<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
---------------
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 0-10630
SEAGATE TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C>
DELAWARE 94-2612933
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
920 DISC DRIVE
SCOTTS VALLEY, CALIFORNIA 95066
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (408) 438-6550
</TABLE>
------------------------
<TABLE>
<CAPTION>
SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------------------------------------ -------------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE
<S> <C>
6 3/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE NEW YORK STOCK EXCHANGE
2012
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:
NONE
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. /X/
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price of Common Stock on June 30, 1995 as
reported by the New York Stock Exchange, was approximately $2.063 billion.
Shares of Common Stock held by each officer and director and by each person who
owns 5% or more of the outstanding Common Stock have been excluded in that such
persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.
The number of outstanding shares of the registrant's Common Stock on June
30, 1995 was 71,990,271
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the following documents are incorporated by reference to Parts I,
II, III, IV of this form 10-K Report: (1) Proxy Statement for registrant's 1995
Annual Meeting of Shareholders (the "Proxy Statement") and (2) registrant's
Annual Report to Shareholders for the fiscal year ended June 30, 1995 (the
"Annual Report to Shareholders").
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Seagate Technology, Inc. (herein "Seagate Technology", "Seagate" or the
"Company") designs, manufactures and markets a broad line of rigid magnetic disc
drives for use in computer systems ranging from notebook computers and desktop
personal computers to workstations and supercomputers as well as in multimedia
applications such as digital video and video-on-demand. The Company's products
include approximately 100 rigid disc drive models with form factors from 2.5 to
5.25 inches and capacities from 170 megabytes to 9 gigabytes. The Company sells
its products to original equipment manufacturers ("OEMs") for inclusion in their
computer systems or subsystems, and to distributors, resellers and dealers. The
Company has pursued a strategy of vertical integration and accordingly designs
and manufactures rigid disc drive components including recording heads, discs,
substrates, motors and custom integrated circuits. It also assembles certain of
the key subassemblies for use in its products including printed circuit board
and head stack assemblies. The Company's products are currently manufactured
primarily in the Far East with limited production in the United States.
In addition to pursuing its core rigid disc drive business, the Company is
broadening its business strategy as a data technology company to more fully
address the markets for storage, retrieval and management of data. In this
regard, the Company has implemented a strategy to establish itself as a leading
supplier of selected magnetic recording components, including thin-film heads,
to other manufacturers. In line with this strategy the Company, in December
1994, acquired Applied Magnetics Corporation's tape head subsidiary, a
manufacturer of magnetic recording tape heads for digital data storage. The
Company has also invested in, and continues to investigate opportunities to
invest in software activities (see Software Expansion, below). Finally, the
Company's broadened strategy may include expanding its traditional rigid disc
drive business to include other forms of data storage and retrieval, such as
flash memory, where the Company has made a significant investment in SunDisk
Corporation ("SunDisk"), a flash memory company. The Company anticipates that
this broadened strategy may include additional acquisitions of, investments in
and strategic alliances regarding complementary businesses, products and
technologies. Neither the components business, the software business nor the
investment in SunDisk was material to the Company's results of operations for
fiscal 1995.
SOFTWARE EXPANSION
The Company is seeking to leverage its name recognition, existing presence
in international markets, distribution channels and OEM relationships by
offering software products directed towards the client/server environment.
The Company anticipates that users of computer systems will increasingly
rely upon client/server network computing environments and believes that as this
reliance increases, users will demand software that more efficiently and
securely manages and provides access to data across computer networked
environments. As such, the Company is broadening its core competencies to
include software products to meet these requirements.
In May 1994 Seagate acquired Crystal Computer Services, Inc., a Vancouver,
Canada based developer and marketer of data access and reporting software for
the Windows platform. These products are sold as Crystal Reports, Crystal
Reports Pro and Crystal Reports Server.
In July 1994 the Company established an equity position in Dragon Systems,
Inc., a Massachusetts based developer of advanced speech recognition technology
and products for PC/workstation platforms. The Dragon family of products
consists of dictation command and control programs, and developer's tools,
including Dragon Dictate, Dragon Talk->To, and Dragon VoiceTools.
1
<PAGE>
In August 1994 the Company acquired Palindrome Corporation, an Illinois
based developer and marketer of storage management software for Novell NetWare
based networks and enterprise LANs. Palindrome provides data protection and
management software including disaster recovery planning, backup archiving,
migration, hierarchical storage management (HSM), library and robotics control,
and centralized management.
In February 1995 Seagate acquired Network Computing, Inc., a California
based developer and marketer of solutions for proactively managing NetWare file
servers, workstations and SNMP devices. Its LANAlert product provides for
automated monitoring and alerting of file servers and workstations.
In March 1995 the Company acquired NetLabs Inc., a California based
developer and marketer of network management software solutions for UNIX-based
networks. NetLabs markets an integrated suite of application software products
that enable users to automate and simplify the monitoring of network status and
performance, detect problems, issue alerts and initiate corrective action, track
inventory, and manage changes in network operation.
In May 1995 the Company acquired Frye Computer Systems Inc., a Massachusetts
based developer and marketer of network management software solutions for PC
LANs. Fryes line of products, THE FRYE UTILITIES FOR NETWORKS, includes an
integrated set of product modules providing solutions for complicated network
management problems.
In June 1995 the Company acquired Creative Interaction Technologies, Inc.
(CIT), a North Carolina based network management software company. CIT makes
AshWin, a batch scheduler for heterogeneous client/server computing.
