-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QQvTaPBijwx0NMZ3flMxUAROhhoJlJh3YgGbPNq/vaCxiGM2iFZvBMQL/lfF8G2E skJcuiqiTQGP9jCnIoExKg== 0000004427-97-000009.txt : 19970513 0000004427-97-000009.hdr.sgml : 19970513 ACCESSION NUMBER: 0000004427-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970328 FILED AS OF DATE: 19970512 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMDAHL CORP CENTRAL INDEX KEY: 0000004427 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPUTERS [3571] IRS NUMBER: 941728548 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07713 FILM NUMBER: 97600705 BUSINESS ADDRESS: STREET 1: 1250 E ARQUES AVE CITY: SUNNYVALE STATE: CA ZIP: 94088 BUSINESS PHONE: 4087466000 MAIL ADDRESS: STREET 1: 1250 E ARQUES AVE CITY: SUNNYVALE STATE: CA ZIP: 94088 10-Q 1 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 March 28, 1997 Commission file no. 1-7713 AMDAHL CORPORATION (Exact name of registrant as specified in its charter) Delaware 94-1728548 (State of incorporation) (I.R.S. Employer Identification No.) 1250 East Arques Avenue Sunnyvale, California 94088-3470 (Address of principal executive offices) (Zip code) Registrant's telephone number: (408) 746-6000 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 Number of shares of common stock, $.05 par value, outstanding at May 2, 1997: 122,672,369. PART I. FINANCIAL INFORMATION AMDAHL CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The following unaudited consolidated financial statements reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position as of the dates and results of operations for the periods indicated. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the Securities and Exchange Commission rules and regulations. Amdahl Corporation (the Company) believes the information included in the following report on Form 10-Q, when read in conjunction with the financial statements and related notes included in the Company's 1996 Annual Report to Stockholders, not to be misleading. CERTAIN OF THE STATEMENTS CONTAINED IN THIS REPORT ON FORM 10-Q ARE FORWARD LOOKING AND INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES WHICH ARE DESCRIBED IN THE SECTION OF THIS REPORT TITLED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, THE COMPANY'S 1996 ANNUAL REPORT TO STOCKHOLDERS AND IN OTHER DOCUMENTS FILED FROM TIME TO TIME WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION, INCLUDING WITHOUT LIMITATION, THE REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 27, 1996. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED. The results of operations for the three months ended March 28, 1997, are not necessarily indicative of results for the entire year ending December 26, 1997.
AMDAHL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 28, 1997 AND DECEMBER 27, 1996 (Dollars in thousands) (Unaudited) 1997 1996 ----------- ----------- Assets Current assets: Cash and cash equivalents $ 197,861 $ 134,646 Restricted cash 56,642 57,126 Short-term investments 149,862 210,671 Receivables, net of allowances 373,290 498,851 Inventories - Purchased materials 25,280 30,766 Systems in process 25,548 26,407 Finished goods 57,618 71,582 Prepaid expenses and deferred tax benefit 84,969 86,360 ----------- ----------- Total current assets 971,070 1,116,409 ----------- ----------- Long-term receivables and other assets 38,139 33,647 ----------- ----------- Property and equipment, at cost: Leased systems 28,137 41,582 System spares 356,284 368,209 Production and data processing equipment 324,284 318,527 Office furniture, equipment, and improvements 143,092 140,050 Land and buildings 78,388 82,318 ----------- ----------- 930,185 950,686 Less - Accumulated depreciation and amortization (688,426) (705,723) ----------- ----------- Property and equipment, net 241,759 244,963 ----------- ----------- Excess of cost over net assets acquired, net of amortization 198,615 201,385 ----------- ----------- $ 1,449,583 $ 1,596,404 =========== =========== Liabilities and stockholders' equity Current liabilities: Notes payable and short-term debt $ 34,328 $ 45,053 Short-term debt - stockholder (Fujitsu Limited) 80,000 80,000 Accounts payable 99,540 141,697 Accounts payable - stockholder (Fujitsu Limited) 28,598 68,625 Accrued liabilities 501,665 541,743 ----------- ----------- Total current liabilities 744,131 877,118 ----------- ----------- Long-term liabilities 41,903 43,663 ----------- ----------- Deferred income taxes 60,144 62,375 ----------- ----------- Stockholders' equity: Common stock, $.05 par value - Authorized - 200,000,000 shares Outstanding - 122,312,000 shares in 1997 and 121,753,000 shares in 1996 6,116 6,088 Additional paid-in capital 559,332 555,690 Retained earnings 33,308 44,313 Cumulative translation adjustments 8,295 9,300 Unrealized holding losses on securities (3,646) (2,143) ----------- ----------- Total stockholders' equity 603,405 613,248 ----------- ----------- $ 1,449,583 $ 1,596,404 =========== ===========
The accompanying notes are an integral part of these financial statements.
