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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
(AMENDMENT NO. 1)
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1998
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 NUMBER 0-21103
ADVANCED DIGITAL INFORMATION CORPORATION
(Exact name of registrant as specified in its charter)
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WASHINGTON 91-1618616
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
P.O. BOX 97057
11431 WILLOWS ROAD N.E. 98073-9757
REDMOND, WASHINGTON (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (425) 881-8004
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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(None) (None)
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK
PREFERRED STOCK PURCHASE RIGHTS
(Title of Class)
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 90 days. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
registrant is $146,072,880 as of December 31, 1998, based on the closing sale
price of such stock on the Nasdaq National Market on that date.
There were 9,776,349 shares of common stock outstanding as of December 31,
1998.
The Index to Exhibits appears on page 50.
Part III is incorporated by reference from the proxy statement to be filed
in connection with the 1999 Annual Meeting of Shareholders.
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ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data of the Company are derived from the
Company's historical financial statements and notes thereto. For the
approximately three-year period from November 1, 1993 to October 15, 1996, the
selected consolidated financial data relate to the operations of the Company as
part of Interpoint Corporation. Subsequent to October 15, 1996, the selected
financial data relates to the operation of the Company as an independent
company. The information set forth below should be read in conjunction with the
Company's financial statements, including the notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
AT OR FOR
FISCAL YEAR ENDED
OCTOBER 31,
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1998 (1) 1997 1996 1995 1994 (2)
---------- --------- ---------- --------- ------------
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
CONSOLIDATED STATEMENTS OF OPERATIONS:
Net sales $114,557 $93,204 $58,957 $31,716 $20,083
Gross profit 33,168 27,648 17,070 9,609 6,588
Acquired in-process technology 4,492 --- --- --- ---
Acquisition expenses --- --- --- --- 590
Income (loss) before provision (benefit)
for income taxes 4,729 12,663 5,288 215 (142)
Net income (loss) 1,530 8,497 3,430 292 (42)
Basic net income per share (3) $0.16 $0.94 $0.43 $0.04 $ 0.00
Diluted net income per share (3) $0.16 $0.92 $0.43 $0.04 $ 0.00
CONSOLIDATED BALANCE SHEETS:
Working capital $ 66,582 $53,358 $24,596 $ 7,249 $ 4,156
Total assets 112,407 75,194 36,710 13,943 8,710
Long-term debt and loan from Interpoint,
excluding current portion 18,368 --- --- 5,434 2,358
Shareholders' equity 63,003 60,110 26,387 3,387 3,027
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(1) The Statement of Operations for fiscal year 1998 includes the results of
EMASS, Inc. for the period from August 19, 1998, date of EMASS'
acquisition, to October 31, 1998.
(2) In February 1994, the Company incurred $590,000 in acquisition-related
expenses associated with its acquisition by Interpoint. Also, in June 1994,
the Company acquired its wholly owned subsidiary, ADIC Europe, in a
transaction accounted for as a purchase.
(3) Earnings per share data have been restated to conform with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share."
2
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF THE COMPANY
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
"SELECTED FINANCIAL DATA" AND THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS
AND NOTES THERETO INCLUDED ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K. THIS
DISCUSSION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES, SUCH AS STATEMENTS OF THE COMPANY'S PLANS, OBJECTIVES,
EXPECTATIONS AND INTENTIONS. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED HERE. THE CAUTIONARY STATEMENTS MADE IN THIS
ANNUAL REPORT ON FORM 10-K SHOULD BE READ AS BEING APPLICABLE TO ALL FORWARD-
lOOKING STATEMENTS WHEREVER THEY APPEAR. FACTORS THAT COULD CAUSE OR CONTRIBUTE
TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED IN "RISK FACTORS," AS WELL AS THOSE
DISCUSSED ELSEWHERE HEREIN. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY
RELEASE THE RESULT OF ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS THAT MAY
BE REQUIRED TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO
REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
GENERAL
Advanced Digital Information Corporation is a leading drive-independent
manufacturer of innovative tape-based storage products and specialized storage
management software that integrate into a wide range of rapidly evolving network
computing environments. Our products are designed to help our customers
organize, protect and retrieve electronic information. The Company designs,
manufactures, sells and supports specialized data storage hardware and software
products.
In August 1998, the Company acquired EMASS, Inc. in a transaction accounted
for as a purchase. The operating results of EMASS, now operated as ADIC Denver
and ADIC/Grau have been included since the date of the acquisition.
FISCAL YEAR 1998 COMPARED TO 1997
NET SALES. Net sales in fiscal year 1998 increased 23% to $114.6 million
compared with net sales of $93.2 million in fiscal year 1997. The increase in
net sales relates both to an increase in sales of small libraries and to the
inclusion of EMASS sales in the fourth quarter of the year. The increase in
small library sales is due in part to the Company's OEM sales under agreements
entered into during the fiscal year. These OEM sales consisted primarily of the
FastStor products introduced in the final quarter of fiscal 1997. The transition
during the year of DLT tape drives, supplied by Quantum, from a condition of
supply constraint to one of general availability resulted in a reduction in the
Company's sales of standalone DLT tape drives and a reduction in sales to the
Company's distributors and resellers as they reduced their inventories. Tape
drives purchased from third-party manufacturers, primarily DLT drives, involve
rapidly changing technology. Often these changes result in price decreases for
purchased tape drives. To remain competitive, the Company sometimes reduces
prices on its library products in response to the decrease in the cost of
purchased tape drives. Primarily due to declining tape drive prices, in fiscal
1998, the Company lowered prices on certain library and other products, further
decreasing sales dollars. Sales to the Company's top two customers were 37% of
net sales in fiscal 1998 compared to 47% in fiscal year 1997. International
sales were $37.9 million in fiscal 1998, accounting for 33% of net sales in both
fiscal years 1998 and 1997.
GROSS PROFIT. Gross profit decreased to 29% in fiscal year 1998 from 30% in
fiscal 1997. The decrease is the result of many factors including higher
overhead associated with the new Redmond facility, increases in personnel to
support the OEM business, and lower than anticipated product revenues,
particularly in the third quarter. It is further decreased by the effect of
certain product price reductions. These factors more than offset the benefit of
the shift in product mix toward higher-margin libraries and away from lower-
margin standalone products. The gross profit percentage in the fourth quarter
benefited from the larger libraries and software sales of EMASS but also
3
reflected a $513,000 charge to cost of goods sold as a result of purchase
accounting adjustments to record EMASS acquired inventory at its fair market
value. Gross profit margins are dependent on a number of factors, including
customer and product mix, price competition and tape drive costs. There can be
no assurance that the Company can improve upon or maintain it's current gross
margin levels, given that tape drives purchased from third-party suppliers are a
significant component of the Company's product costs.
SELLING AND ADMINISTRATIVE EXPENSES. Sales and administrative expenses in
fiscal 1998 were $20.8 million or 18% of sales, compared with $13.6 million or
15% of sales in fiscal year 1997. The increase is due in part to the inclusion
of EMASS expenses from August 19 to October 31, 1998, but also to an increase in
costs in the previous ADIC business. This increase related to increased sales
personnel in the headquarters, regional and international sales offices,
increased advertising and promotion costs and also increased costs associated
with the new headquarters facility. In addition, the acquisition of EMASS caused
the Company to have certain duplicative assets consisting of computer systems to
track product serial numbers and customer service information. These assets
totaled $380,000 and were written off subsequent to the acquisition.
ACQUIRED IN-PROCESS TECHNOLOGY. In connection with the purchase of EMASS,
the existence of acquired in-process technology was determined and valued by an
independent third-party appraisal. The value associated with this intangible
asset of $4.5 million, approximately 18% of the total purchase price, was
expensed immediately. The amount of acquired in-process technology was
determined using various factors such as estimating the stage of development of
each in-process research and development project at the date of acquisition and
estimating cash flows resulting from anticipated revenues generated from such
projects and additional expenditures required in order to complete and maintain
the various projects, then discounting the projected net cash flow. Projects
being pursued by the Company include a new large library storage product and
associated software as well as separate software AMASS products utilizing UNIX
and NT platforms. Of the valuation for acquired in-process technology,
approximately 49% was associated with the in-process library products and 51%
was associated with the in-process software products. These products, if
successfully developed, will replace existing large library and software
products. Customer service and maintenance contracts, however, will continue to
provide revenue associated with the older products.
