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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
of
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 1993
Commission File Number 0-10630
SEAGATE TECHNOLOGY, INC.
(Registrant)
Incorporated in the State of Delaware
I.R.S. Employer Identification Number 94-2612933
920 Disc Drive, Scotts Valley, California 95066
Telephone: (408) 438-6550
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
--- ---
On December 31, 1993, 70,766,002 shares of the registrant's common stock were
issued and outstanding.
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INDEX
SEAGATE TECHNOLOGY, INC.
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
- - ------- --------------------- --------
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Consolidated condensed statements of income--Three and
six months ended December 31, 1993 and January 1, 1993 3
Consolidated condensed balance sheets--December 31, 1993
and July 2, 1993 4
Consolidated condensed statements of cash flows--Six
months ended December 31, 1993 and January 1, 1993 5
Notes to consolidated condensed financial statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II OTHER INFORMATION
- - ------- -----------------
Item 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
</TABLE>
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SEAGATE TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
December 31, January 1, December 31, January 1,
1993 1993 1993 1993
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $ 815,890 $ 776,651 $ 1,589,768 $ 1,519,293
Cost of sales 661,159 592,290 1,295,179 1,152,875
Product development 41,855 38,198 82,826 74,397
Marketing and administrative 49,507 55,870 96,739 114,796
Amortization of goodwill and
other intangibles 3,193 3,228 6,363 6,456
------------ ------------ ------------ ------------
Total Operating Expenses 755,714 689,586 1,481,107 1,348,524
Income from Operations 60,176 87,065 108,661 170,769
Interest income 7,320 5,888 13,518 10,922
Interest expense (5,313) (5,859) (10,178) (12,108)
Other (1,123) 783 585 1,114
------------ ------------ ------------ ------------
Other Income (Expense) 884 812 3,925 (72)
------------ ------------ ------------ ------------
Income before income taxes 61,060 87,877 112,586 170,697
Provision for income taxes 18,318 24,605 33,776 47,795
------------ ------------ ------------ ------------
Net Income $ 42,742 $ 63,272 $ 78,810 $ 122,902
============ ============ ============ ============
NET INCOME PER SHARE:
Primary $ 0.59 $ 0.91 $ 1.09 $ 1.77
Fully diluted 0.57 0.87 1.06 1.69
NUMBER OF SHARES USED IN
PER SHARE COMPUTATIONS:
Primary 72,828 69,691 72,057 69,553
Fully diluted 81,233 76,422 79,786 76,058
</TABLE>
See notes to consolidated condensed financial statements.
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SEAGATE TECHNOLOGY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
December 31, July 2,
1993 1993(1)
------------- ------------
<S> <C> <C>
ASSETS
- - ------
Cash and cash equivalents $ 859,105 $ 426,094
Short-term investments 271,195 203,117
Accounts receivable 345,004 357,681
Inventories 283,872 398,698
Deferred income taxes 90,340 15,131
Other current assets 65,584 70,558
---------- ----------
Total Current Assets 1,915,100 1,471,279
---------- ----------
Property, equipment and leasehold improvements, net 366,665 350,051
Goodwill and other intangibles, net 132,895 139,260
Other assets 81,209 70,603
---------- ----------
Total Assets $2,495,869 $2,031,193
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------
Accounts payable $ 256,251 $ 250,333
Accrued employee compensation 73,685 64,310
Accrued expenses 159,556 193,050
Accrued income taxes 30,714 34,800
Curent portion of long-term debt 1,396 1,500
---------- ----------
Total Current Liabilities 521,602 543,993
---------- ----------
Deferred income taxes 195,655 123,581
Other liabilities 73,637 37,102
Long-term debt, less current portion 550,739 281,276
---------- ----------
Total Liabilities 1,341,633 985,952
---------- ----------
Common stock 707 681
Additional paid-in capital 345,254 315,569
Foreign currency translation adjustment (447) (461)
Retained earnings 808,722 729,912
Deferred compensation -- (460)
---------- ----------
Total Shareholders' Equity 1,154,236 1,045,241
---------- ----------
Total Liabilities and Shareholders' Equity $2,495,869 $2,031,193
========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
(1) The information in this column was derived from the Company's audited
consolidated balance sheet as of July 2, 1993.