Seagate intends to continue its expansion into software and other
complementary businesses and is actively pursuing discussions with companies
that fit with its strategy. Key to the Company's software expansion success is
acquiring companies that possess technology, development personnel and
management providing long-term growth potential. However, implementation of this
broadened strategy entails risks of entering markets in which the Company may
have limited or no experience. In addition, such broadened strategy could result
in the diversion of management's attention from the core rigid disc drive
business which could adversely impact the core business. The broadened strategy
has entailed and may continue to entail acquisitions of, or investments in,
businesses, products and technologies. Acquisitions involve numerous risks,
including difficulties in the assimilation of the operations and products of the
acquired businesses and the potential loss of key employees or customers of the
acquired businesses.
RIGID DISC DRIVE TECHNOLOGY
Magnetic disc drives are used in computer systems to record, store and
retrieve digital information. Most computer applications require access to a
greater volume of data than can economically be stored in the random access
memory of the computer's central processing unit (commonly known as
"semiconductor" memory). This information can be stored on a variety of storage
devices, including rigid disc drives, flexible disc drives, magnetic tape
drives, optical disc drives and semiconductor memory. Rigid disc drives provide
access to large volumes of information faster than optical disc drives, flexible
disc drives or magnetic tape drives and at substantially lower cost than
high-speed semiconductor memory.
Although products vary, all rigid disc drives incorporate the same basic
technology. Inside a sealed housing, one or more rigid discs are attached to a
spindle assembly that rotates the discs at a high constant speed around a hub.
The discs, or media, are the components on which data is stored and from which
it is retrieved. Each disc typically consists of a substrate of finely machined
aluminum or glass with a magnetic layer of a "thin-film" metallic material.
2
<PAGE>
Read/write heads, mounted on an arm assembly similar in concept to that of a
record player, fly extremely close to each disc surface, and record data on and
retrieve it from concentric tracks in the magnetic layers of the rotating discs.
Areal density is a measure of storage capacity per square inch on the
recording surface of a disc. It represents the number of bits of information on
a linear inch of the recording track (called bits per inch or bpi) multiplied by
the number of recording tracks on a radial inch of the disc. With the
proliferation of multimedia applications, the demand for increased areal
densities has and continues to increase at an accelerating rate since sound and
moving pictures require many times the storage capacity of simple text. The
Company is aggressively pursuing a range of technologies to increase areal
densities across the entire range of its products including the use of advanced
signal processing techniques such as PRML (Partial Response Maximum Likelihood)
read/write channels, advanced servo systems, higher precision mechanics and a
more advanced head technology. Today, all Seagate drives use inductive thin-film
heads, which are based on semiconductor processing technology. However, to
attain greater areal densities, the Company currently has under development
magneto-resistive ("MR") thin-film heads to be incorporated into its recently
announced 8 GB Barracuda drive, the ST18771, as well as into future products. MR
heads have discrete read and write structures which take advantage of special
magnetic properties in certain metals to achieve significantly higher storage
capacities. There can be no assurance that the Company's development efforts
will be successful. See "Product Development."
Upon instructions from the drive's electronic circuitry, a head positioning
mechanism (an "actuator") guides the heads to the selected track of a disc where
the data will be recorded or retrieved. The disc drive communicates with the
host computer through an internal controller. Disc drive manufacturers may use
one or more of several industry standard interfaces, such as IPI (Intelligent
Peripheral Interface), SCSI (Small Computer System Interface), ATA (AT
Attachment), PCMCIA (Personal Computer Memory Card International Association) or
proprietary interfaces, such as EISA (Extended Industry Standard Architecture).
Rigid disc drive performance is commonly measured by four key
characteristics: average seek time (commonly expressed in milliseconds), which
is the time needed to position the heads over a selected track on the disc
surface; internal data transfer rate (commonly expressed in Megabits per
second), which is the rate at which data is transferred to and from the disc;
storage capacity (commonly expressed in Megabytes), which is the amount of data
that can be stored on the disc; and spindle rotational speed (commonly expressed
in revolutions per minute), which has an effect on average latency or access to
data.
MARKET OVERVIEW
Rigid disc drives are used in a broad range of computer systems as well as
multimedia applications such as digital video and video-on-demand. The Company
defines the major computer system markets to include mobile computers, personal
computers, mid-range systems and high-end applications. Users of computer
systems are increasingly demanding additional data storage capacity with higher
performance in order to (i) use more sophisticated applications software,
including database management, CAD/CAM/CAE, desktop publishing and enhanced
graphics applications, and (ii) operate in multi-user, multitasking and
multimedia environments.
PERSONAL AND MOBILE COMPUTERS
Desktop and portable personal computers are used in a number of
environments, ranging from homes to businesses and multi-user networks. Software
applications are primarily word processing, spreadsheet, desktop publishing,
database management, multimedia and other related applications. The Company
believes the minimum storage requirements in the past year for entry-level
personal computers were generally 270 megabytes ("MB") to 540 MB of formatted
capacity with average seek times of 15 milliseconds ("msec") or less. As the
personal computer market has matured, users of
3
<PAGE>
personal computers have become increasingly price sensitive. The Company's
objective for the desktop and portable personal computer market is to design
drives for high-volume, low-cost manufacture.
Smaller footprint microcomputers, such as portable, laptop, notebook and
sub-notebook computers require rigid disc drives in form factors of 2.5 inches
or less that emphasize durability and low power consumption in addition to
capacity and other performance characteristics found in their desktop functional
equivalents. Personal digital assistants, hand-held and pen-based computers may
use 1.8 or 2.5 inch hard disc drives or flash memory in the form of a PCMCIA
card for additional memory. These applications also emphasize low power
consumption as well as very high degrees of durability.
