<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-Q
---------------------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED AUGUST 3, 1997
COMMISSION FILE NUMBER: 0-17017
DELL COMPUTER CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 74-2487834
(State of incorporation) (I.R.S. Employer ID No.)
</TABLE>
ONE DELL WAY
ROUND ROCK, TEXAS 78682
(Address of principal executive offices)
(512) 338-4400
(Telephone number)
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 twelve months and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of the close of business on August 29, 1997, 330,800,822 shares of the
registrant's common stock, par value $.01 per share, were outstanding.
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<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DELL COMPUTER CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(IN MILLIONS)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
AUGUST 3, FEBRUARY 2,
1997 1997
--------- -----------
<S> <C> <C>
Current assets:
Cash...................................................... $ 194 $ 115
Marketable securities..................................... 1,321 1,237
Accounts receivable, net.................................. 1,133 903
Inventories............................................... 273 251
Other..................................................... 331 241
------ ------
Total current assets.............................. 3,252 2,747
Property, plant and equipment, net.......................... 288 235
Other....................................................... 12 11
------ ------
$3,552 $2,993
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $1,285 $1,040
Accrued and other......................................... 778 618
------ ------
Total current liabilities......................... 2,063 1,658
Deferred revenue............................................ 231 219
Other....................................................... 46 31
------ ------
Total liabilities................................. 2,340 1,908
------ ------
Put options................................................. 85 279
------ ------
Stockholders' equity:
Preferred stock and capital in excess of $.01 par value;
shares authorized: 5; shares issued and outstanding:
none................................................... -- --
Common stock and capital in excess of $.01 par value;
shares issued and outstanding: 333 and 346,
respectively........................................... 515 195
Retained earnings......................................... 654 647
Other..................................................... (42) (36)
------ ------
Total stockholders' equity........................ 1,127 806
------ ------
$3,552 $2,993
====== ======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
1
<PAGE> 3
DELL COMPUTER CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------- ---------------------
AUGUST 3, JULY 28, AUGUST 3, JULY 28,
1997 1996 1997 1996
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Net sales........................................... $2,814 $1,690 $5,402 $3,328
Cost of sales....................................... 2,190 1,317 4,220 2,636
------ ------ ------ ------
Gross margin...................................... 624 373 1,182 692
------ ------ ------ ------
Operating expenses:
Selling, general and administrative............... 280 195 520 377
Research, development and engineering............. 48 28 89 53
------ ------ ------ ------
Total operating expenses.................. 328 223 609 430
------ ------ ------ ------
Operating income.......................... 296 150 573 262
Financing and other, net............................ 14 7 24 11
------ ------ ------ ------
Income before income taxes and extraordinary
loss........................................... 310 157 597 273
Provision for income taxes.......................... 96 45 185 79
------ ------ ------ ------
Income before extraordinary loss.................. 214 112 412 194
Extraordinary loss, net of taxes.................... -- (9) -- (9)
------ ------ ------ ------
Net income................................ $ 214 $ 103 $ 412 $ 185
====== ====== ====== ======
Earnings per common share:
Income before extraordinary loss.................. $ 0.59 $ 0.28 $ 1.13 $ 0.49
Extraordinary loss, net of taxes.................. -- (.02) -- (.02)
------ ------ ------ ------
Earnings per common share......................... $ 0.59 $ 0.26 $ 1.13 $ 0.47
====== ====== ====== ======
Weighted average shares outstanding................. 364 389 366 391
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE> 4
DELL COMPUTER CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------
AUGUST 3, JULY 28,
1997 1996
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 412 $ 185
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 30 21
Other.................................................. 8 12
Changes in:
Operating working capital.............................. 129 335
Non-current assets and liabilities..................... 28 64
------- -------
Net cash provided by operating activities......... 607 617
------- -------
Cash flows from investing activities:
Marketable securities:
Purchases.............................................. (5,317) (4,305)
Maturities and sales................................... 5,231 3,986
Capital expenditures...................................... (86) (57)
------- -------
Net cash used in investing activities............. (172) (376)
------- -------
Cash flows from financing activities:
Purchase of common stock.................................. (417) (199)
Repurchase of 11% Senior Notes............................ -- (68)
Issuance of common stock under employee plans............. 36 19
Cash received from sale of equity options................. 28 --
------- -------
Net cash used in financing activities............. (353) (248)
------- -------
Effect of exchange rate changes on cash..................... (3) (2)
------- -------
Net increase (decrease) in cash............................. 79 (9)
Cash at beginning of period................................. 115 55
------- -------
Cash at end of period....................................... $ 194 $ 46
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 5
DELL COMPUTER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Dell
Computer Corporation (the "Company") should be read in conjunction with the
consolidated financial statements and notes thereto filed with the Securities
and Exchange Commission in the Company's Annual Report on Form 10-K for the
fiscal year ended February 2, 1997. In the opinion of management, the
accompanying condensed consolidated financial statements reflect all adjustments
(consisting only of normal recurring accruals) considered necessary to present
fairly the financial position of the Company and its consolidated subsidiaries
at August 3, 1997 and February 2, 1997 and the results of their operations for
the three-month and six-month periods ended August 3, 1997 and July 28, 1996.
