-----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, Bi4D7wqp7bjlJAG4ryrYkyVeIpBj/8numEnwSj4rsQwGWCSkyXWeWeTHswxIehTC F7Yds7vrgibaE1X3wLfawg== 0000026999-99-000005.txt : 19990806 0000026999-99-000005.hdr.sgml : 19990806 ACCESSION NUMBER: 0000026999-99-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990626 FILED AS OF DATE: 19990805 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATA GENERAL CORP CENTRAL INDEX KEY: 0000026999 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER & OFFICE EQUIPMENT [3570] IRS NUMBER: 042436397 STATE OF INCORPORATION: DE FISCAL YEAR END: 0925 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07352 FILM NUMBER: 99678289 BUSINESS ADDRESS: STREET 1: 4400 COMPUTER DR CITY: WESTBORO STATE: MA ZIP: 10580 BUSINESS PHONE: 5088985000 MAIL ADDRESS: STREET 1: 4400 COMPUTER DRIVE CITY: WESTBORO STATE: MA ZIP: 10580 10-Q 1 Q3 FY99 FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM 10-Q (Mark one) [ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 26, 1999 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 1-7352 ------------------------------ Data General Corporation ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 04-2436397 - ------------------------------- --------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 4400 Computer Drive, Westboro, Massachusetts 01580 - -------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (508) 898-5000 Former name, former address and former fiscal year if changed since last report: Not Applicable ------------------------------ 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 outstanding of each of the registrant's classes of common stock, as of July 23, 1999: Common Stock, par value $.01 50,705,171 - ---------------------------- ------------------ (Title of each class) (Number of shares) ================================================================================ PART I -- FINANCIAL INFORMATION Item 1. Financial Statements. DATA GENERAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Quarter Ended Nine Months Ended ---------------------- ---------------------- June 26, June 27, June 26, June 27, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS 1999 1998 1999 1998 - ---------------------------------------------------------------------------------------------------------------------- REVENUES: Product................................................. $259,630 $ 253,802 $ 786,145 $ 784,723 Service................................................. 96,189 97,468 290,613 293,632 -------- --------- ---------- ---------- Total revenues..................................... 355,819 351,270 1,076,758 1,078,355 -------- --------- ---------- ---------- COSTS AND EXPENSES: Cost of product revenues (Note A)....................... 180,329 244,270 541,662 624,139 Cost of service revenues................................ 60,286 59,881 182,483 183,171 Research and development................................ 28,802 31,655 86,321 88,048 Selling, general, and administrative.................... 90,904 84,736 263,696 254,190 Restructuring charge.................................... -- 82,400 -- 82,400 -------- --------- ---------- ---------- Total costs and expenses........................... 360,321 502,942 1,074,162 1,231,948 -------- --------- ---------- ---------- Income (loss) from operations............................... (4,502) (151,672) 2,596 (153,593) Interest income............................................. 2,675 3,181 8,720 10,072 Interest expense............................................ 3,555 3,599 10,855 10,814 Other income (expense)...................................... 2,965 (2,000) 8,979 240 -------- --------- ---------- ---------- Income (loss) before income taxes........................... (2,417) (154,090) 9,440 (154,095) Provision (benefit) for income taxes........................ 600 1,000 (5,700) 2,000 -------- --------- ---------- ---------- Net income (loss)........................................... $ (3,017) $(155,090) $ 15,140 $ (156,095) ======== ========= ========== ========== BASIC NET INCOME (LOSS) PER SHARE: Net income (loss) per share............................. $(0.06) $(3.15) $0.30 $(3.19) ====== ====== ===== ====== Weighted average shares outstanding..................... 50,622 49,159 50,249 48,895 ====== ====== ====== ====== DILUTED NET INCOME (LOSS) PER SHARE: Net income (loss) per share............................. $(0.06) $(3.15) $0.30 $(3.19) ====== ====== ===== ====== Weighted average shares outstanding, including common stock equivalents, where applicable.............. 50,622 49,159 51,163 48,895 ====== ====== ====== ====== Note A: Included in the quarter and nine-month period ended June 27, 1998, is a charge of $52,600 for capitalized software and inventory write-downs. No cash dividends have been declared or paid since inception. The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.
DATA GENERAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) June 26, Sept. 26, DOLLARS IN THOUSANDS, EXCEPT PAR VALUE 1999 1998 - --------------------------------------------------------------------------------------------------------------------------- ASSETS Current assets Cash and temporary cash investments............................................ $133,600 $158,220 Marketable securities.......................................................... 135,486 160,354 Receivables, net............................................................... 292,611 307,428 Inventories.................................................................... 126,667 141,639 Other current assets........................................................... 30,441 28,320 ---------- ---------- Total current assets...................................................... 718,805 795,961 Property, plant, and equipment, net................................................ 198,856 180,454 Other assets....................................................................... 100,405 88,649 ---------- ---------- Total assets.............................................................. $1,018,066 $1,065,064 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable............................................................... $120,341 $160,940 Other current liabilities...................................................... 249,188 269,774 ---------- ---------- Total current liabilities................................................. 369,529 430,714 ---------- ---------- Long-term debt..................................................................... 212,750 212,750 ---------- ---------- Other liabilities.................................................................. 24,831 36,645 ---------- ---------- Stockholders' equity Common stock, $0.01 par value Outstanding - 50,653,000 shares at June 26, 1999 and 49,689,000 shares at Sept. 26, 1998 (net of deferred compensation of $16,570 at June 26, 1999 and $15,444 at Sept. 26, 1998)....................................... 639,149 626,137 Accumulated deficit................................................................ (216,836) (231,976) Unrealized gains on marketable securities.......................................... 9,770 8,513 Equity adjustment for minimum pension liability.................................... (6,252) (6,252) Cumulative translation adjustment.................................................. (14,875) (11,467) ---------- ---------- Total stockholders' equity................................................ 410,956 384,955 ---------- ---------- Total liabilities and stockholders' equity................................ $1,018,066 $1,065,064 ========== ========== The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.
