-----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, U7DDhwwMHMbL83llO8xV6C/Bld5UQkPr1P7qFYfjdMWotuoG6/v/IUWiKN/r0lHD 2tpX9JJdbG5cixAkzb23cA== 0000950135-95-002398.txt : 19951119 0000950135-95-002398.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950135-95-002398 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WANG LABORATORIES INC CENTRAL INDEX KEY: 0000104519 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER & OFFICE EQUIPMENT [3570] IRS NUMBER: 042192707 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05677 FILM NUMBER: 95592260 BUSINESS ADDRESS: STREET 1: 600 TECHNOLOGY PARK DRIVE CITY: BILLERICA STATE: MA ZIP: 01821-4120 BUSINESS PHONE: 5084595000 MAIL ADDRESS: STREET 1: 600 TECHNOLOGY PARK DRIVE STREET 2: MAILSTOP 014-B3C CITY: BILLERICA STATE: MA ZIP: 01821-4120 10-Q 1 WANG LABORATORIES, INC. 1 Form 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 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 1-5677 WANG LABORATORIES, INC. ----------------------- (Exact name of registrant as specified in its charter) DELAWARE 04-2192707 -------- ---------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 600 Technology Park Drive Billerica, Massachusetts 01821-4130 ------------------------- ---------- (Address of principal executive offices) (Zip Code) (508) 967-5000 -------------- (Registrant's telephone number, including area code) Not Applicable -------------- (Former name, former address and former fiscal year, if changed since last report) 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 l934 during the preceding twelve months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No ----- ----- Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practical date (September 30, 1995): Common stock, par value $.01 per share 34,036,851 shares 2 2 WANG LABORATORIES, INC. AND SUBSIDIARIES INDEX
Part I. FINANCIAL INFORMATION PAGE NO. Item 1. Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Balance Sheet - 3 September 30, 1995 and June 30, 1995 Condensed Consolidated Statement of Operations - 5 Three months ended September 30, 1995 and Three months ended September 30, 1994 Condensed Consolidated Statement of Cash Flows - 6 Three months ended September 30, 1995 and Three months ended September 30, 1994 Notes to Condensed Consolidated Financial Statements - 7 September 30, 1995 Item 2. Management's Discussion and Analysis of Financial 11 Condition and Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings 15 Item 6. Exhibits and Reports on Form 8-K 15 SIGNATURE 19
3 3 WANG LABORATORIES, INC. AND SUBSIDIARIES PART I - FINANCIAL INFORMATION CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
September 30, June 30, 1995 1995 ------------- -------- ASSETS (Dollars in millions) - ------ CURRENT ASSETS Cash and equivalents $ 153.9 $ 181.3 Accounts receivable, net of allowances of $12.0 million at September 30, 1995 and $10.7 million at June 30, 1995 198.4 182.4 Inventories 28.1 24.4 Other current assets 36.0 37.2 -------- -------- Total current assets 416.4 425.3 Depreciable assets, net of accumulated depreciation of $73.7 million at September 30, 1995 and $60.9 million at June 30, 1995 124.3 134.0 Intangible assets, net 262.3 274.0 Other 25.1 25.7 -------- -------- Total assets $ 828.1 $ 859.0 ======== ========
See notes to the condensed consolidated financial statements. 4 4 WANG LABORATORIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET - (Continued) (UNAUDITED)
September 30, June 30, 1995 1995 ------------- ------- (Dollars in millions) LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------- CURRENT LIABILITIES Borrowings due within one year $ 2.0 $ 3.0 Accounts payable, accrued expenses and other 263.5 275.0 Income taxes 9.9 10.1 Deferred service revenue 91.1 93.1 ------ ------ Total current liabilities 366.5 381.2 LONG-TERM LIABILITIES Debt 22.8 22.8 Restructuring 8.0 9.0 Other liabilities 85.3 80.8 ------ ------ Total long-term liabilities 116.1 112.6 4 1/2% Series A cumulative convertible preferred stock, $.01 par value, 90,000 shares issued at September 30, 1995 and June 30, 1995; redemption and liquidation preference of $90.0 million 84.2 84.1 11% Exchangeable preferred stock, $.01 par value, 3,660,000 shares authorized, 2,914,325 issued at September 30, 1995 and 2,836,326 at June 30, 1995; redemption and liquidation preference of $72.8 million 63.7 61.5 STOCKHOLDERS' EQUITY Common stock, $.01 par value, 100,000,000 shares authorized; outstanding shares: 34,036,851 at September 30, 1995 and 33,907,759 at June 30, 1995 0.3 0.3 Capital in excess of par value 281.4 280.8 Cumulative translation adjustment 0.2 (0.5) Accumulated deficit (84.3) (61.0) ------ ------ Total stockholders' equity 197.6 219.6 ------ ------ Total liabilities and stockholders' equity $828.1 $859.0 ====== ======
