-----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, SvD8ylYRC95DUI6aLzCzMXyYpgpmFUw1qgImzH2XG92U0zkrm2njQR7pezALJQ07 yO/kqeFv5BglEBr25oXtOA== 0000950005-96-000061.txt : 19960213 0000950005-96-000061.hdr.sgml : 19960213 ACCESSION NUMBER: 0000950005-96-000061 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960212 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUN MICROSYSTEMS INC CENTRAL INDEX KEY: 0000709519 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 942805249 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15086 FILM NUMBER: 96514710 BUSINESS ADDRESS: STREET 1: 2550 GARCIA AVE CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043-1100 BUSINESS PHONE: 4159601300 MAIL ADDRESS: STREET 1: 2550 GARCIA AVENUE CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043-1100 10-Q 1 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 December 31, 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:0-15086 SUN MICROSYSTEMS, INC. (Exact Name of registrant as specified in its charter) Delaware 94-2805249 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 2550 Garcia Avenue, Mountain View, CA 94043-1100 (Address of principal executive offices with zip code) Registrant's telephone number, including area code: (415) 960-1300 N/A (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 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 -------- -------- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 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 NO -------- -------- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Class Outstanding at December 31, 1995 Common stock - $0.00067 par value 183,306,237 INDEX PAGE ---- COVER PAGE 1 INDEX 2 PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Income 4 Condensed Consolidated Statements of Cash Flows 5 Notes to Condensed Consolidated Financial Statements 6 Item 2 - Management's Discussion and Analysis of Results of Operations and Financial Condition 8 PART II - OTHER INFORMATION Item 5 - Other Information 13 Item 6 - Exhibits and Reports on Form 8 - K 15 SIGNATURES 16 2 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS SUN MICROSYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) December 31, June 30, 1995 1995 ----------- ----------- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 470,591 $ 413,869 Short-term investments 305,540 814,151 Accounts receivable, net 1,072,492 1,041,804 Inventories 379,936 319,672 Other current assets 394,162 344,868 ----------- ----------- Total current assets 2,622,721 2,934,364 Property, plant and equipment, at cost 1,148,614 1,045,876 Accumulated depreciation and amortization (685,841) (616,871) ----------- ----------- 462,773 429,005 Other assets, net 183,005 181,184 ----------- ----------- $ 3,268,499 $ 3,544,553 =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings $ 13,877 $ 50,786 Accounts payable 344,493 303,995 Accrued liabilities 695,422 688,325 Other current liabilities 222,985 287,676 ----------- ----------- Total current liabilities 1,276,777 1,330,782 Long-term debt and other obligations 65,843 91,176 Stockholders' Equity 1,925,879 2,122,595 ----------- ----------- $ 3,268,499 $ 3,544,553 =========== =========== See accompanying notes 3 SUN MICROSYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) (in thousands, except per share amounts)
Three Months Ended Six Months Ended ----------------------------- ------------------------------ December 31, January 1, December 31, January 1, 1995 1995 1995 1995 ------------ ---------- ---------- ---------- Net revenues $1,751,383 $1,475,349 $3,236,661 $2,748,788 Cost and expenses: Cost of sales 984,665 862,113 1,813,698 1,623,491 Research and development 167,495 142,862 312,180 272,083 Selling, general and administrative 421,252 353,415 819,868 682,437 ---------- ---------- ---------- ---------- Total costs and expenses 1,573,412 1,358,390 2,945,746 2,578,011 Operating Income 177,971 116,959 290,915 170,777 Interest income, net 7,395 3,076 19,004 5,768 ---------- ---------- ---------- ---------- Income before income taxes 185,366 120,035 309,919 176,545 Provision for income taxes 59,317 38,411 99,174 56,494 ---------- ---------- ---------- ---------- Net Income $ 126,049 $ 81,624 $ 210,745 $ 120,051 ========== ========== ========== ========== Net income per common and and common - equivalent share $0.65 $0.42 $1.07 $0.62 ===== ===== ===== ===== Common and common-equivalent shares used in the calculation of net income per share 194,300 195,518 196,799 193,954 ======= ======= ======= ======= See accompanying notes.
