1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
10-Q/A
(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 June 28, 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 August 7, 1997, there were 22,383,196 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 28, 1997 and December 28, 1996.............. 3
Consolidated Statements of Operations --
Three and Six Months Ended June 28, 1997 and
June 29, 1996 (Unaudited)........................ 4-5
Consolidated Statements of Cash Flows --
Six Months Ended June 28, 1997 and June 29, 1996
(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....................................... 10-15
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.... 16
Item 6. Exhibits and Reports on Form 8-K....................... 16-18
3
PART I Item 1. Financial Statements
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (In thousands)
June 28, December 28,
1997 1996
-------- --------
ASSETS
Current assets:
Cash and cash equivalents................. $ 52,584 $ 46,223
Short-term investments.................... 4,000 20,600
Accounts receivable, less allowance
for doubtful accounts and customer
returns and credits of $7,279 and
$7,315, respectively.................... 64,909 56,414
Inventories, net.......................... 61,375 55,765
Deferred income taxes..................... 13,337 14,172
Other current assets...................... 3,968 3,211
-------- --------
Total current assets................. 200,173 196,385
Property and equipment, net.................... 43,736 45,187
Deferred income taxes.......................... 10,048 10,055
Other assets................................... 4,018 4,499
-------- --------
$257,975 $256,126
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................... $24,274 $18,916
Accrued liabilities....................... 25,168 31,900
Accrued income taxes...................... 1,446 1,007
Current portion of long-term obligations.. 1,065 832
-------- --------
Total current liabilities............ 51,953 52,655
Long-term obligations.......................... 3,141 3,458
-------- --------
Total liabilities.................... 55,094 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; 22,369 and 22,184
shares issued and outstanding,
respectively............................ 22 22
Capital in excess of par value............ 64,919 64,124
Treasury stock, at cost, 15 shares
outstanding for both periods............. (9) (9)
Retained earnings......................... 137,949 135,876
-------- --------
Total stockholders' equity........... 202,881 200,013
-------- --------
$257,975 $256,126
======== ========
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 28, June 29,
1997 1996
------- --------
Net sales.................................... $97,144 $90,464
Cost of goods sold........................... 71,452 65,641
------- -------
Gross profit................................. 25,692 24,823
Operating expenses:
Selling, general and administrative..... 15,083 11,634
Research and development................ 8,894 8,142
------- -------
Income from operations....................... 1,715 5,047
Other income (expense), net.................. (171) 688
------- -------
Income before income taxes................... 1,544 5,735
Provision for income taxes................... 525 2,065
------- -------
Net income................................... $ 1,019 $ 3,670
======= =======
Net income per share......................... $0.05 $0.16
======= =======
Common and common equivalent shares used
in the calculation of net income per
share................................... 22,491 22,473
======= =======
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 28, June 29,
1997 1996
------- --------
Net sales.................................... $182,569 $184,282
Cost of goods sold........................... 133,638 133,919
------- -------
Gross profit................................. 48,931 50,363
Operating expenses:
Selling, general and administrative..... 27,822 22,143
Research and development................ 18,239 18,171
------- -------
Income from operations....................... 2,870 10,049
Other income, net............................ 271 833
------- -------
Income before income taxes................... 3,141 10,882
Provision for income taxes................... 1,068 3,917
------- -------
Net income................................... $ 2,073 $ 6,965
======= =======
Net income per share......................... $0.09 $0.31
======= =======
Common and common equivalent shares used
in the calculation of net income per
share................................... 22,425 22,358
======= =======
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 28, June 29,
1997 1996
-------- --------
Cash flows from operating activities:
Cash received from customers............ $174,290 $179,583
Cash paid to suppliers and employees.... (177,951) (174,683)
Interest received....................... 1,167 1,431
Interest paid........................... (308) (252)
Income taxes paid....................... (221) (1,231)
Income tax refund received.............. 434 4,160
Net cash provided (used) by -------- --------
operating activities............. (2,589) 9,008
-------- --------
Cash flows from investing activities:
Sale of short-term
investments, net...................... 16,600 22,300
Capital expenditures.................... (7,643) (8,246)
Net cash provided by -------- --------
investing activities............. 8,957 14,054
-------- --------
