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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission File No. 01-11779
ELECTRONIC DATA SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-2548221
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5400 Legacy Drive, Plano, Texas 75024-3199
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (972) 604-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, $.01 Par Value New York Stock Exchange
London Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 15, 1999, the aggregate market value of the voting stock held
by non-affiliates of the registrant (based on the closing price on such date as
reported on the New York Stock Exchange Composite Transactions) was
approximately $17,995,589,605.
There were 491,766,155 shares of the registrant's common stock outstanding
as of March 15,1999.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1998 Annual Report to Stockholders are
incorporated by reference in Parts II and IV and portions of the Registrant's
Proxy Statement for the Annual Meeting of Stockholders to be held on May 25,
1999 are incorporated by reference in Part III.
PART I
ITEM 1. BUSINESS
Electronic Data Systems Corporation ("EDS") was incorporated in
Delaware in 1994 and succeeded to the business and assets of Electronic Data
Systems Corporation, a Texas corporation which was incorporated in 1962, at the
time of the split-off (the "Split-Off") of EDS from General Motors Corporation
("GM") on June 7, 1996. In October 1984, GM acquired all of the capital stock of
the Texas corporation, which prior to that time had been an independent,
publicly held corporation. As a result of the Split-Off, EDS once again became
an independent publicly held corporation with its Common Stock listed for
trading on the New York and London Stock Exchanges.
EDS is a professional services firm that applies consulting,
information and technical expertise to enhance clients' business performance. As
of December 31, 1998, EDS employed approximately 120,000 persons and served
clients in the United States and approximately 50 other countries. Unless the
context otherwise requires, references herein to EDS include its predecessor and
subsidiaries.
Services
EDS offers its clients a portfolio of related services worldwide within
the broad categories of systems and technology services, business process
management, management consulting, and electronic business. EDS provides clients
access to a wide range of value-added offerings within each of the four
categories. These offerings continue to evolve in response to the rapid
technological changes occurring within the computer industry and clients'
expanding business needs and market opportunities. The following is a
description of EDS' principal service offerings:
- Systems and Technology Services. EDS' traditional outsourcing
business encompasses systems development, systems integration,
and systems management. Also included in this area are desktop
services, Year 2000 conversions and enterprise software
solutions. EDS develops, integrates and manages systems for
clients to reduce operational costs, multiply efficiencies, boost
customer service and retention and increase competitiveness.
- Business Process Management. EDS may manage an entire business
process within the client's enterprise, including such activities
as remittance processing, procurement logistics, enterprise
customer management, customer service and training, as well as
information technology ("IT") operations.
- Management Consulting. A.T. Kearney, an EDS subsidiary, provides
clients with high value-added strategy, operations and
information technology capabilities combined with implementation
skills that improve overall business performance and competitive
positioning. Services in this area focus on strategic consulting,
including customer equity management, new market entry and
shareholder value creation; operations consulting, encompassing
strategic sourcing, supply chain management and manufacturing;
and technology consulting, including systems planning, new
technology applications and advanced applications.
- Electronic Business. EDS' offerings in this area include
interactive marketing and payment services, internet and online
services and advertising, electronic commerce, EDI (electronic
data interchange), smart cards, multimedia and home shopping, and
the design, development, implementation and operation of internet
websites, corporate intranets and extranets.
EDS conducts its sales, marketing and service activities for its systems and
technology services, business process management and electronic markets
businesses on a global basis principally through business units that focus both
geographically and vertically along the lines of specified industries. By
combining the skills of an industry-focused business unit with a geographic
business unit where appropriate, EDS is able to respond to a
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client's requirements with people who are knowledgeable about a specific
industry and the client's business. These industry-focused business units are
Manufacturing, Financial Services, Government, Communications, Health, Travel
and Transportation, and Energy.
EDS leverages its extensive technical infrastructure and other numerous
resources to offer information and technology services at clients' sites or
through large scale information processing centers or specialized service
delivery centers located in areas throughout the world. EDS continually examines
and tests computer hardware and software offered by suppliers worldwide as part
of its efforts to determine which are most appropriate for use in its operations
and/or to offer to its clients. The company assesses the technological changes
that continuously occur within the IT industry, including developments in
distributed computing, client/server architecture and internet-based
applications. EDS has developed computer-aided software engineering tools to
assist in generating new software to keep pace with rapidly evolving strategies
involving hardware technologies and information processing theories and to
facilitate the rapid deployment of the company's products and services to
market.