See notes to the condensed consolidated financial statements. 5 5 WANG LABORATORIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Three Months Ended Ended September 30, September 30, 1995 1994 ------------- ------------- (Dollars in millions, except per share data) REVENUES Product sales $ 82.8 $ 78.7 Service and other 181.3 113.5 ------ ------ 264.1 192.2 COSTS AND EXPENSES Cost of product sales 54.7 54.8 Cost of service and other 124.1 71.4 Research and development 8.7 7.6 Selling, general and administrative 58.9 49.4 Amortization of intangibles - acquisition and fresh-start 10.4 6.6 Acquisition-related charges 27.2 -- ------ ------ Total costs and expenses 284.0 189.8 ------ ------ OPERATING INCOME (LOSS) (19.9) 2.4 OTHER (INCOME) EXPENSE Interest expense 1.0 0.8 Other income - net (3.0) (3.9) ------ ------ Total other income (2.0) (3.1) ------ ------ INCOME (LOSS) BEFORE INCOME TAXES (17.9) 5.5 Provision for income taxes 2.0 2.7 ------ ------- NET INCOME (LOSS) (19.9) 2.8 Dividends and accretion on preferred stock (3.4) (2.0) ------ ------ NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $(23.3) $ 0.8 ====== ====== Weighted average shares and common share equivalents outstanding (in millions) 34.0 32.8 NET INCOME (LOSS) PER SHARE $(0.68) $ 0.02 ====== ======
See notes to the condensed consolidated financial statements. 6 6 WANG LABORATORIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Three Months Three Months Ended Ended September 30, September 30, 1995 1994 ------------- ------------- (Dollars in millions) OPERATING ACTIVITIES Net income (loss) $(19.9) $ 2.8 Depreciation 14.6 6.8 Amortization 11.7 7.6 Non-cash provision for income taxes 1.8 2.4 Provision for acquisition-related charges 27.2 -- Payments of acquisition- and integration- related costs and other charges (10.7) -- CHANGES IN OTHER ACCOUNTS AFFECTING OPERATIONS Accounts receivable (16.0) 1.2 Inventories (0.9) 1.4 Other current assets 0.3 (0.4) Accounts payable and other current liabilities (11.5) (4.1) Other -- (1.2) ------ ------ Net changes in other accounts affecting operations (28.1) (3.1) ------ ------ Net cash provided by (used in) operations before restructuring payments and reorganization-related items (3.4) 16.5 Restructuring payments and reorganization- related items (4.1) (20.1) ------ ------ Net cash used in operations (7.5) (3.6) ------ ------ INVESTING ACTIVITIES Investment in depreciable assets (9.9) (5.7) Investment in capitalized software (0.5) (1.4) Business acquisitions, net of cash acquired (7.6) (1.5) Other (1.6) (0.6) ------ ------ Net cash used in investing activities (19.6) (9.2) ------ ------ FINANCING ACTIVITIES Payments of long-term debt -- (0.4) Increase (decrease) in short-term borrowings (0.8) 6.2 Other 0.6 -- ------ ------ Net cash provided by (used in) financing activities (0.2) 5.8 ------ ------ Effect of changes in foreign exchange rates on cash (0.1) 1.8 ------ ------ DECREASE IN CASH AND EQUIVALENTS (27.4) (5.2) CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 181.3 189.4 ------ ------ CASH AND EQUIVALENTS AT END OF PERIOD $153.9 $184.2 ====== ======
See notes to the condensed consolidated financial statements. 7 7 WANG LABORATORIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1995 NOTE A - BASIS OF PRESENTATION - ------------------------------ During interim periods, the Company follows the accounting policies set forth in its most recent Annual Report on Form 10-K, filed with the Securities and Exchange Commission. Users of financial information produced for interim periods are encouraged to refer to the footnotes contained in the most recent Annual Report on Form 10-K when reviewing interim financial statements. The results of operations for the periods reported are not necessarily indicative of those that may be expected for the full year. However, in the opinion of management, the accompanying interim financial statements contain all material adjustments, consisting principally of normal recurring adjustments necessary to present fairly the financial condition, the results of operations and cash flows of Wang Laboratories, Inc. and its consolidated subsidiaries for the interim periods presented. Earnings per share is based on the weighted average number of common shares outstanding, including those yet to be distributed by the Disbursing Agent appointed under the Company's Reorganization Plan, and the effect, when dilutive, of stock options and warrants. Net income(loss), for purposes of calculating earnings per share, has been reduced by cumulative dividends and accretion related to the Company's preferred stock. Certain amounts in previously issued financial statements were reclassified to conform to current presentations. NOTE B - BUSINESS ACQUISITION - ----------------------------- On July 21, 1995 ("Closing Date"), the Company acquired Sigma Imaging Systems, Inc. ("Sigma"), a privately held company that designs and markets workflow