NOTE 2 -- COMMON STOCK
On July 18, 1997, the Company's stockholders approved an increase in the number
of authorized shares of common stock to one billion. On July 25, 1997, the
Company effected a two-for-one common stock split by paying a 100% stock
dividend to stockholders of record as of July 18, 1997. All share and per share
information included in the accompanying condensed consolidated financial
statements and related notes have been restated to reflect the stock split.
NOTE 3 -- COMMITMENTS AND CONTINGENCIES
The Company is subject to various legal proceedings and claims arising in the
ordinary course of business. The Company's management does not expect that the
results in any of these legal proceedings will have a material adverse effect on
the Company's financial condition or results of operations.
NOTE 4 -- EARNINGS PER COMMON SHARE
Earnings per common share are computed by dividing net income by the weighted
average number of common shares and common stock equivalents (if dilutive)
outstanding during each period. Common stock equivalents include stock options
and equity option instruments. The number of common stock equivalents
outstanding is computed using the treasury stock method.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share." This statement is
effective for financial statements issued for periods ending after December 15,
1997 and will require restatement of all prior period comparative amounts. Under
this statement, primary and fully diluted earnings per share calculations will
be replaced by basic and diluted earnings per share calculations. Diluted
earnings per share does not differ from earnings per common share as currently
reported. Basic earnings per share for the three month periods ended August 3,
1997 and July 28, 1996 will be $0.64 and $0.29, respectively. For the six month
periods then ended, basic earnings per share will be $1.23 and $0.51,
respectively.
NOTE 5 -- SUPPLEMENTAL FINANCIAL INFORMATION (IN MILLIONS)
Supplemental Condensed Consolidated Statement of Financial Position Information:
<TABLE>
<CAPTION>
AUGUST 3, FEBRUARY 2,
1997 1997
--------- -----------
<S> <C> <C>
Inventories:
Production materials...................................... $234 $223
Work-in-process and finished goods........................ 39 28
---- ----
$273 $251
==== ====
</TABLE>
4
<PAGE> 6
Supplemental Condensed Consolidated Statement of Cash Flows Information:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------
AUGUST 3, JULY 28,
1997 1996
--------- --------
<S> <C> <C>
Changes in operating working capital accounts:
Accounts receivable, net.................................. $(263) $(105)
Inventories............................................... (23) 225
Accounts payable.......................................... 252 244
Accrued and other liabilities............................. 232 (53)
Other, net................................................ (69) 24
----- -----
$ 129 $ 335
===== =====
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
All percentage amounts and ratios were calculated using the underlying data in
thousands. Operating results for the three-month and six-month periods ended
August 3, 1997 are not necessarily indicative of the results that may be
expected for the full fiscal year.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
consolidated net sales represented by certain items in the Company's condensed
consolidated statement of income.