The Company expects to incur significant costs to develop the acquired in-
process technology into commercially viable products. Costs include engineering
time and material plus costs for prototype and test systems. The valuation of
the in-process technology included estimates of the costs to complete the new
large library storage product and associated software of approximately $3.5
million. It is expected that these products will be released in the second
quarter of fiscal 2000. Approximately $300,000 of costs were incurred from the
date of acquisition through October 31, 1998, and as of October 31, 1998 the
costs and timing of the project were consistent with the initial estimates of
EMASS management. Estimates of the costs to complete the separate software AMASS
products utilizing UNIX and NT platforms were approximately $900,000.
Approximately $150,000 was incurred from the date of acquisition through October
31, 1998. AMASS NT is expected to be available in the third quarter of fiscal
1999, the other software products are expected to be released by the second
quarter of fiscal 2000. The Company will continue to incur development costs
through such dates. Expenses incurred subsequent to August 1998 are included in
research and development expenses. The Company believes that each of these
projects will be successfully developed, however, if none of these projects is
successfully developed, the Company's sales and profitability may be adversely
affected in future periods. Additionally, the failure of any particular project
could impair the value of other intangible assets acquired and adversely affect
the Company's sales and profitability in future periods. See "Risk Factors
Acquired In-Process Technology."
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses were
$4.5 million or 4% of net sales for the year ended October 31, 1998 compared to
$2.9 million or 3% of net sales for fiscal 1997. The dollar and percentage
increases are both related to EMASS which has significant expenditures
associated with both hardware and software in-process technology. The Company
expects that research and development expenses in fiscal 1999 will be
significantly greater both in absolute dollars and as a percentage of net sales
than previously recorded.
4
OTHER INCOME (EXPENSE). Interest income of $1.0 million for fiscal 1998 was
comparable to fiscal 1997 interest income of $1.1 million. Interest expense
incurred in fiscal 1998 of $311,000 represented interest from August 19 to
October 31, 1998 on a bank loan, the proceeds of which were used to finance the
acquisition of EMASS. The gain on sale of marketable securities relates to
investments in certain equity securities made and sold in fiscal 1998. Foreign
currency gains or losses arise as a result of the operation of the Company's
European subsidiaries, ADIC Europe and Grau, the functional currencies of which
are the French franc and German deutsche mark, respectively. All monetary assets
are translated into the functional currencies on the financial statements of
ADIC Europe and Grau. ADIC Europe buys products from ADIC in U.S. dollars and
resells a significant majority of such products in U.S. dollars. Grau both buys
and sells products to EMASS in U.S. dollars. Grau's sales are primarily in
deutsche marks, the sales of its subsidiaries in U.K. and France, which act as
sales offices in those countries, are made primarily in British pound sterling
and French francs, respectively. Certain of the U.S. dollar receivables and
payables in these entities offset. To the extent that these monetary assets and
liabilities do not fully offset each other and the U.S. dollar exchange rate
changes with respect to these currencies, transaction gains or losses may
result. For large sales denominated in other currencies, the Company attempts to
implement appropriate hedging strategies.
PROVISION FOR INCOME TAXES. The effective tax rate for fiscal year 1998 was
67%. The expense associated with the write-off of acquired in-process technology
is not deductible for state or federal income tax purposes. Without this
expense, the effective tax rate would be 34%. There are significant deferred tax
assets associated with net operating loss carryforwards and other timing
differences of EMASS and Grau. A valuation allowance has been established on
these deferred tax assets because it is more likely than not that the deferred
assets related to EMASS and Grau will not be realized. In the event that future
earnings of these companies allows the Company to deduct these expenses for tax
purposes and recognize these assets, the Company will reallocate the purchase
price to reduce noncurrent intangible assets related to the acquisition.
FISCAL YEAR 1997 COMPARED TO 1996
NET SALES. Net sales for the year ended October 31, 1997 increased 58% to
$93.2 million as compared to $59.0 million for fiscal 1996. The increase in net
sales was due primarily to strong unit sales volume of the Company's DLT-based
products, particularly the VLS DLT and Scalar automated tape libraries, and the
DS9000 series standalone tape drives. Net sales of older products, including
4mm/DAT and 8mm tape libraries decreased in fiscal 1997. The Company reduced its
prices on selected products at various times throughout the year. Sales outside
the United States were $30.6 million or 33% of net sales for the year ended
October 31, 1997 compared to $21.2 million or 36% of net sales for fiscal 1996.
International sales are typically made in U.S. dollars but may also be made in
foreign currencies.
GROSS PROFIT. Gross profit was $27.6 million or 30% of net sales for the
year ended October 31, 1997 compared to $17.1 million or 29% of net sales in
fiscal 1996. Gross profit margin for the current year was higher than fiscal
1996 due to a shift in product mix toward higher-margin Scalar libraries and
product cost reduction efforts. The cost of direct material, specifically the
DLT tape drives, comprised a substantial majority of cost of sales in both
fiscal 1997 and 1996.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
were $13.6 million or 15% of net sales for the year ended October 31, 1997
compared to $9.8 million or 17% of net sales for fiscal 1996. Selling and
administrative expenses for the year ended October 31, 1997 decreased as a
percentage of net sales as increased net sales reflected the benefits of the
Company's significant investments in sales and marketing resources in fiscal
years 1996 and 1995. Net sales volume in the fiscal year increased 58% compared
to a corresponding 38% increase in selling and administrative expenses. The
dollar increase in selling and administrative expenses over fiscal 1996 was
primarily due to additions to sales and marketing staff, increased advertising
costs and increased administrative overhead.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses were
$2.9 million or 3% of net sales for the year ended October 31, 1997 compared to
$1.5 million or 3% of net sales for fiscal 1996. Actual dollar spending during
fiscal 1997 was higher than fiscal 1996 due to increases in development expenses
for the FastStor
5
products released in the final quarter of fiscal 1997 as well as the Scalar
218 series, and additions to research and engineering staff.
OTHER INCOME (EXPENSE). Other income for the year ended October 31, 1997
was $1.5 million compared to expense of $395,000 for fiscal 1996. As a result of
the proceeds from issuance of common stock received in March 1997 as well as
Interpoint's forgiveness of all intercompany loans to ADIC and contribution of
cash to ADIC in October 1996, the Company realized $1.1 million of interest
income in the fiscal year ended October 31, 1997, rather than $508,000 of
interest expense incurred in fiscal 1996. Net foreign currency translation gains
increased approximately $271,000 between the comparison periods.
PROVISION FOR INCOME TAXES. Income tax expense for the year ended October
31, 1997 was $4.2 million compared to $1.9 million for fiscal 1996. The 32.9%
effective tax rate reflects the Company's investment in certain non-taxable
bonds, as well as the utilization of certain credits for increasing research
activities. The provision includes taxes paid in various federal, state and
international jurisdictions.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents totaled $28.2 million at October
31, 1998 and represented 25% of total assets. Its working capital, the
difference between current assets and current liabilities is $66.6 million, with
a ratio of current assets to current liabilities of over 3:1. Current assets and
liabilities, especially accounts receivable, inventories, accounts payable and
accrued liabilities are significantly greater at October 31, 1998 as compared to
October 31, 1997 due to the inclusion of the amounts from EMASS.
The Company's operating activities generated $4.4 million of cash in fiscal 1998
compared to $2.7 million generated in fiscal 1997 and net usage of cash from
operating activities of $3.5 million in fiscal 1996. In each of the three years,
operating cash was used primarily to fund increases in accounts receivable and
inventories and was offset by net income, depreciation and other reserves and
accounts payable. Additionally, in fiscal 1998, net income was reduced by the
write-off of acquired in-process technology, a non-cash item. Other non-cash
items include an increase in the allowance for inventory obsolescence of $1.1
million. As the Company's installed base of library products has increased, the
need for service and warranty repair inventory, especially inventory at regional
locations to support on-site service, has also increased. The Company has
provided an allowance against these inventories as well as for inventories used
for demonstration purposes in addition to its general reserve for excess and
obsolescence. Because these inventories can remain in the field for an extended
time, the amount of this allowance has increased substantially over the past two
years.
The Company's investing activities used cash of $28.7 million in fiscal
1998, primarily associated with the acquisition of EMASS in August 1998. In
connection with this acquisition, the Company acquired assets with a fair value
of $38.9 million, and assumed $13.9 million of liabilities. Included with EMASS'
assets was $1.6 million in cash. Additionally, the Company invested in property,
plant and equipment, primarily associated with the new headquarters facility and
various technology additions and upgrades and also invested in certain
marketable equity securities, some of which were sold later in the year. In
August 1998, the Company received proceeds from long-term borrowings of $20.0
million.
In August 1997, the Company used $4.0 million to acquire a minority equity
position in Crossroads Holding Corp. the parent company of Crossroads Systems,
Inc., a provider of Fibre Channel interconnection products. In March 1997, the
Company completed a public offering of stock which provided cash of $23.7
million. In fiscal 1996 the Company financed its growth through loans from
Interpoint, and the net increases in the amount of such loans was $4.2 million.