Cash flows from financing activities:
Net proceeds from issuance of
common stock.......................... 795 3,786
Principal payments under long-term
obligations........................... (802) (489)
Net cash provided (used) by -------- --------
financing activities............. (7) 3,297
-------- --------
Net increase in cash and cash
equivalents............................. 6,361 26,359
Cash and cash equivalents at beginning
of period............................... 46,223 40,137
-------- --------
Cash and cash equivalents at end
of period............................... $ 52,584 $ 66,496
======== ========
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 28, June 29,
1997 1996
---------- ---------
Reconciliation of net income to net cash
provided (used) by operating activities:
Net income................................ $ 2,073 $ 6,965
Adjustments to reconcile net income to net
cash provided (used) by operating
activities:
Depreciation, amortization
and other............................. 9,810 7,865
Deferred income tax provision........... 842 628
Provision for losses and reserves
on accounts receivable................ 7,274 2,878
Change in assets and liabilities:
Accounts receivable....................... (15,768) (7,828)
Inventories............................... (5,610) (5,333)
Other current assets...................... (757) 4,618
Other assets.............................. 482 (1,315)
Accounts payable.......................... 5,359 1,625
Accrued liabilities....................... (6,733) (125)
Accrued income taxes...................... 439 (970)
------- -------
Net cash provided (used) by
operating activities................ $(2,589) $ 9,008
======= =======
Supplemental schedule of non-cash
investing and financing activities:
Note payable issued to purchase software
licenses................................ $ 626 $ --
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 28, 1997, the consolidated
statements of operations for the three and six months ended June 28, 1997 and
June 29, 1996, as well as the consolidated statements of cash flows for the
six months ended June 28, 1997 and June 29, 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.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share." SFAS No. 128, which is effective for periods
ending after December 15, 1997, requires changes in the computation,
presentation, and disclosure of earnings per share. All prior period
earnings per share data must be restated to conform with the provisions of
SFAS No. 128. The Company will adopt SFAS No. 128 for the year ended
January 3, 1998, but does not expect the new accounting standard to have
a material impact on the Company's reported financial results.
Note 2--INVENTORIES
Inventories consist of the following:
June 28, December 28,
1997 1996
-------- ----------
(In thousands)
Raw materials and component parts............ $34,303 $34,865
Work-in-process.............................. 2,736 2,692
Finished goods............................... 24,336 18,208
------- -------
$61,375 $55,765
======= =======
9
Note 3--ACCRUED LIABILITIES
Accrued liabilities consist of the following:
June 28, December 28,
1997 1996
-------- ---------
(In thousands)
Wages and employee benefits.................. $ 7,121 $ 8,494
Warranty and other related costs............. 13,712 18,455
Other........................................ 4,335 4,951
------- -------
$25,168 $31,900
======= =======
Note 4--NET INCOME PER SHARE
Net income per 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 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
and six month periods ended June 28, 1997 and June 29, 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
---------------------
June 28, June 29,
1997 1996
------ ------
Net sales.................................... 100.0% 100.0%
Cost of goods sold........................... 73.6 72.6
------ ------
Gross margin................................. 26.4 27.4
Operating expenses:
Selling, general and administrative........ 15.5 12.8
Research and development................... 9.1 9.0
------ ------
Income from operations....................... 1.8 5.6
Other income(expense), net................... (0.2) 0.8
------ ------
Income before income taxes................... 1.6 6.4
Provision for income taxes................... 0.6 2.3
------ ------
Net income................................... 1.0% 4.1%
====== ======
11
Six Months Ended
---------------------
June 28, June 29,
1997 1996
------ ------
Net sales.................................... 100.0% 100.0%
Cost of goods sold........................... 73.2 72.7
------ ------
Gross margin................................. 26.8 27.3
Operating expenses:
Selling, general and administrative........ 15.2 12.0
Research and development................... 10.0 9.9
------ ------
Income from operations....................... 1.6 5.4
Other income, net............................ 0.1 0.5
------ ------
Income before income taxes................... 1.7 5.9
Provision for income taxes................... 0.6 2.1
------ ------
Net income................................... 1.1% 3.8%
====== ======
NET SALES
Net sales of $97.1 million for the three month period ended June 28,
1997 represented a 7.4% increase over net sales of $90.5 million for the
same period in 1996. Net sales of $182.6 million for the first six months of
1997 represented a 0.9% decrease from net sales of $184.3 million for the
same period in 1996.