MID-RANGE SYSTEMS
Mid-range systems include high performance microcomputers, technical
workstations, servers and departmental minicomputers. Applications are
characterized by compute- and data-intensive solutions, such as CAD/CAM/CAE,
network management, larger database management systems, scientific applications
and small to medium-sized business applications such as materials requirement
planning, payroll, general ledger systems and related management reports.
Mid-range systems typically require rigid disc drive storage capacities from 1
gigabyte ("GB") to 4 GB per drive and average seek times of less than 12 msec.
Mid-range systems typically use 3.5 and 5.25 inch disc drives. Due to the
leading edge characteristics required by end-users of mid-range systems,
manufacturers of such systems emphasize performance as well as price as the key
selling points.
HIGH-END APPLICATIONS
Large systems include mainframes and supercomputers. Typical applications
are medium and large business management systems, transaction processing,
parallel processing applications and other applications requiring intensive data
manipulation. Also inclusive in high-end applications are systems designed for
video-on-demand and near-line storage.
Users of these systems generally require capacities of 1 GB to 9 GB per
drive with average seek times of less than 12 msec. End-users of large systems
are less concerned than users of smaller systems with the size, weight, power
consumption and absolute cost of the drive. As with mid-range systems, disc
drive products are typically designed into these systems by the OEM with
emphasis on performance, reliability and capacity. In this arena, data storage
subsystems are used containing large numbers of spindles. Data integrity is
paramount, so high device reliability and maintainability are key features.
Mainframe, supercomputer and digital video systems also benefit from very high
device data rates (up to ten times that in small computer systems).
PRODUCTS
The Company's products include approximately 100 rigid disc drive models
with form factors from 2.5 to 5.25 inches and capacities from 170 megabytes to 9
gigabytes. The Company provides more than one product at some capacity points
and differentiates products on a price/performance and form factor basis. The
Company believes that its broad range of rigid disc drives is particularly
appealing to customers, such as large OEMs, which require a wide variety of
drive capacities, performance levels and interfaces. Producing for several
market segments also broadens the Company's customer base and reduces the
Company's reliance on any one segment of the computer market. The Company
continues to devote its resources to developing products with industry leading
performance characteristics and to being among the first to introduce such
products to market. The Company continuously seeks to enhance its market
presence in emerging segments of the rigid disc drive market by drawing on its
established capabilities in high-volume, low-cost production. The Company
believes it offers the broadest range of disc storage products available.
MOBILE COMPUTING
Announcement of the Company's first 2.5 inch family of drives was made in
November 1990 with the ST9096 family. The Company has continued to expand its
2.5 inch family with two different form
4
<PAGE>
factors, the 19mm high form factor which is designed to address the highest
capacity segment of the mobile computing market, and the 12.5mm high form factor
which is designed to address the sub-notebook market. In November 1992 the
Company introduced a patented shock sensing technology called SafeRite-TM-.
SafeRite technology allows for a much higher specification of operating shock
and helps to prevent the drive from writing data "off track". This technology is
available in all of the Company's 2.5 inch drives.
In October 1993 the Company announced its ST9550 family, later renaming it
the "Marathon" family. This 19mm height family was introduced in 455 MB and 341
MB versions. Recent additions to this family include the ST9655, the ST9420, and
the ST9816, with formatted capacities of 520 MB, 420 MB and 816 MB respectively.
The ST9655 and the ST9420 went into volume production during the first and
fourth quarters of fiscal 1995, respectively. The ST9816 is expected to begin
volume production in the first quarter of fiscal 1996. In January 1994 the
12.5mm high ST9300 family (Marathon "SL") was announced with 262, 210 and 131 MB
versions. Volume production of the Marathon SL products began in the fourth
quarter of fiscal 1994. Future plans for the 2.5 inch family of drives include
continued higher capacities and lower cost designs.
DESKTOP COMPUTING
In January 1995 the Company began volume shipments of the newest Medalist xe
product, the Medalist 545xe (ST3660). This 545 MB drive ended the fiscal year as
one of the Company's highest unit volume products. The Medalist xe family of 3.5
inch low-profile cost-effective disc drives features capacity points ranging
from 214 MB to 545 MB of formatted capacity. The design was leveraged from the
earlier ST3290 and ST3144 products that had been shipping in volume in 1993. The
Medalist xe family, formerly the ST3491 family, began volume shipments in the
third quarter of fiscal 1994.
Also in January 1995 the Company announced two new additions to the
Decathlon family: the ST5850 and the ST51080. These drives have 850 MB and 1.08
GB of formatted capacity, respectively. Volume production of the ST5850 began in
the third quarter of fiscal 1995. The ST51080 is expected to begin volume
production in the first quarter of fiscal 1996. The Decathlon family of disc
drives was first introduced in October 1993. The Decathlon family features a 3.5
inch, 19mm high profile which targets the emerging ultra-low profile PCs. This
family also enables a mini-array package whereby up to six drives can be mounted
in the space of one 5.25 inch full height drive. In addition to its unique form
factor, the Company believes the Decathlon family offers the most energy
efficient design in its class, providing advanced power savings for "Green PCs"
and Energy Star systems. Volume production of the first product in this family,
the ST5660 with 545 MB of formatted capacity, commenced in the first quarter of
fiscal 1995.