Prior to Interpoint's distribution of Company stock, Interpoint made a
contribution to the working capital of the Company through the cancellation of
all $9.6 million of Company indebtedness to Interpoint. Interpoint also
contributed an additional $10.0 million in cash to the working capital of the
Company.
At October 31, 1998, ADIC had a $10.0 million bank line of credit that
expires in February 2001, all of which was available. Any borrowings under this
line of credit would bear interest at the bank's reference (prime) rate or
6
adjusted LIBOR rate. A credit agreement covers the line of credit and
long-term note payable and requires the Company to maintain certain financial
ratios and levels of working capital, tangible net worth and profitability.
The Company had no material or unusual commitments as of October 31, 1998
other than annual rental commitments.
The Company believes that its existing cash and cash equivalents and bank
line of credit, together with the results of operations, will be sufficient to
fund its working capital and capital expenditure needs for at least the next 12
months. The Company may utilize cash to acquire or invest in businesses,
products or technologies that it believes are strategic. From time to time, in
the ordinary course of business, the Company evaluates potential acquisitions of
such businesses, products or technologies. However, the Company has no present
understanding, commitments or agreements with respect to any material
acquisition of other businesses, products or technologies.
YEAR 2000
The Company is aware of the issues associated with the programming code in
existing computer systems and the inability of many of these products to
distinguish between twentieth-century dates and twenty-first century dates to
determine the applicable year. This error could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities. The Company is actively assessing the
impact of the upcoming change on its business, financial condition and results
of operations.
Based on the Company's assessment to date, the Company believes the current
versions of its software and hardware products and services are Year 2000
compliant. New products are being designed to be Year 2000 compliant. While most
of the Company's internally manufactured library products have no date
functionality built into them, this is not true for certain software and large
library products. Year 2000 compliant updates are available for most of these
products, those that are currently unavailable are scheduled for release early
in 1999. The Company is reviewing hardware used in connection with its products
for those customers with current service maintenance contracts. Plans exist to
replace certain systems that can not be made compliant and upgrade those that
can. There can be no assurance, however, that all existing Company products will
contain all necessary date codes. Further, use of the Company's products in
connection with other products which are not Year 2000 compliant, including non-
compliant hardware, software and firmware may result in the inaccurate exchange
of dates and result in performance problems or system failure. Any failure of
the Company's products to perform could result in claims against the Company.
The cost of defending any such claim which may arise, as well as any liability
of the Company for Year 2000 related damages could have a material adverse
effect on the Company's business, results of operations and financial condition.
The Company's business depends on numerous systems that could potentially
be impacted by Year 2000 related problems. The Company is assessing the possible
effects on the Company's operations of the Year 2000 readiness of its enterprise
resource planning computer systems and other internal systems. The Company
believes that the enterprise resource planning computer systems at its various
manufacturing sites are either Year 2000 compliant currently or can be modified
to ensure compliance. Other internal systems are currently being assessed, and
based on such assessment the Company will modify or replace such systems. The
Company expects the assessments and tests of these systems to be completed in
mid-1999.
The Company's reliance on key suppliers, and therefore on the proper
function of their information systems and software, means that their failure to
address Year 2000 issues could have a material impact on the Company's
operations and financial results. The Company has asked key suppliers to provide
information regarding their readiness for Year 2000 related issues. The Company
is reviewing the responses and will determine what further actions are required
to mitigate vulnerability to problems with suppliers and other third parties'
systems.
The Company expects to incur primarily internal staff cost and other
expenses related to infrastructure and facilities enhancements necessary to
prepare the systems for Year 2000. To date there have been no material direct
out-of-pocket costs. Although the total cost of these Year 2000 compliance
activities is not yet determined, it is not anticipated to be material to the
Company's business, results of operations and financial condition. The Company
has not completed a contingency plan for handling Year 2000 problems that are
not detected and corrected prior to
7
their occurrence. Any failure of the Company to address any unforeseen Year
2000 issue could adversely affect the Company's business, financial condition
and results of operations.
ITEM 8. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Independent Accountants...........................................26
Consolidated Balance Sheets at October 31, 1998 and October 31, 1997........27
Consolidated Statements of Income for each of the three years in the
period ended October 31, 1998............................................28
Consolidated Statements of Changes in Shareholders' Equity for each
of the three years in the period ended October 31, 1998..................29
Consolidated Statements of Cash Flows for each of the three years in
the period ended October 31, 1998........................................30
Notes to Consolidated Financial Statements..................................32
8
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of
Advanced Digital Information Corporation
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) present fairly, in all material respects,
the financial position of Advanced Digital Information Corporation and its
subsidiaries at October 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended October 31,
1998, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Seattle, Washington
December 8, 1998
9
ADVANCED DIGITAL INFORMATION CORPORATION
CONSOLIDATED BALANCE SHEETS
October 31,
----------------------------
1998 1997
------------ -----------
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 28,225,892 $32,806,822
Accounts receivable, net of allowances of $476,000 in
1998 and $324,000 in 1997........................... 31,797,375 18,078,302
Inventories, net....................................... 32,293,526 16,074,787
Marketable equity securities........................... 2,135,449 ---
Prepaid expenses and other............................. 1,500,145 714,979
Deferred income taxes.................................. 1,339,879 767,688
------------ -----------
Total current assets................................ 97,292,266 68,442,578
Property, plant and equipment, net....................... 7,351,305 2,509,267
Deferred income taxes.................................... 62,681 89,414
Investment in Crossroads Holding Corp.................... 4,000,000 4,000,000
Intangible and other assets.............................. 3,700,374 152,634
------------ -----------
$112,406,626 $75,193,893
------------ -----------
------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................... $ 16,986,445 $11,237,131
Accrued liabilities.................................... 7,901,981 2,594,831
Income taxes payable................................... 397,539 1,252,324
Deferred revenue....................................... 2,252,106 ---
Current portion of long-term debt...................... 3,172,328 ---
------------ -----------
Total current liabilities........................... 30,710,399 15,084,286
Long-term debt........................................... 18,368,092 ---
Other long-term liabilities.............................. 300,000 ---
Minority interest........................................ 24,744 ---
Commitments (Note 15).................................... --- ---
Shareholders' equity:
Preferred stock, no par value; 2,000,000 shares authorized;
none issued and outstanding ............................. --- ---
Common stock, no par value; 40,000,000 shares authorized,
9,766,161 issued and outstanding at October 31, 1998
(9,699,824 in 1997)...................................... 46,231,387 45,808,291
Retained earnings..................................... 16,009,334 14,479,104
Cumulative translation adjustment...................... 762,670 (177,788)
------------ -----------
Total shareholders' equity.......................... 63,003,391 60,109,607
------------ -----------
$112,406,626 $75,193,893
------------ -----------
------------ -----------
See the accompanying notes to these consolidated financial statements.
10
ADVANCED DIGITAL INFORMATION CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED OCTOBER 31,
-----------------------------------------------
1998 1997 1996
------------ ----------- -----------
Net sales................................................ $114,556,941 $93,203,531 $58,956,993
Cost of sales............................................ 81,388,832 65,555,559 41,886,619
------------ ----------- -----------
Gross profit........................................... 33,168,109 27,647,972 17,070,374
------------ ----------- -----------
Operating expenses:
Selling and administrative............................. 20,792,883 13,556,059 9,846,324
Acquired in-process technology......................... 4,492,056 --- ---
Research and development............................... 4,483,145 2,909,460 1,541,647
------------ ----------- -----------
29,768,084 16,465,519 11,387,971
------------ ----------- -----------
Operating profit ........................................ 3,400,025 11,182,453 5,682,403
------------ ----------- -----------
Other income (expense):
Interest income ....................................... 1,027,934 1,095,991 19,459
Interest expense....................................... (311,054) --- (527,951)
Gain on sale of marketable equity securities........... 247,814 --- ---
Foreign currency transaction gains, net ............... 364,020 384,972 113,821
------------ ----------- -----------
1,328,714 1,480,963 (394,671)
------------ ----------- -----------
Income before provision for income taxes............... 4,728,739 12,663,416 5,287,732
------------ ----------- -----------
Provision (benefit) for income taxes:
Current................................................ 3,719,222 4,538,494 1,981,631
Deferred............................................... (545,457) (372,276) (124,098)
------------ ----------- -----------
3,173,765 4,166,218 1,857,533
------------ ----------- -----------
Minority interest........................................ 24,744 -- --
------------ ----------- -----------
Net income .............................................. $ 1,530,230 $ 8,497,198 $ 3,430,199
------------ ----------- -----------
------------ ----------- -----------
Basic net income per share .............................. $ 0.16 $ 0.94 $ 0.43
------------ ----------- -----------
------------ ----------- -----------
Diluted net income per share ............................ $ 0.16 $ 0.92 $ 0.43
------------ ----------- -----------
------------ ----------- -----------
See the accompanying notes to these consolidated financial statements.
