<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 0-22784
-------
------------
GATEWAY 2000, INC.
(Exact name of registrant as specified in its charter)
Delaware 42-1249184
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
610 Gateway Drive
P.O. Box 2000
North Sioux City, South Dakota 57049
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (605) 232-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
----- -----
As of August 6, 1997, there were 153,927,949 shares of the Common Stock of
the Company, $.01 par value per share, outstanding (adjusted to reflect a two-
for-one stock split). As of August 6, 1997, there were no shares of the
Company's Class A Common Stock, $.01 par value per share, outstanding.
<PAGE>
I. FINANCIAL INFORMATION
Item 1. Financial Statements
Gateway 2000, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and six months ended June 30, 1996 and 1997
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
----------------------------------------------------------------------
1996 1997 1996 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 1,137,262 $ 1,392,658 $ 2,279,464 $ 2,811,994
Cost of goods sold 931,091 1,132,300 1,860,962 2,285,843
------------- ------------- ------------- -------------
Gross profit 206,171 260,358 418,502 526,151
Selling, general and administrative expenses 135,370 180,507 277,199 351,422
------------- ------------- ------------- -------------
Operating income 70,801 79,851 141,303 174,729
Other income, net 7,005 6,382 12,999 14,583
------------- ------------- ------------- -------------
Income before income taxes 77,806 86,233 154,302 189,312
Provision for income taxes 26,454 29,750 52,463 65,313
------------- ------------- ------------- -------------
Net income $ 51,352 $ 56,483 $ 101,839 $ 123,999
============= ============= ============= =============
Share and per share information:
Net income per share $ 0.33 $ 0.36 $ 0.65 $ 0.79
============= ============= ============= =============
Weighted average shares outstanding 155,922 156,231 155,777 156,101
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
Gateway 2000, Inc.
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and June 30, 1997
(in thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 516,360 $ 449,719
Marketable securities - 20,080
Accounts receivable, net 449,723 471,827
Inventory 278,043 460,258
Other 74,216 117,943
---------- ----------
Total current assets 1,318,342 1,519,827
Property, plant and equipment, net 242,365 273,812
Software costs, net 77,073 71,914
Other assets 35,631 49,226
---------- ----------
$1,673,411 $1,914,779
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of long-term obligations $ 15,041 $ 13,751
Accounts payable 411,788 526,065
Accrued liabilities 190,762 176,910
Accrued royalties payable 125,270 166,060
Income taxes payable 40,334 5,289
Other current liabilities 16,574 12,036
---------- ----------
Total current liabilities 799,769 900,111
Long-term obligations, net of current maturities 7,244 6,210
Warranty and other liabilities 50,857 60,843
---------- ----------
Total liabilities 857,870 967,164
---------- ----------
Contingencies (Note 6) - -
Stockholders' equity:
Preferred Stock, $.01 par value, 5,000,000 shares authorized; none
issued and outstanding - -
Class A Common Stock, nonvoting, $.01 par value, 1,000,000 shares
authorized; none issued and outstanding - -
Common Stock, $.01 par value, 220,000,000 shares authorized;
153,511,968 shares and 153,883,280 shares issued and outstanding,
in 1996 and 1997 respectively 1,535 1,539
Additional paid-in capital 288,745 294,999
Cumulative translation adjustment 549 2,366
Retained earnings 524,712 648,711
---------- ----------
Total stockholders' equity 815,541 947,615
---------- ----------
$1,673,411 $1,914,779
========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
Gateway 2000, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1996 and 1997
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1996 1997
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net Income $101,839 $ 123,999
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization
26,200 39,041
Provision for uncollectible accounts receivable 7,269 2,910
Deferred income taxes 81 (25,314)
Other, net 356 307
Changes in operating assets and liabilities:
Accounts receivable 27,290 (25,014)
Inventory 13,705 (185,119)
Other assets 1,285 (43,281)
Accounts payable 44,423 116,312
Accrued liabilities (8,575) (13,577)
Accrued royalties 655 40,789
Customer prepayments (6,233) (10,355)
Income taxes payable 35,292 (31,845)
Other liabilities 19,214 17,197
-------- ---------
Net cash provided by operating activities 262,801 6,050
-------- ---------
Cash flows from investing activities:
Capital expenditures (47,340) (43,757)
Software costs (17,801) (5,786)
Purchases of available-for-sale securities - (29,066)