DATA GENERAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended ----------------------------- June 26, June 27, IN THOUSANDS 1999 1998 - ------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss).................................................................. $15,140 $(156,095) Adjustments to reconcile net income (loss) to net cash provided from operating activities Depreciation.................................................................. 58,082 75,583 Amortization of capitalized software development costs........................ 13,221 56,498 Gain on sale of marketable securities......................................... (8,979) (2,239) Other non-cash items, net..................................................... 106 16,903 Change in operating assets and liabilities.................................... (22,818) 39,451 --------- --------- Net cash provided from operating activities................................... 54,752 30,101 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Expenditures for property, plant, and equipment.................................... (93,106) (94,326) Net proceeds from the purchases and sales of marketable securities................. 35,104 (15,916) Capitalized software development costs............................................. (26,146) (28,709) --------- --------- Net cash used by investing activities......................................... (84,148) (138,951) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Cash provided from stock plans..................................................... 7,771 5,853 --------- --------- Net cash provided from financing activities................................... 7,771 5,853 ---------- --------- Effect of foreign currency rate fluctuations on cash and temporary cash investments................................................ (2,995) (1,671) ---------- --------- Decrease in cash and temporary cash investments........................................ (24,620) (104,668) Cash and temporary cash investments - beginning of period.............................. 158,220 216,814 ---------- --------- Cash and temporary cash investments - end of period.................................... $133,600 $112,146 ========== ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid...................................................................... $13,272 $13,502 Income taxes paid.................................................................. $5,741 $1,194 The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.
DATA GENERAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Consolidated Balance Sheet Details June 26, Sept. 26, in thousands 1999 1998 - ------------------------------------------------------------------------------------------------------------------------ Inventories Raw materials...................................................................... $ 5,506 $ 1,420 Work in process.................................................................... 60,730 64,200 Finished systems................................................................... 38,109 50,632 Field engineering parts and components............................................. 22,322 25,387 -------- -------- $126,667 $141,639 ======== ======== Property, plant, and equipment Property, plant, and equipment..................................................... $660,952 $641,612 Accumulated depreciation........................................................... (462,096) (461,158) -------- -------- $198,856 $180,454 ======== ========
Note 2. Earnings Per Share The following data show the amounts used in computing earnings per share and the effect on income and the weighted average number of shares of potentially dilutive common stock. Quarter Ended ------------------------------------------------------------------------------- June 26, 1999 June 27, 1998 ------------------------------------- ---------------------------------------- Loss Shares Per-Share Loss Shares Per-Share in thousands, except per share amounts (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ----------- ------------- --------- ----------- ------------- --------- Basic Earnings Per Share Net loss available to common stockholders $(3,017) 50,622 $(0.06) $(155,090) 49,159 $(3.15) ======= ====== ====== ========= ====== ====== Diluted Earnings Per Share Net loss available to common stockholders and assumed conversions $(3,017) 50,622 $(0.06) $(155,090) 49,159 $(3.15) ======= ====== ====== ========= ====== ======
Nine Months Ended ------------------------------------------------------------------------------- June 26, 1999 June 27, 1998 ------------------------------------- --------------------------------------- Income Shares Per-Share Loss Shares Per-Share in thousands, except per share amounts (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ----------- ------------- --------- ----------- ------------- --------- Basic Earnings Per Share Net income (loss) available to common stockholders $15,140 50,249 $0.30 $(156,095) 48,895 $(3.19) ===== ====== Effect of Dilutive Securities Stock options -- 914 -- -- ------- ------ --------- ------ Diluted Earnings Per Share Net income (loss) available to common stockholders and assumed conversions $15,140 51,163 $0.30 $(156,095) 48,895 $(3.19) ======= ====== ===== ========= ====== ====== For the quarter and nine-month periods ended June 26, 1999 and June 27, 1998, the assumed conversion of the convertible debentures, giving effect to the incremental shares and the adjustment to reduce interest expense, is anti-dilutive and has therefore been excluded from the computation. For the quarter ended June 26, 1999 and for the quarter and nine-month period ended June 27, 1998, the assumed exercise of stock options, giving effect to the incremental shares, is anti-dilutive and has therefore been excluded from the computation.
Note 3. Basis of Presentation and Use of Estimates The preparation of 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation. The Company's accounting policies are described in the Notes to Consolidated Financial Statements in the Company's 1998 Annual Report. The results of operations for the interim periods are not necessarily indicative of the results of the entire fiscal year. Note 4. Restructuring Charge During fiscal year 1998, the Company approved and implemented a restructuring program designed to strengthen the Company's focus on storage and enterprise computing solutions and reduce costs in non-strategic areas. The restructuring was adopted in response to the increasing price competition within the computer hardware industry. Accordingly, during fiscal year 1998, the Company recorded a charge of approximately $135 million related to the restructuring program and certain asset write-downs resulting from the program. The charge included $82.4 million related to employee termination benefits, asset write-downs, and other exit costs which the Company recorded in operating expenses, and $52.6 million for capitalized software and inventory write-downs which were included in product cost of revenues. A summary of the accrued liability balance related to the $82.4 million charged to operating expenses is as follows: - ----------------------------------------------------------------------------------------------------------------------- Less: Fiscal Year 1999 Sept. 26, 1998 Cash Payments and June 26, 1999 in millions Balance Asset Write-downs Balance - ----------------------------------------------------------------------------------------------------------------------- Employee termination benefits $ 27.0 $ 12.7 $ 14.3 Asset write-downs 6.7 5.7 1.0 Lease abandonments 10.6 1.7 8.9 Other exit costs 3.7 2.6 1.1 ------ ------ ------ Total $ 48.0 $ 22.7 $ 25.3 ====== ====== ====== - --------------------------------------------------------------------------------------------------------------------------
