<PAGE>
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
April 2, 1996
Date of Report (Date of earliest event reported)
SILICON GRAPHICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-10441 94-2789662
(State or Other Jurisdiction of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
2011 North Shoreline Boulevard
Mountain View, California 94043-1389
(Address of principal executive offices, including zip code)
(415) 960-1980
(Registrant's telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
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2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a)
At 5:01 P.M., New York City time, on April 2, 1996, the Registrant
("SGI"), through its wholly owned subsidiary, C Acquisition Corporation
("Acquisition"), accepted for purchase 19,218,735 shares of common stock, par
value $1.00 per share (including the Common Share Purchase Rights issued
pursuant to the Rights Agreement, as amended, dated May 15, 1989, between Cray
and Norwest Bank Minnesota, N.A., as Rights Agent) ("Common Stock"), of Cray
Research, Inc. ("Cray") that had been validly tendered and not withdrawn
pursuant to Acquisition's tender offer for 19,218,735 shares of Common Stock at
$30.00 per share, net to the seller in cash (the "Offer"). The Offer was made
pursuant to an Offer to Purchase, dated February 29, 1996, the related Letter of
Transmittal and an Agreement and Plan of Merger (the "Merger Agreement"), dated
as of February 25, 1996, by and among Cray, SGI and Acquisition.
The consummation of the Offer and the acceptance for purchase of the
shares of Common Stock by Acquisition pursuant thereto was announced in a press
release of SGI dated April 2, 1996, a copy of which is filed as Exhibit 20.1
hereto and is incorporated herein by reference.
The 19,218,735 shares of Common Stock purchased pursuant to the Offer
constitute approximately 75% of the shares of Common Stock issued and
outstanding as of February 29, 1996. Pursuant to the Merger Agreement, a
special meeting of Cray's stockholders will be called to act on a second step
merger to convert each remaining outstanding share of Common Stock into the
right to receive one share of common stock, par value $0.001 per share, of SGI
(the "Merger"). The approval of holders of a majority of all outstanding shares
of Common Stock is required to approve the Merger. The approval by Cray's
stockholders is assured because Acquisition now owns a majority of the
outstanding shares of Common Stock and a vote of such shares in favor of the
Merger is sufficient to ensure approval thereof.
The aggregate purchase price for the 19,218,735 shares of Common Stock
purchased pursuant to the Offer was $576,562,050. Acquisition obtained the
funds to acquire the Common Stock through a capital contribution from SGI. SGI
obtained the necessary funds for such capital contribution from cash on hand and
from its existing Credit Agreement, dated as of December 31, 1994, as amended
(the "Credit Agreement"), between SGI and Bank of America, National Trust and
Savings Association. The Credit Agreement contains usual and customary terms
and conditions for agreements of this kind.
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3
On April 3, 1996, four members of the Board of Directors of Cray (the
"Board") were replaced by four new directors nominated by Acquisition. The
directors elected to the Board are Edward R. McCracken, Thomas A. Jermoluk,
Stanley J. Meresman and William M. Kelly. Information with respect to each new
director is included in Schedule I to Amendment No.1 to Cray's
Solicitation/Recommendation Statement on Schedule 14D-9, dated March 6, 1996.
The directors who were replaced are J. Phillip Samper, Philip G. Heasley, Robert
G. Potter and Jan H. Suwinski. Section 1.03 of the Merger Agreement provided
that once Acquisition acquired a majority of the outstanding Shares pursuant to
the Offer, Acquisition became entitled to designate a number of directors on the
Board, rounded up to the next whole number, equal to its pro rata ownership of
Cray. Accordingly, in addition to the foregoing new Board members, Acquisition
may require Cray to either increase the size of the Board by adding up to five
new members (who would be nominated by Acquisition) or replace up to three of
the existing members of the Board with Acquisition's nominees.
(b)
The acquisition by Acquisition of shares of Common Stock pursuant to
the Offer is deemed the indirect acquisition of the assets of Cray represented
thereby, including Cray's plant, equipment and other physical property. Cray
utilizes such assets in the conduct of its business as a leading supplier of
supercomputing tools and services. It is expected that, initially following the
Merger, the business and operations of Cray will be continued substantially as
they are currently being conducted.
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4
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
The financial statements required to be filed were previously reported
in Cray's Annual Report on Form 10-K for the fiscal year ended December 31, 1995
and are incorporated herein by reference.