11
ADVANCED DIGITAL INFORMATION CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED OCTOBER 31, 1998, 1997, AND 1996
COMMON STOCK CUMULATIVE
------------------------ RETAINED TRANSLATION
SHARES AMOUNT EARNINGS ADJUSTMENT TOTAL
--------- ----------- ---------- ----------- -----------
Balance at October 31, 1995........... 1,000 $ 701,752 $ 2,551,707 $ 133,319 $ 3,386,778
Stock dividend to Interpoint.......... 8,000,992
Contribution of capital from
Interpoint.......................... 19,628,054 19,628,054
Net income............................ 3,430,199 3,430,199
Foreign currency translation
adjustment.......................... (57,929) (57,929)
--------- ----------- ----------- ----------- -----------
Balance at October 31, 1996........... 8,001,992 20,329,806 5,981,906 75,390 26,387,102
Shares issued, net of costs........... 1,500,000 23,708,784 23,708,784
Contribution of capital............... 266,503 266,503
Exercise of stock options,
including tax benefit of
$1,064,197.......................... 197,832 1,503,198 1,503,198
Net income............................ 8,497,198 8,497,198
Foreign currency translation
adjustment.......................... (253,178) (253,178)
--------- ----------- ----------- ----------- -----------
Balance at October 31, 1997........... 9,699,824 45,808,291 14,479,104 (177,788) 60,109,607
Shares repurchased.................... (29,500) (200,258) (200,258)
Purchases under Stock Purchase Plan 22,499 142,236 142,236
Exercise of stock options,
including tax benefit of
$317,472............................ 73,338 481,118 481,118
Net income............................ 1,530,230 1,530,230
Foreign currency translation
adjustment.......................... 940,458 940,458
--------- ----------- ----------- ----------- -----------
Balance at October 31, 1998........... 9,766,161 $46,231,387 $16,009,334 $ 762,670 $63,003,391
--------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- -----------
See the accompanying notes to these consolidated financial statements.
12
ADVANCED DIGITAL INFORMATION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31,
--------------------------------------------------
1998 1997 1996
------------ ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................... $ 1,530,230 $ 8,497,198 $ 3,430,199
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization..................... 1,614,373 847,234 607,479
Allowance for doubtful accounts receivable........ 151,909 136,678 133,608
Allowance for inventory obsolescence.............. 1,014,051 271,597 587,334
Acquired in-process technology.................... 4,492,056 --- ---
Gain on sale of marketable equity securities...... (247,814) --- ---
Deferred income taxes............................. 1,229 (372,276) (124,098)
Assets retired.................................... 89,177 --- ---
Change in assets and liabilities, net of effects
from purchase of EMASS, Inc.:
Accounts receivable............................... (3,202,489) (5,561,698) (7,133,048)
Inventories....................................... (1,974,716) (5,550,102) (6,190,465)
Prepaid expenses and other........................ 225,322 (443,687) (60,355)
Other assets...................................... (71,123) 39,424 24,221
Accounts payable.................................. 2,710,791 2,824,342 4,544,059
Accrued liabilities............................... (1,679,326) 1,052,028 649,061
Income taxes payable.............................. (489,382) 1,006,809 49,692
Deferred revenue.................................. 194,755 --- ---
------------ ----------- -----------
Net cash provided by (used in) operating activities.... 4,359,043 2,747,547 (3,482,313)
------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment............ (3,362,582) (1,831,493) (910,718)
Investment in marketable equity securities........... (3,003,908) --- ---
Proceeds from sale of marketable equity securities... 1,116,273 --- ---
Acquisition of EMASS, Inc., net of cash acquired..... (23,472,834) --- ---
Investment in Crossroads Holding Corp................ --- (4,000,000) ---
------------ ----------- -----------
Net cash used in investing activities.................. (28,723,051) (5,831,493) (910,718)
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings................... 20,000,000 --- ---
Repayment of long-term debt.......................... (544,858) --- ---
Proceeds from issuance of common stock, net.......... --- 23,708,784
Repurchase of common stock........................... (200,258) --- ---
Capital contribution from Interpoint, ---
net of loans forgiven.............................
Proceeds from issuance of common stock
for stock options and stock purchase plan......... 305,882 1,503,198 ---
Net increase in loans from Interpoint................ --- --- 4,218,366
------------ ----------- -----------
Net cash provided by financing activities.............. 19,560,766 25,478,485 14,218,366
------------ ----------- -----------
Effect of exchange rate changes on cash................ 222,312 (24,500) (12,390)
------------ ----------- -----------
Net increase (decrease) in cash and cash equivalents... (4,580,930) 22,370,039 9,812,945
Cash and cash equivalents at beginning of period....... 32,806,822 10,436,783 623,838
------------ ----------- -----------
Cash and cash equivalents at end of period............. $ 28,225,892 $32,806,822 $10,436,783
------------ ----------- -----------
------------ ----------- -----------
See the accompanying notes to these consolidated financial statements.
13
ADVANCED DIGITAL INFORMATION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest............................................. $ 195,720 $ --- $508,492
Income taxes......................................... $3,722,491 $2,467,469 $404,668
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Loans from Interpoint Corporation, in the amount of $9,628,054, were
forgiven just prior to the distribution at October 16, 1996 (Note 18).
The Company purchased all of the outstanding stock of EMASS, Inc. in
August 1998 (Note 2). In conjunction with the acquisition, liabilities were
assumed as follows:
Fair value of assets acquired ....................... $38,908,639
Cash paid ........................................... 25,056,549
-----------
Liabilities assumed.................................. $13,852,090
-----------
-----------
See the accompanying notes to these consolidated financial statements.
14
ADVANCED DIGITAL INFORMATION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The financial statements consolidate the accounts of Advanced Digital
Information Corporation, its wholly owned subsidiaries EMASS, Inc. ("EMASS") and
ADIC Europe SARL ("ADE") and EMASS' 80% owned subsidiary ADIC/GRAU Storage
Systems GmbH & Co. KG ("Grau"). The companies are collectively hereinafter
referred to as "ADIC" or the "Company". All intercompany transactions have been
eliminated.
NATURE OF OPERATIONS
ADIC designs, manufactures, markets and services automated high performance
data storage products used to backup and archive electronic data in
client/server network computing environments. The Company's storage management
software is an integrated family of software products. The Company sells its
products on an international basis to resellers, original equipment
manufacturers ("OEMs") and end users.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Estimates that are particularly susceptible to significant change in the
near term are the adequacy of the allowances for sales returns, inventory
obsolescence and allocation of purchase price and estimated valuation of
purchased, developed and in-process technology.
REVENUE RECOGNITION
The Company relies on multiple distribution channels; its customers may be
distributors, resellers, Original Equipment Manufacturers ("OEMs") or end-users.
The Company records revenue from sales of small libraries when the products are
shipped to customers, net of a provision for anticipated returns. Revenue from
large library product sales is recognized upon end-user customer acceptance,
which occurs after delivery and installation are completed. Revenue from
software sales is recognized when the criteria of Statement of Position No.
97-2, "Software Revenue Recognition"("SOP 97-2") have been met. These criteria
include, but are not limited to, software delivery, the Company's lack of other
significant obligations to the customer and a determination that collectability
of the amount due is probable. The Company's software products do not require
significant production, modification, or customization by the Company or the
customer. Revenue from sales of services is recognized when services are
performed and billable, except for extended service agreements. Revenue under
extended service agreements is deferred and recognized ratably over the life of
the service agreement. Large libraries, software and maintenance services may be
sold separately or together. If sold together, total revenue is allocated to the
various elements based upon the price of that item sold on a separate basis.
Estimates of rebates and other reductions of sales due to promotional activities
are estimated at the time of the sale and accrued for by the Company.
Certain distributors of small libraries have the right, on a quarterly
basis, to return products according to a stock rotation policy. Typically, the
value of the products returned can not exceed 15% of the previous quarter's
purchases, the returns must be accompanied by offsetting orders of commensurate
value, and the products returned
15
must be new and in sealed cartons. The Company accrues a provision for the
estimated sales returns, allowances and discounts in the period the products
are shipped to customers.
WARRANTY EXPENSE
For standard Company products, parts and labor are covered under warranty
for periods between three months and three years. With respect to drives and
tapes used in the Company's products but manufactured by a third party, the
Company passes on to the customer the warranty on such drives and tapes provided
by the manufacturer. A provision for costs related to warranty expense is
recorded when revenue is recognized.