<TABLE>
<CAPTION>
PERCENTAGE OF CONSOLIDATED NET SALES
-------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- --------------------
AUGUST 3, JULY 28, AUGUST 3, JULY 28,
1997 1996 1997 1996
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Net sales:
Americas....................................... 70.5% 67.5% 69.1% 66.3%
Europe......................................... 22.1 25.9 23.4 27.2
Asia Pacific and Japan......................... 7.4 6.6 7.5 6.5
----- ----- ----- -----
Consolidated net sales...................... 100.0 100.0 100.0 100.0
Cost of sales.................................... 77.8 77.9 78.1 79.2
----- ----- ----- -----
Gross margin................................ 22.2 22.1 21.9 20.8
Operating expenses:
Selling, general and administrative............ 9.9 11.5 9.6 11.3
Research, development and engineering.......... 1.7 1.7 1.6 1.6
----- ----- ----- -----
Total operating expenses............... 11.6 13.2 11.2 12.9
----- ----- ----- -----
Operating income....................... 10.6 8.9 10.7 7.9
Financing and other income (expense), net........ 0.4 0.4 0.3 0.3
----- ----- ----- -----
Income before income taxes and extraordinary
loss........................................ 11.0 9.3 11.0 8.2
Provision for income taxes....................... 3.4 2.7 3.4 2.4
----- ----- ----- -----
Income before extraordinary loss............... 7.6 6.6 7.6 5.8
Extraordinary loss, net of taxes................. -- (0.5) -- (0.3)
----- ----- ----- -----
Net income............................. 7.6% 6.1% 7.6% 5.5%
===== ===== ===== =====
</TABLE>
5
<PAGE> 7
Net Sales
The second quarter of fiscal 1998 marked the Company's fourteenth consecutive
quarter of sequential growth in consolidated net sales. Consolidated net sales
increased 67% and 62% in the second quarter and first six months, respectively,
of fiscal 1998 over the comparable periods of fiscal 1997, and increased 9% over
the first quarter of fiscal 1998.
The increase in consolidated net sales was primarily attributable to increased
units sold but was also positively affected by product mix shift and slightly
higher average revenue per unit. Unit volumes increased 61% and 62% in the
second quarter and first six months, respectively, of fiscal 1998 compared to
the same periods of fiscal 1997. Unit volumes increased 9% in the second quarter
of fiscal 1998 compared to the first quarter of fiscal 1998. This unit volume
growth reflects strong demand for the Company's products across all product
lines. While desktop products continue to remain the primary driver of unit
volumes (comprising 85% of total units shipped during the second quarter and
first six months of fiscal 1998), the growth rate in the server product line
continues to exceed the growth rate of desktop products. During the second
quarter and first six months of fiscal 1998, server product units increased 269%
and 300%, respectively, over the comparable periods of the prior fiscal year. On
a sequential basis, server units increased 29% in the second quarter of fiscal
1998. Notebook products also exhibited strong unit growth increasing 79% and 75%
in the second quarter and first six months of fiscal 1998, respectively,
compared to the same periods of fiscal 1997.
Net sales grew in all geographic regions in the second quarter and first six
months of fiscal 1998 as compared with the same periods of fiscal 1997. Growth
in net sales was led by the Americas, where net sales increased 74% and 69% in
the second quarter and first six months of fiscal 1998, respectively, from the
related periods in fiscal 1997. Europe also exhibited strong growth, where net
sales increased 42% and 40% in the second quarter and first six months of fiscal
1998, respectively. Additionally, the Asia-Pacific and Japan region continued
strong momentum as net sales increased 89% in both the second quarter and first
six months of fiscal 1998.
The sequential increase in net sales of 9% from the first quarter to the second
quarter of fiscal 1998, was attributable primarily to the strong growth in the
Americas region of 14%. Net sales in the Asia-Pacific and Japan region increased
5% in the second quarter of fiscal 1998 while Europe experienced a seasonal
decline in net sales of 4%.
Gross Margin
The Company's gross margin as a percentage of consolidated net sales remained
relatively flat in the second quarter of fiscal 1998 compared to the second
quarter of fiscal 1997. The increase from 20.8% in the first six months of
fiscal 1997 to 21.9% in the first six months of fiscal 1998 was driven by the
first quarter of each respective period. During the first quarter of fiscal
1998, gross margin was positively affected by component cost declines, partially
offset by price reductions, and a shift in product mix to server and higher-end
desktop products.
On a sequential basis, gross margins increased to 22.2% in the second quarter
from 21.6% in the first quarter of fiscal 1998. The increase is the result of
several factors, including continued product mix shift to servers and higher-end
desktop products and manufacturing efficiencies.