A.T. Kearney
A.T. Kearney, the global management consulting firm which became a
subsidiary of EDS in 1995, provides clients with sophisticated performance
improvement techniques that improve overall competitive position. The firm has
strong expertise in the aerospace and defense, automotive, chemicals,
communications, consumer industries, financial institutions, forest products,
health care, high-tech electronics, oil and gas, pharmaceuticals, retail,
transportation and utilities industries. EDS and A. T. Kearney together offer a
CoSourcing(SM) Service, which focuses on improving clients' business performance
through concurrent implementation of new business processes, information
technology and enterprise-wide transformation.
Strategic Business Lines
Certain services provided by EDS are organized in strategic business
lines so that their resources and capabilities may be globally leveraged across
EDS. These strategic business lines provide services directly to clients but
also work in coordination with a geographical or vertical business unit having
primary responsibility for a particular client. EDS' strategic business lines
include the following:
CIO Services. EDS' CIO Services unit was organized in 1996 to bring
together the industry organizations within EDS which were providing Year 2000
services to existing and new clients. This unit offers complete Year 2000
services, including assessment, planning and strategy, renovation, testing and
implementation, as well as progress reviews and business contingency planning
services.
Centrobe. EDS' Centrobe unit, focused on enterprise customer
management, consolidates all of EDS' customer contact management solutions into
one business line, delivering database marketing, call center services and
direct marketing consulting services for industries on a global basis. Neodata
Corporation, the integrated marketing communications services company which
became a wholly-owned subsidiary of EDS in August 1997, has been integrated into
this business line, making EDS Centrobe the largest direct marketing company in
the world.
Electronic Business. EDS' electronic business unit offers clients
strategic advice, business process design and information technology integration
support to enable them to compete in the global digital economy. This business
unit applies a wide range of electronic commerce technologies and processes to
more effectively connect enterprises to both their customers and suppliers.
Service offerings include electronic business strategy consulting, electronic
business process redesign, internet commerce, transaction settlement, electronic
payment processing (including credit card processing and ATM and debit card
services), and electronic business technology integration support.
Unigraphics Solutions Inc.
EDS owns approximately 86.2% of the common stock of Unigraphics
Solutions Inc. ("UG Solutions"), which had been a wholly-owned subsidiary of EDS
prior to its initial public offering in June 1998. UG Solutions
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develops and markets computer assisted design, manufacturing and engineering
("CAD," "CAM" and "CAE") software and services. Its principal product offerings
include Unigraphics(R) for complex design-through-manufacture applications,
Solid Edge(R) for Windows based design and drafting, IMAN(R) for product
information management, and Parasolid(R), a high precision,
boundary-representation solid modeler for mechanical CAD/CAM/CAE applications.
Acquisitions and Strategic Alliances
From time to time EDS has made acquisitions and entered into strategic
alliances in an effort to obtain a competitive advantage or a new or expanded
presence in targeted geographic or service markets. EDS believes that the
convergence of the computing and software, communication, media and
entertainment and electronic commerce industries will continue. As a result,
acquisitions, joint ventures and strategic alliances are expected to continue to
be important to EDS' ability to compete effectively.
Revenues
EDS receives fees for all aspects of its portfolio of services. The
fees are generally paid pursuant to predetermined rates set forth in contracts.
Customer contracts for systems and technology services and business process
management services generally have terms of one to 10 years. Management
consulting engagements and electronic business projects generally have shorter
terms. See Note 13 to the Company's consolidated financial statements, included
within Exhibit 13 to this Form 10-K, for financial information about industry
segments.
Other than GM, no one client accounted for more than 5% of EDS' total
revenues in 1998, 1997 or 1996.
Competition
EDS experiences competition in the IT industry and in the broader
professional services industry. EDS has historically faced competition
principally from other companies providing information technology systems and
services. EDS' principal competitors include International Business Machines
Corporation, Andersen Consulting LLP and Computer Sciences Corporation. EDS'
competitors have increased in number as its capabilities and service offerings
expand. In addition to the foregoing competitors, in the business process
management area EDS also competes with the "big five" accounting firms, and in
the electronic business area EDS also competes with General Electric Information
Services and a number of other emerging technology companies. Principal
competitors of A.T. Kearney, EDS' management consulting subsidiary, include Bain
Consulting and The McKinsey Group. As the markets for professional services
continue to grow and as the services demanded by customers expand and increase
in complexity, EDS faces increasing competition from niche-oriented,
geographically focused companies as they expand and become broader competitors
through acquisitions, alliances or otherwise.
Technology and its application within the business enterprise is in a
rapid and continuing state of change as new technologies continue to be
developed, introduced and implemented. EDS management believes that its ability
to continue to compete effectively will depend upon its ability to develop and
market offerings that meet changing user needs and respond to technological
changes on a timely and cost-effective basis, as well as its ability to finance
and acquire the resources necessary to offer such services and products.
