<PAGE>
PROSPECTUS
SEQUENT COMPUTER SYSTEMS, INC.
119,489 Common Shares
($.01 par value)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Common Stock of Sequent Computer Systems, Inc. (the
"Company") offered hereby (the "Shares") may be sold by certain
shareholders of the Company (the "Selling Shareholders"). The Company will
not receive any of the proceeds from the offering.
The Common Stock of the Company is traded on the Nasdaq National
Market System. On October 23, 1995, the closing price for the Common Stock
as reported in The Wall Street Journal was $17.375 per share.
The Shares may be offered or sold from time to time by the
Selling Shareholders at market prices then prevailing, in negotiated
transactions or otherwise. Brokers or dealers will receive commissions or
discounts from Selling Shareholders in amounts to be negotiated immediately
prior to the sale. See "Plan of Distribution."
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No person has been authorized to give any information or to make
any representations in connection with this offering other than those
contained in this Prospectus. This Prospectus does not constitute an
offering in any jurisdiction in which such offering may not lawfully be
made.
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Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of the Company since the respective dates
as to which information has been given herein.
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The date of this Prospectus is October 24, 1995.
<PAGE>2
THE COMPANY
The Company's principal executive offices are located at 15450 SW
Koll Parkway, Beaverton, Oregon 97006-6063. Its telephone number is (503)
626-5700. References herein to the "Company" are to Sequent Computer
Systems, Inc. and its wholly-owned subsidiaries unless the context
indicates otherwise.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 and in accordance therewith files periodic
reports and other information with the Securities and Exchange Commission
(the "SEC"). Such reports, proxy statements, and other information
concerning the Company may be inspected and copies may be obtained at
prescribed rates at the offices of the SEC, Judiciary Plaza, 450 Fifth
Street, NW, Washington, D.C. 20549, as well as at the following regional
offices: 75 Park Place, 14th Floor, New York, New York 10007; and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. The Company has filed
with the SEC a Registration Statement under the Securities Act of 1933, as
amended, with respect to the securities offered pursuant to this
Prospectus. For further information, reference is made to the Registration
Statement and the exhibits thereto, which are available for inspection at
no fee at the public reference section of the SEC at its principal office
at Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549.
The Company hereby undertakes to provide without charge to each
person to whom a copy of this Prospectus is delivered, upon written or oral
request to John Eldridge, Investor Relations, Sequent Computer Systems,
Inc., 15450 SW Koll Parkway, Beaverton, Oregon 97006-6063, telephone (503)
626-5700, copies of any and all of the information that has been
incorporated by reference into this Prospectus, other than exhibits to such
information unless such exhibits are specifically incorporated by reference
therein. The information relating to the Company contained in this
Prospectus does not purport to be comprehensive and should be read together
with the information contained in the documents or portions of documents
incorporated by reference into this Prospectus.
<PAGE>3
RECENT DEVELOPMENTS - QUARTER ENDED SEPTEMBER 30, 1995
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
Total revenue was $133.2 million in the third quarter of 1995
compared to $121.2 million in the third quarter of 1994. Total revenue was
$388.5 million in the first nine months of 1995 compared to $323.9 million
in the first nine months of 1994. Net income as $7.4 million in the third
quarter of 1995 compared to $8.9 million i the third quarter of 1994. Net
income was $24.4 million in the first nine months of 1995 compared to $20.7
million in the first nine months of 1994.
Revenue
(dollars in millions)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ -----------------------
Sept. 30, % Oct. 1, Sept. 30, % Oct. 1,
1995 Chg 1994 1995 Chg 1994
---- --- ---- ---- --- ----
<S> <C> <C> <C> <C> <C> <C>
End-user product revenue $ 91.1 4% $ 88.0 $273.1 21% $226.1
Service and other revenue 36.2 29% 28.0 105.0 37% 76.7
------ -- ------ ------ -- ------
Total end-user revenue 127.3 10% 116.0 378.1 25% 302.8
OEM product revenue 5.9 13% 5.2 10.4 (50%) 21.1
------ -- ------ ------ -- ------
Total revenue $133.2 10% $121.2 $388.5 20% $323.9
------ -- ------ ------ -- ------
Export and Foreign Revenue $ 73.9 22% $ 60.4 $210.4 36% $154.3
------ -- ------ ------ -- ------
</TABLE>
End-user product revenue for the third quarter and first nine
months of 1995 improved over the corresponding quarter and nine months of
1994 due to strong results from Europe. Service revenue continued to
benefit from the growing installed customer base and increases in
professional services. OEM product revenue is substantially sales to Unisys
Corporation.