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SEAGATE TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
----------------------------------------
December 31, January 1,
1993 1993
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 78,810 $ 122,902
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 92,750 88,592
Deferred income taxes 12,500 39,294
Provision for loss on equipment, net (1,435) 5,728
Other 960 1,159
Changes in operating assets and liabilities:
Accounts receivable 12,677 21,251
Inventories 110,108 (54,210)
Other current assets (26) (11,599)
Accounts payable 1,724 15,585
Accrued employee compensation 9,375 (9,614)
Accrued expenses 3,050 5,879
Accrued income taxes (14,049) (11,809)
Other liabilities (9) 1,900
------------ ------------
Net Cash Provided by Operating Activities 306,435 215,058
INVESTING ACTIVITIES:
Acquisition of property, equipment and leasehold
improvements, net (88,383) (52,870)
Purchases of short-term investments with
maturities of more than three months (251,698) (154,741)
Proceeds from sales of short-term investments
with maturities of more than three months 183,120 58,145
Increase in other non-current assets, net (11,361) (8,320)
Other, net 16 (714)
------------ ------------
Net Cash Used in Investing Activities (168,306) (158,500)
FINANCING ACTIVITIES:
Issuance of long-term debt 270,750 --
Repayment of long-term debt (1,409) (39,663)
Purchase of treasury stock -- (36,602)
Sale of common stock 24,039 11,186
----------- -----------
Net Cash Provided by (Used in) Financing Activities 293,380 (65,079)
----------- -----------
Effect of exchange rate changes on cash and cash equivalents 1,502 (382)
----------- -----------
Increase (Decrease) in cash and cash equivalents 433,011 (8,903)
Cash and cash equivalents at the beginning of
the period 426,094 432,296
----------- -----------
Cash and cash equivalents at the end of the period $ 859,105 $ 423,393
============ ============
</TABLE>
See notes to consolidated condensed financial statements.
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SEAGATE TECHNOLOGY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The consolidated condensed financial statements have been prepared by
the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations.
The Company believes the disclosures included in the unaudited
consolidated condensed financial statements, when read in conjunction
with the consolidated financial statements of the Company as of July
2, 1993 are adequate to make the information presented not misleading.
The consolidated condensed financial statements reflect, in the
opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to summarize fairly the consolidated
financial position, results of operations and cash flows for such
periods.
The results of operations for the six months ended December 31, 1993
are not necessarily indicative of the results that may be expected for
the entire year ending July 1, 1994.
The Company operates and reports financial results on a fiscal year of
52 or 53 weeks ending on the Friday closest to June 30. Accordingly,
fiscal 1993 ended on July 2, 1993 and fiscal 1994 will end on July 1,
1994.
2. NET INCOME PER SHARE
Primary net income per share is based on the weighted average number
of shares of common stock and common stock equivalents outstanding
during the period. Fully diluted net income per share further assumes
the conversion of the Company's 5% and 6-3/4% convertible subordinated
debentures.