and imaging software for paper-intensive businesses, including insurance, banking, finance, utilities and government. The purchase price of $20.0 million consists of $15.0 million in cash and $5.0 million in common stock of the Company. A cash payment of $9.0 million was made on July 21, 1995 and $6.0 million is due to former Sigma stockholders in February 1996. The common stock will be distributed to former Sigma stockholders on January 3, 1997. The 299,176 shares of the Company's common stock to be issued in connection with the acquisition of Sigma was determined by dividing $5.0 million by $16.71, which was the average closing sale price per share of the Company's common stock on the 20 consecutive trading days ending on the trading day prior to the closing date. The acquisition was accounted for using the purchase method of accounting in accordance with Accounting Principles Board No. 16, "Business Combinations" ("APB 16"). Under APB 16, purchase price allocations were made to the assets acquired and the liabilities assumed based on their respective fair values. The excess of costs over the fair value of the net assets acquired totaled $5.9 million and is included in intangible assets. 8 8 WANG LABORATORIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1995 NOTE B (Continued) - ------ Acquisition-related charges have been recorded as of September 30, 1995, and consist of the following: Sigma in-process research and development $16.0 Capitalized software 6.6 Workforce-related and other 4.6 ----- Total $27.2 =====
The in-process research and development charge consists of that portion of the purchase price allocated to Sigma which was charged to operations because, in management's opinion, technological feasibility for this purchased research and development had not been established. Capitalized software write-offs pertain to overlapping workflow software development efforts. Workforce-related charges, consisting principally of Wang severance costs, were established based on specific identification of employees to be terminated, along with their job classifications or functions and their locations. Other charges relate to customer transition commitments for discontinued Wang product offerings. Cash outlays to complete the acquisition-related initiatives are estimated at $3.9 million, and are anticipated to be generally completed during fiscal 1996. Pro forma results of operations are not presented as the amounts do not differ significantly from the Company's historical results. NOTE C - OTHER BALANCE SHEET INFORMATION - ---------------------------------------- Components of selected captions in the Condensed Consolidated Balance Sheet follow (in millions):
September 30, June 30, 1995 1995 ------------- -------- Inventories Finished products $15.8 $14.5 Raw materials and work-in-process 8.3 8.7 Service parts and supplies 4.0 1.2 ----- ----- $28.1 $24.4 ===== =====
9 9 WANG LABORATORIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued) SEPTEMBER 30, 1995 NOTE C - (Continued) - ------
September 30, June 30, 1995 1995 ------------- -------- Intangible assets Trademarks and patents $ 21.8 $ 21.3 Computer software 34.2 42.2 Installed base - service 124.0 123.5 License agreements 29.9 29.9 Assembled workforce 13.8 11.7 Goodwill 21.4 18.9 Reorganization value in excess of amounts allocated to identifiable assets 85.4 86.6 ------ ------ 330.5 334.1 Less accumulated amortization 68.2 60.1 ------ ------ $262.3 $274.0 ====== ====== Accounts payable, accrued expenses and other Accounts payable $ 48.9 $ 62.2 Accrued expenses 97.2 91.8 Compensation and benefits 48.5 50.1 Restructuring and acquisition- and integration-related accruals 47.7 56.6 Other 21.2 14.3 ------ ------ $263.5 $275.0 ====== ====== Other long-term liabilities Postretirement benefits accrual $ 18.6 $ 18.5 Pension liability 7.0 8.2 Bull facilities accrual 16.0 16.5 Reorganization-related accruals 8.0 8.4 Insurance accruals 7.2 6.5 Deferred income taxes 15.2 15.3 Other 13.3 7.4 ------ ------ $ 85.3 $ 80.8 ====== ======
NOTE D - CONTINGENCIES - ---------------------- On October 27, 1994, Wang filed suit against FileNet Corporation alleging the infringement of five Wang patents covering a wide range of imaging and workflow technologies. A sixth imaging patent was subsequently added. Wang is seeking damages and injunctive relief. The parties are currently engaged in the discovery process. The trial is currently scheduled for calendar 1996. 