In May 1995 the Company announced another expansion of the Medalist family
to include a higher performance series of products with 1.6 GB and 2 GB
formatted capacities. As of June 1995, the Medalist 2140 (2 GB) is the highest
capacity ATA disc drive announced in the industry. These new products are
directed to the growing capacity and cost-effective requirements of the PC
market. They are scheduled for volume production in the second quarter of fiscal
1996. The Medalist family now features drives with capacity points ranging from
700 MB to 2 GB.
MID-RANGE SYSTEMS
In October 1992 the Company expanded its low-profile 3.5 inch mid-range
product line with the ST31200, a high performance drive with 1 GB of formatted
capacity that began production during the first quarter of fiscal 1994. In
October 1993 the Company expanded that product family to a 2 GB formatted
capacity platform with the family name of Hawk. The Hawk 2 went into production
the fourth quarter of fiscal 1994. In January 1994 the Hawk 4, 3.5 inch
half-height 4 GB formatted capacity drive, was announced. Volume production
began in the first quarter of fiscal 1995. In February 1995 the Company
announced the Hawk 2XL in 1 GB and 2 GB versions. The Hawk 2XL features PRML
read channels and embedded servos and is designed to provide a balance of price
and
5
<PAGE>
performance. Volume production of the Hawk 2XL is scheduled to begin in the
first quarter of fiscal 1996. The Company plans to continue designing and
manufacturing for the higher capacity, high performance and cost sensitive
requirements of this market.
HIGH-END COMPUTING
High-end applications range from digital video, video-on-demand, high-end
file servers, mainframes and minicomputers to supercomputers. Two new product
families have been introduced by the Company to address this wide range of
applications. The Barracuda family of 3.5 inch drives, first introduced in
October 1992, had the highest rotational speed of any drives produced at that
time. Since then three additional products have been added to the family. The
Barracuda 4 and Barracuda 2-2HP were introduced in October 1993. The Barracuda 4
is a 4 GB formatted capacity, 7200 RPM drive in the half-height form factor.
Volume production commenced in the first quarter of fiscal 1995. The Barracuda
2-2HP is a 2 GB formatted capacity high-performance drive in the half-height
form factor featuring the 2 head parallel design which doubles the data transfer
rate. Volume production of this product began in the first quarter of fiscal
1995. In January 1994 the Company announced the Barracuda 2, a 3.5 inch
low-profile, one-inch high, 2 GB formatted capacity disc drive. Volume
production of this product also began in the fourth quarter of fiscal 1994.
In May 1995 the Company announced the Barracuda 4 LP, a 4 GB formatted
capacity, high-performance drive in the low-profile form factor. The Barracuda 4
LP is scheduled for volume production in the second quarter of fiscal 1996. Also
announced in May 1995 was the Barracuda 8. This 8.7 GB drive is the third
generation of ultrahigh performance disc drives in the 7200 RPM, 3.5 inch
Barracuda family. The Barracuda 4 LP and the Barracuda 8 incorporate three new
technologies into the Barracuda family. The new technologies are MR heads, a
PRML data channel and a high-performance embedded servo. These technologies
allow for greater areal densities and result in increased capacity per disc. The
Barracuda 8 is scheduled for volume production in the second quarter of fiscal
1996.
Addressing the high-end 5.25 inch market the Company has continued to
leverage its Elite product line. The Elite 3, with 2.9 GB of formatted capacity
began volume shipments in August 1992. To address the emerging digital video and
near-line storage applications the Company introduced the Elite 9 in October
1993. The Elite 9 leverages the established design of the Elite family to an
expanded 9 GB of formatted capacity. Volume production began in the fourth
quarter of fiscal 1994.
OTHER PRODUCTS
In January 1993 the Company established an equity position in SunDisk, a
California-based designer, marketer and manufacturer of solid-state flash memory
devices. These devices are designed for both integrated (embedded) applications
and removable applications. The flash devices range from 1.8 MB to 175 MB and
are best suited for highly rugged, power-sensitive environments.
The Company offers warranty and out-of-warranty repair service to users of
its disc drives. The Company also designs and manufactures disc drive
components, primarily thin-film heads, principally for use in its own products
but also for sale to other disc drive manufacturers.
MARKETING AND CUSTOMERS
The Company sells its products to OEMs and distributors. OEM customers
incorporate Seagate disc drives into computer systems for resale. OEMs either
manufacture and assemble computer system components into computer systems;
purchase components to build their systems; or purchase complete computer
systems and integrate the hard disc drives and other hardware and software.
Distributors typically resell Seagate disc drives to small OEMs, dealers and
other resellers. Certain resellers to which the Company directly sells its
products also resell Seagate drives as part of enhanced packages (e.g., an
add-on kit for a computer or as part of their own computers). Shipments to OEMs
were 72%, 68% and 70% of net sales in fiscal 1995, 1994 and 1993, respectively.
No customer accounted
6
<PAGE>
for 10% or more of consolidated net sales in 1995 and 1994. During fiscal 1993
sales to Sun Microsystems, Inc. accounted for approximately 11% of the Company's
consolidated net sales. No other customer accounted for 10% or more of
consolidated net sales in 1993.
OEMS -- OEM customers typically enter into purchase agreements with the
Company. These agreements provide for pricing, volume discounts, order lead
times, product support obligations and other terms and conditions, usually for
periods of 12 to 24 months, although product support obligations generally
extend substantially beyond this period. These master agreements typically do
not commit the customer to buy any minimum quantity of products. Deliveries are
scheduled only after receipt of purchase orders. In addition, with limited lead
time, customers may cancel or defer most purchase orders without significant
penalty. Anticipated orders from many of Seagate's customers have in the past
failed to materialize or OEM delivery schedules have been deferred as a result
of changes in their business needs. Such order fluctuations and deferrals have
had a material adverse effect on the Company's operations in the past, and there
can be no assurance that the Company will not experience such effects in the
future.