AMDAHL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS ------------------------------------- (In thousands, except per common share amounts) (Unaudited) FOR THE THREE MONTHS ENDED MARCH 28, 1997 MARCH 29, 1996 --------------- --------------- REVENUES Equipment sales $ 112,867 $ 94,464 Service, software and other 280,038 222,564 ------------- ------------- 392,905 317,028 ------------- ------------- COST OF REVENUES Equipment sales 71,537 85,584 Service, software and other 219,606 158,862 ------------- ------------- 291,143 244,446 ------------- ------------- Gross margin 101,762 72,582 ------------- ------------- OPERATING EXPENSES Engineering and development 24,674 30,563 Marketing, general and administrative 87,227 96,353 ------------- ------------- 111,901 126,916 ------------- ------------- Loss from operations (10,139) (54,334) ------------- ------------- INTEREST Income 4,989 8,396 Expense (2,855) (2,216) ------------- ------------- 2,134 6,180 ------------- ------------- Loss before provision for (benefit from) income taxes (8,005) (48,154) PROVISION FOR (BENEFIT FROM) INCOME TAXES 3,000 (9,631) ------------- ------------- NET LOSS $ (11,005) $ (38,523) ============= ============= PER COMMON SHARE AMOUNTS: Net loss $ (.09) $ (.32) ============= ============= Average outstanding shares 122,109 119,566 ============= =============
The accompanying notes are an integral part of these financial statements.
AMDAHL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) FOR THE THREE MONTHS ENDED MARCH 28, MARCH 29, 1997 1996 -------------- ----- -------------- Cash and cash equivalents at beginning of period $ 134,646 $ 192,980 -------------- -------------- Cash flows from operating activities: Net loss (11,005) (38,523) Adjustments to reconcile net loss to net cash provided by (used for) operating activities: Depreciation and amortization 24,070 25,948 Deferred income tax provision (2,231) 1,153 Gain on dispositions of assets (406) (432) Changes in assets and liabilities net of effects of business acquisitions: Decrease in receivables 120,119 44,191 (Increase) decrease in inventories 19,778 (3,108) (Increase) decrease in prepaid expenses and deferred tax benefit 746 (15,155) Increase in long-term receivables and other assets (4,215) (3,301) Decrease in accounts payable (79,541) (16,460) Decrease in accrued liabilities (36,758) (31,652) Increase (decrease) in long-term liabilities 805 (2,396) Net cash provided by (used for) operating activities 31,362 (39,735) -------------- -------------- Cash flows from investing activities: Purchases of available-for-sale short-term investments (12,507) (84,623) Proceeds from sales of available-for-sale investments 11,818 134,270 Proceeds from maturities of short-term investments 60,155 - Capital expenditures: Leased systems (594) (12,644) System spares (5,229) (3,384) Other property and equipment (21,973) (12,131) Proceeds from property and equipment sales 5,315 1,359 Net cash provided by investing activities 36,985 22,847 -------------- -------------- Cash flows from financing activities: Decrease in notes payable and short-term debt (5,120) (3,986) Repayments of long-term borrowings (2,159) (746) Sale of common stock and exercise of options 3,670 2,050 Net cash used for financing activities (3,609) (2,682) -------------- -------------- Effect of exchange rate changes on cash (1,523) (892) -------------- -------------- Net increase (decrease) in cash and cash equivalents 63,215 (20,462) Cash and cash equivalents at end of period $ 197,861 $ 172,518 ============== ==============
The accompanying notes are an integral part of these financial statements. AMDAHL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The accompanying interim financial statements and related notes should be read in conjunction with the financial statements and related notes included in the Company's 1996 Annual Report to Stockholders. RELATIONSHIP WITH FUJITSU LIMITED During the first quarter of 1997 the Company recognized equipment sales to Fujitsu Limited (Fujitsu) under distributorship and other arrangements which contributed $5,154,000 to equipment sales compared to $7,486,000 in the first quarter of 1996. In 1995 the Company entered into a contract manufacturing agreement with HaL Computer Systems, Inc. (HaL), a wholly-owned subsidiary of Fujitsu, whereby Amdahl agreed to manufacture open system workstations for HaL. The Company also performed circuit board assembly for Ross Technology, Inc., a majority-owned subsidiary of Fujitsu. Both of these agreements were completed in 1996 and contributed $4,427,000 and a negative $1,536,000 to equipment sales and gross margin in the first quarter of 1996. Fujitsu reimburses Amdahl for certain specific engineering development activities performed by Amdahl from time to time related to products which