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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
10-Q
(Mark One)
/X/ Quarterly Report Pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 29, 1997
OR
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _________ to _________.
Commission File 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 May 7, 1997, there were 22,304,228 shares outstanding of the
Registrant's Common Stock (par value $0.001 per share).
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EXABYTE CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Consolidated Balance Sheets --
March 29, 1997 and December 28, 1996............. 3
Consolidated Statements of Operations --
Three Months Ended March 29, 1997 and
March 30, 1996 (Unaudited)....................... 4
Consolidated Statements of Cash Flows --
Three Months Ended March 29, 1997 and
March 30, 1996 (Unaudited)....................... 5-6
Notes to Consolidated Financial Statements
(Unaudited)...................................... 7-8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations....................................... 9-12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................... 13-15
3
PART I Item 1. Financial Statements
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (In thousands)
March 29, December 28,
1997 1996
-------- --------
ASSETS
Current assets:
Cash and cash equivalents................. $43,171 $46,223
Short-term investments.................... 16,500 20,600
Accounts receivable, less allowance
for doubtful accounts and customer
returns and credits of $6,362 and
$7,315, respectively.................... 57,225 56,414
Inventories, net.......................... 61,484 55,765
Deferred income taxes..................... 13,779 14,172
Other current assets...................... 3,272 3,211
-------- --------
Total current assets................. 195,431 196,385
Property and equipment, net.................... 44,875 45,187
Deferred income taxes.......................... 9,985 10,055
Other assets................................... 4,250 4,499
-------- --------
$254,541 $256,126
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................... $20,970 $18,916
Accrued liabilities....................... 27,012 31,900
Accrued income taxes...................... 1,290 1,007
Current portion of long-term obligations.. 850 832
-------- --------
Total current liabilities............ 50,122 52,655
Long-term obligations.......................... 3,261 3,458
-------- --------
Total liabilities.................... 53,383 56,113
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; 22,305 and 22,184
shares issued and outstanding,
respectively............................ 22 22
Capital in excess of par value............ 64,215 64,124
Treasury stock, at cost, 15 shares
outstanding for both periods............. (9) (9)
Retained earnings......................... 136,930 135,876
-------- --------
Total stockholders' equity........... 201,158 200,013
-------- --------
$254,541 $256,126
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
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EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended
----------------------
March 29, March 30,
1997 1996
------- --------
Net sales.................................... $85,425 $93,818
Cost of goods sold........................... 62,187 68,277
------- -------
Gross profit................................. 23,238 25,541
Operating expenses:
Selling, general and administrative..... 12,738 10,509
Research and development................ 9,345 10,029
------- -------
Income from operations....................... 1,155 5,003
Other income, net............................ 442 144
------- -------
Income before income taxes................... 1,597 5,147
Provision for income taxes................... 543 1,853
------- -------
Net income................................... $1,054 $3,294
======= =======
Net income per share......................... $0.05 $0.15
======= =======
Common and common
equivalent shares used in the
calculation of net income
per share 22,360 22,089
======= =======
The accompanying notes are an integral part of the consolidated
financial statements.
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EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
----------------------
March 29, March 30,
1997 1996
-------- --------
Cash flows from operating activities:
Cash received from customers............ $84,784 $92,532
Cash paid to suppliers and employees.... (87,928) (85,494)
Interest received....................... 628 729
Interest paid........................... (157) (127)
Income taxes paid....................... (236) (313)
Income tax refund received.............. 440 4,160
Net cash provided (used) by -------- --------
operating activities............. (2,469) 11,487
-------- --------
Cash flows from investing activities:
Sale of short-term
investments, net...................... 4,100 16,200
Capital expenditures.................... (4,504) (4,320)
Net cash provided (used) by -------- --------
investing activities............. (404) 11,880
-------- --------
Cash flows from financing activities:
Net proceeds from issuance of
common stock.......................... 91 140
Principal payments under long-term
obligations........................... (270) (192)
Net cash used by -------- --------
financing activities............. (179) (52)
-------- --------
Net increase (decrease) in cash and cash
equivalents............................. (3,052) 23,315
Cash and cash equivalents at beginning
of period............................... 46,223 40,137
-------- --------
Cash and cash equivalents at end
of period............................... $43,171 $63,452
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
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EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
----------------------
March 29, March 30,
1997 1996
---------- ---------
Reconciliation of net income to net cash
provided (used) by operating activities:
Net income................................ $ 1,054 $ 3,294
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, amortization
and other............................. 4,907 3,702
Deferred income tax provision........... 463 (613)
Provision for losses and reserves
on accounts receivable................ 2,520 1,139
Change in assets and liabilities:
Accounts receivable....................... (3,331) (2,578)
Inventories............................... (5,719) (1,424)
Other current assets...................... (61) (542)
Income tax receivable..................... -- 4,160
Other assets.............................. 249 433
Accounts payable.......................... 2,054 399
Accrued liabilities....................... (4,888) 1,364
Accrued income taxes...................... 283 2,153
------- -------
Net cash provided (used) by
operating activities............... $(2,469) $11,487
======= =======
Supplemental schedule of non-cash
investing and financing activities:
Capital lease obligations................. $ 92 $ --
The accompanying notes are an integral part of the consolidated
financial statements.