DISTRIBUTORS -- The Company's distributors, located throughout the world,
generally enter into non-exclusive agreements for the redistribution of the
Company's products. Distributors typically furnish the Company with a
non-binding indication of their near-term requirements. Product deliveries are
generally scheduled based on a weekly confirmation by the distributor of its
requirements for that week. The agreements typically provide the distributors
with price protection with respect to their inventory of Seagate drives at the
time of a reduction by Seagate in its selling price for the drives, and also
provide limited rights to return the product.
SERVICE AND WARRANTY -- Seagate warrants its products against defects in
design, materials and workmanship by the Company generally for three to five
years depending upon the capacity category of the disc drive, with the higher
capacity products being warranted for the longer periods. Warranty periods for
disc drives have been increasing and may continue to increase. The Company's
products are refurbished or repaired at facilities located in the United States,
Singapore and Thailand.
SALES OFFICES -- The Company maintains sales offices throughout the United
States and in Australia, England, France, Hong Kong, Ireland, Italy, Japan,
Singapore, South Korea, Taiwan, Thailand, Germany and Sweden. Foreign sales are
subject to certain controls and restrictions, including, in the case of certain
countries, approval by the office of Export Administration of the United States
Department of Commerce.
BACKLOG
In view of customers' rights to cancel or defer orders with little or no
penalty, the Company believes backlog in the disc drive industry can be
misleading.
The Company's backlog includes only those orders for which a delivery
schedule has been specified by the customer. Substantially all orders shown as
backlog at June 30, 1995 were scheduled for delivery within six months. Because
many customers place large orders for delivery throughout the year, and because
of the possibility of customer cancellation of orders or changes in delivery
schedules, the Company's backlog as of any particular date is not indicative of
the Company's potential sales for any succeeding fiscal period. The Company's
order backlog at June 30, 1995 was approximately $1,103,000,000 compared with
approximately $739,000,000 at July 1, 1994.
MANUFACTURING
The Company's business objectives require it to establish manufacturing
capacity in anticipation of market demand. The key elements of the Company's
manufacturing strategy are: high-volume, low-cost assembly and test; vertical
integration of selected components; and key vendor relationships. The highly
competitive disc drive industry requires that the Company manufacture
significant volumes of high-quality drives at low unit cost. To do this, the
Company must achieve high manufacturing yields and obtain uninterrupted access
to high-quality components in required volumes at competitive prices.
7
<PAGE>
The Company is currently in the early stages of automating certain of its
manufacturing processes. In the coming year it expects several such processes to
become substantially automated. The Company believes its competitors' level of
automation is significantly greater than its own.
Manufacturing of the Company's rigid disc drives is a complex process,
requiring a "clean room" environment, the assembly of precision components
within narrow tolerances and extensive testing to ensure reliability. The first
step in the manufacturing of a rigid disc drive is the assembly of the actuator
mechanism, heads, discs, and spindle motor in a housing to form the head-disc
assembly (the "HDA"). The assembly of the HDA involves a combination of manual
and semiautomated processes. After the HDA is assembled and servo writing has
been completed, automated testing equipment subjects the HDA to several tests
aimed at ensuring that it meets all of the Company's specifications for quality
and performance. Upon completion of assembly and testing, circuit boards are
added to the HDA and the completed unit is again tested prior to packaging and
shipment. The Company uses statistical process control in an effort to
continually improve its manufacturing processes. Final assembly and test
operations of the Company's disc drives take place primarily at facilities
located in Singapore, Thailand, Minnesota and Oklahoma. The Company has also
announced plans to establish a disc drive manufacturing operation in the
Republic of Ireland that will begin production in mid-October, 1995. Subassembly
and component operations are performed at the Company's facilities in Singapore,
Thailand, Minnesota, California, Malaysia, Scotland, Northern Ireland and
Indonesia. In addition, independent entities manufacture or assemble components
for the Company in the United States, Europe and various Far East countries
including Hong Kong, Japan, Korea, China, the Philippines, Singapore, Taiwan and
Thailand.
The cost, quality and availability of certain components including head,
media, spindle motors, actuator motors, printed circuit boards and custom
semiconductors are critical to the successful production of disc drives. The
Company's design and vertical integration have allowed it to internally
manufacture substantial percentages of its critical components. The Company's
objectives of vertical integration are to maintain control over component
technology, quality and availability, and to reduce costs. The Company believes
that its strategy of vertical integration gives it an advantage over other disc
drive manufacturers. However, this strategy entails a high level of fixed costs
and requires a high volume of production to be successful. During periods of
decreased production, these high fixed costs in the past have had and in the
future could have a material adverse effect on the Company's results of
operations.
Thin-film sliders are fabricated and assembled into head gimbal assemblies
at the Company's facilities. Spindle motors are sourced principally from outside
vendors in the Far East, although the Company is increasing its internal motor
manufacturing capabilities. Actuator motors are sourced both from outside
vendors and internally. The vast majority of the high-volume surface-mount
printed circuit assemblies are assembled internally. The Company evaluates the
need for second sources on a case-by-case basis and, where it is deemed
desirable and feasible to do so, secures multiple sources for components. The
Company has experienced production delays when unable to obtain sufficient
quantities of certain components or assembly capacity. The Company maintains
component inventory levels adequate for its short-term needs. However, an
inability to obtain essential components, if prolonged, would adversely affect
the Company's business.
Because of the significant fixed costs associated with the production of its
products and components and the industry's history of declining prices, the
Company must continue to produce and sell its disc drives in significant volume,
continue to lower manufacturing costs and carefully monitor inventory levels.