Operating Expenses
Selling, general and administrative expenses decreased as a percentage of
consolidated net sales to 9.9% and 9.6% for the second quarter and first six
months of fiscal 1998, respectively, from 11.5% and 11.3% in the comparable
periods of the prior fiscal year due to scaling benefits as a result of
significant sales growth. However, selling, general and administrative expenses
increased as a percentage of consolidated net sales to 9.9% in the second
quarter from 9.3% in the first quarter of fiscal 1998. The increase is
attributable to increased staffing worldwide and increased spending related to
other infrastructure needs to meet the demands of the Company's growth.
Research, development and engineering expenses have increased in absolute dollar
amounts due to increased staffing levels and product development costs in order
to meet the demand of product transition cycles.
6
<PAGE> 8
Although spending may continue to increase in absolute dollar terms, the
Company's goal is to manage operating expenses, over time, relative to net sales
and gross margin.
Income Taxes
The Company's effective tax rate was 31.0% for the second quarter and first six
months of fiscal 1998 compared with 29.0% for the second quarter and first six
months of fiscal 1997. The increase in the Company's effective tax rate resulted
from changes in the geographical distribution of income and losses.
LIQUIDITY AND CAPITAL RESOURCES
The following table presents selected financial statistics and information:
<TABLE>
<CAPTION>
AUGUST 3, FEBRUARY 2,
1997 1997
--------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Cash and marketable securities.............................. $1,515 $1,352
Working capital............................................. $1,189 $1,089
Days of sales in accounts receivable........................ 37 37
Days of supply in inventory................................. 11 13
Days in accounts payable.................................... 53 54
</TABLE>
Cash flows generated from operating activities for the first six months of
fiscal 1998 were $607 million and represented the Company's primary source of
cash during the quarter. Operating cash flows benefited from the Company's
strong net income performance and continued focus on asset management.
During the second quarter of fiscal 1998, the Company repurchased 5.7 million
shares of common stock for $218 million. The Company is currently authorized to
repurchase up to 40.7 million additional shares of its common stock and
anticipates that such repurchases will constitute a significant use of future
cash resources. At August 3, 1997, the Company held equity instrument
arrangements that entitle the Company to purchase 27.0 million additional shares
of common stock for an average cost of $50 per share at various times through
the third quarter of fiscal 1999. The Company's potential repurchase obligations
under put options has decreased from $279 million at February 2, 1997 to $85
million at August 3, 1997, because a significant number of the options that
contained net cash or physical settlement terms have expired or have been
exercised. The above share and per share information has been restated to
reflect the Company's two-for-one stock split effected on July 25, 1997.
The Company utilized $86 million in cash during the first six months of fiscal
1998 to construct and equip facilities. Capital expenditures for fiscal 1998 are
expected to be approximately $190 million.
During the second quarter of fiscal 1998, the Company entered into a $250
million five-year revolving credit facility. This facility replaced a $100
million 364-day revolving credit facility that expired on June 9, 1997 and a
$150 million three-year revolving credit facility that was scheduled to expire
on June 9, 1999. At August 3, 1997, this new facility was unused.
During the first half of fiscal 1998, the Company entered into a $225 million
master lease facility, which provides for the ability to lease certain real
property, buildings and equipment to be constructed or acquired.
Management believes that the Company will have sufficient resources available to
meet its cash requirements for the foreseeable future, including working capital
requirements, planned capital expenditures and stock repurchases.
7
<PAGE> 9
FACTORS AFFECTING THE COMPANY'S BUSINESS AND PROSPECTS
Statements in this Report that relate to future results or events are based on
the Company's current expectations. There are many factors that affect the
Company's business and the results of its operations and may cause the actual
results of operations in future periods to differ materially from those
currently expected or desired. These factors include general economic and
business conditions; the level of demand for personal computers; the level and
intensity of competition in the personal computer industry and the pricing
pressures that may result; foreign currency fluctuations; the ability of the
Company to timely and effectively manage periodic product transitions and
component availability; the ability of the Company to develop new products based
on new or evolving technology and the market's acceptance of those products; the
ability of the Company to manage its inventory levels to minimize excess
inventory, declining inventory values and obsolescence; the product, customer
and geographic sales mix of any particular period; and the Company's ability to
continue to improve its infrastructure (including personnel and systems) to keep
pace with the growth in its overall business activities. For a discussion of
these and other factors affecting the Company's business and prospects, see
"Item 1 -- Business -- Factors Affecting the Company's Business and Prospects"
in the Company's Annual Report on Form 10-K for the fiscal year ended February
2, 1997.
