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, 2000
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
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
Compaq Computer Corporation
20555 SH 249, Houston, Texas 77070
(281) 370-0670
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
Compaq Computer Corporation 401(k) Investment Plan
Year ended December 31, 2000
Compaq Computer Corporation 401(k) Investment Plan
Financial Statements and Supplemental Schedule
Year ended December 31, 2000
Contents
Report of Independent Auditors.......................................................................................................1
Audited Financial Statements
Statements of Net Assets Available for Benefits...........................................................................2
Statement of Changes in Net Assets Available for Benefits........................................................3
Notes to Financial Statements...........................................................................................................4
Supplemental Schedule
Schedule H, Line 4(i) - Schedule of Assets (Held At End of Year)..............................................8
Report of Independent Auditors
Participants and Administrative Committee
of the Compaq Computer Corporation
401(k) Investment Plan
We have audited the accompanying statements of net assets available for benefits of Compaq Computer Corporation 401(k) Investment Plan as of December 31, 2000 and 1999, and the related statement of changes in net assets available for benefits for the year ended December 31, 2000. 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 audits.
We conducted our audits 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 audits provide 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, 2000 and 1999, and the changes in its net assets available for benefits for the year ended December 31, 2000, in conformity with accounting principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2000, 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. The supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in our audits 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 4, 2001
1
Compaq Computer Corporation 401(k) Investment Plan
Statements of Net Assets Available for Benefits
December 31
2000 1999
---------------------------------------
Assets
Investments $3,310,800,451 $3,658,216,956
Contribution receivable:
Employer 114,816 4,178,089
Participant 151,721 3,661
Securities sold receivable - 319,570
Accrued investment income - 38,995,476
---------------------------------------
Net assets available for benefits $3,311,066,988 $3,701,713,752
=======================================
See accompanying notes.
2
Compaq Computer Corporation 401(k) Investment Plan
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2000
Additions:
Participant contributions $ 239,698,439
Employer contributions 99,097,929
Dividends and interest 78,336,587
----------------------
Total additions 417,132,955
Deductions:
Net depreciation in fair value of investments 498,071,160
Benefit payments 344,413,715
Administrative expenses 52,761
----------------------
Total deductions 842,537,636
Other changes in net assets:
Transfers to other qualified plans (1,322,198)
Transfer from other qualified plans 36,080,115
----------------------
Total other changes in net assets 34,757,917
----------------------
Net decrease (390,646,764)
Net assets available for benefits:
Beginning of year 3,701,713,752
----------------------
End of year $ 3,311,066,988
======================
See accompanying notes.
3
Compaq Computer Corporation 401(k) Investment Plan
Notes to Financial Statements
December 31, 2000
1. Description of Plan
General
The following description of the Compaq Computer Corporation 401(k) 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 certain of 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 April 1, 2000, the Company purchased certain assets of Inacom Corp. Net assets of approximately $36 million representing the individual account balances of participants were transferred into the Plan.
Effective June 30, 2000, net assets of approximately $392,000 representing the individual account balances of certain participants were transferred to the EDS 401(k) Plan.
Effective November 30, 2000, net assets of approximately $916,000 representing certain individual account balances were transferred to the AXENT Technologies Inc. 401(k) Plan.
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 an amount equal to the participant’s contribution which does not exceed 6% of $170,000 of base compensation for all participants except certain former employees of Digital Equipment Corporation. For those employees, the Company contributes an amount equal to the lesser of (i) 33–1/3% of such participant’s contributions or (ii) 2% of the participant’s compensation which does not exceed $170,000 of base compensation. The Company contributes the remaining 4% as an employer credit in another company sponsored benefit plan.
Participants direct the investment allocation of all contributions.
4
Compaq Computer Corporation 401(k) Investment Plan
Notes to Financial Statements (continued)
1. Description of Plan (continued)
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 or pay eligible plan expenses. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account net of any outstanding loans against those vested amounts.
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.
Administrative Expenses
The Company pays certain administrative expenses of the Plan.
5
Compaq Computer Corporation 401(k) Investment Plan
Notes to Financial Statements (continued)
1. Description of Plan (continued)
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.
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 represents 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.
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.
6
Compaq Computer Corporation 401(k) Investment Plan
Notes to Financial Statements (continued)
3. Investments
The Plan’s investments are held by Vanguard Fiduciary Trust Company. Individual investments that represent 5% or more of net assets available for benefits at year end are as follows:
December 31
2000 1999
------------------------------------
Compaq Computer Corporation Stock $ 432,074,249 $ 725,214,339
Vanguard 500 Index Fund 502,477,388 309,227,359
Vanguard Primecap Fund 683,230,825 244,663,584
Vanguard Stable Value Fund 631,185,879 193,029,341
Vanguard Growth and Income Fund 457,833,888 463,910,687
Barclays Global Investor Equity Index Fund - 267,908,641
Putnam Voyager International Fund - 388,192,714
Franklin Small Cap Growth Fund, Class A 197,662,444 167,034,678
During 2000, the Plan's investments (including investments bought, sold,
and held during the year) depreciated in value as follows:
Mutual funds $ 173,328,505
Common stock 324,742,655
------------------
------------------
$ 498,071,160
==================
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. The Plan document was completely restated subsequent to its submission for a determination letter. 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.
5. Subsequent Event
In January 2001, net assets of approximately $1.6 million representing individual account balances of certain participants were transferred to B2E Solutions 401(k) Plan.
7
Supplemental Schedule
Compaq Computer Corporation 401(k) Investment Plan
Schedule H, Line 4(i) - Schedule of Assets (Held At End of Year)
EIN: 76-0011617 PN: 001
December 31, 2000
Identity of Issue,
Borrower, Lessor, or Current
Similar Party Description of Investment Value
- ----------------------------------------------------------------------------------------------
* Compaq Computer
Corporation Common stock $ 432,074,249
* Vanguard Fiduciary Trust
Company 500 Index Fund 502,477,388
* Vanguard Fiduciary Trust
Company PrimeCap Fund 683,230,825
* Vanguard Fiduciary Trust
Company Equity Income Fund 133,996,397
* Vanguard Fiduciary Trust
Company Growth and Income Fund 457,833,888
* Vanguard Fiduciary Trust
Company Stable Value Fund 631,185,879
* Vanguard Fiduciary Trust
Company Extend Market Index Fund 27,578,282
Franklin Small Cap Growth Fund, Class A 197,662,444
Deutsche Banc International Equity Fund 165,280,014
* Participant Loans Loans with varying maturing dates and
interest rates ranging from 9.75% to
10.5% 79,481,085
------------------
$ 3,310,800,451
==================
*Party-in-interest
8
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
By: /s/ Linda S. Auwers
Linda S. Auwers
Vice President, Deputy General Counsel
and Secretary
Dated: June 28, 2001
9