3. BALANCE SHEET INFORMATION
(In thousands)
<TABLE>
<CAPTION>
December 31, July 2,
1993 1993
------------ ---------
<S> <C> <C>
Accounts Receivable:
Accounts receivable $ 398,352 $ 404,195
Allowance for non-collection 53,348 46,514
--------- ---------
$ 345,004 $ 357,681
========= =========
</TABLE>
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<TABLE>
<S> <C> <C>
Inventories:
Components $ 162,849 $ 174,199
Work-in-process 53,391 53,982
Finished goods 67,632 170,517
--------- ---------
$ 283,872 $ 398,698
========= =========
Property, Equipment and
Leasehold Improvements:
Property, equipment and leasehold
improvements $ 908,518 $ 847,278
Allowance for depreciation and
amortization 541,853 497,227
--------- ---------
$ 366,665 $ 350,051
========= =========
</TABLE>
4. INCOME TAXES
The estimated tax rate used to compute the income tax provision for
the six months ended December 31, 1993 and January 1, 1993 is based on
the Company's estimate of its domestic and foreign operating income
for the respective year. The income tax provision is less than the
statutory rate primarily because operating income of certain foreign
operations is not subject to foreign income taxes and a portion of
such operating income is considered to be permanently invested in
non-U.S. operations. Accordingly, taxes have not been provided on
such income.
Effective July 3, 1993, the Company adopted Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes" (SFAS
109). Under SFAS 109, deferred tax assets and liabilities are
determined based on differences between the financial reporting and
tax basis of assets and liabilities and are measured by applying
enacted tax rates and laws to taxable years in which such differences
are expected to reverse. Prior to the adoption of SFAS 109, income
tax expense was determined using the deferred method. Deferred tax
expense was based on items of income and expense that were reported in
different years in the financial statements and tax returns and were
measured at the tax rate in effect in the year the difference
originated.
As permitted by SFAS 109, the Company has elected not to restate the
financial statements of any prior years. The change had no effect on
pretax income from continuing operations for the quarter ended October
1, 1993; however, the cumulative effect of the change increased net
income by $3,000,000 or $.04 per share. The Company recorded the
cumulative effect of the change as a reduction of income tax expense
for the quarter ended October 1, 1993.
In August of 1993, the President signed the Revenue Reconciliation Act
of 1993 which, among other things, increased the U.S. statutory rate
from 34% to 35% retroactive to January 1, 1993. Net income for the
quarter ended October 1, 1993 was decreased by approximately
$2,900,000 to reflect the cumulative impact of this rate change on net
deferred tax liabilities and the retroactive application of the
statutory rate to the Company's fiscal year ended July 2, 1993.
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5. SHAREHOLDERS' EQUITY
Shares authorized and outstanding are as follows:
<TABLE>
<CAPTION>
Shares Outstanding
-------------------
December 31, July 2,
1993 1993
---------- ----------
<S> <C> <C>
Preferred stock, par value $.01 per share,
1,000,000 shares authorized -- --
Common stock, par value $.01 per share,
200,000,000 shares authorized 70,766,002 68,155,486
</TABLE>
6. SUPPLEMENTAL CASH FLOW INFORMATION
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
----------------------------------
December 31, January 1,
1993 1993
---------- -----------
<S> <C> <C>
Cash Transactions:
Cash paid for interest $ 9,795 $ 11,085
Cash paid for income taxes 32,848 27,899
Non-Cash Transaction:
Receipt of note receivable for sale of building 5,000 --
</TABLE>
7. LONG-TERM DEBT
In December 1993 the Company issued $270,750,000 principal amount of
5% Convertible Subordinated Debentures Due 2003 in an offering not
registered or required to be registered under the Securities Act of
1933, as amended. The debentures are convertible into the Company's
common stock at $26.25 per share. The purposes of the issuance were
to further strengthen the Company's financial position and to provide
the Company with additional financial flexibility to take advantage
of business opportunities as they may arise.
8. LITIGATION
See Part II, Item 1 of this Form 10-Q for a description of legal
proceedings.