8
<PAGE> 10
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to various legal proceedings and claims arising in the
ordinary course of business. The Company's management does not expect that the
results in any of these legal proceedings will have a material adverse effect on
the Company's financial condition or results of operations.
ITEM 2. CHANGES IN SECURITIES
On July 18, 1997, the Company's stockholders approved an amendment to the
Company's Certificate of Incorporation to increase the number of shares of
common stock, par value $.01 per share, that the Company is authorized to issue
from 300 million to one billion. The amendment was filed with the Delaware
Secretary of State, and became effective, on July 18, 1997.
On July 25, 1997, approximately 165 million authorized shares of common stock
were issued to complete a two-for-one stock split that had been declared by the
Company's Board of Directors on May 20, 1997. The record date for the stock
split was July 18, 1997. The remaining authorized but unissued and unreserved
shares are available for issuance from time to time for any proper purpose
approved by the Company's Board of Directors (including issuances in connection
with future stock splits or dividends and issuances to raise capital or effect
acquisitions). There are currently no arrangements, agreements or understandings
for the issuance or use of the additional shares of authorized common stock
(other than issuances permitted or required under the Company's stock-based
employee benefit plans or awards made pursuant to those plans). The Board of
Directors does not presently intend to seek further stockholder approval of any
particular issuance of shares unless such approval is required by law or the
rules of The Nasdaq Stock Market.
Stockholders do not have any preemptive or similar rights to subscribe for or
purchase any additional shares of common stock that may be issued in the future,
and therefore, future issuances of common stock may, depending on the
circumstances, have a dilutive effect on the earnings per share, voting power
and other interests of the existing stockholders.
The increase in the number of authorized shares of common stock could have an
anti-takeover effect, although that was not its purpose. For example, if the
Company were the subject of a hostile takeover attempt, it could try to impede
the takeover by issuing shares of common stock, thereby diluting the voting
power of the other outstanding shares and increasing the potential cost of the
takeover. The availability of this defensive strategy to the Company could
discourage unsolicited takeover attempts, thereby limiting the opportunity for
the Company's stockholders to realize a higher price for their shares than is
generally available in the public markets. The Board of Directors is not aware
of any attempt, or contemplated attempt, to acquire control of the Company, and
the increase in the number of authorized shares of common stock was not proposed
with the intent that it be utilized as a type of anti-takeover device.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of the Company's stockholders was held on July 18, 1997. At
that meeting, three proposals were submitted to a vote of the Company's
stockholders. Proposal 1 was a proposal to elect two Class III directors (with
Claudine B. Malone and Michael A. Miles being the nominees). Proposal 2 was a
proposal to approve an amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of common stock from 300 million to
one billion. Proposal 3 was a proposal to approve an amendment to the Company's
Incentive Plan to (a) provide for automatic periodic increases in the number of
shares of common stock that may be awarded thereunder and (b) reduce the number
of authorized shares that may be awarded in the form of "Stock Awards" (as
defined in the Incentive Plan) from 25% to 20%.
At the close of business on the record date for the meeting (which was May 30,
1997), there were 168,177,835 shares of common stock outstanding and entitled to
be voted at the meeting. Holders of 145,580,986 shares of common stock
(representing a like number of votes) were present at the meeting, either in
person or by proxy.
9
<PAGE> 11
The following table sets forth the results of the voting on each of the
proposals (including, in the case of Proposal 1, the results of the voting with
respect to each nominee):
<TABLE>
<CAPTION>
NUMBER OF VOTES
-----------------------------------------------
BROKER
PROPOSAL FOR AGAINST ABSTAIN NON-VOTE
-------- ----------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Proposal 1 -- Election of directors:
Claudine B. Malone.................. 145,488,486 298,749 -- --
Michael A. Miles.................... 145,559,215 228,020 -- --
Proposal 2 -- Approval of amendment to
Certificate of Incorporation........ 125,729,775 19,792,819 264,621 --
Proposal 3 -- Approval of amendment to
Incentive Plan...................... 84,197,161 39,330,335 445,451 21,814,288
</TABLE>
Consequently, all proposals were passed by the stockholders.