ADVERTISING EXPENSE
The Company has co-operative advertising agreements with certain of its
domestic and international distributors for the promotion of ADIC product sales.
These agreements allow the distributors to be reimbursed by the Company for
approved promotional activities. The amounts available for reimbursement are
related to a percentage of the distributor's eligible purchases from the
Company. The Company accrues for co-operative advertising as the related revenue
is recognized. All other advertising costs are expensed as incurred.
RESEARCH AND DEVELOPMENT COSTS
Expenditures relating to the development of new products and processes,
including significant improvements and refinements to existing products, are
expensed as incurred.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, short-term investments,
accounts receivable, accounts payable and accrued liabilities approximate fair
value because of the short-term nature of these instruments. The carrying value
of the Company's long-term debt approximates fair value as the debt bears
interest that adjusts based upon market interest rates.
CONCENTRATION OF CREDIT RISK
The Company sells products to a wide variety of industries on a worldwide
basis. In countries or industries where the Company is exposed to material
credit risk, sufficient collateral, including cash deposits and/or letters of
credit, is required prior to the completion of a transaction. The Company does
not believe there is a material credit risk beyond that provided in the
financial statements in the ordinary course of business.
The Company sells a significant portion of its products through third-party
resellers and, as a result, experiences individually significant annual sales
volumes with major distributors. Approximately $25,566,000 (22%) and $16,945,000
(15%) of the Company's fiscal 1998 revenues were from one customer and a second
customer, respectively. The same two customers accounted for fiscal 1997 and
1996 revenues of $25,707,000 (28%) and $18,101,000 (19%), and $13,315,000 (23%)
and $12,610,000 (21%), respectively. These two customers represented 20% and 58%
of the accounts receivable balance at October 31, 1998 and 1997, respectively.
CASH AND CASH EQUIVALENTS
Cash equivalents are short-term, highly liquid investments and consist of
investments in commercial paper and marketable debt securities which are readily
convertible to cash without penalty and subject to insignificant risk of changes
in value. The Company's cash and cash equivalents balance consists of the
following:
OCTOBER 31, OCTOBER 31,
1998 1997
------------ -----------
Cash.................................. $18,998,750 $ 8,091,286
16
Commercial paper...................... 7,973,553 4,457,558
Marketable debt securities............ 1,253,589 20,257,978
----------- -----------
$28,225,892 $32,806,822
----------- -----------
----------- -----------
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost, except for property,
plant and equipment of EMASS and Grau which have been reduced for certain
negative goodwill associated with the acquisition of EMASS by ADIC. Depreciation
and amortization are computed on the straight-line method over the estimated
useful lives of the assets as follows: machinery and equipment and office
equipment, 3 to 10 years; leasehold improvements, the life of the lease.
Expenditures for maintenance and repairs are charged to income as incurred.
INTANGIBLE ASSETS
Intangible assets resulting from the acquisition of EMASS include acquired
developed technology and assembled workforce which were recorded at their fair
value less a pro rata reduction for negative goodwill as of the date of the
acquisition. These assets are amortized over the periods estimated to be
benefited, five years and three years, respectively.
INCOME TAXES
Provision for income taxes has been recorded in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" ("FAS
109"). Under the liability method of FAS 109, deferred tax assets and
liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities and are measured using enacted tax rates and
laws that will be in effect when the differences are expected to be recovered or
settled.
Through October 15, 1996, ADIC's operations have been included in
consolidated income tax returns filed by Interpoint. Income taxes in the
accompanying financial statements for the associated period has been computed
assuming the Company filed separate income tax returns worldwide.
Deferred taxes result from the difference between the tax basis and fair
value of EMASS assets, the use of accelerated depreciation for tax purposes and
from the timing of tax deductions for allowances and accrued expenses.
FOREIGN CURRENCY TRANSLATIONS
The financial statements of ADE and Grau have been translated into U.S.
dollars in accordance with Statement of Financial Accounting Standards No. 52
"Foreign Currency Translation." Under the provisions of this Statement, all
assets and liabilities in the balance sheets of ADE and Grau, whose functional
currency is the French franc and German deutsche mark, respectively, are
translated at year-end exchange rates, and translation gains and losses are
accumulated in a separate component of shareholders' equity.
FOREIGN CURRENCY TRANSACTIONS AND FORWARD CONTRACTS
Foreign currency transaction gains and losses are a result of the effect of
exchange rate changes on transactions denominated in currencies other than the
functional currency, including U.S. dollars. Gains and losses on those foreign
currency transactions are included in determining net income or loss for the
period in which exchange rates
17
change. The effect of exchange rate fluctuations on the results of operations
is minimized by the offsetting nature of ADE and Grau foreign currency
transactions. In addition, the Company may enter into foreign currency
forward contracts to hedge transactions which are not otherwise offset.
Foreign currency forward exchange contracts represent agreements to exchange
the currency of one country for the currency of another country at an
agreed-upon price, on an agreed-upon settlement date. Foreign currency
forward exchange contracts are accounted for by the fair value method, and
are typically three months or less in length. There were no outstanding
contracts at October 31, 1998 or 1997.
STOCK-BASED COMPENSATION
Stock-based compensation plans are accounted for using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25").
EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standards No. 128
"Earnings Per Share" ("FAS 128") in the first quarter of fiscal 1998. Basic
earnings per share is computed based on the weighted average number of shares of
common stock outstanding during the period. Diluted earnings per share is
computed based on the weighted average number of shares of common stock
outstanding during the period increased by the weighted average number of common
stock equivalents outstanding during the period, using the treasury stock
method.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("FAS 130"). FAS 130, which is effective for all periods beginning after
December 15, 1997, establishes standards for reporting and displaying
comprehensive income and its components with the same prominence as other
financial statements. The Company expects that adoption in fiscal year 1999 will
have no material impact on the Company's reported financial results.
In June 1997 the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information" ("FAS
131"). FAS 131, which is effective for fiscal years beginning after December 15,
1997, establishes new disclosure requirements for operating segments, including
products, services, geographic area, and major customers. The Company will adopt
FAS 131 for its 1999 fiscal year, but does not expect the new accounting
standard to have a material effect on the Company's reported financial results.
In June 1998, Statement of Financial Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("FAS 133") was issued. FAS 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities. The Company will adopt FAS 133 for its 2000 fiscal year,
but expects that adoption will have no material impact on its financial
statements.
18
2. ACQUISITION OF EMASS, INC.
In July 1998, ADIC entered into a Stock Purchase Agreement ("Agreement")
with Raytheon E-Systems, Inc. ("RES") to purchase all of the outstanding stock
of EMASS, Inc. ("EMASS") a wholly-owned subsidiary of RES (the "Acquisition").
EMASS is a provider of large-scale libraries and open systems storage software.
The Acquisition was accounted for by the purchase method of accounting in
accordance with Accounting Principles Board Opinion No. 16, "Business
Combinations" ("APB 16") and, accordingly, the operating results of EMASS have
been included in the consolidated operating results since the date of
Acquisition, August 19, 1998. Pursuant to the terms of the Agreement, ADIC made
a cash payment of $24,766,000 to RES and assumed approximately $2,000,000 in
mortgage indebtedness. The Acquisition was funded through a combination of cash
and debt.
A summary of assets acquired and liabilities assumed at the date of the
Acquisition, as determined in accordance with APB 16, is presented in the table
below. Accounts payable and other current liabilities includes approximately
$600,000 of costs associated with the termination of an EMASS employee. The
acquired in-process technology has not yet reached technological feasibility and
has no alternative future use. The fair value of the net assets exceeded the
purchase price, consequently, no goodwill has been recorded and the excess has
been allocated to reduce proportionately the initial values assigned to
noncurrent assets.
Cash....................................................... $ 1,583,715
Accounts receivable........................................ 10,493,341
Inventories................................................ 14,632,283
Prepaid expenses and other ................................ 1,522,661
Property, plant and equipment.............................. 2,517,408
Acquired in-process technology............................. 4,492,056
Intangible and other assets................................ 3,667,175
Accounts payable and other current liabilities............. (11,913,016)
Long-term debt............................................. (1,639,074)
Other long-term liabilities................................ (300,000)
Minority interest of 80% owned subsidiary.................. ---
---
------------
Net assets acquired $ 25,056,549
------------
------------
The valuation of the acquired in-process technology is based upon estimates
by the Company and a valuation by a third-party appraiser. Given that the
valuation of the acquired in-process technology is an estimate, actual results
may change. If the estimate of the in-process technology were to decrease, the
value assigned to property, plant and equipment and intangible and other assets
acquired would increase.