During the first half of 1997, sales of the Company's 8mm half-high drive
and library products represented 77.4% of net sales, a decrease from 78.6% of
net sales for the same period in 1996. Consumable sales represented 14.0% of
net sales in the first half of 1997, an increase from 11.0% for the same
period in 1996. Sales of the Company's minicartridge products increased to
5.6% of net sales in the first half of 1997 compared to 3.4% for the same
period in the previous year. The remainder of sales during the first half of
1997 and 1996, along with a recap of the products described above, are listed
in the following table.
12
PRODUCT MIX TABLE
(As a Percentage of Net Sales)
Six Months Ended
------------------
June 28, June 29,
1997 1996
------- -------
8mm half-high drives:
8205, 8505, 8700, Eliant(TM) 820
and Mammoth.......................... 58.8% 65.5%
8mm full-high drives:
8200 and 8500........................ 0.3 1.2
8mm half-high libraries:
10h, 210, 220, 440 and 480........... 18.6 13.1
8mm full-high libraries:
10, 10i, 10e, 60 and 120............. 0.0* 0.0*
4mm drives and libraries:
4200, 018 and 218.................... 0.3 1.4
Minicartridge products:
TR-3, TR-4i, Eagle(TM) 96, 2501
and Nest products.................... 5.6 3.4
DLT library............................ 0.7 0.0
Consumables............................ 14.0 11.0
Service, spares and other.............. 6.5 6.5
Sales allowances....................... (4.8) (2.1)
------ ------
100.0% 100.0%
====== ======
* Sales of these products were greater than $0 but round to 0.0%.
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.
During the second quarter and first half of 1997, the customer mix shifted
to resellers, retailers and end-users from OEMs and NSOs when compared
to the same periods in 1996. The following table shows the customer mix
for the second quarter and first half of 1997 and 1996.
13
CUSTOMER MIX TABLE
(As a Percentage of Net Sales)
Three Months Ended
------------------
June 28, June 29,
1997 1996
------- -------
Customer Type:
- ------------------
OEM.................................... 41.1% 46.0%
Reseller............................... 49.2 43.5
NSO.................................... 4.6 7.2
Retailer............................... 1.3 0.0
End-user............................... 3.8 3.3
------ ------
100.0% 100.0%
====== ======
Six Months Ended
------------------
June 28, June 29,
1997 1996
------- -------
Customer Type:
- ------------------
OEM.................................... 41.5% 47.3%
Reseller............................... 48.3 42.6
NSO.................................... 4.9 7.0
Retailer............................... 1.2 0.0
End-user............................... 4.1 3.1
------ ------
100.0% 100.0%
====== ======
During the second quarter and first half of 1997, one OEM customer accounted
for 13.7% and 14.2% of sales, respectively, compared to 14.4% and 16.3% of
sales for the same periods in 1996. Another OEM customer accounted for 10.9%
and 13.2% of sales, respectively, compared to 13.7% and 12.9% for the same
periods in 1996. One reseller customer accounted for 11.4% and 10.2% of sales
during the second quarter and first six months of 1997. 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.*
14
GROSS MARGIN
The gross margin percentages for the second quarter and first six months of
1997 were 26.4% and 26.8%, respectively. These figures decreased from
percentages of 27.4% and 27.3%, respectively, for the comparable periods in
1996. Gross margin percentages decreased slightly due to the impact of
start-up manufacturing costs on several new products introduced in 1997,
increased sales of lower margin minicartridge products and increased program
expenditures directed at the Company's reseller, NSO and retail customers.