4 SUN MICROSYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands)
Six Months Ended ------------------------------------ December 31, January 1, 1995 1995 ----------- ----------- Cash flow from operating activities: Net income $ 210,745 $ 120,051 Adjustments to reconcile net income to operating cash flows: Depreciation, amortization and other non-cash items 172,120 133,581 Decrease (increase) in accounts receivable (30,688) 8,201 Increase in inventories (60,264) (20,236) Increase (decrease) in accounts payable 40,498 (94,243) Net increase in other current and non-current assets (35,566) (41,109) Net increase (decrease) in other current and non-current liabilities (62,899) 117,814 ----------- ----------- Net cash provided from operating activities 233,946 224,059 ----------- ----------- Cash flow from investing activities: Acquisition of property, plant and equipment (137,380) (137,174) Acquisition of other assets (47,892) (22,164) Acquisition of short-term investments (1,027,664) (1,376,229) Maturities of short-term investments 1,538,666 1,418,071 ----------- ----------- Net cash (used by) provided from investing activities 325,730 (117,496) ----------- ----------- Cash flow from financing activities: Issuance of common stock 29,814 20,279 Acquisition of treasury stock (484,047) (18,979) Proceeds from employee stock purchase plans 27,770 21,034 Reduction of short - term borrowings, net (36,909) (46,181) Reduction of long - term borrowings and other (39,582) (42,312) ----------- ----------- Net cash used by financing activities (502,954) (66,159) ----------- ----------- Net increase in cash and cash equivalents $ 56,722 $ 40,404 =========== =========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 9,669 $ 9,057 Income taxes $ 131,396 $ 32,978 See accompanying notes.
5 SUN MICROSYSTEMS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) BASIS OF PRESENTATION The consolidated financial statements include the accounts of Sun Microsystems, Inc. ("Sun" or "the Company") and its wholly owned subsidiaries. Intercompany accounts and transaction have been eliminated. Certain amounts from prior years have been reclassified to conform to current year presentation. While the quarterly financial information is unaudited, the financial statements included in this report reflect all adjustments (consisting only of normal recurring accruals) that the Company considers necessary for a fair presentation of the results of operations for the interim periods covered and of the financial condition of the Company at the date of the interim balance sheet. The results for the interim periods are not necessarily indicative of the results for the entire year. The information included in this report should be read in conjunction with the 1995 Annual Report to Stockholders which is incorporated by reference in the Company's 1995 Form 10-K. INVENTORIES (in thousands) December 31, 1995 June 30, 1995 ----------------- ------------- Raw materials $211,072 $170,337 Work in process 60,142 32,356 Finished goods 108,722 116,979 -------- -------- $379,936 $319,672 ======== ======== INCOME TAXES The Company accounts for income taxes under the liability method of Statement of Financial Accounting Standards No. 109. The provision for income taxes during the interim periods considers anticipated annual income before taxes, earnings of foreign subsidiaries permanently invested in foreign operations, and other differences. STOCK DIVIDEND The Company effected a two-for-one stock split (effected in the form of a stock dividend) to stockholders of record as of the close of business on November 20, 1995. Share and per share amounts presented have been adjusted to reflect the stock dividend. 6 SUBSEQUENT EVENT On January 24, 1996, a punitive class action entitled Abraham and Evelyn Kostick Trust v. Peter O. Crisp, et al. No. CV755458, was filed in the Superior Court of the State of California in the County of Santa Clara. The plaintiff claims to be a representative of a class of public stockholders of Apple Computer, Inc. Named as defendants are Apple Computer, Inc., the members of the Apple Board of Directors, and the Company. The plaintiff alleges that Apple's Board and top management have frustrated overtures from various companies to acquire Apple at a premium in order to maintain "their lucrative jobs and their positions of power, prestige and profits." It is further alleged that Apple and the Company "are on the verge" of an acquisition agreement with terms that are "intrinsically unfair" to Apple shareholders. The plaintiff claims that such actions amount to a breach of fiduciary duty by the Apple Board of Directors. The Company is alleged to incur liability by "aiding and abetting" the Apple Board's actions. The complaint seeks an injunction against any combination by Apple with the Company, and an award of unspecified compensatory and punitive damages. The Company's response to the Complaint is due by February 29, 1996. To the Company's knowledge, no formal request for an injunction has yet been filed by the plaintiff. 