10 10 WANG LABORATORIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued) SEPTEMBER 30, 1995 NOTE D (Continued) - ------ The Company is a defendant in several "repetitive stress injury" ("RSI") cases. Such cases, which have been filed against a large number of computer manufacturers, allege that the various defendants' keyboards caused the plaintiffs' injuries. The Company believes that all RSI claims brought against the Company arising before the confirmation of the Reorganization Plan will be discharged pursuant to the Reorganization Plan. In addition, the Company has maintained comprehensive general liability insurance policies with several insurers. These policies indemnify the Company for bodily injury damages arising out of its operations and products. Nevertheless, high deductibles, retrospective premium adjustments, and other issues relating to insurance coverage of RSI claims may significantly limit the amount of insurance coverage available to the Company for such claims. Given the lack of legal precedent with respect to RSI claims, the Company can predict neither the number of cases nor the associated claims for damages that may be filed against the Company. To date, approximately 60 claims have been made against the Company alleging damages for RSI injuries. Claims for all but three of these have been filed as part of the Company's Chapter 11 proceeding (the Company filed for Chapter 11 protection in August 1992 and effectively emerged from Chapter 11 on September 30, 1993). The Company intends to defend itself vigorously against any liability asserted. Prior to its filing for Chapter 11 protection, the Company was also a defendant in a number of other lawsuits arising from the conduct of its business. Substantially all such suits were stayed while the Company operated under Chapter 11. Claims in such suits relating to periods prior to the Company's filing under Chapter 11 are being extinguished and, to the extent allowed, have been provided for under the Reorganization Plan. Although the Company is not in a position to predict accurately the results of specific matters, the Company does not currently believe that its liability, if any, for all litigation will be material to the Company's consolidated financial position or its results of operations. On September 5, 1995, the Company filed suit in the United States District Court for the Eastern District of Virginia against Decision Servcom, Inc. ("DSI"), alleging infringement by DSI of copyrights held by the Company on the operating system software for the Company's VS line of minicomputers. The Company is seeking damages and injunctive relief. NOTE E - SUBSEQUENT EVENT - ------------------------- On October 18, 1995, the Company acquired BISS Limited, a privately held company operating in the United Kingdom that designs, installs, integrates and supports network and client/server computing solutions. Approximately $14 million of the $16 million purchase price was paid in cash in October, with the additional $2 million to be paid in March 1997. 11 11 WANG LABORATORIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- The Company reported revenues of $264.1 million for the three months ended September 30, 1995, a 37.4% increase compared to revenues of $192.2 million for the same period of the prior year. After acquisition-related charges of $27.2 million relating to the acquisition of Sigma Imaging Systems, Inc. ("Sigma") and $10.4 million of amortization of fresh-start and acquired intangible assets, the Company reported an operating loss of $19.9 million. This compares to operating income of $2.4 million for the quarter ended September 30, 1994, which included $6.6 million of amortization of intangible assets. Earnings before interest, income taxes, depreciation and amortization ("EBITDA") amounted to $33.9 million for the first quarter, compared to $18.5 million for the quarter ended September 30, 1994, an increase of 83.2%. EBITDA was determined by excluding from the net income(loss): acquisition-related charges; income taxes; interest expense; interest income (interest income of $2.7 million and $2.1 million for the quarter ended September 30, 1995 and 1994, respectively, was reported in the caption Other income); depreciation and amortization. On July 21, 1995, the Company completed the acquisition of Sigma. Sigma designs and markets workflow and imaging software for paper-intensive businesses. These products provide customers the scaleable, enterprise-wide processing power required for high-volume, image-enabled transaction processing applications. Sigma's products are used in some of the largest multi-site imaging and workflow systems in operation today. The Sigma products running on Microsoft Corporation's Windows NT operating systems will allow Wang to benefit from revenue growth opportunities made possible by its alliance with Microsoft Corporation. The Company has begun shipment of its workflow and imaging software designed to run on Microsoft Corporation's Windows NT server and BackOffice software. As part of the Company's alliance with Microsoft, the Company was designated as the preferred vendor of imaging and workflow systems, and is working closely with Microsoft in the definition of the standards which would enable