Proceeds from maturity of held-to-maturity securities - 8,985
Payment received on note 5,000 -
Purchase of other assets (5,167) (3,376)
-------- ---------
Net cash used in investing activities (65,308) (73,000)
-------- ---------
Cash flows from financing activities:
Proceeds from issuance of notes payable 5,000 5,000
Principal payments on long-term obligations and notes payable (7,350) (7,531)
Stock options exercised 1,167 3,058
-------- ---------
Net cash provided by (used in) financing activities (1,183) 527
Foreign exchange effect on cash and cash equivalents (155) (218)
-------- ---------
Net increase in cash and cash equivalents 196,155 (66,641)
Cash and cash equivalents, beginning of period 166,397 516,360
-------- ---------
Cash and cash equivalents, end of period $362,552 $ 449,719
======== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
1. General:
The accompanying unaudited consolidated financial statements of
Gateway 2000, Inc. (the "Company") as of June 30, 1997 have been prepared on the
same basis as the audited consolidated financial statements for the year ended
December 31, 1996, except as follows, and, in the opinion of management, reflect
all adjustments necessary to fairly state the consolidated financial position,
and the consolidated results of operations and cash flows for the interim
period. Beginning in 1997, certain expenses related to the fulfillment of parts
warranties have been reclassified from selling, general and administrative
expenses to cost of goods sold. Prior year amounts have been restated to conform
with this reclassification. All adjustments are of a normal, recurring nature.
The results for the interim period are not necessarily indicative of results to
be expected for any other interim period or the entire year. These financial
statements should be read in conjunction with the Company's audited consolidated
financial statements and notes thereto for the year ended December 31, 1996,
which are included in the Company's 1996 Annual Report to the Securities and
Exchange Commission on Form 10-K. The preparation of the consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities, and the
reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
2. Stock Split:
On May 15, 1997, the Board of Directors authorized a two-for-one stock
split to be distributed on or about June 16, 1997, to shareholders of record on
June 2, 1997. All references in the financial statements to number of shares and
per share amounts of the Company's common stock have been retroactively restated
to reflect the increased number of common shares outstanding.
3. Share and Per Share Information:
Net income per share has been computed using net income for the three
months ended June 30, 1996 and 1997 and the weighted average number of common
shares and common share equivalents (if dilutive) outstanding during the period.
Common share equivalents considered outstanding relate to stock options and have
been calculated using the treasury stock method for all periods presented.
4. Accounting Policy for Derivatives:
In the normal course of business, the Company enters into foreign
currency forward contracts to hedge foreign currency transactions and probable
anticipated foreign currency transactions. These forward contracts are
designated as a hedge of international sales by U.S. dollar functional currency
entities and intercompany purchases by certain foreign subsidiaries. The
principal currencies hedged are the German Mark, the British Pound, the French
Franc and the Japanese Yen over periods ranging from one to six months. Forward
contracts are accounted for on a mark-to-market basis, with realized and
unrealized gains or losses recognized currently. Gains or losses from forward
contracts which are effective as a hedge are included in the basis of the
designated transaction. The related receivable or liability with counterparties
to the forward contracts is recorded in the consolidated balance sheet. Cash
flows from settlements of forward contracts are included in operating activities
in the consolidated statement of cash flows.
5. Selected Balance Sheet Information:
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
------------ ------------
(in thousands)
(Unaudited)
<S> <C> <C>
Accounts receivable, net:
Accounts receivable $468,691 $500,169
Less allowance for uncollectible accounts (18,968) (28,342)
-------- --------
$449,723 $471,827
======== ========
Inventory:
Components and subassemblies $269,959 $430,837
Finished goods 8,084 29,421
-------- --------
$278,043 $460,258
======== ========
</TABLE>
5
<PAGE>
6. Contingencies:
The Company is a party to various lawsuits and administrative
proceedings arising in the ordinary course of its business. The Company
evaluates such lawsuits and proceedings on a case-by-case basis, and its policy
is to vigorously contest any such claims which it believes are without merit.