are being jointly developed by Amdahl and Fujitsu. In connection with these development efforts, Amdahl recorded $8,903,000 as an offset to engineering and development expenses in the first quarter of 1997, compared to $6,200,000 in the first quarter of 1996. In March 1997 Amdahl granted Fujitsu a license for certain storage system software for use in conjunction with Fujitsu's proprietary operating system for $4,700,000. This amount was recognized in first quarter 1997 as software revenue. In addition, Fujitsu has agreed to compensate Amdahl as a result of changes to development schedules requested by Fujitsu for storage products currently being developed by Fujitsu for the Company under existing joint development programs. Of this compensation, the Company recognized a credit of $6,200,000 which reduced equipment sales cost of revenues in the first quarter of 1997. Amounts due from Fujitsu and their subsidiaries included in receivables were $27,782,000 and $43,906,000 as of March 28,1997 and December 27, 1996, respectively. At March 28, 1997 and December 27, 1996, $80,000,000 was outstanding under the loan agreement with Fujitsu. The terms of the loan were renegotiated in January 1997, and the full amount is payable in January 1998. Interest expense associated with the loan was $1,375,000 and $1,558,000 in the first quarters of 1997 and 1996, respectively. SUPPLEMENTARY CASH FLOW DISCLOSURE Income taxes of $3,403,000 (net of taxes refunded of $152,000) were paid by the Company in the first three months of 1997, and income taxes of $4,555,000 were refunded to the Company in the first three months of 1996. Interest paid on all borrowings was $2,813,000 and $2,231,000 for the first three months of 1997 and 1996, respectively. NONCASH INVESTING ACTIVITIES Net inventory capitalized into property, plan and equipment was $7,474,000 in the first three months of 1997, and transfers of Amdahl-manufactured systems from net property, plant and equipment to inventories were $6,942,000 in the first three months of 1996. SUBSEQUENT EVENTS On April 22, 1997 the Company paid $65 million in cash for the remaining purchase price of Trecom Business Systems, Inc. (Trecom), which was acquired in the second quarter of 1996. On April 16, 1997 Amdahl's professional services company, DMR Trecom, Inc., acquired William J. Kelley & Co., Inc., a Boston- based information technology firm, for $5,100,000. The acquisition will be accounted for in the second quarter of 1997 using the purchase method of accounting. A lawsuit was filed against the Company in June 1995 by an equipment supplier for breach of contract. The Company filed a counterclaim against the supplier in July 1995 for amounts it believed were owed to it by the supplier. On May 5, 1997 a judgement was awarded in favor of the supplier for approximately $4 million. NEW ACCOUNTING STANDARDS In February 1997 the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 128, Earnings per Share, which will be adopted by the Company in the fourth quarter of 1997. SFAS No. 128 requires companies to compute net income per share under two different methods, basic and diluted, and to disclose the methodology used for the calculation. If SFAS No. 128 had been applied by the Company during the first quarter of 1997 and 1996, basic net income per share and diluted net income per share would not have changed. In February 1997 FASB issued SFAS No. 129, Disclosure of Information about Capital Structure, which will be adopted by the Company in the fourth quarter of 1997. SFAS No. 129 requires companies to disclose certain information about their capital structure. The Company does not anticipate that SFAS No. 129 will have a material impact on its financial position, results of operations or cash flows. AMDAHL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management's Discussion and Analysis should be read in conjunction with the Management's Discussion and Analysis included in the Company's 1996 Annual Report to Stockholders. RESULTS OF OPERATIONS First quarter of 1997 compared to first quarter of 1996: Total revenues increased 24% to $392,905,000 in the first quarter of 1997 from $317,028,000 in the first quarter of 1996. Equipment sales revenues increased 20% in the first quarter of 1997 from the first quarter of 1996. Equipment sales were 29% and 30% of total revenues in the first quarters of 1997 and 1996, respectively. The first quarter 1997 equipment sales included revenues from shipments of the Company's Millennium CMOS systems which were not yet available for sale in the first quarter of 1996. Revenues from equipment sales of 5995M systems decreased 53% in the first quarter of 1997 from the first quarter of 1996 due to severe price competition and the limited availability of these systems during first quarter 1997. Revenues from