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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999
A. Full title of the plan and the address of the plan, if different from that of the issuer
below:
Compaq Computer Corporation 401(k) Investment Plan
(formerly Compaq Computer Corporation Investment Plan)
Compaq Computer Corporation
20555 SH 249, Houston, Texas 77070
(281) 370-0670
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Compaq Computer Corporation 401(k) Investment Plan
(formerly Compaq Computer Corporation Investment Plan)
Index to Financial Statements, Supplemental Schedule and Exhibits
As of December 31, 1999 and 1998 and for the year ended December 31, 1999
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The following plan financial statements, schedules and reports, have been prepared in accordance with the financial reporting requirements of ERISA.
CONTENTS
Reports Auditor and Accountants
Report of Independent Auditors - Ernst & Young LLP....................................... 1
Report of Independent Accountants - PricewaterhouseCoopers LLP.................. 3
Audited Financial Statements
Statements of Net Assets Available for Benefits...................................................4
Statement of Changes in Net Assets Available for Benefits...................................5
Notes to Financial Statements..............................................................................6
Supplemental Schedule
Schedule H, Line 4(i) - Schedule of Assets Held for Investment
Purposes at End of Year.................................................................................10
Other
Signatures...........................................................................................................12
Exhibit 1.............................................................................................................13
Report of Independent Auditors
Participants and Administrative CommitteeWe have audited the accompanying statement of net assets available for benefits of Compaq Computer Corporation 401(k) Investment Plan (formerly Compaq Computer Corporation Investment Plan) as of December 31, 1999, and the related statement of changes in net assets available for benefits for the year then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 1999, and the changes in its net assets available for benefits for the year then ended, in conformity with accounting principles generally accepted in the United States.
Our audit was performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets held for investment purposes at end of year as of December 31, 1999, is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in our audit of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.
/s/ Ernst & Young LLP
Houston, Texas
May 30, 2000
Report of Independent Accountants
To the Participants and Administrative Committee of the
Compaq Computer Corporation Investment Plan
In our opinion, the accompanying statement of net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the Compaq Computer Corporation Investment Plan (the Plan) at December 31, 1998 in conformity with generally accepted accounting principles. This financial statement is the responsibility of the Plan's management; our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit of this statement in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
June 21, 1999
Compaq Computer Corporation 401(k) Investment Plan
(formerly Compaq Computer Corporation Investment Plan)
Statements of Net Assets Available for Benefits
December 31 | ||
1999 | 1998 | |
| Assets | ||
| Investments (Note 3) | $ 3,658,216,956 | $ 1,831,120,959 |
| Contribution receivable: | ||
| Employer | 4,178,089 | 33,828 |
| Participant | 3,661 | 51,189 |
| Securities sold receivable | 319,570 | ¯ |
| Accrued investment income | 38,995,476 | ¯ |
Net assets available for benefits | $ 3,701,713,752 | $ 1,831,205,976 |
See accompanying notes.
Compaq Computer Corporation 401(k) Investment Plan
(formerly Compaq Computer Corporation Investment Plan)
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 1999
Additions: | |
| Participant contributions | $ 101,606,800 |
Employer contributions | 61,803,357 |
Dividends and interest | 51,083,410 |
Transfer from other plan (Note 1) | 1,982,232,756 |
Total additions | 2,196,726,323 |
Deductions: | |
Net depreciation in fair value of investments (Note 3) | 182,647,886 |
Benefit payments | 143,499,541 |
Administrative expenses | 71,120 |
Total deductions | 326,218,547 |
Net increase | 1,870,507,776 |
Net assets available for benefits: | |
Beginning of year | 1,831,205,976 |
End of year | $ 3,701,713,752 |
See accompanying notes.
Compaq Computer Corporation 401(k) Investment Plan
(formerly Compaq Computer Corporation Investment Plan)
Notes to Financial Statements
December 31, 1999
1. Description of the Plan
General
The following description of the Compaq Computer Corporation 401(k) Investment Plan (formerly Compaq Computer Corporation Investment Plan) (the "Plan") is provided for general information only. The Plan, established April 1, 1985, is a defined contribution plan covering all eligible employees of Compaq Computer Corporation and its subsidiaries (the "Company"). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). Participants should refer to the Summary Plan Description for a more complete description of the Plan's provisions, a copy of which is available from the Company.
