Undertaking.
3-4 The total amount paid from the grant shall at no time exceed the total
amount of Equity Equivalent of which at all times not less than 25% shall
comprise an amount for issued Ordinary Shares in the Company as aforesaid
PROVIDED ALWAYS that the Company may substitute one form of Equity
Equivalent for another.
4. VARIATIONS IN CURRENCY EXCHANGE RATES:
4-1 The amounts shown in this Agreement for grant and for eligible expenditure
on new machinery and equipment are based on a currency exchange rate of
US$XXXX to the Irish Pound and the grant in respect of new machinery and
equipment shall be adjusted upwards or downwards to take account of the
actual rates prevailing on the dates of payment for the machinery and
equipment PROVIDED that in the event of any eligible expenditure on such
new machinery and equipment occurring after the date specified in Paragraph
2-2 and 2-4 of this Schedule no adjustment therein or in the portion of the
grant applicable thereto will be made or allowed for grant purposes on
account of any decrease in the value of the Irish Pound against the value
of the US Dollar below that determined by the currency exchange rate
prevailing on the said date specified in Paragraph 2-2 and 2-4 of this
Schedule;
4-2 When the actual amount of any additional grant payable pursuant to
Paragraph 4-1 above has been determined, the additional grant shall be the
subject of a Supplemental Agreement between the Authority and the Company
upon the same terms and conditions as those contained in this Agreement
PROVIDED ALWAYS that the liability of the Authority with regard to the
payment of additional grant on foot of the above shall not exceed XXX of
the approved grant amount.
5. ACHIEVEMENT OF PROJECTED PERFORMANCE:
Schedule of Grant Drawdown for the Undertaking
<TABLE>
PHASE 1
Period 31 Dec 1994 31 Dec 1995 31 Dec 1996
End of Yr 1 End of Yr 2 End of Yr 3
<S> <C> <C> <C>
Cumulative Relevant
Jobs to be Created XXX XXX XXX
Maximum Cumulative
Grant Drawdown XXXXXXXXX XXXXXXXXX XXXXXXXXX
PHASE 2
Period 31 Dec 1997 31 Dec 1998
End of Yr 4 End of Yr 5
Cumulative Relevant
Jobs to be Created XXX XXXXX
Maximum Cumulative
Grant Drawdown XXXXXXXXX XXXXXXXXXX
</TABLE>
Unless otherwise agreed to be the Authority and notwithstanding any other
provision in this Agreement:
5-1 The aggregate amount payable from the grant in each period set out above
shall not exceed the maximum amounts specified for that period.
5-2 The maximum grant drawdown in the period to the End of Year 1 shall be
available subject to compliance with the provisions of this Agreement.
5-3 Subject to compliance as aforesaid, payment from the maximum cumulative
grant drawdowns in the periods to the End of Years 2, 3, 4, and 5
respectively, shall be conditional upon the cumulative number of relevant
jobs (as set out above) being created by the immediately preceding End of
Year; in the event of such number of relevant jobs not having been created
by the relevant date no part of the grant drawdown for the following year
will be paid to the Company until such number of relevant jobs has been
created.
5-4 On or after 1 January, 1997, the Company and the Authority shall review the
development of Phase 1 of the Undertaking to that date with particular
reference to the creation of relevant jobs in the Company. Should the
total number of relevant jobs existing in the Company at the date of review
be less than XXX, unless otherwise agreed to by the Authority and
notwithstanding any other provision in this Agreement, all grant monies
paid on foot of this Agreement in excess of IRPoundsXXXXX per relevant job
multiplied by the number of relevant jobs existing in the Company at the
date of review shall be repayable to the Authority by the Company (and in
the event of default by the Company in making repayment shall be repayable
by the Promoters) by not later than three months from the date of review.