The Company's management believes that the ultimate resolution of such pending
matters will not materially adversely affect the Company's business, financial
position, results of operations or cash flows.
The Company is party to agreements with numerous state tax authorities
pursuant to which it collects and remits applicable sales or use taxes in such
states. The Company entered into these agreements in response to inquiries of
taxing authorities in those states concerning whether the Company's alleged
contacts required the collection of sales and use taxes from customers in those
states. These agreements generally limit the liability of the Company for non-
collection of sales taxes prior to such agreements' effective dates. These
agreements do not address income taxes. Taxing authorities in other states have
made similar inquiries concerning the Company's alleged contacts with those
states and, in the future, could make specific assessments. The Company has not
collected or remitted any sales or use taxes in such states for any prior
periods, nor has it established significant reserves for the payment of such
taxes. There can be no assurance that the amount of any sales or use taxes the
Company might ultimately be required to pay for prior periods would not
materially and adversely affect the Company's business, consolidated financial
position, results of operations or cash flows.
The Company currently pays state income taxes in the few states where
it has a physical presence. The Company has not paid incomes taxes in any other
state, nor has it established significant reserves for the payment of such
taxes. Management believes that the amount of any income tax the Company might
ultimately be required to pay for prior periods would not materially and
adversely affect the Company's business, consolidated financial position,
results of operations or cash flows.
7. Subsequent Event:
On July 23, 1997 the Company completed the acquisition of
substantially all the outstanding shares of common stock of Advanced Logic
Research Inc., a manufacturer of network servers, for a purchase price of
$191,465,424. The acquisition will be accounted for as a purchase business
combination.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The following table sets forth, for the periods indicated, certain data
derived from the Company's consolidated statements of operations, expressed as a
percentage of net sales:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -------------------------
1996 1997 1996 1997
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 81.9% 81.3% 81.6% 81.3%
-------- -------- --------- ---------
Gross profit 18.1% 18.7% 18.4% 18.7%
Selling, general and administrative expenses 11.9% 13.0% 12.2% 12.5%
-------- -------- --------- ---------
Operating income 6.2% 5.7% 6.2% 6.2%
Other income, net 0.6% 0.5% 0.6% 0.5%
-------- -------- --------- ---------
Income before income taxes 6.8% 6.2% 6.8% 6.7%
Provision for income taxes 2.3% 2.1% 2.3% 2.3%
-------- -------- --------- ---------
Net income 4.5% 4.1% 4.5% 4.4%
======== ======== ========= =========
</TABLE>
Sales. Sales increased 23% in both the second quarter and first half of
1997 over the comparable periods of 1996. The increase in sales resulted from
continued demand growth in all of the Company's markets, and increased growth
of both international sales and portable products.
Sales in the Company's Americas region for the second quarter of 1997
increased to $1.14 billion, an increase of 19% over the $960.9 million recorded
in the second quarter of 1996 but a decrease of 2% from the first quarter of
1997. For the six month period ended June 30, 1997, revenues in the Americas
region grew 21% over the 1996 levels to $2.31 billion. International sales
in the second quarter of 1997 increased 42% over the second quarter of 1996.
For the first six months of 1997, international sales increased 38% to $506.4
million from $366.4 million in the first six months of 1996. Sales in the
Company's European region in the second quarter of 1997 were $162.8 million, an
increase of approximately 39% from the second quarter of 1996 but a decrease of
approximately 8% from the first quarter of 1997. Sales for the first six months
of 1997 in the Company's European region were $340.5 million, an increase of
approximately 28% over the comparable period of 1996. Sales in the Company's
Asia Pacific region were $87.3 million in the second quarter of 1997, an
increase of 47% over the second quarter of 1996. Sales for the first six months
of 1997 in the Company's Asia Pacific region totalled $165.9 million, an
increase of 65% over the first six months of 1996.