7 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following table sets forth items from the Condensed Consolidated Statements of Income as a percentage of net revenues: Three Months Ended Six Months Ended ------------------------- ------------------------ December 31, January 1, December 31, January 1, 1995 1995 1995 1995 ---- ---- ---- ---- Net Revenues 100.0% 100.0% 100.0% 100.0% Cost of sales 56.2 58.4 56.0 59.1 ---- ---- ---- ---- Gross margin 43.8 41.6 44.0 40.9 Research and development 9.6 9.7 9.6 9.9 Selling, general and administrative 24.0 24.0 25.3 24.8 ---- ---- ---- ---- Operating income 10.2 7.9 9.1 6.2 Interest income, net 0.4 0.2 0.6 0.2 ---- ---- ---- ---- Income before income taxes 10.6 8.1 9.7 6.4 Provision for income taxes 3.4 2.6 3.1 2.0 ---- ---- ---- ---- Net income 7.2% 5.5% 6.6% 4.4% ==== ==== ==== ==== RESULTS OF OPERATIONS Net revenues Net revenues were $1.751 billion for the second quarter and $3.237 billion for the first six months of fiscal 1996, representing increases of 18.7 % and 17.7%, respectively, over the comparable periods of fiscal 1995. Approximately two-thirds of the growth in revenues resulted from strong demand for richly configured servers, high-end desktop systems, and from memory, storage options, and accessories shipped as part of system sales. The remaining increase reflects growth in revenues from memory, storage options, and accessories shipped as separate orders and an increase in revenues from other Sun businesses, including service, aftermarketing, microprocessors, and software, in total as compared with the corresponding periods of fiscal 1995. Domestic net revenues increased by 11.6% and 14.0% while international net revenues (including United States exports) grew 26.0% and 21.7% in the second quarter and first six months of fiscal 1996, respectively, compared with the corresponding periods of fiscal 1995. Europe net revenues increased 23.6% and 19.3% while net revenues in Rest of World increased 28.9% and 24.5% in the second quarter and first six months of fiscal 1996, respectively, when compared with the same periods of fiscal 1995. These increases are due primarily to continued strengthening of the markets in Europe and the expanding markets in Asia. 8 Compared with the second quarter of fiscal 1995, the dollar has weakened against most major European currencies and remained relatively consistent against the Japanese yen. For the six month period, the dollar has strengthened against the Japanese Yen and remained relatively consistent against most major European currencies, compared with the corresponding period in fiscal 1995. Management has estimated that the net impact of currency fluctuations on operating results, while slightly favorable, was not significant in the second quarter or the first six months of fiscal 1996. Gross margin Gross margin was 43.8% for the second quarter and 44.0% for the first six months of fiscal 1996, compared with 41.6% and 40.9%, respectively, for the corresponding periods of fiscal 1995. The increase in the gross margin for the periods compared reflects the effects of increased revenue generated from richly configured, higher margin servers and memory storage options and accessories. The factors described above resulted in a favorable impact on gross margin for the second quarter and first six months of fiscal 1996. Systems repricing actions may be initiated in the future, which could result in downward pressure on gross margins. Sun's future operating results would be adversely affected if such repricing actions were to occur and the Company is unable to mitigate the margin pressure by maintaining a favorable mix of systems, software, service, and other revenues and by achieving component cost reductions and operating efficiencies. Research and development Research and development (R&D) expenses were $167.5 million in the second quarter and $312.2 million for the first six months of fiscal 1996, compared with $142.9 and $272.1 million for the same periods of fiscal 1995. As a percentage of net revenues, R&D expenses decreased to 9.6% for both the second quarter and first six months of fiscal 1996, from 9.7% and 9.9% in the comparable periods of fiscal 1995. The decrease as a percentage of net revenues is primarily due to the increase in revenues in both the second quarter and first six months of fiscal 1996 over the comparable periods of fiscal 1995. Slightly more than a quarter of the dollar increase in the second quarter and more than a third of the dollar increase for the first six months of fiscal 1996 over the comparable periods in fiscal 1995 reflect increases in compensation as a result of increased staffing and achievement of specified