Employees
As of December 31, 1998, EDS employed approximately 120,000 persons located
in the United States and approximately 50 other countries. None of EDS' United
States or Canadian employees is currently employed under an agreement with a
collective bargaining unit, and EDS believes that its relations with employees
are good. To maintain its technical expertise and its responsiveness to evolving
client needs, EDS provides its employees with extensive continuing education and
training, as well as leadership and professional development programs.
4
Patents, Proprietary Rights and Licenses
EDS holds a number of patents and pending patent applications in the United
States and in foreign countries. EDS' policy generally is to pursue patent
protection that it considers necessary or advisable for the patentable
inventions and technological improvements of its business. EDS also relies
significantly on trade secrets, copyrights, technical expertise and know-how,
continuing technological innovations and other means, such as confidentiality
agreements with employees, consultants and customers, to protect and enhance its
competitive position.
Some of the business areas in which EDS is engaged are highly
patent-intensive. Many of EDS' competitors have obtained, and may be expected to
obtain in the future, patents that cover or affect services or products directly
or indirectly related to those offered by EDS. EDS routinely receives
communications from third parties asserting patent or other rights covering EDS'
services or products. There can be no assurance that EDS is aware of all patents
containing claims that may pose a risk of infringement by its services or
products. In addition, patent applications in the United States are confidential
until a patent is issued and, accordingly, EDS cannot evaluate the extent to
which its services or products may infringe claims contained in pending patent
applications. In general, if it were determined that one or more of the services
or products offered by EDS infringe patents held by others, EDS would be
required to cease developing or marketing such services or products, to obtain
licenses to develop or market such services from the holders of the patents or
to redesign such services or products in such a way as to avoid infringing the
patent claims. The extent to which EDS may be required in the future to obtain
licenses with respect to patents held by others and the availability and cost of
any such licenses are currently unknown. There can be no assurance that EDS
would be able to obtain such licenses on commercially reasonable terms or, if it
were unable to obtain such licenses, that it would be able to redesign its
services or products to avoid infringement or that litigation would not ensue.
EDS management is not aware of any pending patent or proprietary right
disputes against EDS that would have a material adverse effect on its
consolidated financial position or results of operations.
Regulation
Various aspects of EDS' business are subject to federal and state
regulation noncompliance with which, depending upon the nature of the
noncompliance, may result in the suspension or revocation of any license or
registration at issue, the termination or loss of any contract at issue or the
imposition of contractual damages, civil fines or criminal penalties. EDS has
experienced no material difficulties in complying with the various laws and
regulations affecting its business.
Services for General Motors
Approximately 25% of EDS' total revenues in 1998 was attributable to GM and
its affiliates. EDS provides substantially all of the worldwide data processing
and telecommunications activities for GM and certain of its affiliates,
including integrated information systems for payroll, health and benefits,
office automation, communications and plant automation functions. The loss of GM
as an ongoing major customer of EDS would have a material adverse effect on EDS.
Immediately prior to the Split-Off, GM and EDS entered into a new Master
Service Agreement (the "MSA") that serves as a framework for the negotiation and
operation of service agreements for certain "in-scope" IT services as defined in
the MSA ("MSA Services") to be provided by EDS to GM on a worldwide basis
(collectively with the MSA, the "IT Services Agreements"). MSA Services
accounted for approximately $3.5 billion of the approximately $4.2 billion of
revenues received by EDS from GM in 1998. The balance was attributable to goods
and services provided outside the scope of the MSA.
The term of the MSA commenced on June 7, 1996, the date of the
Split-Off, and will continue for a period of 10 years thereafter. The term may
be extended for an additional period or periods by mutual agreement between GM
and EDS. The MSA may be terminated, among other events, by GM if there occurs a
"change of
5
control" of EDS (as defined in the MSA) and certain additional conditions are
met (which conditions include a determination by GM's Board of Directors that
there exists substantial uncertainty about EDS' ability to perform its
obligations under the IT Services Agreements or any other significant threat to
the business relationship between the parties).