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SEAGATE TECHNOLOGY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Net sales for the quarter ended December 31, 1993 were $815,890,000 as compared
with $776,651,000 reported for the comparable year-ago quarter, and
$773,878,000 reported for the immediately preceding quarter. Net sales for the
six months ended December 31, 1993 were $1,589,768,000 as compared with
$1,519,293,000 reported for the comparable period a year ago. The increase in
net sales from the comparable year-ago quarter, the immediately preceding
quarter and the comparable six month period last year was primarily due to a
higher level of unit shipments and a shift in mix to the Company's higher
priced products partially offset by a decline in the average unit sales prices
of the Company's products as a result of competitive market conditions. The
rigid disc drive industry in which the Company operates is characterized by
declining unit sales prices over the life of a product and the Company
anticipates this characteristic will continue. However, price erosion has been
more severe than usual over the last twelve months and is likely to continue at
this level of severity over the near term, particularly in view of more
aggressive marketing into the merchant market channels by large OEM computer
manufacturers.
Gross margin as a percentage of net sales was 19.0% and 18.5% for the three and
six months ended December 31, 1993, respectively, compared with 23.7% and 24.1%
for the same periods last year and 18.1% for the immediately preceding quarter.
The decrease in gross margin as a percentage of net sales from the comparable
year-ago quarter was primarily due to a decline in the average unit sales
prices of the Company's products as a result of competitive market conditions
partially offset by a shift in mix to the Company's newer, higher capacity disc
drives, an increase in units produced resulting in lower overhead costs per
unit and a reduction in material costs. The decrease in gross margin as a
percentage of net sales from the comparable six month period last year was
primarily due to a decline in the average unit sales prices of the Company's
products as a result of competitive market conditions and a decrease in units
produced resulting in higher overhead costs per unit partially offset by a
shift in mix to the Company's newer, higher capacity disc drives and a
reduction in material costs. The increase in gross margin as a percentage of
net sales from the immediately preceding quarter was primarily due to a shift
in mix to the Company's newer, higher capacity disc drives, an increase in
units produced resulting in lower overhead costs per unit and a reduction in
material costs partially offset by a decline in the average unit sales prices
of the Company's products as a result of competitive market conditions. The
Company was advised that the Commission (the "EC Commission") of the European
Communities ("EC") had re-established as of December 5, 1993, the levying of
certain customs duties on products, including disc drives imported into the EC
from Singapore. Prior to this determination, the levying of such duties had
been suspended by the EC Commission. Effective January 1, 1994 those products
for which the duties had been imposed were again admitted into the European
Communities exempt from duties providing they qualified for exemption under the
General System of Preferences. These products are subject to ongoing review
and such duties could be reimposed at any time. The imposition of such customs
duties could negatively impact revenues or increase costs and adversely impact
gross margins depending upon the extent to which such duties are absorbed by
the Company.
Product development expenses for the three and six months ended December 31,
1993 were $41,855,000 and $82,826,000 respectively, an increase of $3,657,000
and $8,429,000 respectively, when compared with the comparable periods last
year. These expenses represented 5.1% and 5.2% of net sales for the three and
six months ended December 31, 1993, respectively, compared with 4.9% for the
comparable year-ago periods. The increase in expenses from both comparable
year-ago periods was primarily due to increased product development efforts
related to the Company's new products being introduced in the current fiscal
year and increases in salaries and related costs partially offset by a decrease
in material costs.
Marketing and administrative expenses for the three and six months ended
December 31, 1993 were $49,507,000 and $96,739,000 respectively, a decrease of
$6,363,000 and $18,057,000 respectively, when compared with the comparable
year-ago periods. These expenses represented 6.1% of net sales for the three
and six months ended December 31, 1993 compared with 7.2% and 7.6% respectively
for the
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comparable year-ago periods. The decrease in expenses from both the comparable
three and six month periods last year was primarily due to a decrease in the
provision for bad debts. Occupancy expenses, supplies, advertising expenses
and legal expenses also decreased. These decreases were partially offset by
increased salaries and related costs and equipment expenses.
Net other income (expense) reflected a decrease in net other expense of
$3,997,000 for the six months ended December 31, 1993, when compared with the
same period last year. The decrease in net other expense from the comparable
six month period last year was primarily due to increased interest income as a
result of higher levels of average invested cash during the period and lower
interest expense as a result of lower average debt outstanding.