(b) PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial
statements give effect to the Merger under the purchase method of accounting.
The pro forma combined condensed balance sheet assumes the Merger took place on
December 31, 1995 and combines SGI's unaudited condensed consolidated balance
sheet with Cray's historical condensed consolidated balance sheet at that date.
The pro forma combined condensed statements of operations assume that the Merger
took place as of the beginning of each of the periods presented and combine
SGI's historical condensed consolidated statement of operations for the year
ended June 30, 1995 and SGI's unaudited condensed consolidated statement of
operations for the six months ended December 31, 1995 with the unaudited
condensed consolidated statement of operations of Cray for the twelve-month
period ended June 30, 1995 and the unaudited condensed consolidated statement of
operations of Cray for the six months ended December 31, 1995, respectively.
The charge of $85 million resulting from purchased research and development
costs has been reflected in stockholders' equity in the pro forma combined
condensed balance sheet at December 31, 1995. This same charge has been
excluded from the pro forma combined condensed statements of operations for the
year ended June 30, 1995 and the six months ended December 31, 1995.
The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of operating results or financial position that
would have occurred if the Merger had been consummated as of the dates
indicated, nor is it necessarily indicative of future operating results or
financial position. In particular, the actual adjustments to the valuation of
Cray assets and liabilities in connection with the acquisition may vary
significantly from the estimates reflected in the pro forma financial
information.
These pro forma combined condensed financial statements should be read in
conjunction with the historical consolidated financial statements and the notes
thereto of SGI, which were previously reported in SGI's Annual Report on Form
10-K for the fiscal year ended June 30, 1995 and SGI's Quarterly Reports on Form
10-Q for the fiscal quarter ended December 31, 1995, and of Cray, which were
previously reported in Cray's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 and are incorporated herein by reference.
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5
SGI AND CRAY PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1995
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
SGI CRAY ADJUSTMENTS COMBINED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents. . . . . . . . . . . . . . . $ 258,380 $ 104,425 $ (807)(a) $ 361,998
Short-term marketable investments. . . . . . . . . . . 153,438 - (153,438)(a) -
Accounts receivable, net . . . . . . . . . . . . . . . 655,884 156,039 - 811,923
Inventories. . . . . . . . . . . . . . . . . . . . . . 342,823 177,359 65,000 (c) 585,182
Prepaid expenses and other current assets. . . . . . . 86,755 60,082 109,000 (c) 255,837
------------ ------------ ------------ ------------
Total current assets. . . . . . . . . . . . . . . . 1,497,280 497,905 19,755 2,014,940
Other marketable investments . . . . . . . . . . . . . 282,755 150,000 (282,755)(a) 150,000
Property, plant and equipment, net . . . . . . . . . . 301,113 200,875 (82,000)(c) 419,988
Purchased intangible assets. . . . . . . . . . . . . . - - 98,000 (c) 98,000
Other assets 184,339 129,274 (35,000)(c) 278,613
------------ ------------ ------------ ------------
$ 2,265,487 $ 978,054 $ (282,000) $ 2,961,541
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts and notes payable . . . . . . . . . . . . . . $ 162,745 $ 42,924 $ 150,000 (a) $ 355,669
Other current liabilities. . . . . . . . . . . . . . . 381,883 229,248 95,000 (c)(d) 706,131
------------ ------------ ------------ ------------
Total current liabilities. . . . . . . . . . . . . . 544,628 272,172 245,000 1,061,800
Long-term debt and other . . . . . . . . . . . . . . . 277,575 103,454 (18,000)(c) 363,029
Stockholders' equity . . . . . . . . . . . . . . . . . 1,443,284 602,428 509,000 (b)(c) 1,536,712
------------ ------------ ------------ ------------
$ 2,265,487 $ 978,054 $ (282,000) $ 2,961,541
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA FINANCIAL
STATEMENTS.