GM business units and EDS have entered into a number of Service
Agreements ("Service Agreements") setting forth the terms and provisions
applicable to specific services or projects undertaken pursuant to the MSA. The
provisions of the MSA apply to all Service Agreements, whether entered into
before or after the Split-Off. At the time of the Split-Off, the terms of the
largest domestic Service Agreements then in effect were extended for additional
terms of between one and three years. The Service Agreements with GM's North
American Operations, General Motors Acceptance Corporation (U.S. and Canada) and
Motors Insurance Corporation (U.S. and Canada) were each extended through
December 31, 1999. In addition, GM and EDS entered into a successor Service
Agreement covering GM International Operations with a term ending on December
31, 2000. The Service Agreement with Delphi Automotive Systems (U.S.) ("Delphi")
has been extended until the earlier of December 31, 1999 or the divestiture
(through a "split-off" or "spin-off") by GM of 35% or more of the equity of the
Delphi operations. GM has announced that it intends to complete such divestiture
in 1999. Upon consummation of such divestiture, Delphi would no longer be part
of GM for purposes of the MSA and, consequently, it would no longer be obligated
to purchase, and EDS would no longer be obligated to provide, MSA Services
except as the parties may have otherwise agreed. EDS is currently negotiating
with Delphi regarding the terms of a new master agreement for IT services to be
effective at the time of its divestiture, although there can be no assurance
that the parties will complete such agreement prior to such time or at any time
thereafter.
The MSA provides for certain market testing procedures to test the
competitiveness of the MSA Services provided by EDS. Under these procedures, EDS
may bid on any and all MSA Services and its bid will be evaluated on the same
criteria as bids submitted by other service providers. Since 1998, GM has been
permitted to expose to competitive bidding specified percentages of the prior
year's revenues to EDS for MSA Services. In each year from 1998 through 2000, GM
may expose to competitive bidding and award to third parties contracts for MSA
Services for which GM would otherwise have reasonably paid EDS up to an average
of approximately 6% of the prior year's MSA revenues. From 2001 through 2006, GM
may expose to competitive bidding and award to third parties contracts for MSA
Services for which GM would otherwise have reasonably paid EDS up to an average
of approximately 2.4% of the prior year's MSA revenues. In addition to such
annual limitations, the following aggregate limitations apply: through 2000, in
no single calendar year may the amount paid to third parties for MSA Services
exceed 15% of the aggregate revenue paid to EDS for MSA Services performed
during the prior year; and after 2000, in no single calendar year may the amount
paid to third parties for MSA Services exceed 25% of the aggregate amount of
revenue paid to EDS for MSA Services performed during the prior year.
ITEM 2. PROPERTIES
As of December 31, 1998, EDS operated approximately 400 locations in
41 states and 234 cities in the United States and approximately 318 additional
locations in 194 cities in approximately 40 countries outside the United States.
At such date, approximately 6 million square feet of space was owned by EDS and
approximately 17 million square feet of space was leased. EDS' worldwide
headquarters, which is located on a 363 acre campus in Plano, Texas, contains
approximately 3.5 million square feet of office and data center space. Other
than the 1.6 million square feet EDS Centre building, which is leased for an
initial term of 25 years and subject to certain fixed price purchase options
exercisable by EDS during and at the end of such initial term, all buildings and
real estate comprising the Plano campus are owned by EDS.
EDS' global telecommunications network is monitored from its Service
Management Centers in Plano, Texas, and Stockley Park, United Kingdom. EDS'
large scale Service Management Centers ("SMCs") are located throughout the
United States and in each of Australia, Brazil, Canada, France, Germany, the
Netherlands, Spain and the United Kingdom. In addition, EDS operates Service
Delivery Centers ("SDCs") at customer owned sites or EDS owned or leased
facilities throughout the world. SDCs usually support a single or small number
of customers with more specialized requirements than those supported at the
large scale, multiple customer SMCs. Leased properties consist primarily of
office, warehouse, SDC and non-U.S. SMC facilities. Lease terms are generally
6
five years or, with respect to leases related to a specific customer contract,
have a term concurrent with that contract. Upon expiration of its leases, EDS
does not anticipate any difficulty in obtaining renewals or alternative space.
In addition to its owned and leased properties, EDS occupies office space at
customer locations throughout the world. Such space is generally occupied
pursuant to the terms of the respective customer contracts.
EDS management believes that its facilities are suitable and adequate
for its business; however, EDS periodically reviews its space requirements to
consolidate and dispose of or sublet facilities which are no longer required in
connection with its business and to acquire new space to meet the needs of its
business.
ITEM 3. LEGAL PROCEEDINGS
Three suits challenging the Split-Off, Stephen A. Solomon v. General
Motors Corporation, et al., TRV Holding Company v. General Motors Corporation,
et al., and Melvin Ward et al. v. General Motors Corporation, et al. were
consolidated. The consolidated case purports to be a class action brought on
behalf of the former holders of GM's Class E common stock, all of which was
converted into EDS common stock in connection with the Split-Off, as well as a
double derivative action brought on behalf of EDS against certain present and
former directors of GM and certain former directors of EDS (all of whom were
also directors or officers of GM). EDS is named in the complaint only as a
nominal defendant with respect to the double derivative action. On May 23, 1996,
plaintiffs withdrew their application for expedited proceedings and preliminary
injunctive relief, and on June 7, 1996 the Split-Off was consummated. Since
then, plaintiffs have filed a third amended consolidated complaint. On December
11, 1997, the defendants filed a motion to dismiss the third amended
consolidated complaint. The motion to dismiss was granted on March 25, 1999. EDS
is not aware of whether the plaintiffs will pursue an appeal or other remedy.