The provision included severance benefits for approximately 480 employees, of which approximately 65% were based in the United States and the remainder in Europe and Asia/Pacific. Of the 480 employees identified, 451 were terminated as of June 26, 1999. The remaining terminations are expected to be complete by the end of the fiscal year. Asset write-downs are composed primarily of fixed assets, including leasehold improvements and demonstration equipment which are being disposed of in connection with the restructuring program. There were no material changes in estimates to prior provisions or additional charges recorded during the nine-month period ended June 26, 1999. Note 5. Comprehensive Income In the first quarter of fiscal 1999, the Company adopted SFAS Number 130, "Reporting Comprehensive Income." This statement establishes standards for reporting and displaying comprehensive income and its components in a full set of general purpose financial statements. This statement requires the classification of items of comprehensive income by their nature in a financial statement and the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of the balance sheet. The Company's total comprehensive income is as follows: Quarter Ended Nine Months Ended -------------------------- --------------------------- June 26, June 27, June 26, June 27, in thousands 1999 1998 1999 1998 - -------------------------------------------------------------------------------------------------------------------------------- Net income (loss)...................................... $(3,017) $(155,090) $15,140 $(156,095) Other comprehensive income (expense): Unrealized gains (losses) on marketable securities........................... 2,252 (3,019) 1,257 5,183 Cumulative translation adjustment.................. (1,195) (1,157) (3,408) (1,606) ------- --------- ------- --------- Total other comprehensive income (loss).............. 1,057 (4,176) (2,151) 3,577 ------- --------- ------- --------- Total comprehensive income (loss)....................... $(1,960) $(159,266) $12,989 $(152,518) ======= ========= ======= =========
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations The Company reported a net loss of $3.0 million for the current quarter ended June 26, 1999, compared with a net loss of $155.1 million for the same period of the prior year. The net income was $15.1 million for the nine months ended June 26, 1999, compared with a net loss of $156.1 million for the comparable nine-month period ended June 27, 1998. The net loss for the quarter and nine-month periods ended June 27, 1998 includes certain charges of approximately $135.0 million related to the Company's restructuring program and asset write-downs resulting from the restructuring program. The net income for the current nine-month period includes a gain of $7.5 million resulting from a settlement with the Internal Revenue Service related to taxes paid during the Company's 1983 through 1991 fiscal years and additional gains of $9.0 million resulting from sales of investments. Revenues (in millions) - ------------------------------------------------------------------------------------------------------------------------ Quarter Ended Nine Months Ended -------------------------------------------------------------------------------------- 6/26/99 Change 6/27/98 6/26/99 Change 6/27/98 ------- ------ ------- ------- ------ ------- Product $259.6 2% $253.8 $786.2 -- $784.7 % of Total Revenues 73% 72% 73% 73% Service 96.2 (1%) 97.5 290.6 (1%) 293.7 % of Total Revenues 27% 28% 27% 27% Total $355.8 1% $351.3 $1,076.8 -- $1,078.4 - ------------------------------------------------------------------------------------------------------------------------
In the fiscal quarter ended June 26, 1999, product revenues from the Company's AViiON family of open systems server products were $138.3 million compared with $131.5 million in the comparable period of the prior year. In the current quarter, revenues from the Company's Intel processor-based AViiON systems increased 10% to $129.8 million while revenues from the Motorola processor-based AViiON systems declined by 39% compared with the same period of the prior year. The Company anticipates that the percentage of server product revenues generated by the Intel processor-based AViiON products will continue to increase, while the Motorola processor-based AViiON system revenues are expected to continue to decline. Product revenues from the Company's CLARiiON storage systems increased 10% in the current quarter to $105.7 million despite a decline in revenues from CLARiiON's largest original equipment manufacturer (OEM) customer by nearly 53%. Excluding revenues from this customer, CLARiiON revenues grew approximately 47% from the same period of the prior year. CLARiiON revenues from direct end-user sales increased significantly from the same period of the prior year and currently represent approximately 13% of total CLARiiON product revenues. The Company anticipates that revenues from direct end-user sales will continue to increase in future periods as a result of the on-going investment in the CLARiiON direct sales force. CLARiiON has been sold primarily through OEM and distributor channels; thus sales in any given period are subject to sales cycles and inventory levels of the Company's customers. CLARiiON revenues accounted for 41% of total product revenues in the current quarter. Within the CLARiiON family of storage systems, full fibre channel product revenues represented approximately 62% of total CLARiiON product revenues in the current quarter. The Company anticipates that the percentage of revenues from full fibre channel products will continue to increase while the percentage of revenues from SCSI-based products will decline. Product revenues from personal computers and other equipment decreased 3% in the current quarter as compared to the same period in the prior year and represent 6% of total product revenues for the quarter ended June 26, 1999. Product revenues from VALiiANT, the Company's contract manufacturing operation, decreased by approximately $10.4 million from the comparable quarter in fiscal 1998 to $0.1 million as certain contracts have expired. VALiiANT revenues represent less than 1% of total product revenues for the quarter ended June 26, 1999. For the nine months ended June 26, 1999, product revenues from the Company's AViiON family of open systems server products were $411.0 million compared with $398.3 million in the comparable period of the prior year. In the current nine-month period, revenues from the Company's Intel processor-based AViiON systems increased 13% to $382.4 million while revenues from the Motorola processor-based AViiON systems declined by 52% compared with the same nine-month period of the prior year. Revenues from AViiON systems running the Microsoft NT operating system increased by approximately 14% from the comparable nine-month period of the prior year. Product revenues from the Company's CLARiiON storage systems increased 10% to $322.4 million from the comparable prior-year period and accounted for 41% of total product revenues in the current nine-month period. Within the CLARiiON family of storage systems, full fibre channel product revenues increased nearly four times from the comparable nine-month period of the prior year and represented approximately 56% of total CLARiiON product revenues in the current nine-month period. Product revenues from personal computers and other equipment decreased 24% from the same nine-month period in the prior year and represented 6% of total product revenues compared to 8% for the comparable prior-year period. Revenues by Geographic Marketplace - ------------------------------------------------------------------------------------------------------------------------------- Percentage of Percentage Change of Consolidated Revenues $ of Revenues -------------------------------------------------------------------------------------------------- Quarter Ended Nine Months Ended 6/26/99 - 6/27/98 -------------------------------------------------------------------------------------------------- 6/26/99 6/27/98 6/26/99 6/27/98 Quarter Ended Nine Months Ended -------------------------------------------------------------------------------------------------- Domestic Product 61% 65% 61% 61% (4%) (1%) Service 60% 60% 59% 60% (2%) (3%) Total 61% 64% 60% 61% (4%) (1%) Europe Product 23% 22% 24% 24% 8% 2% Service 31% 31% 32% 31% (3%) 2% Total 25% 24% 26% 26% 4% 2% Other International Product 16% 13% 15% 15% 26% 2% Service 9% 9% 9% 9% 8% (2%) Total 14% 12% 14% 13% 22% 1% - -------------------------------------------------------------------------------------------------------------------------------