Export foreign revenue was 55% of total revenue in the third
quarter and 54% of total revenue in the first nine months of 1995 and 50%
and 48% of total revenue in the corresponding quarter and nine months of
1994. The increase in export and foreign revenue as a percentage of total
revenue in the third quarter and first nine months of 1995 compared to the
corresponding periods in 1994 was due to significant revenue increases in
Europe.
<PAGE>4
Cost of Sales
(dollars in millions)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 30, Oct. 1, Sept. 30, Oct. 1,
1995 1994 1995 1994
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Total cost of goods sold $ 73.7 $ 66.9 $ 211.2 $ 176.0
As a percentage of total revenue 55% 55% 54% 54%
</TABLE>
Total costs of goods sold as a percentage of total revenue
remained relatively constant in both the third quarter and first nine
months of 1995 compared to the corresponding periods of 1994.
Research and Development
(dollars in millions)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 30, Oct. 1, Sept. 30, Oct. 1,
1995 1994 1995 1994
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Research and Development $ 10.2 $ 9.4 $ 30.0 $ 25.7
As a percentage of total revenue 8% 8% 8% 8%
Software costs capitalized $ 5.7 $ 4.9 $ 16.8 $ 14.2
</TABLE>
Research and development costs remained relatively constant as a
percentage of total revenue comparing both the third quarter and first nine
months of 1995 and 1994. Research and development costs include continued
investment in new product development and enhancements to existing
products.
Software costs capitalized increased in the third quarter and
first nine months of 1995 due to greater emphasis on hardware development
for future products, which costs are expensed as incurred.
Selling, General and Administrative
(dollars in millions)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ -----------------------
Sept. 30, % Oct. 1, Sept. 30, % Oct. 1,
1995 Chg 1994 1995 Chg 1994
---- --- ---- ---- --- ----
<S> <C> <C> <C> <C> <C> <C>
Selling, general and
administrative $38.7 13% $34.2 $111.9 15% $97.5
As a percentage of total
revenue 29% 28% 29% 30%
</TABLE>
Selling, general and administrative costs increased 13% and 15%
in the third quarter and first nine months of 1995, respectively, compared
to the corresponding periods of 1994. Selling, general and administrative
costs decreased as a
<PAGE>5
percentage of total revenue in the first nine months
of 1995 compared to the corresponding periods in 1994 due to greater total
revenue levels along with cost control despite the slight increase between the
third quarter of 1995 compared to the third quarter of 1994.
Restructuring Charge
The realignment of resources to provide open distributed
client/server computing solutions, professional service consulting and
architecture-led selling, marketing and engineering strategies is
progressing according to plan. The $1.0 million remaining accrual is
primarily related to obligations associated with closed facility leases and
future extended employee benefit costs. Management expects that the
remaining accrual will be fully utilized according to the realignment plan.
The fourth quarter of 1993 restructuring reduced operating expenses by
approximately $400,000 for the third quarter ended September 30, 1995 and
$1.0 million for the first nine months of 1995.
Interest and Other, Net
(dollars in millions)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
------------------ -----------------
Sept. 30, Oct. 1, Sept. 30, Oct. 1,
1995 1994 1995 1994
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Interest, net $ 0.2 $ (0.0) $ 0.5 $ (0.8)
Other, net (0.5) (0.3) (1.4) 0.3
Provisions for income taxes 3.0 1.5 10.2 3.4
</TABLE>
Interest income in the third quarter and first nine months of
1995 and 1994 was primarily generated from restricted deposits held at
foreign and domestic banks, short-term investments and cash and cash
equivalents. Interest expense in the third quarter and first nine months of
1995 and 1994 includes costs related to Convertible Debentures, foreign
currency hedging loans, capital lease obligations and in 1994 long-term
debt.
Other expenses primarily represents effects of foreign currency
transactions and other miscellaneous non-operating income and expenses.
The provision for income taxes in the third quarter and first
nine months of 1995 reflects a tax rate of 29% versus 14% for 1994. The
increase in the effective tax rate is due to utilization of the majority of
available net operating loss carryforwards in 1994, which lowered the
effective tax rate in 1994 versus 1995.
<PAGE>6
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased to $202.0 million at September 30, 1995
from $168.5 million at December 31, 1994. The Company's current ratio at
September 30, 1995 and December 31, 1994 and 2.5:1 and 2.3:1, respectively.