For additional discussion concerning Proposal 2 (Amendment to Certificate of
Incorporation), see "Item 2 -- Changes in Securities" above.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The following exhibits are filed as part of this Report:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
3 -- Certificate of Amendment to Certificate of Incorporation,
dated and filed on July 18, 1997
10 -- Third Amendment to Dell Computer Corporation Incentive
Plan, dated as of July 18, 1997
11 -- Statement Re Computation of Per Share Earnings
27 -- Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K.
None.
10
<PAGE> 12
SIGNATURE
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 thereunto duly authorized.
DELL COMPUTER CORPORATION
/s/ JAMES M. SCHNEIDER
------------------------------------
James M. Schneider
Vice President, Finance
(On behalf of the registrant and as
chief accounting officer)
September 3, 1997
11
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
<S> <C>
3 Certificate of Amendment to Certificate of Incorporation,
dated and filed on July 18, 1997
10 Third Amendment to Dell Computer Corporation Incentive
Plan, dated as of July 18, 1997
11 Statement Re Computation of Per Share Earnings
27 Financial Data Schedule
</TABLE>
12
<PAGE> 1
EXHIBIT 3
DELL COMPUTER CORPORATION
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
Dell Computer Corporation (the "Company"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "DGCL"), hereby certifies as follows:
FIRST: The Board of Directors of the Company (the "Board"), acting by
unanimous written consent, dated May 20, 1997, in accordance with the
applicable provisions of the DGCL and the Company's Bylaws, did duly adopt
resolutions (a) approving the amendment to the Company's Certificate of
Incorporation described herein, (b) directing that such amendment be
submitted to the stockholders of the Company for consideration at the
Company's Annual Meeting of Stockholders held on July 18, 1997 and (c)
directing that, upon approval and adoption of such amendment by the
stockholders of the Company, this Certificate of Amendment be executed and
filed with the Secretary of State of the State of Delaware.
SECOND: The stockholders of the Company, acting at the Company's
Annual Meeting of Stockholders duly called and held on July 18, 1997 in
accordance with the applicable provisions of the DGCL and the Company's
Bylaws, did duly consent to, approve and adopt such amendment to the
Company's Certificate of Incorporation.
THIRD: The first paragraph of Article Fourth of the Company's
Certificate of Incorporation is hereby amended to read in its entirety as
follows:
"FOURTH: The total number of shares of capital stock of the
Corporation shall be one billion and five million (1,005,000,000), which
shall consist of five million (5,000,000) shares of Preferred Stock, of
the par value of $.01 per share, and one billion (1,000,000,000) shares
of Common Stock, of the par value of $.01 per share."
Such amendment having been duly adopted in accordance with the provisions
of Section 242 of the DGCL and the applicable provisions of the Company's
Certificate of Incorporation and Bylaws, the Company has caused this Certificate
of Amendment to be executed and attested by its duly authorized officers on July
18, 1997.
DELL COMPUTER CORPORATION
By: /s/ MICHAEL S. DELL
----------------------------------
Michael S. Dell,
Chairman of the Board and
Chief Executive Officer
Attest:
/s/ THOMAS H. WELCH, JR.
- ------------------------------------
Thomas H. Welch, Jr.,
Assistant Secretary
13
<PAGE> 1
EXHIBIT 10
THIRD AMENDMENT
TO
DELL COMPUTER CORPORATION INCENTIVE PLAN
Dell Computer Corporation, a Delaware corporation (the "Company"), hereby
adopts an amendment to the Dell Computer Corporation Incentive Plan, dated June
22, 1994, as amended (the "Incentive Plan"), as specified below.
RECITALS
A. The Incentive Plan was submitted to, and approved by, the stockholders
of the Company at the Company's annual meeting of stockholders held on June 22,
1994. Following such approval, the Incentive Plan was adopted by the Company
effective June 22, 1994. The Incentive Plan was subsequently amended effective
July 21, 1995 and November 30, 1995.