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EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1--ACCOUNTING PRINCIPLES
The consolidated balance sheet as of March 29, 1997, the consolidated
statements of operations for the three months ended March 29, 1997 and
March 30, 1996, as well as the consolidated statements of cash flows for the
three months ended March 29, 1997 and March 30, 1996, 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 28, 1996
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:
March 29, December 28,
1997 1996
-------- ----------
(In thousands)
Raw materials and component parts............ $33,849 $34,865
Work-in-process.............................. 2,392 2,692
Finished goods............................... 25,243 18,208
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$61,484 $55,765
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Note 3--ACCRUED LIABILITIES
Accrued liabilities consist of the following:
March 29, December 28,
1997 1996
-------- ---------
(In thousands)
Wages and employee benefits.................. $ 7,090 $ 8,494
Warranty and other related costs............. 14,848 18,455
Other........................................ 5,074 4,951
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$27,012 $31,900
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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.
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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 risk factors specifically delineated and described in Part 1,
Item 1 of the Company's 1996 Form 10-K, filed March 20, 1997 ("1996 Form
10-K"). 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.
RESULTS OF OPERATIONS
The following table sets forth unaudited operating results for the three
month periods ended March 29, 1997 and March 30, 1996 as a percentage
of sales in each of these periods. This data has been derived from the
unaudited consolidated financial statements.
Three Months Ended
---------------------
March 29, March 30,
1997 1996
------ ------
Net sales.................................... 100.0% 100.0%
Cost of goods sold........................... 72.8 72.8
------ ------
Gross margin................................. 27.2 27.2
Operating expenses:
Selling, general and administrative........ 14.9 11.2
Research and development................... 10.9 10.7
------ ------
Income from operations....................... 1.4 5.3
Other income, net............................ 0.5 0.2
------ ------
Income before income taxes................... 1.9 5.5
Provision for income taxes................... 0.7 2.0
------ ------
Net income................................... 1.2% 3.5%
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NET SALES
Net sales for the three month period ended March 29, 1997 of $85.4 million
represented a decrease over the corresponding period in 1996 of 9%. This
sales decrease was the result of lower shipments of 8mm full-high drive,
8mm half-high drive and 4mm products. These decreases were offset by
increases in sales of 8mm half-high libraries and consumables.
During the first three months of 1997, sales of the Company's 8mm half-high
drives and library products represented 76.7% of revenue. This includes sales
of the Eliant(TM) 820, which was released late in the first quarter of 1997.
For the same period in 1996, sales of 8mm half-high drives and libraries
represented 75.5% of revenue. Consumable sales represented 14.9% of sales
in the first quarter of 1997, up from 10.9% for the same period in 1996.
Sales of the Company's 8mm full-high drives and libraries decreased to 0.5%
of sales in the first quarter of 1997 from 1.8% for the same period in the
previous year. The remainder of sales during the first three months of 1997
and 1996, along with a recap of the products described above, are listed in
the following table.
PRODUCT MIX TABLE
(As a Percentage of Net Sales)
Three Months Ended
------------------
March 29, March 30,
1997 1996
------- -------
8mm half-high drives:
8205, 8505, 8700, Eliant(TM) 820
and Mammoth.......................... 58.4% 63.0%
8mm full-high drives:
8200 and 8500........................ 0.4 1.7
8mm half-high libraries:
10h, 210, 220, 440 and 480........... 18.3 12.5
8mm full-high libraries:
10, 10i, 10e, 60 and 120............. 0.1 0.1
4mm drives and libraries:
4200, 018 and 218.................... 0.3 3.6
Minicartridge products:
TR3, TR4i, Eagle(TM) 96 and 2501..... 4.5 3.4
Consumables............................ 14.9 10.9
Service, spares and other.............. 6.9 6.5
Sales allowances....................... (3.8) (1.7)
------ ------
100.0% 100.0%
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In 1997, the Company recharacterized its customer base into the following
categories: original equipment manufacturers ("OEMs"), non-system OEMs
("NSOs"), resellers, retailers and end-users. Previously, the Company had
characterized its customers as OEMs, NSOs, distributors, solution providers
and end-users. All historical amounts presented herein have been
recharacterized to reflect the current classifications.
