1
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Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
10-Q/A
Quarterly Report Pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934
For the quarter ended June 29, 1996
Commission File No. 0-18033
EXABYTE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 84-0988566
(State of Incorporation) (I.R.S. Employer Identification No.)
1685 38th Street
Boulder, Colorado 80301
(Address of principal executive offices, including zip code)
(303) 442-4333
(Registrant's Telephone Number, including area code)
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 ninety days.
Yes /X/ No / /
As of July 30, 1996, there were 22,126,112 shares outstanding of the
Registrant's Common Stock (par value $0.001 per share).
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2
EXABYTE CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Consolidated Balance Sheets --
June 29, 1996 and December 30, 1995............. 3
Consolidated Statements of Operations --
Three and Six Months Ended June 29, 1996 and
July 1, 1995 (Unaudited)........................ 4-5
Consolidated Statements of Cash Flows --
Six Months Ended June 29, 1996 and
July 1, 1995 (Unaudited)........................ 6-7
Notes to Consolidated Financial Statements
(Unaudited)..................................... 8-9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations...................................... 10-16
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.. 17
Item 6. Exhibits and Reports on Form 8-K..................... 18-20
3
PART I Item 1. Financial Statements
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS June 29, December 30,
1996 1995
--------- --------
Current assets:
Cash and cash equivalents................. $ 66,496 $ 40,137
Short-term investments.................... 6,500 28,800
Accounts receivable, less allowance
for doubtful accounts and customer
returns and credits of $5,646 and
$6,832, respectively.................... 61,735 56,785
Inventories, net.......................... 49,502 44,169
Deferred income taxes..................... 16,690 17,595
Other current assets...................... 4,828 9,446
-------- --------
Total current assets................. 205,751 196,932
Property and equipment, net.................... 43,352 42,972
Deferred income taxes.......................... 7,979 7,703
Other assets................................... 4,044 2,729
-------- --------
$261,126 $250,336
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................... $ 23,466 $ 21,840
Accrued liabilities....................... 32,820 32,945
Accrued income taxes...................... 2,947 4,104
Current portion of long-term obligations.. 803 900
-------- --------
Total current liabilities............ 60,036 59,789
Long-term obligations.......................... 3,788 4,181
-------- --------
Total liabilities.................... 63,824 63,970
Stockholders' equity: -------- --------
Preferred stock, $.001 par value;
14,000 shares authorized; no shares
issued and outstanding.................. -- --
Common stock, $.001 par value; 50,000
shares authorized; 22,125 and 21,827
shares issued and outstanding,
respectively............................ 22 22
Capital in excess of par value............ 63,073 59,102
Treasury stock, at cost, 15 shares
outstanding for both periods............. (9) (9)
Retained earnings......................... 134,216 127,251
-------- --------
Total stockholders' equity........... 197,302 186,366
-------- --------
$261,126 $250,336
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
4
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended
-----------------------
June 29, July 1,
1996 1995
-------- --------
Net sales.................................... $90,464 $96,983
Cost of goods sold........................... 65,641 73,728
------- -------
Gross profit................................. 24,823 23,255
Operating expenses:
Selling, general and administrative..... 11,634 11,951
Research and development................ 8,142 9,237
------- -------
Income from operations....................... 5,047 2,067
Other income, net............................ 688 140
------- -------
Income before income taxes................... 5,735 2,207
Provision for income taxes................... 2,065 517
------- -------
Net income................................... $3,670 $1,690
======= =======
Net income per share......................... $0.16 $0.08
======= =======
Common and common
equivalent shares used in the
calculation of net income
per share............................... 22,473 21,924
======= =======
The accompanying notes are an integral part of the consolidated
financial statements.