Effective January 1, 1999, the name of the Plan was changed from Compaq Computer Corporation Investment Plan to Compaq Computer Corporation 401(k) Investment Plan. On December 9, 1999, the Board of Directors of the Company resolved to merge the Digital Equipment Corporation Savings and Investment Plan into the Plan effective December 31, 1999.
Contributions
Participants may contribute from 1% to 19% of pretax annual compensation, as defined in the Plan document. Participants may also rollover amounts representing distributions from other qualified defined benefit or defined contribution plans.
The Company contributes a matching amount up to 6% of the base compensation up to a maximum of $160,000, that a participant contributes to the Plan. Additional amounts may be contributed at the discretion of the Company's board of directors.
Participant Accounts
Each participant's account is credited with the participant's contribution and allocations of (a) the Company's contribution, and (b) Plan earnings or losses, and is charged with an allocation of administrative expenses. Forfeited balances of terminated participants' nonvested accounts are used to reduce future Company contributions. The benefit to which a participant is entitled is the benefit that can be provided from the participant's account net of any outstanding loans against those vested amounts.
Compaq Computer Corporation 401(k) Investment Plan
(formerly Compaq Computer Corporation Investment Plan)
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Vesting
Participants are immediately vested in their deferral and rollover contributions plus actual earnings thereon. Vesting in the Company contribution portion of their accounts plus actual earnings thereon is based on years of service. Effective January 1, 1999, participants vest 20% per year in the employer contributions with 100% vesting after 5 years of credited service. The Plan document provides the vesting provisions for a participant's interest in their employer contribution account prior to January 1, 1999.
Participant Loans
Participants may borrow from their fund accounts up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance. Loan terms range from 1 ¯ 5 years or up to 30 years for the purchase of a primary residence. The loans are secured by the balance in the participant's account and bear interest at a fixed rate of 1% above the prime rate for the term of the loan. Principal and interest is paid ratably through payroll deductions. A participant can have no more than three loans outstanding at any given time.
Payment of Benefits
On termination of service or death, a participant may receive a lump-sum amount equal to the vested value of his or her account or installment options. In addition, a participant who has attained age 59½ may make withdrawals of his or her account while employed by the Company. The Plan also allows for hardship withdrawals effective January 1, 1999.
Administrative Expenses
The Company pays certain administrative expenses of the Plan.
Plan Termination
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts.
Compaq Computer Corporation 401(k) Investment Plan
(formerly Compaq Computer Corporation Investment Plan)
Notes to Financial Statements (continued)
2. Summary of Accounting Policies
Basis of Accounting
The financial statements have been prepared under the accrual basis of accounting.
Benefits are recorded when paid.
Investment Valuation and Income Recognition
The Plan's investments are stated at fair value which equals the quoted market price on the last business day of the Plan year. Shares of registered investment companies are valued at quoted market prices which represent the net asset value of shares held by the Plan at year end. The Company stock is valued at its quoted market price. The participant loans are valued at their outstanding balances, which approximates fair value. Guaranteed investment contracts are recorded at contract value, which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Reclassification
Certain 1998 amounts have been reclassified to conform to the 1999 presentation.
Compaq Computer Corporation 401(k) Investment Plan
(formerly Compaq Computer Corporation Investment Plan)
Notes to Financial Statements (continued)
3. Investments
Guaranteed investment contracts are recorded at contract value, which represents contributions plus earnings, less withdrawals and administrative expenses. Interest crediting rates on the contracts are generally determined at the time of purchase. At December 31, 1999 the interest crediting rates ranged from 5.7% to 7.2%.
The Plan's investments are held by Vanguard Fiduciary Trust Company. Investments that represent 5% or more of total Plan assets are as follows:
December 31 | ||
1999 | 1998 | |
Vanguard Prime Money Market Portfolio Fund | $ 46,986 | $ 106,675,174 |
Vanguard 500 Index Fund | 309,227,359 | 241,679,193 |
Vanguard Primecap Fund | 244,663,584 | 155,911,663 |
Vanguard Equity Income Fund | 143,447,723 | 182,580,102 |
Compaq Computer Corporation Stock | 725,214,339 | 891,254,267 |
Vanguard Stable Value Fund | 193,029,341 | ¯ |
Vanguard Growth and Income Fund | 463,910,687 | ¯ |
Barclays Global Investor Equity Index Fund | 267,908,641 | ¯ |
Putnam Voyager International Fund | 388,192,714 | ¯ |
During 1999, the Plan's investments (including investments bought, sold, and held during the year) appreciated/(depreciated) in value as follows:
Mutual funds | $ 128,840,555 |
Common stock | (311,488,441) |
$ (182,647,886) |
4. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service dated January 3, 1995, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the "Code") and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The plan administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax exempt.