Toward these ends, the Company continually evaluates its components and
manufacturing processes as well as the desirability of transferring volume
production of disc drives and related components between facilities, including
transfer overseas to countries where labor costs and other manufacturing costs
are significantly lower than in the U.S., principally Singapore, Thailand,
Malaysia and China. In addition, the Company is considering expanding its
manufacturing operations into other third world countries. Frequently, transfer
of production of a product to a different facility requires qualification of
such new facility by certain of the Company's OEM customers. There can be
8
<PAGE>
no certainty that such changes and transfers will be implemented on a
cost-effective basis without delays or disruption in the Company's production
and without adversely affecting the Company's results of operations.
Although offshore operations are subject to certain inherent risks,
including delays in transportation, changes in governmental policies, tariffs,
import/export regulations, and fluctuations in currency exchange rates in
addition to geographic limitations on management controls and reporting, the
Company has not had any significant adverse experience in this regard and has
significant experience in the offshore production of its products. Certain of
the Far East countries in which the Company operates have experienced political
unrest and the Company's operations have been adversely affected for short
periods of time.
PRODUCT DEVELOPMENT
The Company's strategy for new products emphasizes developing and
introducing on a timely basis products that offer functionality and performance
equal to or better than competitive product offerings. The rigid disc drive
industry is characterized by ongoing, rapid technological change, relatively
short product life cycles and rapidly changing user needs. The Company believes
that its future success will depend upon its ability to develop, manufacture and
market products which meet changing user needs, and which successfully
anticipate or respond to changes in technology and standards on a cost-effective
and timely basis. Accordingly, the Company is committed to the development of
new component technologies, new products, and the continuing evaluation of
alternative technologies. The Company is presently concentrating its product
development efforts on new disc drives and improved disc drive components as
described below.
The Company develops new disc drive products and the processes to produce
them at four locations: Scotts Valley and Simi Valley, California; Oklahoma
City, Oklahoma; and Bloomington, Minnesota. Generally speaking, Scotts Valley
and Simi Valley are responsible for development of 3.5 inch, 2.5 inch and
smaller form factor drives intended for desktop, laptop, notebook and
sub-notebook personal computer systems; Oklahoma City is responsible for
development of 3.5 inch disc drives with capacities and interfaces intended for
use in minicomputers, supermicrocomputers, workstations and file servers; and
Bloomington is responsible for 3.5 inch and 5.25 inch products principally
intended for use in systems ranging from workstations and superminicomputers to
mainframe and supercomputers as well as new markets such as digital video and
video-on-demand.
The Company has focused its components research and development efforts in
four main areas: motors, heads, media and ASICs (application specific integrated
circuits). The major emphasis of this R&D is reduced size and power consumption,
improved performance and reliability, and reduced cost. Disc drive customers
require new products to have greater reliability with ever decreasing defective
parts per million ("DPPMs") and ever increasing mean time between failures
("MTBFs").
The principal areas of research and development relating to motors are
improved bearings, smaller form factors, lower power requirements, quieter
operation, higher reliability, improved magnets and lower cost.
The Company's head research and development efforts are focused on
increasing recording densities, reducing the size and mass of the slider,
developing suspensions and assembly technology for reduced head size, reducing
the cost and increasing the reliability. This research and development includes
substantial effort to develop and manufacture magneto-resistive ("MR") heads and
advanced air bearing sliders for high areal density and small form factor
products. There can be no assurance that the Company's MR head development
effort will be successful and a failure of the Company to successfully
manufacture and market products incorporating MR head technology in a timely
manner could have a material adverse effect on the Company's business and
results of operations.
Media research and development efforts are focused on higher performance
materials for increased areal density and better substrate and surface
topographies for lower flying height applications, improved head/disc separation
margin and increased reliability.
9
<PAGE>
ASIC development has been and will continue to be focused on optimizing the
architecture for system performance, cost and reliability. In addition, the
focus has been and will continue to be on reducing the number of parts, the
amount of power consumption, and the size, and increasing areal densities by use
of advanced signal processing techniques such as PRML (Partial Response Maximum
Likelihood) read/write channels. The Company designs nearly all of its ASICs for
motor and actuator control and manufactures some of these circuits. It designs
many of the other ASICs in the drive such as interface and read/write, and
procures these from third parties.
In addition to developing new products and components, the Company devotes
significant resources to product engineering aimed at improving manufacturing
processes, lowering manufacturing costs and increasing volume production of new
and existing products. Process engineering groups are located with the disc
drive development groups and the reliability engineering groups in locations
listed above; however, most of the Company's volume production is done in
locations remote from these groups and the development of the volume processes
are completed at the volume manufacturing sites.
No assurance can be given that the Company will be able to successfully
complete the design or introduction of new products in a timely manner, that the
Company will be able to manufacture new products in volume with acceptable
manufacturing yields, or successfully market these products, or that these
products will perform to specifications on a long-term basis.
During the fiscal years ended June 30, 1995, July 1, 1994 and July 2, 1993
the Company's product development expenses were $220,024,000, $171,907,000 and
$154,005,000 respectively.
PATENTS AND LICENSES
The Company has been issued over 460 U.S. patents and approximately 370
foreign patents relating to certain of its disc drive components and
manufacturing processes. The Company also has approximately 254 U.S. and 250
foreign patent applications pending. Due to the rapid technological change that
characterizes the rigid disc drive industry, the Company believes that the
improvement of existing products, reliance upon trade secrets and unpatented
proprietary know-how and development of new products are generally more
important than patent protection in establishing and maintaining a competitive
advantage. Nevertheless, the Company believes that patents are of value to its
business and intends to continue its efforts to obtain patents, when available,
in connection with its research and development program. There can be no
assurance that any patents obtained will provide substantial protection or be of
commercial benefit to the Company, or that their validity will not be
challenged.