The decrease in domestic product revenues for the current quarter and nine-month period ended June 26, 1999 was primarily a result of decreased shipments of Motorola processor-based AViiON systems and VALiiANT products, which was partially offset by increased shipments of CLARiiON products and Intel processor-based AViiON systems. The increase in European product revenues, including U.S direct export sales, for the current quarter ended June 26, 1999 was due to increased shipments of Intel and Motorola processor-based AViiON systems as well as CLARiiON storage systems, offset, in part, by decreases in personal computers and other equipment. The increase in other international product revenues, including U.S. direct export sales, for the current quarter and nine-month period ended June 26, 1999 is attributable to increased shipments of Intel processor-based AViiON systems and personal computers and other equipment, offset, in part, by decreased shipments of CLARiiON storage products. In the service business, the Company experienced an 8% decrease in contract maintenance revenues in the current quarter ended June 26, 1999 as compared with the same period in fiscal 1998 due to a decline in the contract maintenance service base. This decrease was offset, in part, by a 21% increase in professional services revenues in the current quarter ended June 26, 1999 as compared with the quarter ended June 27, 1998. Professional services revenues represent approximately 28% of total service revenues in the current quarter. For the nine-month period ended June 26, 1999 the Company experienced a 5% decrease in contract maintenance revenues offset, in part, by an 11% increase in professional services revenue. Professional services revenues represented 27% of total service revenues in the current nine-month period. Foreign exchange negatively impacted total international revenue by approximately 2% in the current quarter. Cost of Revenues (in millions) - --------------------------------------------------------------------------------------------------------------------------- Quarter Ended Nine Months Ended ----------------------------------------------------------------------------------------------- 6/26/99 Change 6/27/98 6/26/99 Change 6/27/98 ----------------------------------------------------------------------------------------------- Product $180.3 (26%) $244.3 $541.7 (13%) $624.2 % of Product Revenues 69% 96% 69% 80% Service 60.3 1% 59.9 182.4 -- 183.2 % of Service Revenues 63% 61% 63% 62% Total Cost of Revenues $240.6 (21%) $304.2 $724.1 (10%) $807.4 % of Total Revenues 68% 87% 67% 75% - --------------------------------------------------------------------------------------------------------------------------
During the quarter ended June 27, 1998, certain charges of $52.6 million related to the Company's restructuring program were included in the cost of product revenues. Without the charges, the pro forma cost of product revenues was 76% and 73% for the quarter and nine-month period ended June 27, 1998. The decrease in the product cost as a percentage of product revenues from the pro forma product cost as a percentage of product revenues during the comparable prior year periods was a result of the shift in product mix to high-end NUMA technology based AViiON systems which have lower product cost. During the quarter ended June 26, 1999, an increased percentage of direct end-user CLARiiON sales also contributed to the decrease in product cost as a percentage of product revenues. The increase in the service cost as a percentage of service revenues for the current quarter ended June 26, 1999 as compared to the same period of the prior year is a result of the shift in service revenue mix from contract maintenance revenues to professional services revenues. Operating Expenses (in millions) - --------------------------------------------------------------------------------------------------------------------------- Quarter Ended Nine Months Ended ------------------------------------------------------------------------------- 6/26/99 Change 6/27/98 6/26/99 Change 6/27/98 ------------------------------------------------------------------------------- Research & Development $28.8 (9%) $31.7 $86.3 (2%) $88.1 % of Total Revenues 8% 9% 8% 8% Selling, general & administrative $90.9 7% $84.7 $263.7 4% $254.2 % of Total Revenues 26% 24% 24% 24% Restructuring charge -- -- $82.4 -- -- $82.4 % of Total Revenues -- 23% -- 8% - ---------------------------------------------------------------------------------------------------------------------------
The Company continues to focus its research and development efforts on its core business technology: multi-user computer systems and mass storage devices. In the current nine-month period, gross expenditures on research and development and software development before capitalization were $112.4 million, a decrease of 4% from $116.8 million for the comparable prior-year period. Gross expenditures on research and development before capitalization for the quarter ended June 26, 1999 were $38.4 million, a decrease of 2% from $39.1 million expended during the quarter ended June 27, 1998. For both the three-month and nine-month periods ended June 26, 1999, continued increases in research and development expenditures in CLARiiON fibre channel products and NUMA technology, were offset by savings associated with the Company's restructuring program implemented in fiscal year 1998. For the current quarter and nine-month period ended June 26, 1999, selling, general, and administrative expenses increased by 7% and 4%, respectively, from the comparable prior-year periods. In the current quarter, the Company announced plans to significantly increase its sales and marketing investments in its CLARiiON storage business. This investment, which will be implemented over the next eighteen months, is expected to result in an increase of approximately 450 people, of which the majority will be direct sales people. This expense, and related marketing efforts, is expected to cost more than $100 million over the eighteen-month period. The increase in selling, general and administrative expenses in the current quarter and nine-month period ended June 26, 1999 from the comparable prior-year periods is primarily the result of marketing efforts associated with this investment, partially offset by savings in the server business resulting from the Company's fiscal 1998 restructuring program. During fiscal year 1998, the Company approved and implemented a restructuring program designed to strengthen the Company's focus on storage and enterprise computing solutions and reduce costs in non-strategic areas. The restructuring was adopted in response to the increasing price competition within the computer hardware industry. Accordingly, during fiscal year 1998, the Company recorded a charge of approximately $135 million related to the restructuring program and certain asset write-downs resulting from the program. The charge included $82.4 million related to employee termination benefits, asset write-downs, and other exit costs which the Company recorded in operating expenses, and $52.6 million for capitalized software and inventory write-downs which were included in product cost of revenues. A summary of the accrued liability balance related to the $82.4 million charged to operating expenses is as follows: - -------------------------------------------------------------------------------------------------------------------------- Less: Fiscal Year 1999 Sept. 26, 1998 Cash Payments and June 26, 1999 in millions Balance Asset Write-downs Balance - -------------------------------------------------------------------------------------------------------------------------- Employee termination benefits $ 27.0 $ 12.7 $ 14.3 Asset write-downs 6.7 5.7 1.0 Lease abandonments 10.6 1.7 8.9 Other exit costs 3.7 2.6 1.1 ------ ------ ------ Total $ 48.0 $ 22.7 $ 25.3 ====== ====== ====== - --------------------------------------------------------------------------------------------------------------------------