interoperability between production workflow systems and electronic messaging systems. In the first half of fiscal 1996, the Company expects to provide connections between its document imaging software for Windows and the Company's family of imaging server products. Product revenues for the first quarter increased by 14.1% to $42.3 million in the United States, while international product revenues decreased slightly to $40.5 million, compared to $37.1 million and $41.6 million, respectively, for the same period of the prior year. Proprietary product sales totaled $18.3 million for the first quarter, 1995 as compared to $18.8 million in the prior year first quarter. Network product and other product sales totaled $56.0 million and $56.6 million for the first quarter of 1995 and 1994, respectively. Open software product sales more than doubled to $8.5 million for the three months ended September 30, 1995, from $3.3 million during the three months ended September 30, 1994. 12 12 WANG LABORATORIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Results of Operations (Continued) - --------------------- Service and other revenues for the three months ended September 30, 1995 in the United States increased $52.2 million to $100.9 million, while international service and other revenues increased by $15.6 million to $80.4 million, compared to the same period of the prior year. Increased service and other revenues are due to the acquisition of the U.S. customer services business of Bull HN Information Systems, Inc. and certain of its sales and service subsidiaries ("Bull") in the third quarter of fiscal 1995. Proprietary services increased $19.8 million as a result of a $38.0 million increase in Bull proprietary product services revenue, and an $18.2 million decrease in Wang proprietary product services revenue. Wang proprietary maintenance revenues declined at approximately the same rate as they had in recent periods. Network services increased $47.3 million compared to the same period of the prior year. This increase was mainly due to increased third party maintenance contracts acquired from Bull. Open software services totaled $0.7 million for the quarter. Product gross margin for the three months ended September 30, 1995 increased to 33.9% from 30.4% in the comparable period of the prior year. The increase was due to changes in product mix, particularly the increased volume of open software and the addition of high-margin Bull products. Gross margin for service and other revenues for the three months ended September 30, 1995 decreased to 31.6% from 37.1% in the comparable period of the prior year. Margins were negatively affected by the increase in maintenance on lower-margin multi-vendor service products. The service gross margin continued to be adversely affected by competitive and technological pressures. Additionally, the Bull acquisition has reduced the gross margin because of its historically lower margins on its proprietary maintenance contracts as compared to margins on the Company's proprietary maintenance contracts. Research and development costs increased by $1.1 million, or 14.5%, representing 3.3% and 4.0% of revenues for the three months ended September 30, 1995 and 1994, respectively. The increase is due to the Bull and Sigma acquisitions. The Company's development efforts are now focused on developing software for open systems platforms and to continuing support of its proprietary VS products. Selling, general and administrative expenses increased $9.5 million, or 19.2% for the period due to the Bull and Sigma acquisitions, and represented 22.3% and 25.7% of revenues for the three months ended September 30, 1995 and 1994, respectively. Offsetting these increases were acquisition- and integration-related initiatives and restructuring programs which continued to contribute significantly to the elimination of unnecessary or redundant programs, personnel, support costs and other related expenses. Amortization of fresh-start and acquired intangible assets totaled $10.4 million and $6.6 million for the three months ended September 30, 1995 and 1994, respectively. Amortization of $3.5 million was recorded for the three months ended September 30, 1995 for intangible assets established in connection with the Bull acquisition. Amortization of $6.5 million and $6.6 million for the three months ended September 30, 1995 and 1994, respectively, relates to the implementation of fresh-start reporting as of September 30, 1993. 