performance goals. The remaining increase in absolute dollars is due to Sun's development of UltraSPARC and the Company's continuing emphasis on technological advancement for both hardware and software products, as well as microprocessor technologies. To maintain its competitive position in the industry, the Company expects to continue to invest significant resources in new hardware, software and microprocessor product development, as well as in enhancements to existing products. Selling, general and administrative Selling, general and administrative (SG&A) expenses were $421.3 million in the second quarter and $819.9 million in the first six months of fiscal 1996, compared with $353.4 and $682.4 million for the same periods of fiscal 1995. As a percentage of net revenues, SG&A expenses were 24.0% and 25.3% in the second quarter and first six months of fiscal 1996, respectively, and 24.0% and 24.8%, respectively in the comparable periods of fiscal 1995. Approximately half of the dollar increases are attributable to increased marketing costs related to new product introductions and other promotional programs, and increases related to compensation resulting from increased headcount and achievement of specified performance goals. The remaining increases reflect costs incurred in connection with the Company's ongoing efforts to improve business processes and cycle times. The Company expects to continue to invest in efforts to achieve additional operating efficiencies through continual review and improvement of business processes . In addition, the Company expects to continue to hire personnel to drive its demand creation programs and service support organizations. 9 Interest income, net Net interest income was $7.4 million for the second quarter and $19.0 million for the first six months of fiscal 1996, compared with $3.1 million and $5.8 million, respectively, in net interest income for the corresponding periods in fiscal 1995. The increase is primarily the result of interest savings from reduced debt levels in fiscal 1996 as compared to the corresponding periods in fiscal 1995. Income taxes The Company's effective income tax rate for the second quarter and the first six months of both fiscal 1996 and 1995 was 32%. FUTURE OPERATING RESULTS This following section of the report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties so that actual results may vary materially. The future operating results discussed below represent specific risks which could impact the financial condition and results over the next few quarters. This information below should be read in conjunction with the 1995 Annual Report to Stockholders which is incorporated by reference in the Company's 1995 Form 10-K. Sun introduced and began shipments of its new enhanced desktop systems based upon the UltraSPARC processors in the second quarter of this fiscal year. In addition, Sun's enhanced server systems based upon the UltraSPARC processor are intended to be introduced in the second half of fiscal 1996. Future operating results will depend to a considerable extent on the Company's ability to closely manage the introduction of products based upon UltraSPARC processors. In addition, the timing of introductions of new products and services by Sun's competitors may negatively affect the future operating results of the Company, particularly when occurring in periods leading up to the Company's introduction of its own new or enhanced products, such as the UltraSPARC products. These new UltraSPARC products include advanced components manufactured internally and by third party suppliers. The manufacture and timely delivery of the Company's UltraSPARC products depends on the ability of certain suppliers to manufacture and deliver advanced components in sufficient quantity and quality to build these products. Furthermore, in order to secure components for production and introduction of these new products, the Company frequently makes advanced payments to certain suppliers and often enters into noncancelable purchase commitments with vendors with respect to the purchase of components. Due to the variability of material requirement specifications during development and production, the Company must closely manage material purchase commitments and respective delivery schedules. The inability of the Company to secure enough components to build the new products in the quantities and configurations required or to produce, test and deliver sufficient products to meet demand in a timely manner, and any delays in production or variability of customer demand in light of the Company's noncancelable purchase commitments would adversely affect the Company's net revenues and operating results. The introduction of the UltraSPARC products requires that the Company must rapidly bring such products to volume manufacturing, a process that requires accurate forecasting of