The estimated tax rate used to compute the income tax provision for the six
months ended December 31, 1993 and January 1, 1993 is based on the Company's
estimate of its domestic and foreign operating income for each of the two
years. The income tax provision is less than the statutory rate primarily
because operating income of certain foreign operations is not subject to
foreign income taxes and a portion of such operating income is considered to be
permanently invested in non-U.S. operations. Accordingly, taxes have not been
provided on such income.
Effective July 3, 1993, the Company adopted Financial Accounting Standards
Board Statement No. 109, "Accounting for Income Taxes" (SFAS 109). Under SFAS
109, deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax basis of assets and liabilities and are
measured by applying enacted tax rates and laws to taxable years in which such
differences are expected to reverse. Prior to the adoption of SFAS 109, income
tax expense was determined using the deferred method. Deferred tax expense was
based on items of income and expense that were reported in different years in
the financial statements and tax returns and were measured at the tax rate in
effect in the year the difference originated.
LIQUIDITY AND CAPITAL RESOURCES:
At December 31, 1993, the Company's cash, cash equivalents and short-term
investments totaled $1,130,300,000, an increase of $501,089,000 from the July
2, 1993 balance. These funds are being maintained in short-term liquid
investments until required for other purposes.
In December 1993, the Company completed an offering of $270,750,000 principal
amount of 5% Convertible Subordinated Debentures Due 2003. The proceeds of the
offering are expected to be used to further strengthen the Company's financial
position and to provide the Company with additional financial flexibility to
take advantage of business opportunities as they may arise.
As of December 31, 1993 the Company had a domestic credit facility consisting
of a $50 million line of credit. There were no borrowings under this line of
credit at December 31, 1993 although approximately $11 million had been
utilized for letters of credit. Additionally the Company had approximately $28
million of non-domestic lines of credit which can be used for borrowings as
well as letters of credit, bankers' guarantees, and overdraft facilities.
Although there were no borrowings under these lines at December 31, 1993,
approximately $2 million had been utilized for bankers' guarantees. The
Company also had approximately $30 million of lines of credit worldwide which
can be used for letters of credit and bankers' guarantees, but not borrowings.
Of the $30 million, approximately $10 million had been utilized at December 31,
1993.
The Company expects investments in property and equipment in the current fiscal
year to approximate $235 million, of which approximately $92 million has been
incurred as of December 31, 1993. The Company plans to finance these
investments from cash flows from operations and existing cash balances. The
$92 million comprised $44 million for manufacturing facilities and equipment in
the thin-film head operations in Minnesota, Malaysia and Northern Ireland, $35
million for manufacturing facilities and equipment related to the Company's
sub-assembly and disc drive final assembly and test facilities in the U.S. and
Far East, $9 million for expansion of the Company's thin-film media operations
in Fremont, San Jose and Anaheim, California and $4 million for other purposes.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
SECURITIES LITIGATION
In 1988 a series of lawsuits was filed in Federal Court for the Northern
District of California against the Company, alleging violations of the federal
securities laws on behalf of a class of purchasers of the Company's securities.
These lawsuits have been the subject of much pretrial proceedings, which have
had the net effect of narrowing the claims made against the Company. Discovery
is continuing and a trial date is expected to be set in 1994.
In 1991 another series of lawsuits was filed in Federal Court for the Northern
District of California against the Company, alleging violations of the federal
securities laws and trial is set for October 11, 1994.
The Company believes both series of securities lawsuits are without merit and
intends to vigorously contest each action.
ENVIRONMENTAL MATTERS
The United States Environmental Protection Agency (EPA) and/or similar state
agencies have identified the Company as a potentially responsible party with
respect to environmental conditions at several different sites to which
hazardous wastes had been shipped or from which they were released. Other
parties have also been identified at certain of these sites as potentially
responsible parties. Many of these parties either have shared or likely will
share in the costs associated with the sites. Investigative and/or remedial
activities are ongoing at all such sites.