13 13 WANG LABORATORIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Results of Operations (Continued) - --------------------- Interest expense increased to $1.0 million, principally as the result of interest on the acquisition note payable to Bull HN Information Systems, Inc. Other income was primarily comprised of interest income, which totaled $2.7 million and $2.1 million for the three months ended September 30, 1995 and 1994, respectively, and which resulted primarily from investments in time deposits. The provision for income taxes of $2.0 million and $2.7 million included $1.8 million and $2.4 million of non-cash expense for the three months ended September 30, 1995 and 1994, respectively, relating to the utilization of the Company's net operating loss carryforwards. Under fresh-start reporting, realization of these net operating loss carryforwards is recognized as a reduction of Reorganization value in excess of amounts allocated to identifiable intangible assets. At September 30, 1995, the Company employed approximately 6,800 people in continuing operations, compared to 5,000 at September 30, 1994. The Bull acquisition resulted in increased personnel levels of approximately 1,800. Liquidity and Sources of Capital - -------------------------------- Cash and equivalents decreased $27.4 million to $153.9 million, primarily due to working capital needs, payments of restructuring, reorganization and acquisition- and integration-related items and cash used for the Sigma acquisition. This compares to a $5.2 million decrease in the same period of the prior year. Cash used in operations before reorganization-related items of $3.4 million and for reorganization- related items of $4.1 million, resulted in net cash used in operations of $7.5 million for the three months ended September 30, 1995. This compares to cash provided by operations before reorganization-related items of $16.5 million, offset by payments of reorganization-related items of $20.1 million, resulting in $3.6 million net cash used in operations in the three months ended September 30, 1994. Higher levels of receivables and inventories utilized $16.9 million of cash in the current quarter, compared to cash generated of $2.6 million in the same quarter of the prior year. Lower accounts payable and other current liabilities resulted in reductions of $11.5 million and $4.1 million for the three months ended September 30, 1995 and 1994, respectively. Receivable days sales outstanding increased to 62 days at September 30, 1995 compared to 49 days at September 30, 1994, and relates primarily to the inclusion of the acquired Bull businesses along with the implementation of new financial systems. Inventory turnover rate was 7.8 times at September 30, 1995, compared to 8.0 times at September 30, 1994. Net cash used in investing activities totaled $19.6 million for the quarter ended September 30, 1995 compared to $9.2 million for the same period of the prior year. Investment in depreciable assets increased by $4.2 million, primarily due to the acquisition of the Bull businesses. Cash paid for business acquisitions of $7.6 million relates to the Sigma acquisition, and consists of a $9.0 million payment and $0.1 million of transaction costs, net of $1.5 million of cash acquired (see Note B, "Business Acquisition"). 14 14 WANG LABORATORIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Liquidity and Sources of Capital (Continued) - -------------------------------- Net cash used in financing activities totaled $0.2 million for the period compared to net cash provided by financing activities of $5.8 million in the same period of the prior year. Short-term borrowings resulted in cash used of $0.8 million for the three months ended September 30, 1995 compared to cash provided of $6.2 million for the same period of the prior year. At September 30, 1995, in addition to the cash balance on hand, the parent company had available to it the unused portions of the BTCC financing arrangement, providing for borrowings and/or the issuance of additional letters of credit of up to $74.1 million. In addition to normal operating activities, expected cash requirements over the next twelve months include approximately $50 million for acquisition- and integration-related costs and other charges and previously recorded restructuring and reorganization-related items. Dividend requirements of the Company's outstanding 11% Exchangeable Preferred Stock can be satisfied in either cash or payment-in-kind, at the option of the Company, through September 30, 1996. Dividends after September 30, 1996 must be paid in cash. Payment of cash dividends on 4 1/2% Series A Cumulative Convertible Preferred Stock is currently prohibited by the terms of the 11% Exchangeable Preferred Stock and the BTCC financing agreement. The Company believes that existing cash balances, cash generated from operations, and borrowing availability under the BTCC facility will be sufficient to meet the parent company's and subsidiaries' cash requirements from operations for at least the next twelve months, and to complete the planned acquisition- and integration-related and restructuring efforts. As part of furthering its business strategy, the Company continually explores the acquisition of or the opportunity for strategic relationships with other businesses. One or more of these opportunities could have an impact on the Company's liquidity through the use of cash or the issuance of debt, or result in the issuance of additional equity securities of the Company. 15 15 PART II - OTHER INFORMATION ITEM 1 Legal Proceedings During the quarter ended September 30, 1995 a lawsuit filed by a shareholder in December 1992 alleging certain violations of federal securities laws and other laws was settled within the limits of the Registrant's applicable insurance policies. ITEM 6. Exhibits and Reports on Form 8-K (a) The following exhibits are included herein:
Exhibit No. Description - ----------- ----------------------------------------- 2.1(1) The Amended and Restated Reorganization Plan of Wang Laboratories, Inc. and Official Committee of Unsecured Creditors dated September 30, 1993 3.1(2) Certificate of Incorporation 3.2(12) Amended and Restated Certificate of Stock Designation with respect to the 11% Preferred Stock 3.3(1) By-laws of the Registrant 3.4(9) Certificate of Incorporation, as amended 3.5(13) Certificate of Stock Designation with respect to the 4 1/2% Series A Cumulative Convertible Preferred Stock 10.1(3) Stock Incentive Plan 10.2(3) 1993 Directors' Stock Option Plan 10.3(4) Form of Contingent Severance Compensation Agreements with Donald P. Casey, J.J. Van Vuuren, Albert A. Notini, William P. Ferry, David I. Goulden, Bruce A. Ryan, James J. Hogan and Franklyn A. Caine, each an executive officer of the Company 10.4(5) Contingent Severance Compensation Agreement with Joseph M. Tucci 10.5(7) Employment Agreement with Joseph M. Tucci, as amended
16 16
Exhibit No. Description - ----------- ----------------------------------------- 10.6(6) Employment Agreement with Donald P. Casey 10.7(7) Employment Agreement with William P. Ferry 10.8(7) Employment Agreement with James J. Hogan 10.9(3) Loan and Security Agreement with Congress Financial Corporation, dated December 15, 1993 10.10(5) Termination Agreement between the Registrant and Michael Mee 10.11(5) Form of Stock and Warrant Subscription Agreement, dated September 20, 1993 10.12(3) Form of Registration Rights Agreement for Securities, dated December 17, 1993 10.13(5) Consulting Employment Agreement of Stephen G. Jerritts 10.14(3) Consulting Agreement of Raymond C. Kurzweil 10.15(5) Employee Retention Agreement with William P. Ferry 10.16(5) Employee Retention Agreement with James J. Hogan 10.17(5) Employment Agreement with Bruce A. Ryan 10.18(7) Form of Non-Negotiable Security Promissory Note from Joseph M. Tucci to the Registrant 10.19(7) Form of Pledge Agreement with Joseph M. Tucci 10.20(7) Form of Non-Negotiable Secured Promissory Note from Donald P. Casey to the Registrant 10.21(7) Form of Pledge Agreement with Donald P. Casey
17 17
Exhibit No. Description - ----------- ----------------------------------------- 10.22(8) Stock Incentive Plan, as Amended 10.23(9) Contingent Severance Compensation, as Amended with Franklyn A. Caine 10.24(9) Employees' Stock Incentive Plan 10.25(9) 1995 Director Stock Option Plan 10.26(10) The Asset and Stock Purchase Agreement among Wang Laboratories, Inc., Bull HN Information Systems, Inc., Bull S.A. and, for certain purposes, Compagnie de Machines Bull dated as of December 30, 1994 and a Credit Agreement among Wang Laboratories, Inc., HFS, Inc. and certain lenders and agents named therein and Banker's Trust Company dated January 30, 1995 10.27(11) Employment Agreement with Ronald A. Cuneo 10.28(13) Employment Agreement with Joseph M. Tucci, as Amended 10.29(13) Employment Agreement with Donald P. Casey, as Amended 10.30(13) Employment Agreement with Stephen G. Jerritts 11.1 Statement of Computation of Earnings per Share 12.1 Statement of Computation of Earnings to Fixed Charges (b) During the quarter ended September 30, 1995, the Registrant filed a current report on Form 8-K dated July 27, 1995 relating to the acquisition by the Registrant of all the issued and outstanding stock of Sigma Imaging Systems, Inc. (1) Filed as an Exhibit to the Registrant's Registration Statement on Form 8-A (File No. 0-22470), filed on September 27, 1993. (2) Filed as an Exhibit to the Registrant's Registration Statement on Form S-8 (File No. 33-73210), filed on December 21, 1993. (3) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for the quarter ended December 31, 1993. (4) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for the quarter ended March 31, 1994. (5) Filed as an Exhibit to the Registrant's Registration Statement on Form S-1, as amended (File No. 33-81526) filed September 13, 1994. (6) Filed as an Exhibit to the Registrant's annual report on Form 10-K for the fiscal year ended June 30, 1993. (7) Filed as an Exhibit to the Registrant's annual report on Form 10-K for the fiscal year ended June 30, 1994.