These impacts were partially offset by lower warranty costs in 1997 versus
1996 and the impact of a stronger dollar versus the yen, which reduced the
cost of certain Japanese components.
OPERATING EXPENSES
Selling, general and administrative expenses for the second quarter and
first half of 1997 increased as a percentage of sales to 15.5% and 15.2%,
respectively, from 12.8% and 12.0% for the same periods in the prior year.
The increases for the quarter and year-to-date periods represented in absolute
dollars are $3.4 million and $5.7 million, respectively. The increases in
spending for the quarter and year-to-date periods are due to increased
marketing efforts on products released during 1997 and a corporate branding
program. These expenses were also modestly impacted by the opening of
subsidiaries in Singapore and Canada during the latter part of 1996 and early
part of 1997.
Research and development expenditures increased to 9.1% for the second quarter
of 1997 compared to 9.0% for the comparable period in 1996. These expenses
for the first half of 1997 increased to 10.0% of sales compared to 9.9% for
the comparable period in 1996. In absolute dollars, these expenses increased
by $750,000 and $68,000, respectively, for the quarter and year-to-date
compared to the comparable periods in the prior year.
OTHER INCOME, NET
Other income (expense), net, consists primarily of interest income and
expense, state franchise taxes, foreign currency gains and losses, the
translation impact of the Company's foreign subsidiaries' balance sheets and
other miscellaneous items.
TAXES
The provision for income taxes for the first half 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 for the second quarter of 1997 was $0.05 compared to
$0.16 for the same period in 1996. For the first six months of 1997, it was
$0.09 compared to $0.31 for the same period in 1996. These decreases were
primarily the result of lower gross margin percentages and higher operating
expenses.
15
LIQUIDITY AND CAPITAL RESOURCES
During the first half of 1997, the Company expended $2.6 million of
cash on operating activities, generated $800,000 in proceeds from the sale
of common stock and expended $7.6 million for capital equipment and $800,000
on long-term obligations. Together, these activities resulted in a net
decrease in the combined balance of cash and short-term investments of
$10.2 million to a quarter-ending balance of $56.6 million. The Company's
working capital increased to $148.2 million at June 28, 1997 from $143.7
million at December 28, 1996.
The Company has a $7.5 million bank line of credit which expires April 30,
1998. Under this agreement, borrowings under the line are limited to 80%
of eligible accounts receivable plus 25% of eligible inventory (limited to
$3,000,000). On July 22, 1997 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 1997.*
16
PART II.
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Shareholders held on May 9, 1997,
Mr. Mark W. Perry was re-elected to the Company's Board of Directors for a
three-year term.
The vote was as follows:
Name of Director Total Vote For Total Vote Withheld
- ---------------- -------------- -------------------
Mark W. Perry 18,604,236 729,756
Messrs. Ralph Z. Sorenson and Thomas E. Pardun will continue in office until
the 1999 Annual Meeting of Shareholders. Messrs. Peter D. Behrendt, Bruce M.
Holland and Thomas G. Washing will continue in office until the 1998 Annual
Meeting of Shareholders.
In addition, the following matters were approved:
Total Total Vote Total Vote Total Broker
Matter Voted On Vote For Against Abstaining Non-Vote
- --------------- --------- ---------- ---------- ------------
Ratification and approval
of the Company's Incentive
Stock Plan, as amended.... 8,992,888 3,899,983 435,953 6,005,168
Ratification of Price
Waterhouse LLP as the
Company's independent
accountants............... 18,909,689 79,424 344,879 -0-
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 28, 1997.
17
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 August , 1997 By
----------------------- -----------------------------------
President, Chief Executive Officer
and Chief Financial Officer