From time to time EDS is involved in various litigation matters arising
in the ordinary course of its business. EDS management does not believe that
disposition of any current matter will have a material adverse effect on EDS'
consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None submitted.
EXECUTIVE OFFICERS OF EDS
The following sets forth certain information with respect to the
executive officers of EDS as of March 22, 1999:
Richard H. Brown, 51, has been Chairman and Chief Executive Officer of
EDS since January 1999. He was Chief Executive Officer of Cable & Wireless plc
from July 1996 to December 1998 and President and Chief Executive Officer of H&R
Block, Inc., and Chairman of its CompuServe subsidiary, from May 1995 to July
1996. Mr. Brown was Vice Chairman of Ameritech Corporation from January 1993 to
May 1995 and President of its Illinois Bell subsidiary from 1990 to 1993. He
held various executive positions with United Telecommunications, Inc. from 1981
to 1990, most recently as Executive Vice President, and was with Ohio Bell from
1969 to 1981.
Jeffrey M. Heller, 59, has been the President and Chief Operating
Officer of EDS since June 1996 and a director of EDS since 1983. He has been the
Chairman of EDS' Unigraphics Solutions Inc. subsidiary since January 1999. Mr.
Heller was a Senior Vice President of EDS from 1984 until June 1996. He joined
EDS in 1968 and has served in numerous technical and management capacities.
7
John A. Bateman, 50, has been a Senior Vice President of EDS since
June 1996 and prior to that time had been a Vice President since 1992. Mr.
Bateman has responsibility for EDS' European, Middle Eastern and African
operations.
Hartmut W. Burger, 55, has been an Executive Vice President of EDS
since June 1996 and prior to that time had been a Vice President since October
1992. He has responsibility for EDS' technical infrastructure and internal
information functions, EDS' electronic business strategic business line, and
EDS' business units serving customers in the communications industry. Prior to
assuming his current responsibilities, Mr. Burger was responsible for EDS'
business units serving customers in the manufacturing and commercial services
industries.
John R. Castle, Jr., 56, has been an Executive Vice President of EDS
since June 1996 and prior to that time had been a Senior Vice President since
October 1988. He has oversight responsibility for EDS' government affairs,
communications and public relations groups and its legal department. Prior to
joining EDS in 1988, Mr. Castle was a partner in the Dallas law firm of Hughes &
Luce.
Paul J. Chiapparone, 59, has been an Executive Vice President of EDS
since June 1996 and prior to that time had been a Senior Vice President since
April 1986. He has responsibility for EDS' global business units supporting the
GM account. Mr. Chiapparone joined EDS in 1966 and has served in numerous
management capacities.
J. Coley Clark, 53, has been a Senior Vice President of EDS since June
1996 and prior to that time had been a Vice President since 1989. Mr. Clark has
responsibility for EDS' business units serving customers in the financial
services and travel and transportation industries.
James E. Daley, 58, has been Executive Vice President and Chief Finan-
cial Officer of EDS since March 8, 1999. Before joining EDS, Mr. Daley had been
with Price Waterhouse, L.L.P from 1963 to 1998, serving as its Co
Chairman-Operations from 1988 to 1995, Vice Chairman International from 1995 to
1996, Global ABS Leader of Financial Services Industry Practices from 1997 to
1998, and as a member of its Policy Board from 1984 to 1995, Management
Committee from 1986 to 1996, World Board from 1988 to 1996 and World Firm
Management Committee from 1988 to 1995.
H. Paulett Eberhart, 45, has been a Senior Vice President of EDS since
August 1998 with responsibility for EDS' financial organization. Prior to August
1998, she had served as Controller since October 1992 and Vice President since
June 1994. Ms. Eberhart joined EDS in 1978 and has served in numerous financial
and leadership positions.
Gary B. Moore, 49, has been a Senior Vice President of EDS since June
1996 and prior to that time had been a Vice President since 1992. Since June
1996, Mr. Moore has held responsibility for EDS' business units serving
customers in the manufacturing industry. He had served as Chairman of EDS Japan
from January 1993 to June 1996.