18 18 (8) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for the quarter ended September 30, 1994. (9) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for the quarter ended December 31, 1995. (10) Filed as an Exhibit to the Registrant's Current Report of Form 8-K dated January 31, 1995. (11) Filed as an Exhibit to the Registrant's quarter report on Form 10-Q for the quarter ended March 31, 1995. (12) Filed as an Exhibit to the Registration Statement on Form S-3 (File No. 33-58717), filed April 19, 1995. (13) Filed as an Exhibit to the Registrant's annual report on Form 10-K for the fiscal year ending June 30, 1995. 19 19 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. DATE: November 14, 1995 WANG LABORATORIES, INC. /s/ Franklyn A. Caine ------------------------------- Franklyn A. Caine, Executive Vice President and Chief Financial Officer EX-11.1 2 COMPUTATION OF EARNINGS PER SHARE 1 WANG LABORATORIES, INC. AND SUBSIDIARIES EXHIBIT 11.1 - COMPUTATION OF EARNINGS PER SHARE
Three Months Ended Three Months Ended September 30, 1995 September 30, 1994 ---------------------- ---------------------- Primary Fully Diluted Primary Fully Diluted ------- ------------- ------- ------------- (In millions except per share data) Average shares of common stock outstanding 34.0(1) 34.0(1) 32.0(1) 32.0(1) Common equivalent shares for stock options -- -- 0.8 0.9 ------ ------ ------ ------ 34.0 34.0 32.8 32.9 ====== ====== ====== ====== Net income (loss) $(19.9) $(19.9) $ 2.8 $ 2.8 Accretion and dividends on preferred stock (3.4) (3.4) (2.0) (2.0) ------ ------ ------ ------ Net income (loss) applicable to common stockholders $(23.3) $(23.3) $ 0.8 $ 0.8 ====== ====== ====== ====== Net income (loss) per share $(0.68) $(0.68) $ 0.02 $ 0.02 ====== ====== ====== ====== (1) Includes shares distributed as well as those held in a disputed claim reserve to be distributed when claims are resolved.
EX-12.1 3 CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES 1 WANG LABORATORIES, INC. AND SUBSIDIARIES EXHIBIT 12.1 - CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in millions except ratios)
Reorganized Company ------------------------------------------------------- Three months Year Nine months ended September 30, ended June 30, ended June 30, 1995 1995 1994 ------------------- -------------- -------------- FIXED CHARGES Interest expense $ 1.0 $ 3.7 $ 3.5 Portion of rent expense representative of interest 1.9 5.9 5.6 ------ ------ ----- 2.9 9.6 9.1 Preferred dividend requirement 4.8 12.7 7.5 ------ ------ ----- Combined fixed charges and preferred dividend $ 7.7 $ 22.3 $16.6 ====== ====== ===== EARNINGS Income (loss) from continuing operations before income taxes, discontinued operations, fresh-start reporting adjustment and extraordinary item $(17.9) (1) $(54.0) (2) $20.4 Fixed charges per above 2.9 9.6 9.1 ------ ------ ----- $(15.0) $(44.4) $29.5 ====== ====== ===== Ratio of earnings to combined fixed charges and preferred dividends -- -- 1.8 ====== ====== ===== Coverage deficiency $(15.0) (1) $(44.4) (2) -- ====== ====== ===== Predecessor Company --------------------------------------------------- Three months For the year ended June 30, ended September 30, ----------------------------- 1993 1993 1992 1991 ------------------- ----------------------------- FIXED CHARGES Interest expense $ 1.2 $ 15.0 $ 44.6 $ 44.0 Portion of rent expense representative of interest 2.7 9.7 19.1 33.5 ------ --------------------------- 3.9 24.7 63.7 77.5 Preferred dividend requirement -- -- -- -- ------ --------------------------- Combined fixed charges and preferred dividend $ 3.9 $ 24.7 $ 63.7 $ 77.5 ====== ============================ EARNINGS Income (loss) from continuing operations before income taxes, discontinued operations, fresh-start reporting adjustment and extraordinary item $(22.6) $(197.2) $(346.5) $(368.8) Fixed charges per above 3.9 24.7 63.7 77.5 ------ --------------------------- $(18.7) $(172.5) $(282.8) $(291.3) ====== ============================ Ratio of earnings to combined fixed charges and preferred dividends -- -- -- -- ====== ============================ Coverage deficiency $(18.7) $(172.5) $(282.8) $(291.3) ====== ============================ (1) Includes $27.2 million of acquisition-related charges. (2) Includes $64.2 million provision for integration-related costs and other charges.
EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET, CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND EXHIBIT 11.1-COMPUTATION OF EARNINGS PER SHARE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995. 1,000 U.S. DOLLARS 3-MOS JUN-30-1996 JUL-01-1995 SEP-30-1995 1 153,900 0 210,400 12,000 28,100 416,400 198,000 73,700 828,100 366,500 24,800 300 63,700 84,200 197,300 828,100 82,800 264,100 54,700 178,800 105,200 0 1,000 (17,900) 2,000 (19,900) 0 0 0 (19,900) (0.68) (0.68) PP&E cost and accumulated depreciation include capitalized non-consumable spares inventory. Bonds, mortgages and similar debt is comprised of borrowings due within one year and long-term debt. Other costs and expenses includes $27.2 million of acquisition-related charges related to the July 21, 1995 acquisition of Sigma Imaging Systems, Inc.
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