storage product equipment sales increased 24% in the first quarter of 1997 when compared to the same period of 1996 due to increased shipments in open system storage products. Service, software and other revenues were 71% and 70% of total revenues in the first quarters of 1997 and 1996, respectively. Service, software and other revenues increased 26% in the first quarter of 1997 from the first quarter of 1996, primarily reflecting consulting services revenues from Trecom, which was acquired in the second quarter of 1996. Total gross margin was 26% of revenues in the first quarter of 1997, compared to 23% in the first quarter of 1996. The gross margin percentage on equipment sales increased to 37% in the first quarter of 1997 from 9% in the first quarter of 1996 due in large part to sales of the Millennium systems which have higher gross margins than the 5995M systems. The gross margin on service, software and other revenues decreased to 27% in the first quarter of 1997 from 29% in the first quarter of 1996. The primary cause of the decrease is that gross margins from the maintenance business have been negatively effected by competitive pricing pressures and an erosion of the installed base of older generations of mainframe. In addition, the consulting and professional services businesses contributed a greater proportion of revenues during 1997. These businesses generate lower gross margins than the Company's hardware maintenance business which predominated services revenues in 1996. First quarter 1997 engineering and development expenses decreased $6 million or 19% when compared to the first quarter of 1996. The reduction in engineering and development expenses is primarily due to reductions in its workforce and facilities to levels more appropriate to current business requirements. This reduction also contributed to the decrease of first quarter 1997 marketing, general and administrative expenses of $11 million or 11% when compared to the first quarter of 1996. Net interest income decreased $4 million in the first quarter of 1997 from the first quarter of 1996 due primarily to a reduction in short-term investments, reflecting cash used for operations and the payment of $66 million for the acquisition of Trecom in the second quarter of 1996. The effective income tax rate was negative 36% in the first quarter of 1997, compared to 20% in the first quarter of 1996. FINANCIAL CONDITION March 28, 1997 Compared to December 26, 1996 The Company's net cash position (cash, restricted cash and short-term investments net of short-term and long-term debt, excluding capitalized lease obligations) increased by $11 million from December 27, 1996 to March 28, 1997. Cash, cash equivalents, restricted cash and short-term investments increased $2 million. Receivables decreased $126 million, reflecting lower revenues. Inventories decreased $20 million, due to lower manufacturing costs on Millennium mainframe systems. LIQUIDITY The nature of the computer industry, combined with the current economic environment, make it very difficult for the Company to predict future liquidity requirements with certainty. However, the Company believes that existing cash and short-term investments will be adequate to finance continuing operations, investments in property and equipment, inventories and spare parts, expenditures for the development of new products, repayment of outstanding debt and the remaining liability for the acquisition of Trecom, at least through 1997. Over the longer term, Amdahl must successfully execute its plans to generate significant positive cash flows if it is to sustain adequate liquidity without impairing growth or requiring the infusion of additional funds, either from external sources of cash or from the sale of business assets. PART II. OTHER INFORMATION Item 1. Legal Proceedings Not applicable. Item 2. Changes in Securities Not applicable. Item 3. Defaults upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable Item 5. Other information Not applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10 First amendment to loan agreement between Amdahl Corporation and Fujitsu Limited dated January 27, 1994. 27 Financial data schedule. (b) Reports on Form 8-K Not applicable. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMDAHL CORPORATION Date: May 9, 1997 By: /s/ John C. Lewis ---------------------- ---------------------- John C. Lewis Chairman of the Board, President and Chief Executive Officer Date: May 9, 1997 By: /s/ Ernest B. Thompson --------------------- -------------------------- Ernest B. Thompson Vice President and Controller (Principal Accounting Officer) EX-10 2 Exhibit 10 FIRST AMENDMENT TO LOAN AGREEMENT BETWEEN AMDAHL CORPORATION AND FUJITSU LIMITED DATE JANUARY 27,1994 THIS AMENDMENT (the "First Amendment") is made as of January 27, 1997. BETWEEN (1) AMDAHL CORPORATION, a U.S. corporation incorporated under the laws of the state of Delaware, with its principal office at 1250 East Arques Avenue, P.O. Box 3470, Sunnyvale, California, 94088-3470, U.S.A. ("the Borrower" under the Agreement); and (2) FUJITSU LIMITED, a Japanese company, with its principal office at 6-1 Marunouchi 1-chome, Chiyoda-ku, Tokyo 100, Japan ("the Lender" under the Agreement). WHEREAS (A) The Borrower and the Lender entered into an agreement dated January 27, 1994 whereby the Lender agreed to made advances to the Borrower up to US$100,000,000 (the "Agreement"); (B) The amount advanced under the Agreement and outstanding as of the date of this First Amendment is US$80,000,000 (the "Loan" under the Agreement), and the repayment date of the Loan is January 28, 1997 (the "Repayment Date" under the Agreement); and (C) The Borrower and the Lender have agreed to extend the Repayment Date of the Loan to January 28, 1998, on substantially the same terms and conditions of the Agreement. NOW IT IS HEREBY AGREED as follows: 1. The Repayment Date in Clause 1.1 of the Agreement is changed to read as January 28, 1998. 2. The definition of the Commitment Period in Clause 1.1 shall be changed to the period beginning on the Closing Date and ending on January 27, 1997. The undrawn part of the Loan Facility shall be canceled as of January 27, 1997, and no second and subsequent tranches shall be available under the Clause 7.2.2 of the Agreement. 3. The words "each fiscal month of each year of the Commitment Period" in Clause 6.1 of the Agreement shall be replaced by "each fiscal month of each year until the Borrower pays full amount of the Loan and all interest thereon,". 4. The Borrower hereby repeats the representations and warranties contained in Clause 15 of the Agreement; provided, that for the purpose of the representations and warranties given under this First Amendment, the date of the unaudited consolidated financial statements of the Borrower and its Subsidiaries as set forth in Clause 15.11 of the Agreement shall be December 27, 1996. 5. The Borrower also represents and warrants that no Senior Loan Documents were executed prior to the date of this First Amendment. 6. The effectiveness of this First Amendment and the Borrower's right to extend the Repayment Period of the Loan to January 28, 1998 are subject to (i) the satisfaction as of January 27, 1997 of the conditions specified in Clauses 5.2.2, and 5.3.1 of the Agreement and the condition that the Lender shall have received the certificate specified in Clause 5.3.3 of the Agreement. In this regard, the reference to "Drawdown Date" in Clause 5.3.3 shall be modified to read as January 27, 1997. The effectiveness of this First Amendment shall also be subject to the issuance of a foreign exchange clearance document by the Minister of Finance of Japan for the extension of the Loan as contemplated in this First Amendment. 7. Notwithstanding the foregoing, the Loan plus all accrued interest thereon shall be due and payable on February 20, 1997 unless prior thereto the Borrower has delivered to the Lender the document specified in Clause 5.3.2 of the Agreement. In this regard, references to "Agreement" in Clause 5.3.2 shall mean this First Amendment. . 8. After the date of this First Amendment, the Borrower shall not be allowed to make any prepayment of the Loan in accordance with the Clause 12 of the Agreement. 9. The Borrower shall reimburse the Lender all reasonable expenses (and any value added or similar taxes thereon) incurred by the Lender in connection with the negotiation, preparation, execution and completion of this First Amendment, as well as the enforcement and preservation of any of its rights under this First Amendment. The Borrower shall also pay all present and future stamp, registration and similar taxes or charges which may be payable or determined to be payable in connection with the execution, delivery, performance or enforcement of this First Amendment. 10. Capitalized terms in this First Amendment not defined herein shall have the meanings ascribed to them in the Agreement. Except as expressly modified herein, all other terms and conditions of the Agreement shall continue unchanged and remain in full force and effect. The Borrower Signed by /s/ John C. Lewis John C. Lewis Chairman and Chief Executive Officer for and on behalf of AMDAHL CORPORATION The Lender Signed by /s/ Tadashi Sekizawa Tadashi Sekizawa President and Representative Director for and on behalf of FUJITSU LIMITED EX-27 3
5 1,000 3-MOS DEC-26-1997 MAR-21-1997 254,503 149,862 373,290 0 108,446 971,070 930,185 688,426 1,449,583 744,131 48 0 0 6,116 597,289 1,449,583 112,867 392,905 71,537 291,143 111,901 0 2,855 (8,005) 3,000 (11,005) 0 0 0 (11,005) (.09) (.09)
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