SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported)
NOVEMBER 8, 1995 (NOVEMBER 2, 1995)
AST RESEARCH, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-13941 95-3525565
(Commission File Number) (IRS Employer 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
NOT APPLICABLE
(Former name or former address, if changed since last report.)
ITEM 5. OTHER EVENTS
On November 2, 1995, AST Research, Inc. (the "Company") signed a letter of
intent with Samsung Electronics Co., Ltd. ("Samsung") pursuant to which Samsung
will provide certain additional support to the Company as consideration for such
number of shares of Common Stock as would increase its ownership to 49.9
percent. The additional support includes the following:
* A line of credit or other form of credit support through November 30, 1996,
in the amount of $100 million, secured by an interest in inventory,
accounts receivable, and other available assets of the Company as requested
by Samsung.
* An increase in the Company's supplier line of credit with Samsung to $100
million through November 30, 1996 and an extension of payment terms to 90
days through November 30, 1996, decreasing to 30 days for products shipped
after January 30, 1997.
* Samsung will provide certain other elements of support to the Company, the
amount and value to be agreed to by Samsung and a committee of independent
directors.
In connection with this agreement, the Company will issue a number of shares of
Common Stock to Samsung so as to increase its ownership to 49.9%, and Samsung
will appoint two additional directors to the Company's board of directors. As a
result, Samsung designated directors will represent a majority of the Company's
board. In addition, Samsung and the Company agreed to negotiate further support
arrangements by Samsung, which if met, would increase Samsung's ownership to 60
percent. The support transactions are subject to definitive documentation and
approvals.
The Company also announced the appointment of Ian Diery as President and Chief
Executive Officer and as a member of the Board of Directors. In addition, the
Company released results of the first quarter of fiscal year 1996, reporting a
loss of $96.4 million, or $2.36 per share.
A copy of the press releases are attached as Exhibits 99.1 and 99.2 to this
Report, and are incorporated herein by this reference. A copy of the Letter of
Intent is attached as Exhibit 99.3, and is incorporated herein by this
reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
Exhibit Description
<C> <S>
99.1 Press release issued by the Registrant on November 2, 1995, reporting
first quarter results, announcing a letter of intent agreement with
Samsung pursuant to which Samsung will provide additional support to
the Company.
99.2 Press release issued by the Registrant on November 2, 1995, announcing
the appointment of Ian Diery as President and Chief Executive Officer
and Board Member.
99.3 Letter of Intent, dated November 2, 1995 by and between AST Research,
Inc., and Samsung Electronics Co., Ltd.
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AST Research, Inc.
_______________________________________
(Registrant)
By Bruce C. Edwards
Executive Vice President
and Chief Financial Officer
Date: November 8, 1995
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Media Contact: Emory Epperson
(714) 727-7958
Analyst Contact: Janine Whittington
(714) 727-7780
AST REPORTS FIRST QUARTER RESULTS
IRVINE, Calif., Nov. 2, 1995 -- AST Research, Inc. (ASTA-NASDAQ) today announced
revenues of $403.4 million for the first quarter of fiscal year 1996, ended
Sept. 30, 1995. This compares to revenues of $495.4 million recorded during the
prior year period. The revenue decline was primarily due to significantly lower
domestic sales and partially offset by sales growth in international markets,
particularly in the Asia Pacific region.
The company reported a net loss of $96.4 million, or net loss per share of
$2.36 for the first quarter fiscal year 1996, compared to a net loss of $39.4
million and net loss per share of $1.22 recorded during the prior year period.
In a separate announcement, the company also named computer industry
veteran Ian Diery as president, chief executive officer and a board member.
The company also announced that Samsung and AST have entered into a letter
of intent pursuant to which Samsung will provide certain additional support to
AST. The arrangements include, among other things, credit support of up to $100
million through Nov. 30, 1996 and a significant increase in AST's vendor line
with Samsung. The letter of intent contemplates that in connection with the
arrangements, and upon reaching certain other support targets, Samsung's
interest in AST would increase to as much as 49.9 percent and Samsung would
appoint two additional directors to the AST board. As a result, the Samsung-
designated directors would represent a majority of the AST board. In addition,
the parties agreed to negotiate further support arrangements under which
Samsung's interest could increase to as much as 60 percent. The support
transactions are subject to definitive documentation and to certain conditions
and approvals. "Disappointing first quarter results were caused by lower than
anticipated sales in the North American marketplace and seasonal softness in
Europe, which were further impacted by downward industry pricing actions and
delays in some new product shipments," said Safi Qureshey, AST chairman. "We
have thoroughly analyzed the issues facing AST. Our turnaround plan, which will
be led by Ian Diery, has been developed with a clear understanding of these
issues and with substantial support from our strategic partner, Samsung
Electronics."