5
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Six Months Ended
----------------------
June 29, July 1,
1996 1995
-------- --------
Net sales.................................... $184,282 $193,177
Cost of goods sold........................... 133,919 140,173
-------- --------
Gross profit................................. 50,363 53,004
Operating expenses:
Selling, general and administrative..... 22,143 22,611
Research and development................ 18,171 18,094
-------- --------
Income from operations....................... 10,049 12,299
Other income, net............................ 833 1,584
-------- --------
Income before income taxes................... 10,882 13,883
Provision for income taxes................... 3,917 4,720
-------- --------
Net income................................... $ 6,965 $ 9,163
======== ========
Net income per share......................... $ 0.31 $ 0.42
======== ========
Common and common
equivalent shares used in the
calculation of net income
per share............................... 22,358 22,030
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
6
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
----------------------
June 29, July 1,
1996 1995
-------- --------
Cash flows from operating activities:
Cash received from customers............ $179,583 $190,224
Cash paid to suppliers and employees.... (174,683) (193,447)
Interest received....................... 1,431 1,850
Interest paid........................... (252) (98)
Income taxes paid....................... (1,231) (5,641)
Income tax refund received.............. 4,160 --
Net cash provided (used) by -------- --------
operating activities............. 9,008 (7,112)
-------- --------
Cash flows from investing activities:
Sale of short-term
investments, net...................... 22,300 32,053
Capital expenditures.................... (8,246) (12,687)
Net cash provided by -------- --------
investing activities............. 14,054 19,366
-------- --------
Cash flows from financing activities:
Net proceeds from issuance of
common stock.......................... 3,786 710
Principal payments under long-term
obligations........................... (489) (162)
Net cash provided by -------- --------
financing activities............. 3,297 548
-------- --------
Net increase in cash and cash
equivalents............................. 26,359 12,802
Cash and cash equivalents at beginning
of period............................... 40,137 46,233
-------- --------
Cash and cash equivalents at end
of period............................... $ 66,496 $ 59,035
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
7
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
----------------------
June 29, July 1,
1996 1995
-------- --------
Reconciliation of net income to net cash
provided (used) by operating activities:
Net income................................ $ 6,965 $ 9,163
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Depreciation, amortization
and other............................. 7,865 7,379
Deferred income tax provision........... 628 (1,178)
Provision for losses and reserves
on accounts receivable................ 2,878 3,624
Change in assets and liabilities:
Accounts receivable....................... (7,828) (6,939)
Inventories............................... (5,333) (17,485)
Other current assets...................... 4,618 (1,883)
Other assets.............................. (1,315) (279)
Accounts payable.......................... 1,625 (1,733)
Accrued liabilities....................... (125) 1,962
Accrued income taxes...................... (970) 257
------- -------
Net cash provided (used) by
operating activities............... $ 9,008 $(7,112)
======= =======
Supplemental schedule of non-cash
investing and financing activities:
Transfer of inventories to
property and equipment.................. $ -- $ 1,228
Note payable used to finance
software licenses....................... $ -- $ 1,055
The accompanying notes are an integral part of the consolidated
financial statements.
8
EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1--ACCOUNTING PRINCIPLES
The consolidated balance sheet as of June 29 1996, the consolidated
statements of operations for the three and six months ended June 29, 1996 and
July 1, 1995, as well as the consolidated statements of cash flows for the
six months ended June 29, 1996 and July 1, 1995, have been prepared by the
Company without an audit. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments necessary for a fair
presentation thereof, have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
consolidated financial statements be read in conjunction with financial
statements and notes thereto included in the Company's December 30, 1995
annual report to stockholders heretofore filed with the Commission as Part
II to the Company's Annual Report on Form 10-K. The results of operations
for interim periods presented are not necessarily indicative of the operating
results for the full year.
Note 2--INVENTORIES
Inventories consist of the following:
June 29, December 30,
1996 1995
-------- ----------
(In thousands)
Raw materials and component parts............ $31,081 $24,932
Work-in-process.............................. 2,604 2,033
Finished goods............................... 15,817 17,204
------- -------
$49,502 $44,169
======= =======
Note 3--ACCRUED LIABILITIES
Accrued liabilities consist of the following:
June 29, December 30,
1996 1995
-------- ---------
(In thousands)
Wages and employee benefits.................. $ 7,108 $ 5,603
Warranty and other related costs............. 21,436 20,068
Loss on purchase commitments................. 1,154 4,212
Other........................................ 3,122 3,062
------- -------
$32,820 $32,945
======= =======
9
Note 4--NET INCOME PER SHARE
Net income per common share is based on the weighted average number of shares
of common stock and common stock equivalents (dilutive stock options)
outstanding during each respective period. Proceeds from the exercise of the
dilutive stock options are assumed to be used to repurchase outstanding
shares of the Company's common stock at the average fair market value during
the period.