At July 2, 1993 the total remaining cost of investigation and remediation at
all the sites was approximately $16,300,000. At July 2, 1993 the Company had
recovered $800,000 from Control Data Corporation (CDC), through its
indemnification and cost sharing agreements with CDC and, in addition, expects
to recover approximately $11,300,000 over the next 30 years. CDC is the former
owner of the sites now owned by the Company from which hazardous wastes were
shipped or at which contamination has been identified. In addition, the Company
has a $10 million note payable to CDC with right of offset for environmental
liabilities. After deducting the expected recoveries from CDC, the expected
aggregate undiscounted liability was approximately $5,000,000 with expected
payments of $557,000 in 1997, $383,000 in 1998 and the remainder thereafter.
Approximately $15,000,000 of the $16,300,000 total estimated remaining costs is
attributable to one site in Omaha, Nebraska acquired by Seagate from CDC. In
1993 the Company entered into an agreement to sell the Omaha property. Under
the agreement the Company retains responsibility for and has indemnified the
buyer with respect to all environmental contamination existing on the site at
the time of sale. IT Corporation, a nationally known environmental consulting
firm, has provided consulting services to CDC and the Company for the Omaha
site for several years and assisted the Company in estimating the liability
related to the cost of remediation. This liability is based on a plan of
investigation and remediation developed by IT Corporation pursuant to a Consent
Order entered into by the Company and the EPA in 1990. According to the plan
the likely technology for remediation of groundwater at the facility will be
pumping and treatment, while remediation of soils will most likely be
accomplished by soil vapor extraction, followed by in-situ bioremediation. A
substantial portion of the Omaha liability was discounted by applying a risk
free rate, determined to be 4.53%, to the expected payments to be made by the
Company over the next 30 years. None of the liabilities for any of the other
sites has been discounted. The total liability for all sites recorded by the
Company after discounting was $3,000,000 at July 2, 1993.
Considering the indemnification and cost-sharing agreements entered into with
CDC and the reserves that the Company has established with respect to its
future environmental costs the Company believes, based
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on present information available to it, that its future environmental costs
will not have a material adverse effect on its financial condition or results
of operations.
PATENT LITIGATION
In November 1992, Rodime, PLC ("Rodime") filed a complaint in Federal Court for
the Central District of California, alleging infringement of U.S. Patent No. B1
4,638,383 and various state law unfair competition claims. In February 1993,
Rodime filed an amended complaint alleging infringement of a second patent,
U.S. Patent No. 4,890,174. The Company has initiated a counter-claim against
Rodime in the same action for infringement of a Seagate patent, U.S. Patent No.
4,620,251. On June 11, 1993, Judge Gadbois of the Central District of
California signed and issued an Order in which the companies stipulated to a
dismissal with prejudice of any claims and counterclaims based on U.S. Patent
Nos. 4,890,174 and 4,620,251. The Court has continued the pre-trial
conference date to March 28, 1994, at which time the Court will schedule a date
for the commencement of trial.
It is the opinion of the Company's patent counsel that the Company's products
do not infringe any valid claims of the Rodime patent in suit and thus the
Company has refused Rodime's offer of a license for its patents. However, many
other companies, such as IBM, Conner Peripherals, Hewlett-Packard and a number
of Japanese companies have been reported to have made payments to and taken
licenses from Rodime.