Unit shipments in the second quarter of 1997 increased 31% to approximately
554,000 from 424,000 in the second quarter of 1996. For the six months ended
June 30, 1997, unit shipments increased 35% to approximately 1,114,000 from
approximately 824,000 in the first six months of 1996. Unit shipments for the
second quarter of 1997 decreased 1% from unit shipments in the first quarter of
1997. Unit shipments for the second quarter of 1997 in the Company's Americas
region grew 26% over the second quarter of 1996, but were essentially the same
as shipments in the first quarter of 1997. For the six months ended June 30,
1997, unit shipments increased 31% over the first six months of 1996. Unit
shipments in the Company's European region grew 47% over the second quarter of
1996, but decreased 9% from the first quarter of 1997. For the six months ended
June 30, 1997, unit shipments increased 43% over the first six months of 1996.
Unit shipments for the second quarter of 1997 in the Company's Asia Pacific
region grew 90% over the second quarter of 1996 and 1% over the first quarter of
1997. For the six months ended June 30, 1997, unit shipments increased 118% over
the comparable period of 1996.
Weighted average unit prices in the second quarter of 1997 were 6.3%
lower than prices in the second quarter of 1996 and .7% less than prices in the
first quarter of 1997. For the first six months of 1997, weighted average unit
prices were 8.7% below prices for the first six months of 1996. Generally, unit
prices for specific PC products have decreased over time reflecting the effects
of competition and reduced component costs associated with advances in
technology. The Company has generally offset such decreasing unit prices by
adding or improving product features and by introducing new products based on
newer technology at higher unit prices. In 1995, significant new technology was
introduced, outpacing the normal rate of component cost declines, and as a
result, prices gradually increased throughout the year. Average unit selling
prices maintained these abnormally high levels through the first quarter of
1996. Beginning in the second quarter of 1996, in addition to the normal
component cost declines, significant cost declines were experienced in Dynamic
Random Access Memory (DRAM) prices. These declines in component costs were
generally passed on to customers through price decreases. In addition, the rate
of new technology introduced in 1996 slowed, and was not substantial enough to
offset the declines in component prices, also contributing to the decline in
average unit prices.
7
<PAGE>
Gross Profit. Gross profit in the second quarter and the first six months
of 1997 increased 26% over the comparable periods of 1996. As a percentage of
sales, gross profit for the second quarter and the first six months of 1997
increased to 18.7% from 18.1% and 18.4% for the comparable periods of 1996, but
remained constant with levels in the first quarter of 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the second quarter and first six months of 1997
increased approximately 33% and 27%, respectively, over the comparable periods
of 1996. As a percentage of sales, in the second quarter and first six months of
1997, these expenses increased to approximately 13.0% and 12.5%, respectively,
from 11.9% and 12.2% in the comparable periods of 1996. Significant factors
contributing to the increase were higher personnel costs and increased
depreciation and amortization.
Personnel-related costs increased faster than the growth of sales during
the second quarter and first six months of 1997 as a result of increased
expenditures to expand customer support capacity and general building of the
Company's internal infrastructure and systems. Depreciation and amortization
expense increased due to the Company's continued investments in facilities,
software applications, and other projects which were placed into service after
the second quarter of 1996. The Company expects to continue to make the
necessary expenditures and infrastructure investments to manage its growth.
Operating Income. Due to the factors discussed above, operating income in
the second quarter of 1997 increased by 13% to $79.9 million from $70.8
million in the second quarter of 1996. Operating income for the six months ended
June 30, 1997 increased 24% to $174.7 million from $141.3 million in the first
six months of 1996. As a percentage of sales, operating income for the second
quarter of 1997 decreased to 5.7% from 6.2% in the second quarter of 1996, and
for the six month period of 1997 operating income of 6.2% was essentially the
same as the first six months of 1996.