10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
This Form 10-Q contains forward-looking statements within the context of
Section 21E of the Securities Exchange Act of 1934, as amended. Each and every
forward-looking statement involves a number of risks and uncertainties,
including those sixteen risk factors specifically delineated and described in
Part 1, Item 1 of the Company's 1995 Form 10-K, filed March 22, 1996
("1995 Form 10-K") and as specifically expanded and modified below. The actual
results that the Company achieves may differ materially from any forward-
looking statements due to such risks and uncertainties. The Company has
identified by *bold-face* various sentences within this Form 10-Q which contain
such forward-looking statements, and words such as "believes", "anticipates",
"expects", "intends", and similar expressions are intended to identify forward-
looking statements, but are not the exclusive means of identifying such
statements. The Company undertakes no obligation to revise any forward-looking
statements in order to reflect events or circumstances that may arise after the
date of this report.
The 1995 Form 10-K Risk Factors are hereby restated, modified and expanded in
accordance with the following section references that correlate to the
corresponding 1995 Form 10-K Risk Factors sections:
Product Development; Mammoth: The Company began commercial shipment of the
Mammoth product in the first quarter of 1996. The Mammoth product incorporates
a mechanical deck manufactured by the Company. The Company's manufacturing
experience in the past has been largely limited to the assembly and testing of
purchased components, and the Company has had limited experience in other
phases of manufacturing. In particular, the Company has had only limited
experience in the manufacture of mechanical decks and certain critical
components of the deck assembly, including the head scanner assemblies, and
there can be no assurance that the Company will be able to manufacture the
Mammoth product in commercial quantities at commercially acceptable cost. Any
inability of the Company to manufacture the Mammoth product and components in
the required volumes would have a material adverse effect on the Company's
competitive position and on its results of operations. The Company's ability
to successfully introduce the Mammoth product is also dependent upon the
availability of advanced tape media which is currently solely sourced from
Sony. For these and other factors relating to the introduction, manufacture
and sale of the Mammoth product, which factors could have a material adverse
effect on the Company's results of operations, see the 1995 Form 10-K.
Dependence on Key Vendors; Sony; see also Competition: Sony announced on
May 14, 1996 the introduction of a competitive 8mm product offering. The
Company believes that the Sony introduction represents the first 8mm offering
by a competitor. Sony's competitive position may also adversely affect the
Company's ability to procure 8mm mechanical decks and tape media at required
volumes and competitive prices. For a fuller discussion of these and other
factors, which could have a material adverse effect on the Company's
competitive position and on its results of operations, see the 1995 Form 10-K.
RESULTS OF OPERATIONS
The following table sets forth unaudited operating results for the three
and six month periods ended June 29, 1996 and July 1, 1995 as a percentage
of sales in each of these periods. This data has been derived from the
unaudited consolidated financial statements.
11
Three Months Ended
----------------------
June 29, July 1,
1996 1995
-------- --------
Net sales.................................... 100.0% 100.0%
Cost of goods sold........................... 72.6 76.0
------ ------
Gross profit................................. 27.4 24.0
Operating expenses:
Selling, general and administrative........ 12.8 12.3
Research and development................... 9.0 9.5
------ ------
Income from operations....................... 5.6 2.2
Other income, net............................ 0.8 0.1
------ ------
Income before income taxes................... 6.4 2.3
Provision for income taxes................... 2.3 0.6
------ ------
Net income................................... 4.1% 1.7%
====== ======
Six Months Ended
----------------------
June 29, July 1,
1996 1995
-------- --------
Net sales.................................... 100.0% 100.0%
Cost of goods sold........................... 72.7 72.6
------ ------
Gross profit................................. 27.3 27.4
Operating expenses:
Selling, general and administrative........ 12.0 11.7
Research and development................... 9.9 9.4
------ ------
Income from operations....................... 5.4 6.3
Other income, net............................ 0.5 0.8
------ ------
Income before income taxes................... 5.9 7.1
Provision for income taxes................... 2.1 2.4
------ ------
Net income................................... 3.8% 4.7%
====== ======
12
NET SALES
Net sales for the three and six month periods ended June 29, 1996 of $90.5
million and $184.3 million, respectively, represented a decrease over the
corresponding periods in 1995 of 7% and 5%, respectively. These sales
decreases were primarily the result of product transitions.
During the first half of 1995, revenue related to certain of the Company's
discontinued products (full-high drives and libraries and the EXB-4200)
comprised 15.3% of total revenue. During the first half of 1996, revenue
related to these products fell to 2.4% of total revenue. This decrease in
revenue was partially offset by increased revenue from the Company's half-high
products, including the EXB-8700 and Mammoth drives.