The provision included severance benefits for approximately 480 employees, of which approximately 65% were based in the United States and the remainder in Europe and Asia/Pacific. Of the 480 employees identified, 451 were terminated as of June 26, 1999. The remaining terminations are expected to be complete by the end of the fiscal year. Asset write-downs are composed primarily of fixed assets, including leasehold improvements and demonstration equipment which are being disposed of in connection with the restructuring program. There were no material changes in estimates to prior provisions or additional charges recorded during the nine-month period ended June 26, 1999. At June 26, 1999, the number of employees totaled approximately 4,950, which are a net increase of approximately 250 and 150 employees from September 26, 1998 and June 27, 1998, respectively. Interest income for the current quarter was $2.7 million, a 16% decrease from $3.2 million for the comparable period of fiscal 1998, due to lower interest yields and levels of invested cash. Interest expense was $3.6 million for both the current quarter and the same quarter of the prior year. Interest expense relates primarily to interest on the Company's 6% Convertible Subordinated Notes due 2004. Other income for the current quarter includes a gain of $3.0 million from the sales of equity investments. Interest income, interest expense and other income were $8.7 million, $10.9 million and $9.0 million, respectively, for the nine-month period ended June 26, 1999 as compared to $10.1 million, $10.8 million and $0.2 million, respectively, for the comparable period of the prior year. Other income for the current nine-month period relates to gains on sales of equity investments. Other income for the nine-month period ended June 27, 1998 relates to gains of $2.2 million on sales of equity investments offset, in part, by a loss of $2.0 million from the write-off of an investment in a non-affiliated company. The current quarter income tax expense of $0.6 million relates primarily to foreign and state income tax, as well as, federal alternative minimum taxes. The Company has a valuation allowance which offsets substantially all deferred tax assets as of June 26, 1999 and September 26, 1998. The amount of the deferred tax assets considered realizable is subject to change based on estimates of future income during the carryforward period. The Company will assess the need for the valuation allowance at each balance sheet date based on all available evidence and may adjust the level of the valuation allowance, if appropriate. The income tax benefit for the nine-month period ended June 26, 1999 of $5.7 million includes a gain of $7.5 million resulting from a settlement with the Internal Revenue Service for taxes paid during the Company's 1983 through 1991 fiscal years. Financial Condition Cash and temporary cash investments as of June 26, 1999 were $133.6 million, a decrease of $24.6 million from the end of fiscal 1998. At the same date, the Company held $135.5 million in marketable securities, a net decrease of $24.9 million from the end of fiscal 1998. In total, cash and temporary cash investments along with marketable securities decreased $49.5 million for the current nine-month period. The decrease was mainly attributable to the purchases of equipment required for the Company's server and storage businesses, payments reducing employee and vendor related accruals, payments related to the Company's investment in the CLARiiON storage business, and payments related to the restructuring program implemented in June 1998. The marketable securities held, which supplement cash and temporary cash investments, include United States treasury bills and notes, notes issued by U.S. government agencies, commercial paper and certificates of deposit, as well as equity securities recorded at their fair market value of $11.0 million which are classified as available-for-sale. The unrealized gain on marketable securities of $9.8 million as of June 26, 1999 is recorded as a separate component of stockholders' equity. During the current three-month and nine-month periods ended June 26, 1999, the Company recorded gains of $3.0 million and $9.0 million, respectively, on the sales of investments in marketable securities. Net cash provided from operations for the nine months ended June 26, 1999 totaled $54.8 million; expenditures for property, plant, and equipment totaled $93.1 million; capitalized software development costs totaled $26.1 million. Cash provided from stock plans totaled $7.8 million during the current nine-month period ended June 26, 1999. The effect of foreign currency exchange rate fluctuations on cash and temporary cash investments was a decrease of $3.0 million. Net receivables as of June 26, 1999 were $292.6 million compared with $307.4 million as of September 26, 1998. This decrease in net receivables of $14.8 million from September 26, 1998 is primarily attributable to higher revenues in the quarter ended September 26, 1998 as compared to the current quarter ended June 26, 1998. Inventories as of June 26, 1999 were $126.7 million, a decrease of $15.0 million from September 26, 1998, primarily as a result of reduced inventory levels related to improved supply management. Net property, plant, and equipment increased $18.4 million from September 26, 1998 to $198.9 million primarily due to the purchases of equipment and capital expenditures for developing both operating and financial systems and to support the new product initiatives in the server and storage businesses. Fixed asset dispositions related to the sale of demonstration equipment totaled $5.4 million for the current nine-month period. Management expects that sales of demonstration equipment will continue. The increase of $11.8 million in other assets from September 26, 1998 to $100.4 million at June 26, 1999 was attributed mainly to the capitalization of software development costs net of related amortization. The decrease of $40.6 million in accounts payable from September 26, 1998 levels was attributed mainly to the timing of payments related to purchases of material. Other current and other liabilities decreased by approximately $32.4 million from September 26, 1998 to $274.0 million. This decrease was primarily related to funding of the Company's domestic pension plan and payments related to the Company's restructuring program. Long-term debt of $212.8 million remained unchanged from September 26, 1998. Year 2000 Information and Readiness Disclosure The "Year 2000 issue" arises because many computer hardware systems and software programs use only two digits to represent the year. As a result, these systems and programs may not correctly handle dates beyond 1999, resulting in errors in information or program or systems failures. Assessments of the potential effects of the Year 2000 issues vary markedly among different companies, governments, consultants, economists, and commentators. It is not possible to accurately predict what the actual impact may be. In this context, the Company offers the following statements concerning the Year 2000 issues. All statements made and referred to here are Year 2000 readiness disclosures under the U.S. Year 2000 Information and Readiness Disclosure Act. Except as otherwise noted, all statements in this Year 2000 Information and Readiness Disclosure are stated as of June 26, 1999. To better address the Year 2000 issue in a comprehensive and coordinated manner, across all of Data General's operations worldwide, the Company has created a cross-functional corporate Year 2000 project team, reporting and responsible to the senior management of the Company. A project plan has been adopted and is guiding the Company's efforts to assess and address Year 2000 issues pertaining to each of the identified functional areas of the company's operations. 