B. The Board of Directors of the Company (the "Board"), acting by unanimous
written consent in accordance with the applicable provisions of the General
Corporation Law of the State of Delaware (the "DGCL") and the Company's Bylaws,
did duly adopt resolutions (1) approving the amendment to the Incentive Plan
described herein (subject to the approval of such amendment by the stockholders
of the Company), (2) directing that such amendment be submitted to the
stockholders of the Company for consideration at the Company's annual meeting of
stockholders held on July 18, 1997 and (3) directing that, upon approval and
adoption of such amendment by the stockholders of the Company, the Incentive
Plan be amended as described herein.
C. The stockholders of the Company, acting at the Company's annual meeting
of stockholders duly called and held on July 18, 1997 in accordance with the
applicable provisions of the DGCL and the Company's Bylaws, did duly consent to,
approve and adopt the amendment to the Incentive Plan described.
Now, therefore, the Company hereby adopts the following amendment to the
Incentive Plan.
1. CALCULATION OF AUTHORIZED AND AVAILABLE SHARES. Sections 2.1, 2.2 and
2.3 of the Incentive Plan are hereby deleted and replaced in their entirety with
the following:
2.1 Maximum Amount of Shares. Subject to the provisions of Paragraph
2.6 and Paragraph 11.1 of the Plan, the aggregate number of shares of Stock
that may be issued or transferred pursuant to Awards under the Plan (the
"Authorized Shares") shall be calculated as follows (with all references to
"fiscal years" referring to fiscal years of the Corporation):
(a) At any time from (and including) July 18, 1997 until (and
including)the end of fiscal 1998, the number of Authorized Shares shall
be 31,761,880.
(b) At any time during any fiscal year (commencing with fiscal 1999
and ending with fiscal 2003), the number of Authorized Shares shall be
equal to the sum of (1) the number of Authorized Shares as of the end of
the immediately preceding fiscal year, plus (2) 4% of the total number
of issued and outstanding shares of Stock as of the end of the
immediately preceding fiscal year, plus (3) 4% of the total number of
shares of Stock repurchased by the Corporation during the immediately
preceding fiscal year, plus (4) the Performance Amount (as defined in
subparagraph (d) of this Paragraph) for the immediately preceding fiscal
year.
(c) The number of Authorized Shares shall not be increased after
fiscal 2003 unless such increase is approved by the Corporation's
stockholders.
(d) The "Performance Amount" for any fiscal year shall be
calculated as follows:
(1) If the Total Shareholder Return (as defined below) achieved
by the Corporation during such fiscal year exceeds the average Total
Shareholder Return achieved by the
14
<PAGE> 2
companies included in the S&P Computer Systems Index during such
fiscal year, the Performance Amount for such fiscal year shall be
equal to the sum of (A) 1% of the total number of issued and
outstanding shares of Stock as of the end of such fiscal year, plus
(B) 1% of the total number of shares of Stock repurchased by the
Corporation during such fiscal year.
(2) If the Total Shareholder Return achieved by the Corporation
during such fiscal year does not exceed the average Total Shareholder
Return achieved by the companies included in the S&P Computer Systems
Index during such fiscal year, the Performance Amount for such fiscal
year shall be equal to zero.
The term "Total Shareholder Return" for any period and for any company
shall mean the number (expressed as a percentage) obtained by dividing (X)
the sum of the amount of dividends for such period, assuming dividend
reinvestment, and the difference between the price per share of such
company's common stock at the end of the period and the price per share of
such company's common stock at the beginning of the period, by (Y) the
price per share of such company's common stock at the beginning of such
period.
2.2 Calculation of Available Shares. At any time, the number of
shares that may then be issued or transferred pursuant to Awards under the
Plan (the "Available Shares") shall be equal to the difference between (a)
the number of Authorized Shares at such time and (b) the sum of (1) the
number of shares of Stock subject to issuance upon exercise or settlement
of then outstanding Awards, (2) the number of shares of Stock that equal
the value of then outstanding Performance Units determined in each case as
of the Date of Grant of each Award (other than Awards designated to be paid
only in cash) and (3) the number of shares of Stock that have been issued
upon exercise or settlement of outstanding Awards (except as otherwise
provided in Paragraph 2.3).