"We have worked with AST from the beginning in the development of its
turnaround plan and are confident in the abilities of their new leadership to
quickly bring about significant change," said Won S. Yang, Samsung Electronics
senior executive managing director and AST board member. "Using our extensive
resources, we will continue to work very closely together to support AST's
efforts to improve performance and return to a market growth position."
International sales of $211.7 million for the first quarter of fiscal year
1996 rose 28 percent over the comparable prior year period, including a 55
percent increase in the Asia Pacific region. Significant year-over-year sales
gains were achieved in Japan, Singapore, China, Australia and New Zealand, as
well as Denmark, Norway and France. The company also continued to expand its
global presence in the consumer retail market in the Europe and Asia/Pacific
regions.
The company recorded revenues in the Americas of $191.7 million,
representing a 42 percent decrease from sales achieved during the first quarter
of fiscal year 1995. The decline was primarily due to slower demand, increased
pricing pressures and heightened competition in the domestic retail sector of
the market.
During the first quarter of fiscal year 1996, AST shipped 245,000 units,
including 213,000 desktops and servers and 32,000 notebooks, compared with
246,000 desktops and servers and 63,000 notebooks shipped during the prior year
period.
BALANCE SHEET SUMMARY
At Sept. 30, 1995, total cash and cash equivalents were $135.3 million,
with no short-term borrowings. Total inventory was $349.2 million, up from
$311.5 million at July 1, 1995 and represented inventory turns of 4.7. Accounts
receivable totaled $282.0 million, which represented 63 days sales outstanding.
CORPORATE BACKGROUND
AST Research Inc., a member of the Fortune 500 list of America's largest
industrial and service companies, is one of the world's leading personal
computer manufacturers. The company develops PC products ranging from portable
systems to superservers sold in more than 100 countries worldwide. Corporate
headquarters is located at 16215 Alton Parkway, P.O. Box 57005, Irvine, Calif.
92619-7005. Telephone (714) 727-4141 or (800) 876-4278. Fax: (714) 727-9355.
# # #
AST RESEARCH, INC.
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
September 30, July 1,
1995 1995
(Unaudited)
Assets:
<S> <C> <C>
Cash and cash equivalents $ 135,326 $ 95,825
Accounts receivable, net 281,964 394,927
Inventories 349,223 311,469
Other current assets 47,550 38,911
Total current assets 814,063 841,132
Property and equipment, net 99,353 101,255
Other assets 78,328 79,114
Total assets $ 991,744 $1,021,501
Liabilities and shareholders' equity:
Current liabilities $ 456,795 $ 534,260
Long-term debt 122,518 219,224
Other non-current liabilities 4,583 4,779
Total liabilities 583,896 758,263
Common stock and additional capital 383,524 142,532
Retained earnings 24,324 120,706
Total shareholders' equity 407,848 263,238
Total liabilities and shareholder equity $ 991,744 $1,021,501
</TABLE>
AST RESEARCH, INC.
Condensed Consolidated Statements of Operations
In thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended
(Unaudited)
September 30, October 1,
1995 1994
<S> <C> <C>
Net sales $ 403,357 $ 495,446
Cost of sales 410,126 458,147
Gross profit (6,769) 37,299
Selling and marketing 51,302 51,865
General and administrative 23,891 21,369
Engineering and development 9,566 9,902
Operating loss (91,528) (45,837)
Other income (expense), net (4,854) (3,115)
Loss before taxes (96,382) (48,952)
Benefit for taxes - (9,546)
Net loss $ (96,382) $ (39,406)
Net loss per share $ (2.36) $ (1.22)
Shares used in computing net loss per share 40,762 32,346
</TABLE>
AST RESEARCH, INC.
Computation of Net Loss per Share
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended
(Unaudited)
September 30, October 1,
1995 1994
<S> <C> <C>
Shares used in computing primary
loss per share:
Weighted average shares of
common stock outstanding 40,762 32,346
Effect of stock options treated as
common stock equivalents under
the treasury stock method - -
Weighted average common and common
equivalent shares outstanding 40,762 32,346
Net loss $ (96,382) $ (39,406)
Net loss per share - primary (F1) $ (2.36) $ (1.22)
</TABLE>
<F1>
Fully diluted per share information is not presented as such amounts are
anti-dilutive.