For the first nine months of 1995, cash and cash equivalents
increased $17.8 million. The Company continues to invest in property and
equipment ($31.2 million), and capitalized software ($16.8 million). Other
uses of funds were increases in net receivables ($23.5 million), increases
in inventories ($10.7 million), and increases in prepaid expenses ($5.8
million). Primary sources of funds were net income ($24.4 million),
depreciation and amortization ($38.5 million), increases in accounts
payable and other ($15.2 million), increase in unearned revenue ($6.6
million), increases in income tax payable ($2.4 million), and stock
issuance proceeds from employee stock purchases, stock option plans, and
conversion of debentures ($19.0 million).
At September 30, 1995, accounts receivable in the accompanying
consolidated balance sheet is net of $8 million received by the Company
under its two year agreement to sell its domestic accounts receivable.
The Company continues to maintain a $50 million line of credit
(increased from $30 million) with a group of banks for operating purposes
in addition to short-term borrowing agreements totaling approximately $66.9
million as hedge facilities to cover certain foreign currency exposures. At
September 30, 1995, no borrowings were outstanding under the line of credit
and $35.5 million was outstanding under the short-term borrowing
agreements.
Management expects that current funds, funds from operations, and
the bank lines of credit will provide adequate resources to meet the
Company's anticipated cash requirements through 1995.
<PAGE>7
SELLING SHAREHOLDERS
The following table sets forth certain information provided to
the Company by the Selling Shareholders.
Common Stock
beneficially Common Shares
Name of Selling owned as of offered by this
Shareholder October 24, 1995 Prospectus
- --------------- ---------------- ---------------
Peter John Blankespoor 102,419 102,419
Ulka Robert William Douma 8,535 8,535
Michiel Adriaan Koekoek 8,535 8,535
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by the Selling
Shareholders, or by pledgees, donees, transferees or other successors in
interest. Such sales may be on the Nasdaq National Market System or
otherwise at prices and at terms then prevailing or at prices related to
the then current market price, or in negotiated transactions. The Shares
may be sold by one or more of the following methods: (a) block trades in
which the broker or dealer so engaged will attempt to sell the Shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker or dealer as
principal, in a market maker capacity or otherwise, and resale by such
broker or dealer for its account pursuant to this Prospectus; and (c)
ordinary brokerage transactions and transactions in which the broker
solicits purchasers. In effecting sales, brokers or dealers engaged by the
Selling Shareholders may arrange for other brokers or dealers to
participate. Brokers or dealers will receive commissions or discounts from
the Selling Shareholders in amounts to be negotiated immediately prior to
the sale. The Selling Shareholders, such brokers or dealers, and any other
participating brokers or dealers may be deemed to be "underwriters" within
the meaning of the Securities Act of 1933 (the "1933 Act") in connection
with such sales.
Upon the Company being notified by a Selling Shareholder that any
material arrangement has been entered into with a broker or dealer for the
sale of Shares through a block trade or any other purchase by a broker or
dealer as principal, other than a purchase as a market maker in an ordinary
trading transaction, a supplemented prospectus will be filed, if required,
pursuant to Rule 424 under the 1933 Act, disclosing (i) the name of such
Selling Shareholder and of the participating brokers or dealers, (ii) the
number of Shares
<PAGE>8
involved, (iii) the price at which such Shares will be
sold, (iv) the commission paid or discounts or concessions allowed to such
brokers or dealers, where applicable, (v) that such brokers or dealers did
not conduct any investigation to verify the information set out or
incorporated by reference in this Prospectus, and (vi) other facts material
to the transaction.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC are incorporated
herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1994 filed pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "1934 Act");
2. The Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1995 and June 30, 1995 and the
Company's Current Report on Form 8-K dated October 19, 1995
filed pursuant to Section 13 of the 1934 Act; and
3. The description of the Common Stock contained in the
Company's registration statement under section 12 of the
1934 Act, Form 8-A, including any amendment or report
updating such description.
All reports and other documents subsequently filed by the Company
pursuant to sections 13(a), 13(c), 14, and 15(d) of the 1934 Act prior to
the termination of the offering shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of the filing of
such reports and documents.
EXPERTS
The financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K of the Company for the year
ended December 31, 1994 have been so incorporated in reliance on the report
of Price Waterhouse LLP, independent accountants, given upon the authority
of said firm as experts in auditing and accounting.