Other Income Net. Other income, net includes other income net of expenses,
such as interest income and expense, lease financing commissions, referral fees
for on-line services and foreign exchange transaction gains and losses. Other
income, net decreased to $6.4 million from $7.0 million in the second quarter of
1996. The principal causes of the decrease were foreign exchange losses and a
decrease in referral commissions from internet providers. For the six months
ended June 30, 1997, other income, net increased to $14.6 million from $13.0
million during the first six months of 1996. The principal cause for the
increase was a generation of additional interest income as a result of the
availability of additional cash and marketable securities compared to 1996. This
increase was partially offset by foreign exchange losses and decreases in
referral commissions from internet providers.
Income Taxes. The Company's effective tax rate was 34.5% for the three and
six months ended June 30, 1997, up from the 34.0% recorded in the second quarter
and first half of 1996, but consistent with the 34.5% recorded for the year
ended December 31, 1996.
Liquidity and Capital Resources
The Company has financed its operating and capital expenditure requirements
to date principally through cash flow from its operations. At June 30, 1997, the
Company had cash and cash equivalents of $449.7 million, marketable securities
of $20.1 million and an unsecured committed credit facility with certain banks
of $225 million, consisting of a revolving line of credit facility and a
sub-facility for letters of credit. At June 30, 1997, no amounts were
outstanding under the revolving line of credit. Approximately $4.4 million was
committed to support outstanding standby letters of credit. Management believes
the Company's current sources of working capital, including amounts available
under existing credit facilities, will provide adequate flexibility for the
Company's financial needs for the forseeable future.
The Company generated $6.1 million in cash from operations during the first
six months of the year. Net income adjusted for non-cash changes totaled $140.6
million. An increase in inventory levels consumed approximately $185.1 million
in cash, net of inventory transfers to property, plant and equipment, but was
partially offset by an increase in accounts payable of $116.3 million and
accrued royalties of $40.8 million. The timing of income tax payments in the
first six months consumed $31.8 million in cash. The Company used approximately
$73.0 million in cash for investing activities, as a result of the Company's
continued investment in facilities and a $20.1 million net investment in
marketable securities.
At June 30, 1997, the Company had long-term indebtedness and capital lease
obligations of approximately $6.2 million. These obligations relate primarily to
the Company's expansion of international operations and its investments in
equipment and facilities. Borrowings, exclusive of capital lease obligations,
bear fixed and variable rates of interest currently ranging from interest free
(for certain incentive funds from the Industrial Development Authority of the
City of Hampton, Virginia) to 8.87% and have varying maturities through 2001.
The Company's capital lease obligations relate principally to its computer and
telephone system equipment.
On July 23, 1997, the company completed the acquisition of Advanced Logic
Research Inc. (ALR). The acquisition was funded through the Company's cash
reserves.
The Company anticipates that it will retain all earnings in the foreseeable
future for development of its business and will not distribute earnings to its
stockholders as dividends.
8
<PAGE>
Factors That May Affect Future Results
This Report includes forward-looking statements made in good faith based on
current management expectations pursuant to the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. These statements are not
guarantees of future performance and actual outcomes may differ materially from
what is expressed or forecasted.
Factors that could cause future results to differ from these expectations
include the following: growth in the personal computer industry; competitive
factors and pricing pressures; component supply shortages; inventory risks due
to shifts in market demand; the outcome of pending and future litigation;
foreign currency fluctuations; and general domestic and international economic
conditions.
In addition to other information contained in this Report, the following
factors, among others, sometimes have affected, and in the future could affect,
the Company's actual results, and could cause future results to differ
materially from those expressed in any forward looking statement made by, or on
behalf of the Company.
Management of rapid growth of the Company including problems with respect
to the size of its work force and production facilities and the adequacy of its
management information and other systems, purchasing and inventory controls, and
the forecasting of component part needs have the potential to affect results.
These
9
<PAGE>
problems can result in high backlog of product orders, delays in customer
support response times and increased expense levels.
Short product life cycles characterize the PC industry, resulting from
rapid changes in technology and consumer preferences and declining product
prices. The Company's in-house engineering personnel work closely with PC
component suppliers and other technology developers to evaluate the latest
developments in PC-related technology. There can be no assurance that the
Company will continue to have access to new technology or will be successful in
incorporating such new technology in its products or features in a timely
manner.