EXHIBIT 99.2
FOR IMMEDIATE RELEASE
Media Contact: Emory Epperson
(714) 727-7958
Analyst Contact: Janine Whittington
(714) 727-7780
AST NAMES IAN DIERY AS PRESIDENT AND CEO
IRVINE, Calif., Nov. 2, 1995 ----AST Research, Inc. (ASTA----NASDAQ) today named
Ian Diery as president and chief executive officer and a board member.
Effective immediately, Diery will oversee all worldwide operations,
including manufacturing, sales and marketing, product development, finance and
administration.
Prior to joining AST, Diery, 46, was at Apple Computer for six years,
serving most recently as executive vice president and general manager of the
company's Personal Computer Division. In that role, he led Apple's successful
broad-scale launch of PC-based multimedia systems and the introduction of the
Power Macintosh. Other roles at Apple included executive vice president,
worldwide sales and marketing, where he was instrumental in establishing high
visibility for the Macintosh line of systems; and senior vice president of Apple
Pacific, achieving multi-billion dollar growth in the Asia Pacific region and
the No. 2 market share position in Japan.
"Today represents a turning point in AST's history," said Safi Qureshey,
who as AST's chairman, will focus his efforts on the strategic relationship with
Samsung Electronics, new business development and long-term strategic direction.
"With Ian's proven track record and demonstrated success for producing quick
results, he has earned a solid reputation as a winner in the PC industry.
"Ian's strengths include operations and sales and marketing from a
worldwide perspective, both of which are essential to compete in today's PC
environment. As we work to improve our domestic performance and continue to
expand internationally, Ian will lead our efforts to aggressively implement the
objectives of our turnaround plan with substantial assistance and support from
Samsung.
In addition to his tenure at Apple, Diery served in various executive roles
at Wang Laboratories, including executive vice president, worldwide field
operations; senior vice president, U.S. sales operations; and senior vice
president, Europe.
"I see tremendous potential in AST," said Diery. "I am impressed with the
company's global presence, its dedication to the reseller channel and the
synergies created by the strategic relationship with Samsung Electronics. I
look forward to returning AST to a market growth position."
"We are pleased that Ian is in place to lead AST's turnaround," said Won
Yang, Samsung Electronics executive managing director and AST board member.
"Samsung shares the same visions for AST that Ian has and we fully support both
Ian and the turnaround plan."
In a separate announcement today, AST also released its financial results
for the first quarter of fiscal year 1996.
CORPORATE BACKGROUND
AST Research Inc., a member of the Fortune 500 list of America's largest
industrial and service companies, is one of the world's leading personal
computer manufacturers. The company develops PC products ranging from portable
systems to superservers sold in more than 100 countries worldwide. Corporate
headquarters is located at 16215 Alton Parkway, P.O. Box 57005, Irvine, Calif.
92619-7005. Telephone (714) 727-4141 or (800) 876-4278. Fax: (714) 727-9355.
# # #
EXHIBIT 99.3
AST RESEARCH, INC.
16215 Alton Parkway
Irvine, California 92718
November 2, 1995
Samsung Electronics Co., Ltd.
Samsung Main Building
250, 2-Ka, Taepyung-Ro, Chung-Ku
Seoul, Korea 100-742
Gentlemen:
This letter confirms our mutual understandings regarding certain support
arrangements to be implemented by Samsung Electronics Co., Ltd., a Korean
corporation ("Samsung"), and AST Research, Inc., a Delaware corporation ("AST"),
and also sets forth our understandings with respect to certain matters related
thereto. Except for the agreements set forth in paragraph 3 below, which are
intended to be binding, this letter and the transactions described herein are
not to be considered as a legally binding or enforceable agreement of either AST
or Samsung. Rather, this letter will serve to assist the parties in negotiating
and entering into enforceable Definitive Agreements. Subject to the foregoing,
our understanding is as follows:
1. The Support Arrangements. Subject to the terms and conditions of definitive
agreements to be entered into between AST and Samsung (all such agreements and
other instruments, the "Definitive Agreements"), Samsung, or one or more wholly-
owned subsidiaries of Samsung designated by Samsung, will provide the support
arrangements and Samsung and AST will enter into the other transactions
consistent with the terms set forth in Exhibit I attached hereto.
2. Definitive Agreements. AST and Samsung shall enter into as expeditiously as
possible the Definitive Agreements pertaining to CEO and Board Composition,
Amendment to Stockholder Agreement, Issuance of Additional Shares and Samsung
Support Transactions, each of which shall be consistent with the terms set forth
in Exhibit I attached hereto.