1. Product Readiness and Customer Communications The Company is communicating with its customers concerning the Year 2000 issue. The primary means of communication are the Data General and CLARiiON Year 2000 Internet web sites at http://www.dg.com/year2000 and http://www.clariion.com/year2000/index.html, where Year 2000 readiness disclosures concerning various products and the Company's Year 2000 program are made available to customers and the general public. The Company has assessed the Year 2000 readiness of Data General's AViiON computer systems and CLARiiON storage products, as well as of Data General Pentium processor-based and later generation personal computers. Based on these efforts, the Company has determined that Data General's AViiON computer systems and CLARiiON storage products are either Year 2000 Ready or may be made so by means of Year 2000 updates or patches available from the Company. As well, the Company offers a Year 2000 support strategy for the current releases of Data General's DG/UX operating system software, the details of which are available on the Data General Year 2000 web site. Most other active Data General and CLARiiON-branded products, including many 32-bit ECLIPSE MV computer systems, have also been evaluated for Year 2000 readiness. Consistent with industry practices, inquiries concerning Year 2000 readiness of third-party products resold by Data General are being referred to the third-party suppliers of such products. The Company has determined not to test certain products for Year 2000 Readiness. As well, some Data General products have been determined to not be Year 2000 Ready. For the most current information concerning products' Year 2000 readiness, customers are directed to the Data General Year 2000 web sites, since the Company is making no statement regarding Year 2000 readiness for any product except as noted on the Company's Year 2000 web sites. 2. Data General's Internal Systems, Manufacturing Processes and Facilities Data General has been preparing for Year 2000 since mid-1996, and has established teams to coordinate solutions to the Year 2000 issue for its own internal information systems and applications across the Company's operations worldwide. Generally, the Company has structured the Year 2000 project in four phases: inventory and assessment; remediation and/or avoidance; compliance confirmation; and (as and when appropriate) contingency planning. As of December 31, 1998, Data General had substantially completed the assessment and inventory phase of its Year 2000 project relative to the Company's key information system and applications. As of June 26, 1999, approximately 80% of the Company's key business systems have been qualified by the Company as Year 2000 Ready. Data General continues to address known Year 2000 issues, and is committed to making its key internal information systems Year 2000 Ready in time to meet the Company's critical business requirements. Based on existing plans and schedules, and subject to the possibility of delays, the Company plans to have substantially all of its key business systems Year 2000 Ready by September 30, 1999. Although Data General's Year 2000 project relative to its critical information management systems is still in process, the Company believes that the impact of the Year 2000 issues on its core business systems and applications should not have a material adverse impact on future results. The Company has assessed the Year 2000 issue as related to its manufacturing facilities and processes. Projects are underway to address those Year 2000 issues which have been identified. The Company is not aware at June 26, 1999, of any material Year 2000 concerns with respect to its manufacturing facilities and processes. The Company is also continuing its assessment of the possible impact of Year 2000 issues on the operations of its offices and facilities (including such matters as security systems, PBX and voicemail systems, and heating and air-conditioning systems). Projects are underway to address those Year 2000 issues that have been identified. The Company is not aware at June 26, 1999, of any material Year 2000 concerns with respect to the operation of its offices and facilities. The Company has sought to assess the Year 2000 risks arising from external factors, such as potential interruptions of telecommunications or transportation services or utilities, for the Company's key geographical locations based on currently available data. However, the likelihood and extent of widespread or persistent interruptions to such infrastructure services is generally difficult to predict. As more accurate information becomes available, the Company will be completing and tuning its contingency plans intended to support the continued operation of the Company's critical functions in the event of interruptions to infrastructure services. 3. Data General's Suppliers The Company's procurement organizations are seeking to monitor the Year 2000 readiness of the Company's key suppliers. The Company is assessing the responses to Year 2000 readiness questionnaires sent in December 1998, to an extensive list of suppliers, including those suppliers which the Company considers most critical to its operations. Each of 124 suppliers considered most critical to the Company's manufacturing operations has provided satisfactory assurances concerning the supplier's Year 2000 readiness. In addition, as of June 26, 1999, more than 80% of the Company's 253 largest suppliers (excluding those mentioned above) have also given the Company satisfactory Year 2000 assurances. The Company is following up with these and other suppliers where appropriate. Since the Company's suppliers' Year 2000 preparations and assessments are ongoing, Data General's efforts to monitor the Year 2000 readiness of key suppliers will be continuing. If Year 2000 readiness issues are identified, the Company intends to take reasonable actions as needed to address the Company's business requirements. Since determining the Year 2000 readiness of suppliers depends upon their cooperation and upon their disclosure of often imprecise or estimated information, it is likely that the Company's inquiries will not be entirely successful, and it remains possible that the actual outcomes may deviate from the suppliers' assurances to the Company. It is possible that notwithstanding the Company's efforts, interruptions of key components or services could have an adverse impact on the Company's operations and future results. The Company is evaluating contingency plans to mitigate or avoid potential interruptions to normal business operations. It is likely, however, that not every potential Year 2000 exposure will be avoided; for example alternative sources of supply for single-sourced components may not always be readily available. A measure of reasonable business risk will be undertaken relative to the Year 2000 problem, both by Data General and by other companies. 