5-5 In the event that the Company has implemented Phase 2 of the Undertaking,
on or after 1 January, 1999 the Company and the Authority shall review the
development of the Undertaking to that date with particular reference to
the creation of relevant jobs in the Company. Should the total number of
relevant jobs existing in the Company at the date of review be less than
XXXXX, unless otherwise agreed to by the Authority and notwithstanding any
other provision in this Agreement, all grant monies paid on foot of this
Agreement in excess of IRPoundsXXXXX per relevant job multiplied by the
number of relevant jobs existing in the Company at the date of review shall
be repayable to the Authority by the Company (and in the event of default
by the Company in making repayment shall be repayable by the Promoters) by
not later than three months from the date of review.
For the purposes of this Paragraph, "relevant jobs" shall mean full-time
permanent jobs existing in the Company at the relevant date.
6. REDUCTION OF CONTINGENT LIABILITY FOR REPAYMENT OF CAPITAL GRANT:
The Company's liability for repayment of grant monies paid in respect of
new machinery and equipment shall be reduced by XXX XXXXX on the date which
is XXXX years from the end of the year in which the relevant payment was
made and by further XXX XXXXX on each anniversary of that date PROVIDED
ALWAYS that the aforesaid reduction in the Company's contingent liability
for repayment of the grant in respect of new machinery and equipment shall
not operate:
1. After the Company's contingent liability for grants paid in
respect of new machinery and equipment has been reduced by XXX; or
2. In the event of a Receiver of Liquidator being appointed over
any of the property of the Company.
PROVIDED FURTHER that nothing herein shall be construed as extending the
liability of the Company or the Promoters beyond the period specified in
Clause 18 hereof unless the prior approval of the Company is obtained
thereto.
IN WITNESS whereof the parties hereto have caused their respective Seals to be
affixed hereto the day and year first herein written.
PRESENT when the Seal of THE
INDUSTRIAL DEVELOPMENT AUTHORITY
was affixed hereto:-
___________________________
Authorized Officer
___________________________
Authorized Officer
PRESENT when the Seal of
AST IRELAND LIMITED
was affixed hereto:-
____________________________
___________________________
SIGNED for and on behalf of
AST RESEARCH, INC.
by:-
James L. Forquer
Senior Vice President,
Worldwide Operations
Dated 9th day of November, 1993
INDUSTRIAL DEVELOPMENT AUTHORITY
First Part
AST IRELAND LIMITED
Second Part
- and -
AST RESEARCH, INC.
Third Part
__________________________________________
CAPITAL GRANT AGREEMENT
__________________________________________
INDUSTRIAL DEVELOPMENT AUTHORITY
Wilton Park House
Wilton Place
Dublin 2
EXHIBIT 11
AST RESEARCH, INC.
COMPUTATION OF PER SHARE EARNINGS
FOR THE YEARS ENDED JULY 2, 1994,
JULY 3, 1993 AND JUNE 27, 1992
<TABLE>
<CAPTION>
(In thousands, except per share amounts) 1994 1993 1992
Primary earnings (loss) per share
<S> <C> <C> <C>
Shares used in computing primary earnings (loss) per share:
Weighted average shares of common stock outstanding 31,921 31,289 30,622
Effect of stock options treated as equivalents under
the treasury stock method 627 - 1,136
Weighted average common and common equivalent
shares outstanding 32,548 31,289 31,758
Net income (loss) $ 53,501 $ (53,738) $ 68,504
Earnings (loss) per share - primary $ 1.64 $ (1.72) $ 2.16
Fully diluted earnings (loss) per share
Shares used in computing fully diluted earnings(loss)per share:
Weighted average shares of common stock outstanding 31,921 31,289 30,622