The transactions contemplated hereby shall be subject to the final approval of
the Independent Directors on the Board of Directors of AST and, if so desired by
the Independent Directors or the full Board of Directors of AST, to the receipt
by the Board of Directors of AST of a fairness opinion, in form and substance
satisfactory to the Independent Directors, from a nationally recognized
investment banking firm selected by the Independent Directors.
3. Public Announcements. Neither the parties nor their respective agents shall
make any public announcement with respect to this Letter of Intent or the
transactions contemplated hereby, except as required by applicable law, without
prior consultation with the other party. The parties agree to make all filings
required under the securities laws in connection with this Letter of Intent.
4. Governing Law. This Letter of Intent shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts to
be performed in such state.
If the foregoing is in accordance with your understanding, please return a
signed copy of this letter to the undersigned.
Very truly yours,
AST RESEARCH, INC.
By: Safi U. Qureshey
Title: Chairman
Accepted and agreed to:
SAMSUNG ELECTRONICS CO., LTD.
By: Won Suk Yang
Title: Snr. Exec. Managing Director
EXHIBIT I
TERM SHEET FOR
ADDITIONAL SUPPORT
CEO AND BOARD COMPOSITION
* Ian Diery to be appointed CEO and to the board of directors.
* Samsung designates two additional new directors (so that the Samsung
designees represent a majority of the board).
* Committee of the board comprised of Messrs. Goeglein (chairman),
Santoro and Peltason is established to seek an agreement on Samsung
ownership above the 49.9% referred to in the final bullet point below
under "Conditions".
AMENDMENT TO STOCKHOLDER AGREEMENT
* Permit open market purchases by Samsung at any price (F1).
* Retain Samsung's ownership limit at 49.9% during Standstill Period
until such time as: (i) December 14, 1998 or such earlier date as the
Lyons shall be amended to exempt Samsung ownership of more than 50%
from the Change in Control put, (ii) the closing price for the Lyons
is an agreed upon percentage in excess of the Change in Control
Purchase Price for 20 consecutive trading days or (iii) the
Independent Directors approve removing the 49.9% ownership limit.
Thereafter, Samsung's ownership limit shall be 66 2/3%.
* Remove the timing restrictions currently provided in Sections 3.1 (pro
rata transactions) and 3.2 (registered public offerings); retain the
ability to sell pursuant to Independent Director-approved
transactions.
* Eliminate provisions regarding board selection in Article 4, provided
that the requirement that at least 3 directors shall be "Independent
Directors" shall remain; and provided further that rights will revert
to existing if Samsung sells down below 40%. Add provision that at
least one Independent Director will serve on committees. Amend
definition of Independent Director to require no prior relationship
with the Company, Samsung or their respective affiliates.
* Delete limitations on Samsung voting and proxy solicitations in
Article 6, other than Section 6.3 requiring Independent Director
approval of material transactions between Samsung and the Company.
ISSUANCE OF ADDITIONAL SHARES
* Issue to Samsung such number of shares of Common Stock as would
increase its ownership to 49.9%, in consideration of the agreements
referred to herein.
SAMSUNG SUPPORT TRANSACTIONS
* Samsung provides the Company a line of credit or other form of credit
support through 11/30/96 in the amount of US $100 million, secured by
a security interest in inventory, accounts receivable, and other
available assets of the Company if requested by Samsung.
* Samsung increases supplier line of credit to $100 million through
11/30/96 and extends payment terms to 90 days for product shipped
prior to 11/30/96. Payment terms for product shipped from 11/30/96
and prior to 12/30/96 shall be 60 days; 45 days from 12/30/96 and
prior to 1/30/97; and 30 days thereafter.
* It is anticipated that Samsung will provide certain other elements of
support to the Company. Such benefits shall be valued as mutually
agreed by Samsung and the Independent Directors. If the aggregate
value of such benefits, as so determined, delivered through
September 30, 1996 shall be less than an agreed upon target value,
Samsung shall, at its election, either make payment in cash of the
shortfall or return for cancellation such number of shares equal to
the quotient obtained by dividing the amount of the shortfall by an
agreed price per share.
CONDITIONS
* The Company receives a fairness opinion from its financial advisor
regarding the foregoing.
* The foregoing is approved by a majority of the non-Samsung-designated
directors.
* The new committee and Samsung commit to negotiate in good faith the
terms on which Samsung would provide additional support and
increase its ownership to the 60% level. The Company will retain
the right to condition any such additional transactions on
shareholder approval and/or the receipt of a fairness opinion,
in addition to independent board approval and appropriate exploration
of reasonably available alternatives.
<F1>
If Samsung desires to make any purchases, they and the Company will
explore at that time the possibility of Samsung acquiring newly issued
shares from the Company on mutually acceptable terms.