Because of rapid technological development in the disc drive industry, it is
possible that certain of the Company's products could involve infringement of
existing patents. The rigid disc drive industry has been characterized by
significant litigation relating to patent and other intellectual property
rights. From time to time, the Company receives claims that certain of its
products infringe patents of third parties. Although the Company has been able
to resolve some such claims or potential claims by obtaining licenses or rights
under the patents in question without a material adverse affect on the Company,
other such claims are pending which if resolved unfavorably to the Company could
have a material adverse effect on the Company's business. For a description of
current disputes see the "Litigation" note to the Company's consolidated
financial statements. In addition, the costs of engaging in intellectual
property litigation may be substantial regardless of outcome. The Company has
patent cross licenses with Areal Technology, Hewlett-Packard Company, NEC
Corporation, Toshiba Corporation, Hitachi, Ltd., Quantum Corporation, Western
Digital Corporation, Ceridian Corporation (formerly Control Data Corporation),
IBM, Maxtor Corporation, Read-Rite Corporation, Applied Magnetics Corporation
and Headway Technologies, Inc., and is licensed under certain Unysis, Bull and
Bull SA disc drive and controller patents by virtue of such companies' former
ownership of Magnetic Peripherals Inc., now merged into the Company.
Additionally, the Company has agreements in principle with other major disc
drive companies.
10
<PAGE>
COMPETITION
The rigid disc drive industry is intensely competitive, with manufacturers
competing for a limited number of major customers. The principal competitive
factors in the rigid disc drive market include product quality and reliability,
form factor, storage capacity, price per unit, price per megabyte, product
performance, production volume capability and responsiveness to customers. The
relative importance of these factors varies with different customers and for
different products. The Company believes that it is generally competitive as to
these factors.
The Company has experienced and expects to continue to experience intense
competition from a number of domestic and foreign companies, some of which have
far greater resources than the Company. In addition to independent rigid disc
drive manufacturers, the Company also faces competition from present and
potential customers, including IBM, Hewlett-Packard, Toshiba, NEC and Fujitsu
Limited who continually evaluate whether to manufacture their own drives or
purchase them from outside sources. These manufacturers also sell drives to
third parties which results in direct competition with the Company.
Product life cycles are relatively short in the disc drive industry. The
Company expects its competitors to offer new and existing products at prices
necessary to gain or retain market share and customers. To remain competitive,
the Company believes it will be necessary to continue to reduce its prices and
aggressively enhance its product offerings. In addition to the foregoing, the
ability of the Company to compete successfully will also depend on its ability
to provide timely product introductions and to continue to reduce production
costs. The Company's establishment and ongoing expansion of production
facilities in Singapore, Thailand, Malaysia and China are directed toward such
cost reductions. The Company's four development centers and market-focused
design strategies are structured for time-to-market product introductions.
The introduction of products using alternative technologies could be a
significant source of competition. For example, optical recording and high-speed
semiconductor memory could compete with the Company's products in the future.
Although optical disc technologies are attractive for certain archival and
imaging applications, they have lower performance and are more costly than
magnetic disc drives and the Company does not believe that they will be
competitive with magnetic disc drives in the near future in markets requiring
on-line, random access, non-volatile mass storage. Semiconductor memory (SRAM
and DRAM) is much faster than magnetic disc drives, but currently is volatile
(i.e., subject to loss of data in the event of power failure) and much more
costly. Flash EE prom, a nonvolatile semiconductor memory, is currently much
more costly and, while it has higher read performance than disc drives, it has
lower write performance. Flash EE prom could become competitive in the near
future for applications requiring less storage capacity (i.e., less than 40 MB)
than is required in the Company's more traditional computer related market
place.
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. These sites
were acquired by the Company from Ceridian Corporation ("Ceridian") (formerly
Control Data Corporation) in fiscal 1990. 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 such
sites.
The Company's portion of the estimated cost of investigation and remediation
of known contamination at the sites to be incurred after June 30, 1995 was
approximately $14,900,000. Through June 30, 1995 the Company had recovered
approximately $2,500,000 from Ceridian through its indemnification and cost
sharing agreements with Ceridian and, in addition, expects to recover
approximately $9,800,000 from Ceridian over the next 30 years. After deducting
the expected recoveries from Ceridian, the expected aggregate undiscounted
liability was approximately $5,100,000 at
11
<PAGE>
June 30, 1995 with payments expected to begin in 1999. The total liability for
all sites recorded by the Company after considering the estimated effects of
inflation, reimbursements by Ceridian and discounting was approximately
$3,000,000 at June 30, 1995.
The Company believes that the indemnification and cost-sharing agreements
entered into with Ceridian and the reserves that the Company has established
with respect to its future environmental costs are such that, based on present
information available to it, future environmental costs related to currently
known contamination will not have a material adverse effect on its financial
condition or results of operations.
EMPLOYEES
From July 1, 1994 to June 30, 1995, the number of persons employed worldwide
by the Company increased from approximately 53,000 to approximately 65,000.
Approximately 55,000 of the Company's employees were located in the Company's
Far East operations as of June 30, 1995. In addition, the Company makes use of
supplemental employees, principally in manufacturing, who are hired on an
as-needed basis. Management believes that the future success of the Company will
depend in part on its ability to attract and retain qualified employees at all
levels, of which there can be no assurance. The Company believes that its
employee relations are good.