Half-high 8mm drives represented 65.5% of revenue during the first six
months of 1996 compared to 57.1% for the same period in 1995. Half-high
libraries represented 13.3% of revenues during the first half of 1996
compared to 11.9% for the comparable period in 1995. Quarter-inch products,
including the Company's TR3 offering, increased to 3.4% of revenue during
the first six months of 1996, compared to 2.2% for the corresponding period
in 1995. Additionally, media and service revenues continued to grow in both
absolute dollars and as a percentage of total revenue.
The remainder of sales during the first six months of 1996 and 1995, along
with a recap of the products described above are listed in the following
table.
13
PRODUCT MIX TABLE
(As a Percentage of Net Sales)
Six Months Ended
----------------------
June 29, July 1,
1996 1995
-------- --------
8mm half-high drives:
EXB-8205, 8505, 8700 and Mammoth........... 65.5% 57.1%
8mm full-high drives:
EXB-8200 and 8500.......................... 1.2 5.9
8mm half-high libraries:
EXB-10h, 210, 440 and 480.................. 13.3 11.9
8mm full-high libraries:
EXB-10, 10i, 10e, 60 and 120............... 0.0 3.2
4mm products:
EXB-4200................................... 1.2 6.2
Quarter-inch products:
TR3, EXB-1500 and 2501..................... 3.4 2.2
Consumables.................................. 11.0 9.4
Service, spares and other.................... 6.5 5.7
Sales allowances............................. (2.1) (1.6)
------ ------
100.0% 100.0%
====== ======
In 1996 the Company recharacterized its customer base into the following
categories: original equipment manufacturers ("OEM's"), non-system OEM's
("NSO's"), solution providers, distributors and end-users. Previously, the
Company had characterized its customers as OEM's, distributors, and
value-added resellers ("VAR's"). All historical amounts presented herein
have been recharacterized to reflect the current classifications.
The customer mix during the second quarter and first half of 1996 shifted to
OEM's and distributors from solution providers, NSO's and end-users. The
following table shows the customer mix for the second quarter and first half
of 1996 and 1995.
14
CUSTOMER MIX TABLE
(As a Percentage of Net Sales)
Three Months Ended Six Months Ended
------------------- -------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
------ ------ ------ ------
Customer Type:
- --------------
OEM.............................. 46.0% 44.8% 47.3% 44.4%
Distributor...................... 41.4 37.4 40.5 36.6
NSO.............................. 7.2 10.4 7.0 10.5
Solution provider................ 2.2 3.2 2.1 4.5
End-user......................... 3.2 4.2 3.1 4.0
------ ------ ------ ------
100.0% 100.0% 100.0% 100.0%
====== ====== ====== ======
During the second quarter and first six months of 1996, one OEM customer
accounted for 14% and 16% of sales, respectively, compared to 16% for both
comparable periods in 1995. Another customer accounted for 14% and 13% of
sales, respectively, for the second quarter and first six months of 1996.
No other customers accounted for 10% or more of sales in any of these periods.
*Since these and other major customers also sell competing products and
continually review new technologies, there can be no assurance that sales
to these or any other customers will continue to represent the same portion
of the Company's future revenue.*
GROSS MARGIN
The Company's gross margin percentage for the second quarter of 1996 increased
to 27.4% from 24.0% for the comparable period in 1995. The gross margin
percentage for the first half of 1996 was 27.3% compared to 27.4% for the
comparable period in 1995. Several factors positively impacted gross margin
in the second quarter of 1996 compared to the same period in the prior year.
These factors include lower warranty costs and a stronger dollar versus the
yen, which reduced the costs of certain Japanese components. *The Company
believes that the impact of the dollar versus the yen will positively impact
margins throughout the rest of 1996.* In addition, increased library
revenues, particularly related to the Company's larger EXB-440 and EXB-480
libraries, positively impacted gross margins. Offsetting this impact was
lower average selling prices on the EXB-8505, which negatively impacted gross
margins. *Price erosion is a continuing factor for the Company due to the
competitive nature of the storage peripherals business.*
15
OPERATING EXPENSES
Selling, general and administrative expenses increased as a percentage of
sales to 12.8% and 12.0%, respectively, for the second quarter and first
six months of 1996 compared to 12.3% and 11.7%, respectively, for the same
periods in 1995. In absolute dollars, these expenses decreased by $317,000 for
the second quarter of 1996 over the same period in 1995. They decreased
$468,000 for the first six months of 1996 over the comparable period in 1995.