TAX DEFICIENCY
The Internal Revenue Service ("IRS") concluded a field audit of the Company's
income tax returns for the fiscal years 1983 through 1987. The Company
received "Notices of Deficiency" (the "Notices") for fiscal years 1981 through
1987. Proposed adjustments to income and tax credits in the Notices resulted
in proposed tax deficiencies of approximately $112,280,000 plus interest. The
major proposed adjustment to income in all fiscal years audited related to the
allocation of income between the Company and its manufacturing subsidiary in
Singapore. The Company filed a Petition with the United States Tax Court
contesting the proposed tax deficiencies. Trial commenced before the United
States Tax Court in Washington, D.C. on November 4, 1991 and ended on November
22, 1991. All briefs have been filed and the parties are awaiting the Court's
decision. The Company believes that it has meritorious legal defenses to the
IRS adjustment and that the outcome of the trial will not have a material
adverse effect on the Company's financial condition or results of operations.
The Company's federal income tax returns for the fiscal years ending June 30,
1988 through 1990 are presently under examination by the IRS. Certain state
tax returns for years ending June 30, 1984 through June 30, 1992 are also under
examination by state taxing authorities. The Company believes that adequate
amounts of tax have been provided for any final assessments which may result
from these examinations.
OTHER LITIGATION
Amstrad PLC ("Amstrad") initiated a lawsuit in London, England on December 11,
1992 against the Company concerning the Company's sale to Amstrad of allegedly
defective disc drives. The Company has replied to the allegations made against
it by Amstrad by denying all material points of Amstrad's claim and asserting
many affirmative defenses. Discovery is ongoing, however no trial date has
been set. The Company believes this lawsuit is without merit and will continue
to defend itself vigorously.
In October 1991 International Business Machines Corporation ("IBM") initiated a
lawsuit in the Federal District Court for Minnesota against the Company and one
of its employees for allegedly threatening the misappropriation of IBM trade
secrets, including trade secrets related to IBM's magneto-resistive ("MR") head
technology. IBM has since amended its complaint adding another Company
employee as a defendant and alleging that the defendants have now
misappropriated such IBM trade secrets. Discovery is proceeding and the Court
has now extended the time for the case to be made "trial ready" from January
1994 to July 1994. The Company believes that IBM's claims are without merit
and has filed a counter- claim against IBM. In addition, the Company is
continuing development of MR heads.
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The Company is involved in a number of other judicial and administrative
proceedings incidental to its business. Although occasional adverse decisions
(or settlements) may occur, the Company believes that the final disposition of
such matters will not have a material adverse effect on the Company's financial
position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's 1993 Annual Meeting of Shareholders was held on October 28, 1993.
The following is a brief description of each matter voted upon at the meeting
and a statement of the number of votes cast for, against or withheld and the
number of abstentions and broker nonvotes with respect to each matter.
(a) The shareholders elected the following directors:
<TABLE>
<CAPTION>
FOR WITHHELD
--- --------
<S> <C> <C>
Alan F. Shugart 57,229,564 218,441
Gary B. Filler 57,223,340 224,665
Kenneth E. Haughton 57,227,174 220,831
Robert A. Kleist 57,229,284 218,721
Lawrence E. Perlman 57,199,875 248,130
Thomas P. Stafford 57,215,334 232,671
Laurel L. Wilkening 57,202,658 245,347
</TABLE>
(b) The shareholders approved an amendment to the 1991 Incentive Stock
Option Plan to increase the number of shares of Common Stock reserved for
issuance thereunder by 6,000,000 shares.
<TABLE>
<CAPTION>
For Against Abstain Broker Nonvote
--- ------- ------- --------------
<S> <C> <C> <C>
35,306,890 12,589,479 553,109 8,998,527
</TABLE>
(c) The shareholders approved an amendment to the 1991 Incentive Stock
Option Plan to provide for certain specific limitations on the grant of stock
options to executive officers of the Company.
<TABLE>
<CAPTION>
For Against Abstain Broker Nonvote
--- ------- ------- --------------
<S> <C> <C> <C>
45,076,457 2,294,969 550,968 9,525,611
</TABLE>
(d) The shareholders ratified the appointment of Ernst & Young as
independent auditors of the Company for the fiscal year ending July 1, 1994.