4. Risks of Claims There may be a potential for claims against the Company arising from products and services that were not Year 2000 Ready. Because the Company is in the business of selling computer system products, the Company's risk of being subjected to lawsuits relating to Year 2000 issues with its products is likely to be greater than that of companies in other industries. Although the Company believes that it has valid defenses to Year 2000 claims which may be brought against it by its customers, the outcomes of Year 2000 claims and the impact of such claims on the Company cannot be determined at this time. The actual outcomes will depend on the facts and circumstances of each situation and on an evolving state of law as Year 2000 claims are addressed by legal systems worldwide. 5. Costs Associated with the Year 2000 Project The cost of addressing Year 2000 issues is funded through operating cash flows. The Company does not expect the amounts to have a material effect on its financial position or results of operations. The Company has incurred costs of approximately $10.5 million directly associated with Year 2000 projects to date as of June 26, 1999. 6. Certain Additional Risk Factors It is unknown how the Company's sales may be impacted by Year 2000 issues. As the Company's customers focus on preparing their businesses for Year 2000, capital budgets in the near term may be redirected toward remediation efforts, potentially delaying the purchase or implementation of new systems, thereby creating less demand for the Company's products and services. As well, customers' procurement efforts may be temporarily delayed as a result of Year 2000 readiness testing within customers' operations. Alternatively, sales of Year 2000 Ready Data General products could be increased, as Year 2000 Ready products are purchased to replace older products. Service revenues could be reduced if customers discontinue support of products which are not Year 2000 Ready, or perhaps increased as customers purchase new, Year 2000 Ready systems. As well, the Company's sales during 1999 could be affected by the customers' perceptions of Data General's own state of Year 2000 readiness. All these factors could affect the Company's future revenues. Overriding any preparations taken by the Company, the Year 2000 issue presents risks and uncertainties that could affect the Company; these include unexpected Year 2000 issues, or unexpected problems arising from plans implemented to anticipate Year 2000 problems; interruptions to power, water or telecommunications utility services; potential unavailability of skilled or critical personnel; delays or interruptions in transportation systems; and potential governments' responses to Year 2000 emergencies, among others. Further, there can be no assurance that there will not be delays in, or increased costs associated with, the Company's Year 2000 readiness efforts, or that the Company's suppliers and other parties will adequately prepare for the Year 2000. Notwithstanding the Company's diligent efforts, one can anticipate that Data General will not be able in all cases to identify and avoid every possible Year 2000 impact. The Company is working to assess and evaluate likely Year 2000 problem scenarios and to evaluate Year 2000 contingency plans in appropriate cases. The Company expects that this contingency planning effort will continue throughout 1999 as the Company completes its preparations for the Year 2000 and learns more about the Year 2000 preparations and vulnerabilities of third parties. The nature of the uncertainties surrounding the Year 2000 issue is such that it remains possible that Year 2000 issues could have a material adverse impact on the Company's operations and financial results. While the Company does not currently expect that this will be the case and continues to aggressively pursue its preparations for Year 2000, the Company can offer no assurance whether or to what extent the Company may be affected by matters which it has not anticipated or by matters outside of the Company's control. The Company recognizes the need to continue its analysis, assessment, monitoring, and planning for the various Year 2000 issues, across its businesses worldwide, and to address Year 2000 issues as they are identified. Within that uncertain context, however, and subject to the various factors discussed above, the Company believes as of June 26, 1999, that the impact of Year 2000 issues on its business should not have a material adverse effect on the Company's financial position or results of operations. Market Risk The Company is exposed to market risk primarily in its cash and foreign currency transactions. Because a substantial portion of the Company's operations and revenue occur outside the United States, the Company's results can be significantly impacted by changes in foreign currency exchange rates. The Company manages its foreign currency risk through the use of forward foreign currency contracts. The Company does not hold or enter into derivative financial instruments for trading purposes. At inception, the forward foreign currency contracts are designated as hedges of intercompany accounts receivable and foreign sales which are firmly committed or forecasted. These contracts generally mature within three-months. Market value gains and losses on these contracts are included in the cost of product revenues and generally offset exchange gains or losses on the related transactions. As of June 26, 1999, the Company had entered into forward foreign currency contracts to purchase $26.0 million and sell $71.9 million in various foreign currencies with maturity dates of July 26 and July 27, 1999. The potential gain or loss from a hypothetical 10% beneficial or adverse change in foreign currency exchange rates on the forward foreign currency contracts maturing after June 26, 1999 would result in a gain or loss of approximately $4.6 million. The Company expects that exchange gains or losses on the related hedged transactions would offset this gain or loss. Euro Conversion On January 1, 1999, 11 of the 15 members of the European Union established fixed conversion rates between their existing currencies and the "Euro." The Euro will trade on currency exchanges and the legacy currencies will remain legal tender for a transition period between January 1, 1999 and January 1, 2002. During the transition period, public and private companies may pay for goods and services using the Euro or the participating country's legacy currency. The participating countries will issue sovereign debt exclusively in Euros, and will redenominate outstanding sovereign debt. Participating countries no longer control their own monetary policies by directing independent interest rates for their legacy currencies. Instead, the authority to direct monetary policy, including money supply and official interest rates will be exercised by the new European Central Bank. The Company has established plans and has begun developing the necessary modifications for the technical adaptation of its internal information technology and other systems to accommodate Euro-denominated transactions. The Company is also assessing the business implications of the conversion to the Euro, including long-term competitive implications and the effect of market risk with respect to financial instruments. The Company is currently unable to determine the ultimate financial impact of these matters, if any, on its results of operations, financial condition or cash flows. However, the Company will continue to assess the impact of Euro conversion issues as the applicable accounting, tax, legal, and regulatory guidance evolves. Statements concerning the Company's business outlook or future economic performance; Year 2000 readiness; currency market risk; Euro conversion issues; anticipated profitability, revenues, expenses or other financial items; product