Certain key management employees, particularly Ted Waitt, Chairman and
Chief Executive Officer and a founder of the Company, have been instrumental in
the success of the Company. The Company has not entered into an employment
agreement with Ted Waitt. The loss of Ted Waitt's services could materially and
adversely affect the Company's business, consolidated financial position,
results of operations or cash flows.
The Company is party to agreements with numerous state tax authorities
pursuant to which it collects and remits applicable sales or use taxes in such
states. The Company entered into these agreements in response to inquiries of
taxing authorities in those states concerning alleged Company contacts with such
states and whether such alleged contacts required the collection of sales and
use taxes from customers and/or the payment of income tax in those states. These
agreements generally limit the liability of the Company for non-collection of
sales taxes prior to such agreements' effective dates. These agreements do not
address income taxes. Taxing authorities in other states have made similar
inquiries or asserted similar claims concerning the Company's alleged contacts
with those states and in the future could make specific assessments. The Company
has not collected or remitted any sales or use taxes in such states for any
prior period, nor has it established significant reserves for the payment of
such taxes. There can be no assurance that the amount of any sales or use taxes
the Company might ultimately be required to pay for prior periods would not
materially and adversely affect the Company's business, consolidated financial
position, results of operations or cash flows.
The Company currently pays state income taxes in the few states where it
has a physical presence. The Company has not paid income taxes in other states,
nor has it established significant reserves for the payment of such taxes.
Management believes that the amount of any income tax the Company might
ultimately be required to pay for prior periods would not materially and
adversely affect the Company's business, consolidated financial position,
results of operations or cash flows.
10
<PAGE>
II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a party to various lawsuits and administrative
proceedings arising in the ordinary course of its business. The Company
evaluates such lawsuits and proceedings on a case by case basis, and its policy
is to vigorously contest any such claims which it believes are without merit.
The Company's management believes that the ultimate resolution of such pending
matters will not materially and adversely affect the Company's business,
consolidated financial position, results of operations or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on May 15, 1997.
At the meeting, stockholders voted on (i) the election of three Class III
directors of the Company to hold office until the annual meeting of stockholders
of the Company to be held in 2000 and until a successor is duly elected and
qualified, (ii) approval of the Gateway 2000, Inc. 1995 Employee Stock Purchase
Plan, as amended and restated, and (iii) consideration of a stockholder proposal
concerning endorsement of the CERES Principles.
<TABLE>
<CAPTION>
Votes Votes Withheld/ Broker
For Against Abstentions Non-Votes
--- ------- ----------- ---------
<S> <C> <C> <C> <C>
1. Election of Directors
Charles G. Carey 64,913,356 -- 141,594 --
James F. McCann 64,915,015 -- 139,935 --
Theodore W. Waitt 64,915,997 -- 138,953 --
2. Approve 1995 Employee Stock Purchase Plan, 64,634,280 261,452 159,218 --
as amended and restated
3. Stockholder Proposal concerning endorsement
of CERES Principles 1,079,610 52,662,699 3,521,542 7,791,099
</TABLE>
11
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Description of Exhibits
No. -----------------------
---
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
The Company filed a Current Report on Form 8-K on May 28, 1997, and
Form 8-K/A dated June 2, 1997 pursuant to Item 5 reporting the announcement of a
two-for-one stock split of its outstanding common stock on June 16, 1997.
12
<PAGE>
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.
GATEWAY 2000, INC.
Date: August 14, 1997 By: /s/ David J. McKittrick
---------------------------------------------
David J. McKittrick
Senior Vice President, Chief Financial Officer
and Treasurer (authorized officer and chief
accounting officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> The schedule contains summary financial information extracted from
Gateway 2000, Inc.'s consolidated statements of operations for the three months
ended June 30, 1997 and the consolidated balance sheet as of June 30, 1997 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 449,719
<SECURITIES> 20,080
<RECEIVABLES> 500,169
<ALLOWANCES> 28,342
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0
0
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</TABLE>