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6
SGI AND CRAY PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
SGI CRAY ADJUSTMENTS (m) COMBINED
------------ ------------ --------------- ------------
<S> <C> <C> <C> <C>
NET REVENUES $ 2,228,268 $ 727,723 $ - $ 2,955,991
COSTS AND EXPENSES:
Cost of revenues . . . . . . . . . . . . . . . . . . . 1,032,059 440,715 84,000 (e)(g) 1,556,774
Research and development . . . . . . . . . . . . . . . 247,678 131,262 (1,000)(g) 377,940
Selling, general and administrative. . . . . . . . . . 619,259 171,521 (1,000)(g) 789,780
Restructuring/merger related costs . . . . . . . . . . 22,000 150,109 - 172,109
Amortization of purchased intangibles. . . . . . . . . - - 19,000 (i) 19,000
------------ ------------ ------------ ------------
Total costs and expenses. . . . . . . . . . . . . . 1,920,996 893,607 101,000 2,915,603
------------ ------------ ------------ ------------
Operating income (loss). . . . . . . . . . . . . . . . 307,272 (165,884) (101,000) 40,388
Interest and other income (expense), net . . . . . . . 9,447 5,526 (33,000)(k) (18,027)
------------ ------------ ------------ ------------
Income (loss) before taxes . . . . . . . . . . . . . . 316,719 (160,358) (134,000) 22,361
Provision (benefit) for income taxes . . . . . . . . . 91,863 1,301 (50,920)(l) 42,244
------------ ------------ ------------ ------------
Net income (loss). . . . . . . . . . . . . . . . . . . 224,856 (161,659) (83,080) (19,883)
Preferred stock dividend requirement . . . . . . . . . 54 - - 54
------------ ------------ ------------ ------------
Net income (loss) available to common stockholders . . $ 224,802 $ (161,659) $ (83,080) $ (19,937)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income (loss) per share. . . . . . . . . . . . . . $ 1.28 $ (6.33) $ (0.12)
------------ ------------ ------------
------------ ------------ ------------
Shares used to compute per share data. . . . . . . . . 175,435 25,539 162,800
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA FINANCIAL
STATEMENTS.
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7
SGI AND CRAY PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
SGI CRAY ADJUSTMENTS (m) COMBINED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET REVENUES $ 1,267,012 $ 405,447 $ - $ 1,672,459
COSTS AND EXPENSES:
Cost of revenues . . . . . . . . . . . . . . . . . . . 603,967 255,696 45,000 (f)(h) 904,663
Research and development . . . . . . . . . . . . . . . 153,540 58,158 (1,000)(h) 210,698
Selling, general and administrative. . . . . . . . . . 365,340 85,469 (1,000)(h) 449,809
Restructuring costs. . . . . . . . . . . . . . . . . . 1,275 45,857 47,132
Amortization of purchased intangibles. . . . . . . . . - - 9,000 (j) 9,000
------------ ------------ ------------ ------------
Total costs and expenses. . . . . . . . . . . . . . 1,124,122 445,180 52,000 1,621,302
Operating income (loss). . . . . . . . . . . . . . . . 142,890 (39,733) (52,000) 51,157
Interest and other income (expense), net . . . . . . . 13,040 (1,003) (16,000)(k) (3,963)
------------ ------------ ------------ ------------
Income (loss) before taxes . . . . . . . . . . . . . . 155,930 (40,736) (68,000) 47,194
Provision (benefit) for income taxes . . . . . . . . . 45,220 (1,571) (25,840)(l) 17,809
------------ ------------ ------------ ------------
Net income (loss). . . . . . . . . . . . . . . . . . . 110,710 (39,165) (42,160) 29,385
Preferred stock dividend requirement . . . . . . . . . - - -
------------ ------------ ------------ ------------
Net income (loss) available to common stockholders . . $ 110,710 $ (39,165) $ (42,160) $ 29,385
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income (loss) per share. . . . . . . . . . . . . . $ 0.62 $ (1.55) $ 0.16
------------ ------------ ------------
------------ ------------ ------------
Shares used to compute per share data. . . . . . . . . 178,268 25,281 184,700
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA FINANCIAL
STATEMENTS.
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8
SGI AND CRAY
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
(a) Represents borrowings, the liquidation of marketable investments and
cash used to finance the acquisition of 19,218,735 shares of Cray Common Stock
pursuant to the Offer.
(b) Represents issuance of one share of SGI Common Stock in exchange for
each remaining outstanding share of Cray Common Stock at a per share value of
$26.15 (average of SGI Common Stock closing prices for the five trading days
immediately preceding and following the February 26, 1996 announcement of the
merger) plus the value of Cray stock options assumed by SGI.