or service line growth, plans or objectives; and statements concerning assumptions made or expectations as to any future events, conditions, performance or other matters, are "forward-looking statements", as that term is defined under the Federal securities laws. Forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from those stated in such statements. Such risks, uncertainties and factors include, but are not limited to, fluctuations in customer demand, order patterns and inventory levels, changes and delays in product development plans and schedules, customer acceptance of new products, changes in pricing or other actions by competitors, general economic conditions, as well as other risks detailed in the Company's filings with the Securities and Exchange Commission, including Data General's Report on Form 10-K for the 1998 fiscal year-ended September 26, 1998 and this Quarterly Report on Form 10-Q for the third fiscal quarter of 1999, which ended June 26, 1999. PART II -- OTHER INFORMATION Item 1. Legal Proceedings. The Company has been engaged in patent infringement litigation against IBM Corporation since November 1994. Two lawsuits, both in the discovery stages, are pending in the United States District Court for the District of Massachusetts in Worcester. The Company alleges that several IBM products including the AS/400 midrange systems and the AS/400 RISC-based computer product line infringe various Company patents. Both suits seek compensatory damages and, where appropriate, injunctive relief. IBM has answered both complaints, has denied the Company's infringement claims and has interposed counterclaims alleging that the Company's AViiON and CLARiiON computer systems infringe IBM patents. Although the Company believes its claims are valid, it cannot predict the outcome of the litigation. In the opinion of management, based on preliminary evaluation of the IBM patents covered in the counterclaims and subject to the risks of litigation, the counterclaims are without merit, the Company will prevail thereon and the counterclaims will not have a material adverse impact on the results of operations or the financial position of the Company. The Company and certain of its subsidiaries are involved in various other patent infringement, contractual, and proprietary rights suits. In the opinion of management, the conclusion of these suits will not have a material adverse effect on the financial position or results of operations and cash flows of the Company and its subsidiaries. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: 3. (c) By-Laws of the Company, as amended through November 4, 1998, previously filed as Exhibit 3(c) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 26, 1998, which is incorporated herein by reference. 3. (e) Amendment to Certificate of Incorporation of the Company, filed January 28, 1999, previously filed as Exhibit 3(e) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 26, 1998, which is incorporated herein by reference. 10. (w) Employee Qualified Stock Purchase Plan, as amended, previously filed as Exhibit 10(w) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 27, 1999 which is incorporated herein by reference. 10. (jj) 1998 Employee Stock Option Plan, previously filed as Exhibit 4.1 to the Company's Registration Statement on Form S-8, Registration Number 333-69559, which is incorporated herein by reference. 10. (kk) Form of (Key Executive) 1998 Employee Stock Option Agreement, previously filed as Exhibit 10(kk) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 26, 1998, which is incorporated herein by reference. 10. (ll) Form of Amendment to Employment Agreements between the Company and its key executives previously filed as Exhibit 10(ll) to the Company's Quarterly Report on Form 10-Q for the quarter ended December, 26, 1998, which is incorporated herein by reference. 10. (mm) 1998 Non-Employee Director Stock Option Plan, previously filed as Exhibit 4.2 to the Company's Registration Statement on Form S-8, Registration Number 333-69559, which is incorporated herein by reference. 10. (nn) Form of 1998 Non-Employee Director Stock Option Agreement, previously filed as Exhibit 10(nn) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 26, 1998, which is incorporated herein by reference. 10. (oo) Summary of 1999 Fiscal Year Bonus Opportunity for Chief Executive Officer, previously filed as Exhibit 10(oo) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 26, 1998, which is incorporated herein by reference. 10. (pp) Amendment to Supplemental Pension and Retiree Medical Agreement dated December 2, 1998, between the Company and its President and Chief Executive Officer, previously filed as Exhibit 10(pp) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 26, 1998, which is incorporated herein by reference. (b) No reports on Form 8-K were filed during the current quarter ended June 26, 1999. 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. DATA GENERAL CORPORATION (Registrant) /s/ John J. Gavin Jr. -------------------------------------------- John J. Gavin Jr. Chief Financial Officer, Vice President, and Corporate Controller Dated: August 5, 1999 EXHIBITS Index to Exhibits. 3. (c) By-Laws of the Company, as amended through November 4, 1998, previously filed as Exhibit 3(c) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 26, 1998, which is incorporated herein by reference. 3. (e) Amendment to Certificate of Incorporation of the Company, filed January 28, 1999, previously filed as Exhibit 3(e) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 26, 1998, which is incorporated herein by reference. 10. (w) Employee Qualified Stock Purchase Plan, as amended, previously filed as Exhibit 10(w) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 27, 1999, which is incorporated herein by reference. 10. (jj) 1998 Employee Stock Option Plan, previously filed as Exhibit 4.1 to the Company's Registration Statement on Form S-8, Registration Number 333-69559, which is incorporated herein by reference. 10. (kk) Form of (Key Executive) 1998 Employee Stock Option Agreement, previously filed as Exhibit 10(kk) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 26, 1998, which is incorporated herein by reference. 10. (ll) Form of Amendment to Employment Agreements between the Company and its key executives previously filed as Exhibit 10(ll) to the Company's Quarterly Report on Form 10-Q for the quarter ended December, 26, 1998, which is incorporated herein by reference. 10. (mm) 1998 Non-Employee Director Stock Option Plan, previously filed as Exhibit 4.2 to the Company's Registration Statement on Form S-8, Registration Number 333-69559, which is incorporated herein by reference. 10. (nn) Form of 1998 Non-Employee Director Stock Option Agreement, previously filed as Exhibit 10(nn) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 26, 1998, which is incorporated herein by reference. 10. (oo) Summary of 1999 Fiscal Year Bonus Opportunity for Chief Executive Officer, previously filed as Exhibit 10(oo) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 26, 1998, which is incorporated herein by reference. 10. (pp) Amendment to Supplemental Pension and Retiree Medical Agreement dated December 2, 1998, between the Company and its President and Chief Executive Officer, previously filed as Exhibit 10(pp) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 26, 1998, which is incorporated herein by reference. EX-27 2 ART. 5 FDS FOR 3RD QUARTER 1999 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE Q3 FY99 CONDENSED CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS SEP-26-1999 JUN-26-1999 133,600 135,486 312,709 (20,098) 126,667 718,805 660,952 462,096 1,018,066 369,529 212,750 0 0 639,149 (228,193) 1,018,066 259,630 355,819 180,329 240,615 119,706 0 3,555 (2,417) 600 (3,017) 0 0 0 (3,017) (0.06) (0.06)
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