volumes, mix of products and configurations, among other things in order to achieve acceptable yields and costs. The Company must manage the transition from older, displaced products to minimize disruptions in customer ordering patterns, reduce levels of older product inventory, and ensure that adequate volumes of the new products can be delivered to meet customer demand. The ability of the Company to match supply and demand is further complicated by the Company's need to adjust prices to reflect changing competitive and market conditions and the variability and timing of customer orders taken with respect to its older products. As a result, the Company's operating results could be adversely affected if the Company is not able to correctly anticipate the level of demand and the mix 10 of products. Because the Company is continuously engaged in this product development, introduction and transition process, its operating results may be subject to considerable fluctuations particularly when measured on a quarterly basis. Generally, the computer systems sold by Sun, such as the UltraSPARC products, are the result of both adopting hardware and software development, such that delays in the software development can delay the ability of the Company to ship new hardware products. In addition, adoption of a new release of an operating system may require effort on the part of the customer and porting by software vendors providing applications. As a result, the timing of conversion to a new release is inherently unpredictable. Moreover, delays by customers in of a new release of an operating system can limit the acceptability of hardware products tied to that release. Such delays could adversely affect the future operating results of the Company. Sun's systems based on the UltraSPARC processors operate using the Company's recently released version of its operating system, Solaris 2.5. In attempts to minimize the aforementioned risks, the Company has expended significant effort toward making Solaris 2.5 binary compatible with the applications currently running on Solaris 2.x, so customers should not need to modify these applications to run on UltraSPARC- based systems. The Company's operating results would be adversely affected if Solaris 2.5 does not achieve market acceptance in a timely manner. The Company's order backlog at December 31, 1995 was approximately $378 million, an increase of $55 million from the backlog level of approximately $323 million at June 30, 1995 due in part to the introduction of the UltraSPARC - based systems. Backlog includes only orders for which a delivery schedule within six months has been specified by the customer. Backlog levels vary with demand, product availability and the Company's delivery lead times and are subject to decreases as a result of customer order delays, changes or cancellations. As such, backlog levels are not a reliable indicator of future operating results. The Company receives questions from time to time from stockholders regarding the fluctuation of operating results. The Company's future operating results will continue to be subject to quarterly variations based upon a wide variety of factors, including volume, mix, and timing of orders received during the period, the ability to develop, manufacture and introduce new products, the timing of new product introductions, the availability of components, price erosion, conditions in the computer hardware and software industries generally and the general economy, such as recessionary periods, political instability, changes in trade policies, fluctuations in interest or currency exchange rates and other competitive factors. Seasonality also affects the Company's operating results, particularly in the first quarter of each fiscal year. In addition, the Company's operating expenses are increasing as the Company continues to expand its operations, and future operating results will be adversely affected if revenues do not increase accordingly. While the Company cannot predict what effect these various factors may have on its financial results, the aggregate effect of these and other factors could results in significant volatility in the Company's future performance and stock price. LIQUIDITY AND CAPITAL RESOURCES Total assets at December 31, 1995 decreased by approximately $276 million from June 30, 1995, due principally to a decrease in cash, cash equivalents and short-term investments ($452 million) offset by increases in inventories ($60 million), other current assets ($49 million), property, plant and equipment- net ($33 million) and accounts receivable ($31 million). Cash and short-term investments decreased primarily due to the repurchase of 17.2 million shares of common stock for $455 million during the first quarter of fiscal 1996 and due to scheduled debt repayments. The increase in inventories reflects a build-up of supply to meet anticipated customer demand for new products to be introduced in the second half of fiscal 1996. Other current assets increased principally due to the timing of payments for income and other taxes. Increase in property, plant and equipment reflects additions to the Company's Menlo Park campus and capital additions to support the increased headcount. Accounts receivable increase reflects an increase in quarterly revenues from the fourth quarter of fiscal 1995 to the second quarter of fiscal 1996 of $103 million. 