G. Stuart Reeves, 59, has been an Executive Vice President of EDS since
June 1996 and prior to that time had been a Senior Vice President since February
1987. He has responsibility for EDS' business units serving customers in
government and in the energy and healthcare industries, EDS' Customer Solutions
strategic business line, and EDS' Canadian, Mexican and Central and South
American operations. Mr. Reeves joined EDS in 1967 and has held numerous
technical and management positions.
Edward V. Yang, 53, has been a Senior Vice President of EDS since June
1996 and prior to that time had been a Vice President since 1994. Mr. Yang has
responsibility for EDS' Asia/Pacific and Japanese operations. He joined EDS in
1992 as president of EDS' operations in East Asia. Prior to that time, Mr. Yang
was a Senior Vice President of Wang Laboratories and manager of its South
American and Asia/Pacific operations.
Executive officers serve at the discretion of the Board of Directors of
EDS.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "EDS." The table below shows the range of reported per share
sales prices on the NYSE Composite Tape for the Common Stock for the periods
indicated.
Calendar Year High Low
- ------------- ---- ---
1997
First Quarter.................................. $49.63 $40.13
Second Quarter................................. 44.75 31.75
Third Quarter.................................. 46.75 34.50
Fourth Quarter................................. 44.19 29.56
1998
First Quarter.................................. $50.88 $40.50
Second Quarter................................. 46.75 33.94
Third Quarter.................................. 42.25 30.56
Fourth Quarter................................. 51.31 30.44
The last reported sale price of the Common Stock on the NYSE on
March 15, 1999 was $47.50 per share. As of March 15, 1999, the approximate
number of record holders of Common Stock was 206,302.
EDS declared quarterly dividends on the Common Stock at the rate of
$.15 per share for each quarter of 1997 and 1998.
ITEM 6. SELECTED FINANCIAL DATA
"Selected Financial Data" for the years 1994 through 1998 on page 53 of
EDS' Annual Report to Stockholders for the year ended December 31, 1998 is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 23 through 32 of EDS' Annual Report to
Stockholders for the year ended December 31, 1998 is incorporated herein by
reference.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of EDS included in EDS' Annual
Report to Stockholders for the year ended December 31, 1998 are incorporated
herein by reference.
Consolidated Statements of Income -- for the years ended December 31,
1998, 1997 and 1996.
Consolidated Balance Sheets -- as of December 31, 1998 and 1997.
Consolidated Statements of Stockholders' Equity and Comprehensive
Income -- as of and for the years ended 1998, 1997 and 1996.
Consolidated Statements of Cash Flows -- for the years ended
December 31, 1998, 1997 and 1996.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For Item 10, the names and ages of the executive officers of EDS as of March 22,
1999, and the position(s) each of them has held during the past five years, are
included in Part I of this Form 10-K as permitted by General Instruction G(3).
All other information required by Item 10, and the information required by Items
11, 12 and 13, is incorporated by reference to the registrant's definitive proxy
statement for its Annual Meeting of Stockholders to be held on May 25, 1999,
which will be filed with the Securities and Exchange Commission within 120 days
after December 31, 1998.
10
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. The following consolidated financial statements of Electronic Data
Systems Corporation and subsidiaries included in the registrant's 1998 Annual
Report to Stockholders are incorporated by reference in Part II, Item 8:
Consolidated Statements of Income -- for the years ended December 31,
1998, 1997 and 1996.
Consolidated Balance Sheets -- as of December 31, 1998 and 1997.
Consolidated Statements of Stockholders' Equity and Comprehensive
Income -- as of and for the years ended 1998, 1997 and 1996.
Consolidated Statements of Cash Flows -- for the years ended
December 31, 1998, 1997 and 1996.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
2. The following financial statement schedule of Electronic Data Systems
Corporation and subsidiaries is included in Item 14(d):
Schedule II - Valuation and Qualifying Accounts.
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission
are not required under the related instructions or are inapplicable
and, therefore, have been omitted.
3. Exhibits
Exhibit No. Description
- ---------- -----------
3(a) Restated Certificate of Incorporation of Electronic Data
Systems Corporation, as amended through June 7, 1996 -
incorporated herein by reference to Exhibit 3(a) to the
Current Report on Form 8-K of the Registrant dated June 7,
1996.
3(b) Amended and Restated Bylaws of Electronic Data Systems
Corporation, as amended through June 7, 1996 - incorporated
herein by reference to Exhibit 3(b) to the Current Report on
Form 8-K of the Registrant dated June 7, 1996.
4(a) Rights Agreement dated as of March 12, 1996 between the
Registrant and The Bank of New York, as Rights Agent -
incorporated herein by reference to Exhibit 4(c) to the
Registration Statement on Form S-4 of the Registrant (File No.