<TABLE>
<CAPTION>
For Against Abstain Broker Nonvote
--- ------- ------- --------------
<S> <C> <C> <C>
57,089,102 157,325 201,578 --
</TABLE>
13
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibit is included herein:
11.1 Computation of Net Income per Share.
(b) Reports on Form 8-K
On December 3, 1993, the Company filed a report on Form 8-K with the Securities
and Exchange Commission to report that it had given public notice, on November
29, 1993, of its intention, subject to market and other conditions, to raise up
to $287,500,000 through an offering of convertible subordinated debentures not
registered or required to be registered under the Securities Act of 1933, as
amended.
On December 10, 1993, the Company filed a report on Form 8-K with the
Securities and Exchange Commission to report that it had been advised that the
Commission (the "EC Commission") of the European Communities ("EC") had
re-established as of December 5, 1993 the levying of certain customs duties on
products including disc drives imported into the EC from Singapore. Prior to
this determination, the levying of such duties had been suspended by the EC
Commission.
On December 17, 1993, the Company filed a report on Form 8-K with the
Securities and Exchange Commission to report that it had given public notice
that it had completed an offering (the "Offering") of $250,000,000 principal
amount of 5% Convertible Subordinated Debentures Due 2003 not registered or
required to be registered under the Securities Act of 1933, as amended, and to
report the risk factors included in the offering circular used in connection
with the Offering concerning an investment in the securities of the Company.
On December 17, 1993, the Company filed a report on Form 8-K/A to amend the
report on Form 8-K filed on the same day. This amendment was filed to add a
portion of Exhibit 4.1 that was inadvertently omitted in the original filing.
14
<PAGE> 15
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.
SEAGATE TECHNOLOGY, INC.
------------------------
(Registrant)
DATE: January 20, 1994 BY: /s/ Donald L. Waite
-------------------------------
DONALD L. WAITE
Sr. Vice President, Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
DATE: January 20, 1994 BY: /s/ Alan F. Shugart
-------------------------------
ALAN F. SHUGART
Chairman of the Board,
President and Chief Executive
Officer, (Principal Executive
Officer and Director)
15
<PAGE> 1
EXHIBIT 11.1
SEAGATE TECHNOLOGY, INC.
COMPUTATION OF NET INCOME PER SHARE
(In thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------- ----------------------------
December 31, January 1, December 31, January 1,
1993 1993 1993 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PRIMARY
Weighted average number of common
shares outstanding during the period 70,323 66,835 69,577 66,974
Incremental common shares attributable
to exercise of outstanding options
(assuming proceeds would be used
to purchase treasury stock) 2,505 2,856 2,480 2,579
----------- ----------- ----------- -----------
Total shares 72,828 69,691 72,057 69,553
=========== =========== =========== ===========
Net Income:
Amount $ 42,742 $ 63,272 $ 78,810 $ 122,902
Per share $ 0.59 $ 0.91 $ 1.09 $ 1.77
FULLY DILUTED
Weighted average number of common
shares outstanding during the periods 70,323 66,835 69,577 66,974
Incremental common shares attributable
to exercise of outstanding options
(assuming proceeds would be used to
purchase treasury stock) and conversion
of 6-3/4% and 5% convertible
subordinated debentures 10,910 9,587 10,209 9,084
----------- ----------- ----------- -----------
Total shares 81,233 76,422 79,786 76,058
=========== =========== =========== ===========
Net Income:
Amount $ 42,742 $ 63,272 $ 78,810 $ 122,902
Add 6-3/4% convertible subordinated
debentures interest, net of income
tax effect 2,810 2,850 5,620 5,719
Add 5% convertible subordinated
debentures interest, net of income
tax effect 368 -- 368 --
----------- ----------- ----------- -----------
Total $ 45,920 $ 66,122 $ 84,798 $ 128,621
=========== =========== =========== ===========
Per share $ 0.57 $ 0.87 $ 1.06 $ 1.69
=========== =========== =========== ===========
</TABLE>
16