Supplemental Schedule
Compaq Computer Corporation 401(k) Investment Plan
(formerly Compaq Computer Corporation Investment Plan)
Schedule H, Line 4(i) Schedule of Assets Held for Investment Purposes at
End of Year
EIN: 76-0011617 PN: 001
December 31, 1999
Identity of Issue, |
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* Compaq Computer Corporation | Common stock | $ 725,214,339 | |||||||||
Warburg Pincus | International Equity Fund | 353 | |||||||||
* Vanguard Fiduciary Trust Company | Explorer Fund |
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| * Vanguard Fiduciary Trust Company | Prime Money Market Portfolio Fund |
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| * Vanguard Fiduciary Trust Company | Short-Term Corporate Fund |
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| * Vanguard Fiduciary Trust Company | 500 Index Fund |
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| * Vanguard Fiduciary Trust Company | PrimeCap Fund |
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| * Vanguard Fiduciary Trust Company | Equity Income Fund |
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| * Vanguard Fiduciary Trust Company | Growth and Income Fund |
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| * Vanguard Fiduciary Trust Company | Stable Value Fund |
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| * Vanguard Fiduciary Trust Company | Extend Market Index Fund |
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Franklin | Small Cap Growth Fund | 167,034,678 | |||||||||
Deutsche Banc | International Equity Fund | 77,423,954 | |||||||||
Barclays Global Investor | Equity Index Fund | 267,908,641 | |||||||||
Barclays Global Investor | U.S. Debt Fund | 5,193,493 | |||||||||
Barclays Global Investor | Extended Market Fund | 10,517,595 | |||||||||
Barclays Global Investor | EAFE Equity Fund | 10,079,035 | |||||||||
Putnam Investments | International Voyager Fund | 388,192,714 | |||||||||
Templeton | Foreign Fund | 127,748,140 | |||||||||
PIMCO Advisors | Total Return Fund | 81,973,682 | |||||||||
| * Northern Trust Corporation | Short-Term Investment Fund | 5,819,455 | |||||||||
Identity of Issue, |
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Guaranteed Investment Contracts: | |||||||||||
Allstate Life Insurance | 7.15%, Due 7/1/2003 | 32,414,369 | |||||||||
Canada Life Assurance Company |
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Canada Life Contract Assurance Company |
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CDC Capital Inc. | 5.66%, Due 12/31/2001 | 20,000,000 | |||||||||
CNA Life Insurance | 6.80%, Due 4/1/2000 | 19,301,326 | |||||||||
Jackson National Life | 6.14%, Due 4/1/2002 | 10,149,673 | |||||||||
John Hancock Mutual Life Insurance |
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John Hancock Mutual Life Insurance |
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John Hancock Mutual Life Insurance |
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Metropolitan Life | 6.63%, Due 7/1/2001 | 16,009,803 | |||||||||
Metropolitan Life | 6.24%, Due 7/1/2000 | 6,769,160 | |||||||||
Metropolitan Life | 7.04%, Due 7/1/2002 | 33,264,407 | |||||||||
New York Life Insurance Company |
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New York Life Insurance Company |
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Peoples Security | 6.57%, Due 1/1/2001 | 12,002,230 | |||||||||
Principal Mutual | 6.35%, Due 4/1/2002 | 15,949,809 | |||||||||
Principal Mutual | 7.23%, Due 1/1/2001 | 20,354,034 | |||||||||
Principal Mutual | 6.05%, Due 3/31/2000 | 3,463,395 | |||||||||
SunAmerica | 6.98%, Due 7/1/2001 | 16,038,103 | |||||||||
Traveler's | 5.67%, Due 4/1/2002 | 17,872,805 | |||||||||
Traveler's | 7.16%, Due 7/1/2003 | 10,129,666 | |||||||||
* Participant Loans | Loans with varying maturing dates and interest rates ranging from 6.5% to 11.5% |
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$ 3,658,216,956 | |||||||||||
*Party-in-interest
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the Plan) have duly caused this annual report to be signed by the undersigned thereunto duly authorized.
Compaq Computer Corporation 401(k)
Investment Plan
Date: July 7, 2000 By: /s/ Linda S. Auwers
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Linda S. Auwers
Vice President, Associate General
Counsel and Secretary
Compaq Computer Corporation