2.3 Restoration of Unused Shares. If Stock subject to any Award is
not issued or transferred, or ceases to be issuable or transferable for any
reason, including (but not exclusively) because an Award is forfeited,
terminated, expires unexercised, is settled in cash in lieu of Stock or is
exchanged for other Awards, the shares of Stock that were subject to that
Award shall no longer be charged against the number of Authorized Shares in
calculating the number of Available Shares under Paragraph 2.2 and shall
again be included in Available Shares.
2. REDUCTION IN AVAILABILITY OF STOCK AWARDS. Section 2.7 of the Incentive
Plan is hereby amended by replacing the words "twenty-five percent" in such
provision with the words "twenty percent."
3. NO EFFECT ON OTHER PROVISIONS. Except as described in Paragraphs 1 and 2
above, the terms, conditions and provisions of the Incentive Plan shall remain
in full force and effect and shall be unaffected by this amendment.
4. EFFECTIVE DATE OF AMENDMENT. This amendment, and the changes to the
provisions of the Incentive Plan effected hereby, shall be effective as of July
18, 1997.
In witness whereof, the Company, acting by and through its duly authorized
officer, has executed this instrument to be effective as of the date specified
in Paragraph 4 above.
DELL COMPUTER CORPORATION
By: /s/ MICHAEL S. DELL
----------------------------------
Michael S. Dell
Chairman and Chief Executive
Officer
15
<PAGE> 1
DELL COMPUTER CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------------- ----------------------------------
AUGUST 3, 1997 JULY 28, 1996 AUGUST 3, 1997 JULY 28, 1996
---------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Primary earnings per common share:
Calculation of weighted average shares (a):
Weighted average shares of common stock
outstanding 334 360 337 364
Weighted average shares of common stock
equivalents, utilizing the treasury stock
method 30 29 29 27
---------------- ----------------- ----------------- ----------------
Weighted average shares outstanding 364 389 366 391
================ ================= ================= ================
Earnings:
Net Income available to stockholders $214 $103 $412 $185
================ ================= ================= ================
Earnings per common share (a)(b) $0.59 $0.26 $1.13 $0.47
================ ================= ================= ================
Fully diluted earnings per common share:
Calculation of weighted average shares (a):
Weighted average shares of common stock
outstanding 334 360 337 364
Weighted average shares of common stock
equivalents, utilizing the treasury stock
method 32 30 32 30
Assumed conversion of Convertible Preferred
Stock (c) -- 2 -- 2
---------------- ----------------- ----------------- ----------------
Weighted average shares outstanding 366 392 369 396
================ ================= ================= ================
Earnings:
Net Income available to common stockholders $214 $103 $412 $185
================ ================= ================= ================
Earnings per common share (a)(b) $0.58 $0.26 $1.12 $0.47
================ ================= ================= ================
</TABLE>
(a) All share and per share information for fiscal 1997 reflects both
two-for-one common stock splits effected on December 6, 1996 and July 25,
1997.
(b) Earnings per common share was calculated using the underlying data in
thousands.
(c) Assumes conversion of the 60,000 shares of outstanding convertible
preferred stock from the beginning of fiscal 1997 to the actual conversion
date.
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DELL
COMPUTER CORPORATION FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTH PERIOD
ENDED AUGUST 3, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-01-1998
<PERIOD-END> AUG-03-1997
<CASH> 194
<SECURITIES> 1,321
<RECEIVABLES> 1,160
<ALLOWANCES> 27
<INVENTORY> 273
<CURRENT-ASSETS> 3,252
<PP&E> 439
<DEPRECIATION> 151
<TOTAL-ASSETS> 3,552
<CURRENT-LIABILITIES> 2,063
<BONDS> 17
0
0
<COMMON> 515
<OTHER-SE> 612
<TOTAL-LIABILITY-AND-EQUITY> 3,552
<SALES> 5,402
<TOTAL-REVENUES> 5,402
<CGS> 4,220
<TOTAL-COSTS> 4,220
<OTHER-EXPENSES> 89
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> 597
<INCOME-TAX> 185
<INCOME-CONTINUING> 412
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 412
<EPS-PRIMARY> 1.13
<EPS-DILUTED> 1.12
</TABLE>