11 Total liabilities decreased $80 million from June 30, 1995, due principally to decreases in income taxes payable ($62 million) and short-term and long term debt obligations ($62 million) offset by an increase in accounts payable ($41 million). Income tax payable decreased due to timing of income tax payments. Short-term and long term debt obligations decreased as a result of scheduled debt repayments. The increase in accounts payable primarily reflects increased inventory receipts in the last two weeks of the quarter as compared to the fourth quarter of fiscal 1995. At December 31, 1995, the Company's primary sources of liquidity consisted of cash, cash equivalents and short-term investments of $776 million and a revolving credit facility with banks aggregating $150 million, which was available subject to compliance with certain covenants. The Company believes that the liquidity provided by existing cash and short-term investment balances and the borrowing arrangements described above will be sufficient to meet the Company's capital requirements through fiscal 1996. However, the Company believes the level of financial resources is a significant competitive factor in its industry and may choose at any time to raise additional capital through debt or equity financing to strengthen its financial position, facilitate growth and provide the Company with additional flexibility to take advantage of business opportunities that may arise. 12 PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS On January 24, 1996, a punitive class action entitled Abraham and Evelyn Kostick Trust v. Peter O. Crisp, et al. No. CV755458, was filed in the Superior Court of the State of California in the County of Santa Clara. The plaintiff claims to be a representative of a class of public stockholders of Apple Computer, Inc. Named as defendants are Apple Computer, Inc., the members of the Apple Board of Directors, and the Company. The plaintiff alleges that Apple's Board and top management have frustrated overtures from various companies to acquire Apple at a premium in order to maintain "their lucrative jobs and their positions of power, prestige and profits." It is further alleged that Apple and the Company "are on the verge" of an acquisition agreement with terms that are "intrinsically unfair" to Apple shareholders. The plaintiff claims that such actions amount to a breach of fiduciary duty by the Apple Board of Directors. The Company is alleged to incur liability by "aiding and abetting" the Apple Board's actions. The complaint seeks an injunction against any combination by Apple with the Company, and an award of unspecified compensatory and punitive damages. The Company's response to the Complaint is due by February 29, 1996. To the Company's knowledge, no formal request for an injunction has yet been filed by the plaintiff. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On November 1, 1995, the Annual Meeting of Stockholders of the Company was held in Menlo Park, California. An election of directors was held with the following individuals being elected to the Board of Directors of the Company: Share Voted For Votes Withheld --------------- -------------- Scott G. McNealy 81,210,675 362,472 L. John Doerr 81,224,075 249,072 Judith L. Estrin 81,187,563 285,584 Robert J. Fisher 81,212,332 260,815 Robert L. Long 81,213,709 259,438 M. Kenneth Oshman 81,222,174 250,973 A. Michael Spence 73,361,361 8,111,786 The seven nominees who received the highest number of votes (all of the above individuals) were elected to the Board of Directors. Votes withheld from any nominee were counted for purposes of determining the presence or absence of a quorum. The stockholders also approved an amendment to the Company's 1990 Employee Stock Purchase Plan which increased the number of shares of Common Stock reserved for issuance thereunder by 3,900,000 shares, from 7,550,000 shares to 11,450,000 shares. There were 64,363,131 shares voted for the amendment, 6,909,677 shares voted against the amendment, 214,278 abstentions and 9,986,061 broker non-votes. The stockholders also approved am amendment to the Company's 1990 Long-Term Equity Incentive Plan in order to increase the number of shares reserved for issuance thereunder by 12,100,000 shares, from 13,250,000 shares to 25,350,000 shares. There were 43,565,969 shares voted in favor of the