The following summary (unaudited), prepared on a pro forma basis, combines
the consolidated results of operations for the years ended October 31, 1998 and
1997 as if EMASS had been acquired at November 1, 1997 and 1996, respectively.
YEARS ENDED OCTOBER 31,
-------------------------------
1998 1997
------------ ------------
Net sales.................................. $167,667,000 $157,675,000
Net loss................................... $(3,055,000) $(1,614,000)
Basic net loss per share................... $(.31) $(.18)
Diluted net loss per share................. $(.31) $(.18)
19
The pro forma results are not necessarily indicative of what actually would
have occurred if the Acquisition had been in effect for the periods presented.
In addition, they are not intended to be a projection of future results and do
not reflect any synergies that might be achieved from consolidated operations.
3. MARKETABLE EQUITY SECURITIES
In January 1998, the Company began investing in certain equity securities.
In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("FAS 115")
these investments are classified as available-for-sale. Under FAS 115,
unrealized holding gains and losses are reflected as a net amount in a separate
component of shareholder's equity until realized. For the purpose of computing
realized gains and losses, costs are identified on a specific identification
basis. There is no significant difference between the cost basis and fair value
of these securities at October 31, 1998. During April 1998, the company sold
certain of these securities and realized a gain of approximately $248,000.
4. INVENTORIES
Inventories are comprised of the following:
OCTOBER 31, OCTOBER 31,
1998 1997
----------- -----------
Finished goods............................ $13,104,058 $ 8,231,656
Work-in-process........................... 3,382,683 1,416,067
Raw materials............................. 17,951,520 7,557,748
----------- -----------
34,438,261 17,205,471
Allowance for inventory obsolescence...... (2,144,735) (1,130,684)
----------- -----------
$32,293,526 $16,074,787
----------- -----------
----------- -----------
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
OCTOBER 31, OCTOBER 31,
1998 1997
------------ ------------
Land and building ................................ $ 1,490,023
Machinery and equipment .......................... 6,923,443 $ 4,366,343
Office equipment ................................. 3,315,244 417,116
Leasehold improvements ........................... 618,592 415,493
------------ ------------
12,347,302 5,198,952
Accumulated depreciation and amortization ........ (4,995,997) (2,689,685)
------------ ------------
$ 7,351,305 $ 2,509,267
------------ ------------
------------ ------------
Depreciation and amortization expense was $1,445,000, $848,000 and $607,000 in
fiscal 1998, 1997 and 1996, respectively.
6. INTANGIBLE ASSETS
Intangible assets consists of the following:
20
OCTOBER 31,
1998
-----------
Developed technology.......................... $3,016,088
Assembled workforce........................... 627,272
----------
3,643,360
Accumulated amortization...................... (169,231)
----------
$3,474,129
----------
----------
7. INVESTMENT IN CROSSROADS HOLDING CORP.
In August 1997, the Company purchased an approximately 15% interest in
Crossroads Holding Corp. for an aggregate purchase price of $4,000,000. This
investment is accounted for under the cost method. Crossroads Systems, Inc.
("Crossroads"), a wholly owned subsidiary of Crossroads Holding Corp., develops
products that provide interconnectivity between various network protocols and
Fibre Channel networks. ADIC does not exercise influence over, or participate in
the management or board of directors of Crossroads Holding Corp. or Crossroads
Systems, Inc.
Under an OEM agreement with Crossroads, also entered into in August 1997,
the Company markets interconnectivity products developed by Crossroads under the
ADIC brand name and serves as a master distributor for Crossroads products. This
agreement has a two-year term and may be terminated, modified or renewed as
mutually agreed upon by the parties. There are no minimum purchase requirements.
8. ACCRUED LIABILITIES
Accrued liabilities are comprised of the following:
OCTOBER 31, OCTOBER 31,
1998 1997
----------- -----------
Accrued payroll and related liabilities.......... $4,548,151 $1,646,813
Allowance for warranty returns................... 762,669 375,497
Taxes, other than income......................... 329,303 254,564
Interest......................................... 115,334 --
Other............................................ 2,146,524 317,957
---------- ----------
$7,901,981 $2,594,831
---------- ----------
---------- ----------
9. CREDIT AGREEMENT AND LONG-TERM DEBT
CREDIT AGREEMENT
ADIC has a $10 million unsecured line of credit with a bank expiring
February 28, 2001. All of this line was available at October 31, 1998.
Borrowings against the line of credit will bear interest at the bank's prime
rate or adjusted LIBOR rate. A credit agreement covers both the line of credit
and long-term note payable and requires the Company to maintain certain
financial ratios and levels of working capital, tangible net worth and
profitability. The Company is in compliance with each of these covenants at
October 31, 1998.
LONG-TERM DEBT
Long-term debt consists of the following at October 31, 1998:
21
Unsecured note payable to a bank in monthly installments of $235,000 through
August 2003 plus interest at the bank's prime rate or adjusted
LIBOR rate, 6.758% at October 31, 1998 $19,529,412
Local borrowings comprised of various notes payable by Grau and collateralized
by the Grau manufacturing facility in Germany, payable in quarterly installments
of principle and interest of $109,000 through fiscal 2005 and with interest
rates ranging from 4.05% to 6.70% at October 31, 1998 2,011,008
-----------
$21,540,420
-----------
-----------
As of October 31, 1998, the maturities of long-term debt were as follows:
YEAR ENDED OCTOBER 31, AMOUNT
- ------------------------ ------
1999............................................ $ 3,172,328
2000............................................ 3,192,791
2001............................................ 3,206,439
2002............................................ 3,097,995
2003............................................ 8,358,239
Thereafter...................................... 512,628
-----------
21,540,420
Less: current maturities........................ (3,172,328)
-----------
$18,368,092
-----------
-----------
10. FEDERAL INCOME TAXES
Income before provision for income taxes was taxed under the following
jurisdictions:
YEARS ENDED OCTOBER 31,
--------------------------------------------
1998 1997 1996
---------- ---------- ----------
Current income tax:
U.S. Federal...................... $2,640,109 $3,692,339 $1,881,631
Foreign .......................... 1,069,113 832,155 ---
State and local................... 10,000 14,000 100,000
---------- ---------- ----------
Total current..................... 3,719,222 4,538,494 1,981,631
---------- ---------- ----------
Deferred income tax:
U.S. Federal...................... (545,457) (372,276) (267,260)
Foreign........................... --- --- 143,162
---------- ---------- ----------
Total deferred.................... (545,457) (372,276) (124,098)
---------- ---------- ----------
Total provision for income taxes.... $3,173,765 $4,166,218 $1,857,533
---------- ---------- ----------
---------- ---------- ----------
The provision for federal income tax differs from the amount computed by
applying the statutory federal income tax rate to income before provision for
income taxes for the following reasons:
YEARS ENDED OCTOBER 31,
-----------------------------------------------
1998 1997 1996
-------------- -------------- -----------
Federal income tax at statutory rate of 34% $1,607,771 $4,305,561 $ 1,797,829
Change in valuation allowance........... 68,000 --- ---
Acquired in-process technology.......... 1,527,299 --- ---
Tax exempt interest income.............. (123,323) (130,827) ---
Tax credits............................. (68,046) (127,604) (1,000)
Activity of foreign subsidiaries........ 61,050 126,686 (35,344)
22
State income taxes...................... 10,000 14,000 100,000
Other................................... 91,014 (21,598) (3,952)
---------- ---------- -----------
$3,173,765 $4,166,218 $ 1,857,533
---------- ---------- -----------
---------- ---------- -----------
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets at October 31, 1998 and 1997 are:
OCTOBER 31, OCTOBER 31,
1998 1997
---------- -----------
Deferred tax assets:
Inventories.......................................... $ 3,554,271 $399,509
Team member compensated absences..................... 24,763 25,845
Allowance for warranty returns....................... 134,467 85,193
Allowances for bad debt and sales returns............ 654,049 202,303
Plant and equipment.................................. 1,305,481 89,414
Net operating loss carryforwards..................... 969,000 ---
Other................................................ 238,809 54,838
----------- --------
Deferred tax assets.......................... 6,880,840 857,102
Deferred tax liability - intangible and other assets... (693,260) ---
Net valuation allowance................................ (4,785,020) ---
----------- --------
Net deferred tax assets...................... $ 1,402,560 $857,102
----------- --------
----------- --------
The net valuation allowance relates to certain timing differences and net
operating loss carryforwards for EMASS and Grau and was recorded at the date of
acquisition of EMASS. Tax benefits associated with any portion of this allowance
that is subsequently relieved will be allocated to further reduce noncurrent
intangible and other assets of EMASS.