333-02543).
4(b) Indenture dated as of August 12, 1996, between the Registrant
and Texas Commerce Bank National Association, as Trustee -
incorporated herein by reference to Exhibit 4 to the
Registration Statement on Form S-3 of the Registrant (File No.
333-10145).
4(c) Instruments defining the rights of holders of nonregistered
debt of the Registrant have been omitted from this exhibit
index because the amount of debt authorized under any such
instrument does not exceed 10% of the total assets of the
Registrant and its subsidiaries. The Registrant agrees to
furnish a copy of any such instrument to the Securities and
Exchange Commission upon request.
11
10(a) Master Service Agreement dated June 7, 1996 between General
Motors Corporation and the Registrant (portions of which are
subject to confidential treatment granted by the Securities
and Exchange Commission) - incorporated herein by reference to
Exhibit 10(a) to the Current Report on Form 8-K of the
Registrant dated June 7, 1996.
10(b) 1996 Incentive Plan of Electronic Data Systems Corporation -
incorporated herein by reference to Exhibit 10(b) to the
Quarterly Report on Form 10-Q of the Registrant for the
quarter ended June 30, 1998.*
10(c) Electronic Data Systems Corporation 1998 Supplemental Executive
Retirement Plan.*
10(d) Electronic Data Systems Corporation Deferred Compensation
Plan for Non-Employee Directors - incorporated herein by
reference to Exhibit 10(d) to the Quarterly Report on
Form 10-Q of the Registrant for the quarter ended June 30, 1998.*
10(e) Form of Indemnification Agreement entered into between the
Registrant and each of its directors and executive officers -
incorporated herein by reference to Exhibit 10(f) to the
Registration Statement on Form S-4 of the Registrant (File
No. 333-02543).*
10(f) Revolving Credit and Term Loan Agreement dated as of October 4,
1995 among the Registrant, Citibank, N.A., as
Administrative Agent, and the other financial institutions
identified therein as Arrangers, Managers and Lenders -
incorporated herein by reference to Exhibit 10(h) to the
Registration Statement on Form S-4 of the Registrant (File No.
333-02543).
10(g) Amended and Restated Revolving Credit and Term Loan Agreement
entered into as of September 23, 1997 among the Registrant and
the Lenders identified therein - incorporated herein by
reference to Exhibit 10(g) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1997.
10(h) Multi-Currency Revolving Credit Agreement dated as of October 4,
1995 among the Registrant, Citibank, N.A., as
Administrative Agent, and the other financial institutions
identified therein as Arrangers, Managers and Lenders -
incorporated herein by reference to Exhibit 10(i) to the
Registration Statement on Form S-4 of the Registrant (File No.
333-02543).
10(i) Amended and Restated Multi-Currency Revolving Credit
Agreement entered into as of September 23, 1997 among the
Registrant and the Lenders identified therein - incorporated
herein by reference to Exhibit 10(i) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997.
10(j) Registration Rights Agreement dated March 12, 1995 between
General Motors Corporation and United States Trust Company of
New York, as Trustee of the General Motors Corporation
Hourly-Rate Pension Plan - incorporated herein by reference to
Exhibit 10(j) to the Registration Statement on Form S-4 of the
Registrant (File No. 333-02543).
10(k) Succession Agreement dated June 7, 1996 among the Registrant,
General Motors Corporation and United States Trust Company of
New York, as Trustee of the General Motors Corporation
Hourly-Rate Pension Plan, with respect to the Registration
Rights Agreement filed as Exhibit 10(j) above incorporated
herein by reference to Exhibit 10(k) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December
31, 1996.
10(l) Form of Change in Control Employment Agreement entered into
by the Registrant with each of its executive officers -
incorporated herein by reference to Exhibit 99 to the
Registration Statement on Form S-3 of the Registrant
(File No. 333-06655).*
12
10(m) Agreement dated as of August 6, 1998 between Lester M.
Alberthal, Jr. and the Registrant - incorporated herein by
reference to Exhibit 10(m) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998.*
10(n) Agreement dated as of December 1, 1998 between Gary J.
Fernandes and the Registrant.*
10(o) Agreement between the Registrant and Robert Mintz dated
March 31, 1998.*
10(p) Senior Management Retention Plan of Electronic Data Systems
Corporation.*
10(q) Employment Agreement effective January 1, 1999 between the
Registrant and Richard H. Brown.*
12 Computation of Ratios of Earnings to Fixed Charges
for the three years ended December 31, 1998.
13 Portions of the Registrant's 1998 Annual Report
to Stockholders expressly incorporated by reference herein:
Pages 22 through 52.