The decrease is mainly a result of decreased advertising expenses offset by
growth in European sales activities. Other principal components of these
sales-related costs include salaries and benefits, sales commissions and
promotions expenses.
Research and development expenditures decreased to 9.0% of sales for the
second quarter of 1996 compared to 9.5% for the same period in 1995. These
expenses for the first half of 1996 increased to 9.9% of sales compared to
9.4% for the comparable period in 1995. In absolute dollars, these expenses
decreased $1.1 million during the second quarter of 1996 over the same period
in 1995. The decrease is due mainly to completion of the development of
the Mammoth product late in the first quarter and its transition to
manufacturing. For the first half of 1996, the increase in research and
development absolute dollars was $77,000 over the same period in 1995.
OTHER INCOME, NET
Other income, net, consists primarily of interest income and expense,
discounts taken by customers, state franchise taxes, foreign currency gains
and losses and other miscellaneous items.
TAXES
The provision for income taxes for the first six months of 1996 was
36.0% of income before taxes compared to 34.0% in the prior year. *The
Company's annual provision for income taxes may be lower if proposed
changes in the tax law are passed which extend the research and development
credit beyond July 1995.*
NET INCOME
Net income per share increased to $0.16 for the second quarter of 1996
compared to $0.08 for the same period in 1995. For the first six months
of 1996, it decreased to $0.31 compared to $0.42 for the comparable period in
1995. This decrease was primarily the result of lower sales.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of 1996, the Company generated $9.0 million of
cash from operating activities, generated $3.8 million in proceeds from the
sale of common stock and expended $8.2 million for capital equipment and
$489,000 on repayment of long-term obligations. Together, these activities
resulted in a net increase in the combined balance of cash and short-term
investments of $4.1 million to a quarter-ending balance of $73.0 million. The
Company's working capital increased to $145.7 million at June 29, 1996 from
$137.1 million at December 30, 1995.
16
The Company has a $7.5 million bank line of credit which expires April 30,
1997, with borrowings under the line limited to 80% of eligible accounts
receivable plus 25% of eligible inventory (limited to $3,000,000). On July 31,
1996 the amount available under the line was $7.5 million and no borrowings
were outstanding. Borrowings under the line of credit bear interest at the
lower of the bank's prime rate or LIBOR + 2%. The ability to borrow under
this line of credit is dependent upon the Company's adherence to a set of
financial covenants. The Company is currently in compliance with all such
covenants.
*The Company believes its existing sources of liquidity and funds expected to
be generated from operations will provide adequate cash to fund the Company's
anticipated working capital and other cash requirements through fiscal 1996.*
17
PART II.
Item 4. Submission of Matters to a Vote of Security Holders.
At the Company's Annual Meeting of Stockholders held on April 30, 1996,
Thomas E. Pardun and Ralph Z. Sorenson were elected to the Company's Board
of Directors for a three-year term.
Name of Director Total Vote For Total Vote Withheld
________________ ______________ ___________________
Thomas E. Pardun 18,366,414 164,525
Ralph Z. Sorenson 18,374,057 156,882
In addition, the following matters were approved:
Total Total Total
Total Vote Vote Broker
Matter Being Voted Upon Vote For Against Abstaining Non-Vote
_______________________ ________ _______ __________ ________
Approval of amendment to
Company's Employee Stock
Purchase Plan to, among
other things, increase
the number of shares
reserved for issuance by
500,000 shares to increase
to 15% the maximum percent-
age of earnings which each
employee may apply to the
purchase of shares and
extend the termination
date to January 25, 2006. 16,152,991 2,104,399 211,849 61,700
Ratification of Price
Waterhouse as independent
accounts of the Company. 18,403,192 57,763 52,763 None
_________________
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index
Exhibit
Number Description
------- -----------
27.0 Financial Data Schedule
(b) Reports on Form 8-K: There were no reports on Form 8-K for the
three month period ended June 29, 1996
18
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.
EXABYTE CORPORATION
Registrant
Date October 3, 1996 By /s/William L. Marriner
----------------------- ------------------------
Executive Vice President and Chief
Financial Officer
(Principal Financial and Accounting
Officer)