Deferred U.S. income taxes are not provided for the earnings of the
Company's foreign subsidiaries because the Company expects those earnings will
be permanently reinvested. Net pretax operating results from the foreign
subsidiaries are income of $2,428,000, $2,075,000 and $407,000 for fiscal 1998,
1997 and 1996, respectively.
Grau has net operating loss carryforwards of approximately $4 million which
have no expiration date.
11. NET INCOME PER SHARE
Effective for the fiscal year ended October 31, 1998, net income per
common share is computed using FAS 128. All prior periods have been restated to
conform to the requirements of FAS 128. The adoption of FAS 128 did not have a
material impact on the Company's net income per share.
The following table sets forth the computation of basic and diluted net
income per share for fiscal 1998, 1997 and 1996.:
YEARS ENDED OCTOBER 31,
------------------------------------------------
1998 1997 1996
-------------- -------------- ----------
Numerator:
Net income.................................... $1,530,230 $8,497,198 $3,430,199
Denominator:
Denominator for basic net income per share -
weighted average shares..................... 9,742,263 9,084,274 8,001,992
Dilutive potential common shares from Team
Member (employee) stock options............. 122,741 200,950 20,870
---------- ---------- ----------
23
Denominator for diluted net income per share
- adjusted weighted average shares and
assumed conversions......................... 9,865,004 9,285,224 8,022,862
---------- ---------- ----------
---------- ---------- ----------
Basic net income per share....................... $ 0.16 $ 0.94 $ 0.43
---------- ---------- ----------
---------- ---------- ----------
Diluted net income per share..................... $ 0.16 $ 0.92 $ 0.43
---------- ---------- ----------
---------- ---------- ----------
12. CAPITAL STOCK
STOCK ISSUANCE
On March 12, 1997, ADIC completed a public offering of 1,525,000 shares of
its common stock. Of the total, 1,500,000 were sold by the Company and 25,000
shares were sold by a selling shareholder. Net proceeds of $23,709,000 were
received and will be used for working capital and other general corporate
purposes.
SHAREHOLDER RIGHTS PLAN
In July 1996, the Board of Directors adopted a shareholder rights plan
("Shareholder Rights Plan") in which preferred stock purchase rights were
distributed as a dividend at the rate of one right for each share of ADIC common
stock. The Shareholder Rights Plan is designed to deter coercive takeover
tactics and ensure that the Board of Directors can adequately protect the
interests of the shareholders in the event of a takeover attempt.
13. STOCK-BASED COMPENSATION PLANS
At October 31, 1998, the Company had three stock option plans. The 1996
Transition Plan comprises the stock options held by ADIC Team Members and
directors which were converted in connection with the spin-off from Interpoint.
There were 476,092 options issued under this plan at exercise prices ranging
from $.4397 to $5.2328. No further options may be issued under this plan. In
addition, 1,032,500 shares are reserved under the Company's 1996 and Alberg
Stock Option Plans for Team Members, directors, officers, consultants, agents,
advisors and independent contractors of the Company. Terms of the plans require
the option price to be equal to the fair market value on the date of grant.
Options may be exercisable for all or part of the shares as determined by the
option and the majority of the options issued under these plans expire five
years from the date of grant.
During fiscal year 1998, certain non-executive Team Members were given the
opportunity to cancel existing grants and receive new grants. In each case, the
new option price was equal to or greater than the fair market value on the date
of grant and the vesting and expiration schedules were the same as for any new
grant, i.e. any vesting associated with the canceled grant was forfeited.
In February 1998, the shareholders approved a Stock Purchase Plan to provide
eligible Team Members to purchase shares of Common Stock on favorable terms
through payroll deductions. In accordance with this plan, 22,499 shares of stock
were issued during fiscal 1998.
The Company accounts for the above described stock option and stock purchase
plans (the "Plans") following the guidelines of APB 25 and related
interpretations. No compensation cost has been recognized for stock options
granted and stock purchased under these Plans. Had compensation cost for the
Company's Plans been determined based on the fair value at the grant dates for
awards under those Plans consistent with the method of FAS 123, the Company's
net income, basic and diluted net income per share and pro forma basic and
diluted net income per share would have been reduced to the pro forma amounts
indicated below.
24
YEARS ENDED OCTOBER 31,
----------------------------------------------------
1998 1997 1996
---------- ---------- ----------
Net income(loss):
As reported............................... $1,530,230 $8,497,198 $3,430,199
Pro forma................................. $(344,763) $7,563,013 $3,367,350
Basic net income (loss) per share:
As reported............................... $0.16 $0.94 $0.43
Pro forma................................. $(0.04) $.83 $0.42
Diluted net income (loss) per share:
As reported............................... $.016 $0.92 $0.43
Pro forma................................. $(0.03) $0.81 $0.42
The value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model using the following weighted average
assumptions:
YEARS ENDED OCTOBER 31,
----------------------------
1998 1997 1996
------ ----- -----
Weighted average risk free interest rates ........ 4.98% 6.00% 6.01%
Expected dividend yield .......................... 0% 0% 0%
Expected volatility .............................. 65% 65% 65%
Expected lives (in years) ........................ 4 4 4
The Black-Scholes option pricing model requires the input of highly
subjective assumptions and does not necessarily provide a reliable measure of
fair value.
25
Options granted, exercised and canceled under the Plans are summarized as
follows:
WEIGHTED
AVERAGE
EXERCISE
OPTIONS PRICE
--------- ---------
Balance at October 31, 1995............................... --- ---
Options converted in spin-off from Interpoint
Corporation.......................................... 476,092 $2.73
Options granted......................................... 368,500 13.23
---------
Balance at October 31, 1996............................... 844,592 7.31
Options granted......................................... 254,851 17.38
Options exercised....................................... (197,832) 2.21
Options canceled........................................ (16,575) 11.83
---------
Balance at October 31, 1997............................... 885,036 11.26
Options granted......................................... 758,165 12.06
Options exercised....................................... (73,338) 2.25
Options canceled........................................ (414,256) 16.58
---------
Balance at October 31, 1998............................... 1,155,607 10.45
---------
---------
At October 31, 1998 a total of 326,754 options were exercisable, the
weighted average exercise price of these options was $9.21. The weighted average
grant date fair value of options granted in fiscal years 1998, 1997 and 1996 was
$6.18, $9.47 and $6.38 respectively.
The following table summarizes information about stock options outstanding at
October 31, 1998.
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------- ----------------------------------
Weighted Weighted Weighted
average average average
Range of Number remaining exercise Number exercise
exercise prices outstanding contractual life price exercisable price
- -------------------------- --------------- ----------------- --------------- --------------- --------------
$0.8953 - $1.6270 19,600 41 mos $1.36 19,600 $1.36
$2.5504 - $5.2328 181,687 25 mos $3.76 122,189 $3.57
$8.7500 - $13.5000 769,290 49 mos $10.68 165,125 $13.22
$14.9375 - $19.5625 185,030 50 mos $17.07 19,840 $18.29
26
14. PROFIT INCENTIVE AND BONUS PLANS
The Company currently has a non-contributory bonus plan for certain
high-level Team Members and a non-contributory profit sharing plan for all other
domestic Team Members, other than those employed by EMASS. These plans are
generally based upon a combination of Team Member salaries and performance. No
distributions are made under the bonus plan if budgeted income is not achieved.
EMASS Team Members had a separate plan based on certain EMASS financial
performance criteria. Contributions to all plans combined totaled $291,000 and
$740,000 for fiscal 1998 and 1997, respectively.
In fiscal 1996, the Company's Team Members participated in Interpoint's
non-contributory profit incentive plan for key Team Members and a
non-contributory profit sharing plan for all regular full-time domestic Team
Members. These plans were generally based upon Team Member compensation and
pre-tax profits. Contributions to the plans were $433,000 for the year ended
October 31, 1996.
15. COMMITMENTS
LEASE COMMITMENTS
The Company currently leases facilities in Redmond, Washington and
Englewood, Colorado for administrative, sales and marketing, research and
development, operations and warehouse activities. Sales and service offices are
leased at various sites in the United States and Europe.
Minimum annual rental commitments at October 31, 1998, for noncancelable
operating leases, are shown in the following table:
YEAR ENDED OCTOBER 31, AMOUNT
- ---------------------- ------
1999....................................... $2,183,000
2000....................................... $1,615,000
2001....................................... $1,313,000
2002....................................... $1,049,000
2003....................................... $1,034,000
Rent expense aggregated $1,255,000 in fiscal 1998, $571,000 in fiscal 1997
and $400,000 in fiscal 1996.