(c) Estimated valuation adjustments of Cray assets and liabilities
resulting from the preliminary allocation of the purchase price, elimination of
stockholders' equity and the estimated $85 million charge taken at the time of
acquisition for purchased research and development costs. The aggregate
purchase price (including acquisition costs) is estimated to be approximately
$765 million in cash, common stock and the value of Cray stock options assumed
by SGI.
(d) Accrued expenses associated with preliminary cost estimates, including
severance costs, termination of leases and other reserves.
(e) Recognition of additional cost of sales assuming a $96 million
purchase price adjustment to record inventory at fair value, amortized over
nine months assuming acquisition had taken place on July 1, 1994.
(f) Recognition of additional cost of sales assuming a $77 million
purchase price adjustment to record inventory at fair value, amortized over
nine months assuming acquisition had taken place on July 1, 1995.
(g) Reduction of depreciation and amortization related to valuation
adjustments of property, plant and equipment and leased systems and spares
assuming the acquisition had taken place on July 1, 1994.
(h) Reduction of depreciation and amortization related to valuation
adjustments of property, plant and equipment and leased systems and spares
assuming the acquisition had taken place on July 1, 1995.
(i) Amortization of purchased intangible assets (principally purchased
technology, Cray trade name and customer list) assuming acquisition had taken
place on July 1, 1994. Amortization of purchased intangible assets is based on
lives ranging from 3-20 years.
(j) Amortization of purchased intangible assets (principally purchased
technology, Cray trade name and customer list) assuming acquisition had taken
place on July 1, 1995. Amortization of purchased intangible assets is based on
lives ranging from 3-20 years.
(k) Adjustment to interest income associated with purchase consideration.
(l) Income tax effects of pro forma adjustments computed using the
combined federal and state statutory rate of 38%.
(m) The statement of operations presentation excludes the effect of an
estimated $85 million charge to operations taken at the time of acquisition for
purchased research and development costs related to acquired technology that has
not reached technological feasibility and that has no alternative future use.
The statement of operations presentation also excludes consideration of
integration costs and potential cost savings because SGI has not completed its
comprehensive review of Cray's business, operations, capitalization and
management.
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9
(c) EXHIBITS
Exhibit No. Description
- ---------- -----------
2.1 Agreement and Plan of Merger, dated as of February 25, 1996,
among Cray, Acquisition and Parent (incorporated herein by
reference to Exhibit (c) of SGI's Tender Offer Statement on
Schedule 14D-1, dated February 29, 1996).
20.1 Press release of SGI dated April 2, 1996 regarding completion of
the Offer (incorporated herein by reference to Exhibit (a)(11) of
Amendment No. 5 to SGI's Tender Offer Statement on Schedule 14D-1,
dated April 3, 1996).
23.1 Consent of KPMG Peat Marwick LLP.
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10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
SGI has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
SILICON GRAPHICS, INC.
Dated: April 17, 1996 By /s/ WILLIAM M. KELLY
-------------------------------
William M. Kelly
Vice President, Business
Development and General
Counsel
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11
EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- --------
2.1 Agreement and Plan of Merger, dated as of February 25,
1996, among Cray, Acquisition and SGI (incorporated
herein by reference to Exhibit (c) of SGI's Tender
Offer Statement on Schedule 14D-1, dated February 29,
1996).
20.1 Press release of SGI dated April 2, 1996 regarding
completion of the Offer (incorporated herein by
reference to Exhibit (a)(11) of Amendment No. 5 to
SGI's Tender Offer Statement on Schedule 14D-1, dated
April 3, 1996).
23.1 Consent of KPMG Peat Marwick LLP.
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Cray Research, Inc.:
We consent to the incorporation by reference in the Registration Statement
on Form S-8 (File numbers 33-11703, 33-16529, 33-18717, 33-26003, 33-34919,
33-38536, 33-40879, 33-44305, 33-44333, 33-48890, 33-59098, 33-65190,
033-50999, 033-51275, 33-58017, 33-60213, 33-60215) of Silicon Graphics, Inc.
of our report dated January 24, 1996, with respect to the consolidated
balance sheets of Cray Research, Inc. and subsidiaries as of December 31,
1995 and 1994, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the years in the three year
period ended December 31, 1995, which report is incorporated by reference in
the Form 8-K of Silicon Graphics, Inc. dated April 2, 1996.
KPMG PEAT MARWICK LLP
Minneapolis, Minnesota
April 2, 1996