amendment, 26,808,787 shares voted against the amendment, 350,460 abstentions and 10,747,931 broker non-votes. Additionally, the stockholders approved the Company's Section 162(m) Performance-Based Executive Bonus Plan (the "Bonus Plan"). There were 70,865,909 shares voted in favor of the Bonus Plan, 7,378,059 shares voted against the Bonus Plan, 291,296 abstentions and 2,937,983 broker non-votes. The affirmative vote of the holders of a majority of the Common Stock represented in person or by proxy and entitled to vote at the Annual Meeting ("Votes Cast") was needed in order to approve the foregoing proposals. Votes cast against the proposals were counted for purposes of determining (i) the presence or absence of a quorum for the transaction of business and (ii) the number of votes cast with respect to each such proposal. An abstention had the same effect as a vote against the proposal. Broker non-votes were counted for purposes of determining the presence or absence of a quorum, but were non counted as Votes Cast. 13 ITEM 5 - OTHER INFORMATION SCHEDULE OF SALES BY EXECUTIVE OFFICERS DURING THE QUARTER The following is a summary of all sales of the Company's Common Stock by the Company's executive officers and directors who are subject to Section 16 of the Securities Exchange Act of 1934, as amended, during the fiscal quarter ended December 31, 1995: OFFICER / DATE PRICE NUMBER OF DIRECTOR SHARES SOLD ============================================================================ William Hearst * 11/8/95 $84.375 5,000 Masood Jabbar 11/3/95 $83.00 5,284 *Former director of Sun Microsystems, Inc The amounts above do not reflect the stock dividend which was effected on November 20, 1995. 14 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K a) EXHIBITS 11.0 Statement re: Computation of Earnings Per Share 27.0 Financial data for the period ended December 31, 1995 b) REPORTS ON FORM 8-K A report on Form 8-K was filed on November 7, 1995 reporting that on November 2, 1995, the Company amended its First Amended and Restated Common Shares Rights Agreement between the Company and the First National Bank of Boston dated December 14, 1990, as amended to date, in order to increase the "Purchase Price", as defined therein, from $100 to $200 ( effectively $50 to $100 on a post-split basis reflecting the Company's two-for-one stock split, effected in the form of a stock dividend, the record date and the payment date of which was November 20, 1995 and December 11, 1995, respectively). 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SUN MICROSYSTEMS, INC. BY /s/ Michael E. Lehman ----------------------------- Michael E. Lehman Vice President and Chief Financial Officer /s/ George Reyes ----------------------------- George Reyes Vice President and Corporate Controller, Chief Accounting Officer Dated: January 31, 1996 16 EX-11 2 STATEMENT RE: COMPUTATION OF EARN. PER SHARE EXHIBITS TO REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1995 17 SUN MICROSYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) (in thousands, except per share amounts) PRIMARY
Three Months Ended Six Months Ended -------------------------- ---------------------------- December 31, January 1, December 31, January 1, 1995 1995 1995 1995 -------- -------- -------- -------- Net income $126,049 $ 81,624 $210,745 $120,051 Weighted average common shares outstanding 183,391 190,150 186,643 190,104 Common - equivalent shares attributable to stock options and warrants 10,909 5,368 10,156 3,850 -------- -------- -------- -------- Total common and common - equivalent shares outstanding 194,300 195,518 196,799 193,954 ======== ======== ======== ======== Net income per common and common - equivalent share $ 0.65 $ 0.42 $ 1.07 $ 0.62 ======== ======== ======== ========
18 SUN MICROSYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) (in thousands, except per share amounts) FULLY DILUTED
Three Months Ended Six Months Ended ------------------------------ ------------------------------- December 31, January 1, December 31, January 1, 1995 1995 1995 1995 Net income $126,049 $ 81,624 $210,745 $120,051 Weighted average common shares outstanding 183,391 190,150 186,643 190,104 Common - equivalent shares attributable to stock options and warrants 11,467 5,920 10,625 4,338 -------- -------- -------- -------- Total common and common - equivalent shares outstanding 194,858 196,070 197,268 194,442 ======== ======== ======== ======== Net income per common and common - equivalent share $ 0.65 $ 0.42 $ 1.07 $ 0.62 ======== ======== ======== ========
19 EX-27 3
5 3-MOS JUN-30-1996 OCT-1-1995 DEC-31-1995 470,591 305,540 1,072,492 102,483 379,936 2,622,721 1,148,614 685,841 3,268,499 1,276,777 41,375 72 0 0 1,925,807 3,268,499 1,751,383 1,751,383 984,665 1,573,412 0 3,879 1,242 185,366 59,317 126,049 0 0 0 126,049 0.65 0.65
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