OTHER COMMITMENTS
In connection with the purchase of Grau by EMASS in 1994, EMASS entered into
an agreement with the minority shareholder of Grau whereby the minority
shareholder has the option to "put" his 20% interest in Grau to the Company for
an amount based on Grau profitability, but not to be less than $2,000,000. This
option is effective for the period January 1, 2000 to March 31, 2000.
16. RELATED PARTY TRANSACTIONS
Other accrued liabilities at October 31, 1998 include $708,000 due under an
employment separation agreement with the minority interest stockholder of Grau.
A company in which the Grau minority interest stockholder has an equity
ownership provides certain support services in Europe. Cost of these services
totaled $18,000 for the period August 19, 1998 to October 31, 1998.
17. GEOGRAPHIC SEGMENT INFORMATION
27
Major operations outside the United States consist of ADE, the Company's
wholly owned subsidiary in France and Grau, a subsidiary in Germany, which has
further subsidiaries operating as branch offices in both France and the United
Kingdom. Certain information regarding operations in this geographic segment is
presented in the table below. Transfers between geographic segments are made at
arms-length prices consistent with rules and regulations of governing tax
authorities. The profits on these transfers are not recognized until sales are
made to non-affiliated customers.
Excluded from U.S. net sales are transfers from the U.S. to ADE and Grau of
$14,794,000, $14,488,000 and $6,404,000 in 1998, 1997 and 1996, respectively.
Included in U.S. sales are export sales to unaffiliated customers of $7,404,000,
$7,329,000 and $4,666,000 in 1998, 1997 and 1996, respectively. Included in U.S.
operating profit is the expense associated with the acquired in-process
technology.
Total international sales were $37,929,000, $30,611,000 and $21,216,000 in
fiscal 1998, 1997 and 1996, respectively.
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1998 1997 1996
------------ ----------- -----------
Net sales:
United States................................... $ 84,032,381 $69,921,043 $42,406,762
Europe.......................................... 30,524,560 23,282,488 16,550,231
------------ ----------- -----------
$114,556,941 $93,203,531 $58,956,993
------------ ----------- -----------
------------ ----------- -----------
Operating profit:
United States................................... $ 776,182 $ 9,425,633 $ 5,209,722
Europe.......................................... 2,623,843 1,756,820 472,681
------------ ----------- -----------
$ 3,400,025 $11,182,453 $ 5,682,403
------------ ----------- -----------
------------ ----------- -----------
Identifiable assets:
United States................................... $ 80,320,412 $66,394,754 $31,797,515
Europe.......................................... 32,086,214 8,799,139 4,912,158
------------ ----------- -----------
$112,406,626 $75,193,893 $36,709,673
------------ ----------- -----------
------------ ----------- -----------
18. BASIS OF PRESENTATION FOR FISCAL 1996
On February 11, 1994, the Company was acquired by Interpoint Corporation
("Interpoint") pursuant to an Agreement and Plan of Merger dated October 29,
1993, in which the Company was merged into a wholly owned subsidiary of
Interpoint. On October 15, 1996, Interpoint distributed to its shareholders all
of the outstanding shares of ADIC (the "Distribution"). The Distribution was
made in connection with, and was a condition precedent to, the merger of
Interpoint with a wholly owned subsidiary of Crane Co., a Delaware corporation.
Prior to the Distribution, Interpoint made a contribution to the working capital
of ADIC through the cancellation of all intercompany indebtedness of ADIC and
ADE to Interpoint, transferred certain other assets to ADIC, including its
ownership of ADE, and contributed additional cash to ADIC for working capital of
$10 million. Total capital contributions were $19,628,054.
The consolidated financial statements for the period prior to October 15,
1996 reflect the results of operations, financial position, and cash flows of
ADIC as a wholly owned subsidiary of Interpoint and may not be indicative of
actual results of operations and financial position of the Company under other
ownership.
The consolidated statements of income for the fiscal year ended October 31,
1996 reflect certain expense items incurred by Interpoint which were allocated
to the Company on a basis which management believes represents a reasonable
allocation of such costs to present ADIC as a stand-alone company. These
allocations consist primarily of corporate expenses such as executive and other
compensation and interest expense on intercompany borrowings. Compensation has
been allocated based on an estimate of Interpoint personnel time dedicated to
the operations and management of ADIC. Interest expense has been allocated based
on Interpoint's borrowing rate and actual intercompany borrowings. A summary of
these allocations is as follows:
CORPORATE INTEREST
YEAR ENDED: EXPENSES EXPENSE
- ----------- -------- -------
October 31, 1996............................... $177,292 $528,524
-------- --------
-------- --------
28
19. QUARTERLY INFORMATION (UNAUDITED)
1998
-----------------------------------------------------------------
Q1 Q2 Q3 Q4
------------- ------------- ------------- --------------
Net sales.............................. $22,866 $24,806 $25,314 $41,571
Gross profit........................... $7,415 $7,010 $6,770 $11,973
Net income (loss)...................... $2,361 $1,934 $752 $(3,517)
Basic net income (loss) per share...... $0.24 $0.20 $0.08 $(0.36)
Diluted net income (loss) per share.... $0.24 $0.20 $0.08 $(0.36)
1997
-----------------------------------------------------------------
Q1 Q2 Q3 Q4
------------- ------------- ------------- --------------
Net sales.............................. $20,069 $22,073 $24,463 $26,599
Gross profit........................... $5,971 $6,511 $7,066 $8,100
Net income............................. $1,661 $1,901 $2,262 $2,673
Basic net income per share............. $0.21 $0.21 $0.23 $0.27
Diluted net income per share........... $0.20 $0.21 $0.23 $0.27
29
INDEX TO EXHIBITS
(ITEM 14C)
EXHIBIT
NUMBER DESCRIPTION PAGE
- ----------- -------------------------------------------------------------------------------------------- ---------
2.1 Stock Purchase Agreement by and between Raytheon E-Systems, Inc. and Advanced Digital
Information Corporation, dated July 21, 1998.............................................. (A)
2.2 Amendment No. 1 to Stock Purchase Agreement by and between Raytheon E-Systems, Inc. and
Advanced Digital Information Corporation, dated July 21, 1998 (Exhibit 2.2)............... (B)
2.3 Letter agreement between Raytheon E-Systems, Inc. and the Company dated August 19, 1998
(Exhibit 2.3)............................................................................. (B)
3.1 Restated Articles of Incorporation of ADIC (Exhibit 3.1).................................... (C)
3.2 Restated Bylaws of ADIC (Exhibit 3.2)....................................................... (C)
4.1 Rights Agreement, dated as of August 12, 1996, between ADIC and ChaseMellon Shareholders
Services, L.L.C., as Rights Agent (Exhibit 4.2)........................................... (C)
10.1 Credit Agreement between Advanced Digital Information Corporation and Seafirst Bank, dated
August 17, 1998........................................................................... (D)
10.2 Lease Agreement and Work Letter Agreement between The Quadrant Corporation and ADIC, dated
as of November 5, 1997 (Exhibit 10.1)..................................................... (E)
10.3* ADIC Bonus Plan (Exhibit 10.2).............................................................. (E)
10.4* Amended 1997 Stock Purchase Plan (Appendix A)............................................... (F)
10.5* ADIC 1996 Stock Option Plan (Appendix B).................................................... (F)
10.6* ADIC 1996 Transition Plan (Exhibit 10.4).................................................... (C)
10.7 Form of Indemnification Agreement, together with schedule of agreements..................... (G)
21.1 Subsidiaries of the Registrant.............................................................. (H)
23.1 Consent of Independent Accountants..........................................................
27.1 Financial Data Schedule..................................................................... (H)
- ------------------------
* Management contract or compensatory plan or arrangement.
(A) Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K
dated July 21, 1998.
(B) Incorporated by reference to designated exhibit to the Current Report on
Form 8-K dated August 19, 1998.
(C) Incorporated by reference to designated exhibit to Form 10 Information
Statement filed September 10, 1996.
(D) Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form
10-Q for the quarterly period July 31, 1998.
(E) Incorporated by reference to designated exhibit of the Annual Report on Form
10-K for the fiscal year ended October 31, 1997.
(F) Incorporated by reference to designated appendix of the proxy statement
filed in connection with the 1998 Annual Meeting of Shareholders.
(G) Incorporated by reference to Exhibit 10.5 of the Annual Report on Form 10-K
for the fiscal year ended October 31, 1996.
(H) Previously filed with Annual Report on Form 10-K for the fiscal year ended
October 31, 1998.
30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ADVANCED DIGITAL INFORMATION
CORPORATION
(REGISTRANT)
By: /s/ PETER H. VAN OPPEN
---------------------------------
Peter H. van Oppen
Chairman and
Chief Executive Officer
Dated:September 10, 1999
31