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The customer mix during the first quarter of 1997 shifted to resellers from
OEMs. Resellers represented 47.2% of sales in the first quarter of 1997
compared to 41.7% for the same period in 1996. Sales to OEMs decreased to
42.1% of total sales in the first quarter of 1997, compared to 48.6% for the
same period in 1996. Sales to other customer categories increased to 10.7%
of total sales in the first quarter of 1997 compared to 9.7% for the same
period in 1996. The following table shows the customer mix for the first
three months of 1997 and 1996.
CUSTOMER MIX TABLE
(As a Percentage of Net Sales)
Three Months Ended
------------------
March 29, March 30,
1997 1996
------- -------
Customer Type:
- ------------------
OEM.................................... 42.1% 48.6%
Reseller............................... 47.2 41.7
NSO.................................... 5.3 6.7
Retailer............................... 1.1 0.0
End-user............................... 4.3 3.0
------ ------
100.0% 100.0%
====== ======
During the first quarter of 1997, one OEM customer accounted for 15% of sales
compared to 18% of sales for the same period in 1996. Another OEM customer
accounted for 16% of sales compared to 12% for the comparable period in 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 gross margin percentage for the first quarter of 1997 was 27.2%,
consistent with the same period in the prior year. Gross margins were
favorably impacted by decreased warranty costs and continued improvement
in the value of the dollar versus the yen which resulted in reduced costs
for certain Japanese components. This was offset by the impact of a higher
level of sales allowances in the first quarter of 1997 over the same period
in 1996.
OPERATING EXPENSES
Selling, general and administrative expenses for the first quarter of 1997
increased as a percentage of sales to 14.9% from 11.2% for the same period
in the prior year. This increase represented in absolute dollars is
$2.2 million. The increase is due to aggressive marketing of products
released in the first quarter of 1997 and corporate branding efforts.
These expenses were also modestly impacted by the opening of subsidiaries in
Singapore and Canada during the latter part of 1996.
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Research and development expenditures increased to 10.9% for the first quarter
of 1997 compared to 10.7% for the comparable period in 1996. In absolute
dollars, these expenses decreased by $684,000 in the first quarter of 1997 over
the same period in the prior year. Engineering expenses related to Mammoth
decreased significantly since its introduction at the end of the first
quarter of 1996. This was offset by expenditures on a number of new products
introduced in the first quarter of 1997, such as the Eliant(TM) 820, and
products to be introduced in the second quarter of 1997.
OTHER INCOME, NET
Other income (expense), net, consists primarily of interest income and expense,
state franchise taxes, foreign currency gains and losses and other
miscellaneous items.
TAXES
The provision for income taxes for the first three months of 1997 was
34.0% of income before taxes compared to 36.0% for the comparable
period in 1996.
NET INCOME
Net income per share was $0.05 for the first quarter of 1997 compared to
$0.15 for the same period in 1996. This decrease was primarily the result
of lower sales.
LIQUIDITY AND CAPITAL RESOURCES
During the first three months of 1997, the Company expended $2.5 million of
cash on operating activities, generated $91,000 in proceeds from the sale
of common stock and expended $4.5 million for capital equipment and $270,000
on long-term obligations. Together, these activities resulted in a
net decrease in the combined balance of cash and short-term investments of
$7.2 million to a quarter-ending balance of $59.7 million. The Company's
working capital increased to $145.3 million at March 29, 1997 from $143.7
million at December 28, 1996.
The Company had a $7.5 million bank line of credit which expired April 30,
1997. Under this agreement, borrowings under the line were limited to 80% of
eligible accounts receivable plus 25% of eligible inventory (limited to
$3,000,000). On April 23, 1997 the amount available under the line was $7.5
million and no borrowings were outstanding. Borrowings under the line of
credit bore interest at the lower of the bank's prime rate or LIBOR + 2%.
The ability to borrow under this line of credit was dependent upon the
Company's adherence to a set of financial covenants. *The Company anticipates
renewal of the bank line of credit at substantially identical terms.* Upon
such renewal the Company would be in compliance with all relevant loan
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 1997.*
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PART II.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index
Exhibit
Number Description
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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 March 29, 1997
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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 May 12, 1997 By /s/ William L. Marriner
----------------------- ------------------------
President (acting) and
Chief Executive Officer (acting)