21 Subsidiaries of the Registrant as of December 31, 1998.
23 Consent of Independent Auditors.
24 Powers of Attorney for Directors signing this Report on Form 10-K.
27 Financial Data Schedule for the year ended December 31, 1998,
submitted to the Securities and Exchange Commission in
electronic format.
* Management contracts and compensatory plans and arrangements required to be
filed as exhibits to this Form 10-K pursuant to Item 14(c).
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended December 31,
1998.
(c) Exhibits.
The response to this portion of Item 14 is submitted as a separate
section of this report.
(d) Financial Statement Schedule.
The response to this portion of Item 14 is submitted as a separate
section of this report.
13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Electronic Data Systems Corporation
Dated: March 26, 1999 By: /s/ Richard H. Brown
---------------------------------
Richard H. Brown
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Dated: March 26, 1999 By: /s/ Richard H. Brown
---------------------------------
Richard H. Brown
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Dated: March 26, 1999 By: /s/ Jeffrey M. Heller
---------------------------------
Jeffrey M. Heller
President, Chief Operating Officer
and Director
Dated: March 26, 1999 By: /s/ James E. Daley
---------------------------------
James E. Daley
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Dated: March 26, 1999 By: /s/ H. Paulett Eberhart
---------------------------------
H. Paulett Eberhart
Senior Vice President
(Principal Accounting Officer)
Dated: March 26, 1999 By: *
---------------------------------
James A. Baker, III
Director
14
Dated: March 26, 1999 By: *
---------------------------------
Richard B. Cheney
Director
Dated: March 26, 1999 By: *
---------------------------------
William H. Gray, III
Director
Dated: March 26, 1999 By: *
---------------------------------
Ray J. Groves
Director
Dated: March 26, 1999 By: *
---------------------------------
Ray L. Hunt
Director
Dated: March 26, 1999 By: *
---------------------------------
C. Robert Kidder
Director
Dated: March 26, 1999 By: *
---------------------------------
Judith Rodin
Director
Dated: March 26, 1999 By: *
---------------------------------
Enrique J. Sosa
Director
* By: /s/ D. Gilbert Friedlander
----------------------------------------
D. Gilbert Friedlander, Attorney in Fact
March 26, 1999
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Electronic Data Systems Corporation:
Under date of February 1, 1999, we reported on the consolidated balance sheets
of Electronic Data Systems Corporation and subsidiaries as of December 31, 1998
and 1997, and the related consolidated statements of income, shareholders'
equity and comprehensive income, and cash flows for each of the years in the
three-year period ended December 31, 1998, as contained in the 1998 annual
report to stockholders. These consolidated financial statements and our report
thereon are incorporated by reference in the annual report on Form 10-K for the
year 1998. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related consolidated financial
statement schedule as listed in the accompanying index. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement schedule based on our
audits.
In our opinion, such consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
Dallas, Texas
February 1, 1999
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
SCHEDULE II - ALLOWANCES
Additions Additions
Balance at charged to charged to
beginning costs and other Balance at
Description of year expenses accounts Deductions end of year
----------- ------------ ------------ ---------- ------------
FOR THE YEAR ENDED DECEMBER 31, 1998
Allowances Deducted from Assets
Accounts and notes receivable 105.4 75.3 -- 36.0 (a) 144.7
Inventories 30.7 6.4 -- 27.3 (b) 9.8
----------- ------------ ------------ ----------- ----------
Total Allowances Deducted from Assets 136.1 81.7 -- 63.3 154.5
=========== ============ ============ ============ ==========
FOR THE YEAR ENDED DECEMBER 31, 1997
Allowances Deducted from Assets
Accounts and notes receivable 117.2 37.8 -- 49.6 (a) 105.4
Inventories 25.6 17.3 -- 12.2 (c) 30.7
----------- ------------ ------------ ------------ ----------
Total Allowances Deducted from Assets 142.8 55.1 -- 61.8 136.1
=========== ============ ============ ============ ==========
FOR THE YEAR ENDED DECEMBER 31, 1996
Allowances Deducted from Assets
Accounts and notes receivable 99.5 93.4 -- 75.7 (a) 117.2
Inventories 19.5 15.5 -- 9.4 (c) 25.6
----------- ------------ ------------ ----------- -----------
Total Allowances Deducted from Assets 119.0 108.9 -- 85.1 142.8
=========== ============ ============ =========== ===========
Notes:
(a) Primarily accounts written off
(b) Primarily due to the outsourcing of the Company's computer equipment procurement operations
(c) Obsolete parts written off and foreign currency translation adjustments