Effect of stock options treated as equivalents under
the treasury stock method 685 - 1,152
Shares assumed issued on conversion of
Liquid Yield Option Notes 2,260 - -
Total fully diluted shares outstanding 34,866 31,289 31,774
Net income (loss) - fully diluted earnings per share:
Net income (loss) - primary earnings per share $ 53,501 $ (53,738) $ 68,504
Adjustment for interest on LYONs, net of tax 1,950 - -
Adjusted net income (loss) - fully diluted earnings
per share $ 55,451 $ (53,738) $ 68,504
Earnings (loss) per share - fully diluted $ 1.59 $ (1.72) $ 2.16
</TABLE>
EXHIBIT 21
LIST OF SUBSIDIARIES
Jurisdiction of
Name Organization
AST Europe Limited United Kingdom
AST Research (Far East) Limited Hong Kong
AST Computer China Limited People's Republic of China
AST Research France S.A.R.L. France
AST Research Deutschland GmbH Germany
AST Taiwan Ltd. Taiwan
AST Research (Japan) K.K. Japan
AST Research (Switzerland) S.A. Switzerland
AST Australia Pty. Limited Australia
AST Research Italia S.p.A. Italy
AST Canada Inc. Canada
AST Middle East Limited United Arab Emirates (Dubai)
AST de Mexico S.A. de C.V. Mexico
AST Benelux N.V. Belgium
AST Research Spain, S.L. Spain
AST Singapore Pte. Ltd. Singapore
AST Sweden AB Sweden
AST Denmark A/S Denmark
AST Finland OY Finland
AST Holdings Ireland Limited Ireland
AST New Zealand Limited New Zealand
AST Norway AS Norway
AST Computer (BVI) Limited British Virgin Islands
AST Computer (Barbados) Fsc, Inc. Barbados
AST Korea Ltd. Korea
AST Computer and Services (M) Sdn. Bhd. Malaysia
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 Nos. 2-96552 and 33-1112) pertaining to the AST Research, Inc.
Incentive Stock Option, Nonqualified Stock Option and Restricted Stock Purchase
Plan-1983 (As Amended) and in the related Prospectuses, in the Registration
Statements (Form S-8 Nos. 33-1111 and 33-30666) pertaining to the Chief
Executives' Plan (As Amended) and in the related Prospectuses, in the
Registration Statements (Form S-8 Nos. 33-29345 and 33-57234) pertaining
to the 1989 Long-Term Incentive Program (As Amended) and in the related
Prospectuses, in the Registration Statement (Form S-8 No. 33-52482) pertaining
to the Non-Employee Directors' Common Stock Purchase Warrants and 1991 Stock
Option Plan for Non-Employee Directors and in the related Prospectuses, and in
the Registration Statement (Form S-8 No. 33-55241) pertaining to the AST
Research, Inc. 1994 One-Time Grant Stock Option Plan for Non-Employee Directors
and in the related Prospectuses of our report dated July 26, 1994, with respect
to the consolidated financial statements and schedules of AST Research, Inc.
included in this Annual Report (Form 10-K) for the year ended July 2, 1994.
Ernst & Young LLP
Orange County, California
September 22, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
accompanying Consolidated Balance Sheets and Consolidated Statements of
Operations and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-02-1994
<PERIOD-END> JUL-02-1994
<CASH> 153,118
<SECURITIES> 0
<RECEIVABLES> 343,621
<ALLOWANCES> 17,564
<INVENTORY> 333,729
<CURRENT-ASSETS> 865,967
<PP&E> 159,530
<DEPRECIATION> 56,089
<TOTAL-ASSETS> 1,038,312
<CURRENT-LIABILITIES> 431,493
<BONDS> 215,294
<COMMON> 323
0
0
<OTHER-SE> 383,631
<TOTAL-LIABILITY-AND-EQUITY> 1,038,312
<SALES> 2,367,274
<TOTAL-REVENUES> 2,367,274
<CGS> 1,985,941
<TOTAL-COSTS> 1,985,941
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9,080
<INTEREST-EXPENSE> 9,937
<INCOME-PRETAX> 79,004
<INCOME-TAX> 25,503
<INCOME-CONTINUING> 53,501
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,501
<EPS-PRIMARY> 1.64
<EPS-DILUTED> 1.59
</TABLE>