ITEM 2. PROPERTIES
Seagate's executive offices are located in Scotts Valley, California.
Principal manufacturing facilities are located in Singapore, Thailand,
Minnesota, Oklahoma, California, Malaysia, Scotland and Northern Ireland. A
major portion of the Company's facilities are occupied under leases which expire
at various times through 2005. The following is a summary of square footage
owned or leased by the Company:
<TABLE>
<CAPTION>
FACILITIES (SQUARE FEET)
------------------------------------------------------------------------------------------------------------------------------
MANUFACTURING PRODUCT
LOCATION & WAREHOUSE DEVELOPMENT ADMINISTRATIVE TOTAL
-------------------------------------------------------------------- ------------- ----------- -------------- ---------
<S> <C> <C> <C> <C>
Singapore........................................................... 686,211 14,820 240,334 941,365(1)
Indonesia........................................................... 21,667 -- -- 21,667
China............................................................... 57,684 -- 4,280 61,964
Minnesota........................................................... 465,280 73,498 47,600 586,378(2)
Thailand............................................................ 909,035 -- 170,902 1,079,937(3)
Oklahoma............................................................ 274,501 77,497 93,492 445,490
California --
Scotts Valley..................................................... 218,336 157,378 150,500 526,214(4)
Fremont........................................................... 219,607 10,000 23,050 252,657
Anaheim........................................................... 100,000 -- 20,000 120,000
Simi Valley....................................................... 300 43,898 -- 44,198
Columbus, OH........................................................ 34,914 -- -- 34,914
Malaysia............................................................ 408,809 -- 55,400 464,209(5)
Scotland............................................................ 30,731 3,680 7,790 42,201
Amsterdam........................................................... 32,635 -- 8,828 41,463
Northern Ireland.................................................... 110,000 -- 10,000 120,000
Republic of Ireland................................................. 155,000 -- -- 155,000
Other --
Domestic.......................................................... 35,598 15,600 155,393 206,591(6)
Pacific Rim....................................................... -- -- 31,006 31,006
Europe............................................................ -- -- 37,531 37,531(7)
Canada............................................................ -- -- 25,186 25,186
------------- ----------- -------------- ---------
Total............................................................... 3,760,308 396,371 1,081,292 5,237,971
------------- ----------- -------------- ---------
------------- ----------- -------------- ---------
<FN>
------------------------
(1) Includes approximately 202,800 square feet owned by the Company on leased
land; excludes 1,000,000 square feet under construction.
(2) Excludes approximately 217,800 square feet leased to others.
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
(3) Includes approximately 297,000 square feet owned by the Company on leased
land.
(4) The aggregate of Scotts Valley facilities includes approximately 365,600
square feet owned by the Company. Of this amount approximately 144,200
square feet is on leased land.
(5) Excludes approximately 550,000 square feet under construction.
(6) Excludes approximately 51,800 square feet leased to others and 12,300
square feet unoccupied.
(7) Excludes approximately 130,300 square feet currently unoccupied and 16,000
square feet leased to others.
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The information required by this item is incorporated by reference to pages
30-31 and 33-36 of the Annual Report to Shareholders, filed as Exhibit 13.1
hereto.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The information required by this Item is incorporated by reference to pages
1-2 of the Annual Report to Shareholders, filed as Exhibit 13.1 hereto.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated by reference to pages
1-2 of the Annual Report to Shareholders, filed as Exhibit 13.1 hereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this Item is incorporated by reference to pages
3-11 of the Annual Report to Shareholders, filed as Exhibit 13.1 hereto.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference to pages
1-2 and 12-39 of the Annual Report to Shareholders, filed as Exhibit 13.1
hereto.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
13
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The present directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
DIRECTOR OR
EXECUTIVE
OFFICER
NAME AGE POSITION SINCE
------------------------- --- ------------------------------------------------------------------------------------- -----------
<S> <C> <C> <C>
Alan F. Shugart 64 President, Chief Executive Officer and Chairman of the Board 1979
Bernardo A. Carballo 46 Executive Vice President, Sales, Marketing, Product Line Management and Customer 1991
Service
Brendan C. Hegarty 52 Executive Vice President, Chief Operating Officer, Components 1989
Stephen J. Luczo 38 Executive Vice President, Corporate Development and Chief Operating Officer, Software 1993
Ronald D. Verdoorn 44 Executive Vice President, Chief Operating Officer, Storage Products 1991
Donald L. Waite 62 Executive Vice President, Chief Administrative Officer and Chief Financial Officer 1983
Stephen B. Greenspan 54 Senior Vice President, Quality 1991
Hossein M. Moghadam 51 Senior Vice President and Chief Technical Officer, Data Storage Products 1993
Robert A. Sandie 59 Senior Vice President, Corporate Materials 1991
Gary B. Filler 54 Director 1985
Kenneth Haughton 67 Director 1986
Robert A. Kleist 67 Director 1981
Lawrence Perlman 57 Director 1989
Thomas P. Stafford 64 Director 1988
Laurel L. Wilkening 50 Director 1993
</TABLE>
All directors hold office until the annual meeting of shareholders of the
Company following their election, or until their successors are duly elected and
qualified. Officers are elected annually by the Board of Directors and serve at
the discretion of the Board.
Mr. Shugart was Chairman of the Board and Chief Executive Officer of the
Company from its inception in 1979 until 1991. From 1979 until 1983 he also
served as the Company's President. He now serves as Chairman of the Board,
President and Chief Executive Officer. He was re-appointed Chairman of the Board
in October 1992. Mr. Shugart is also currently a Director of Valence Technology,
Inc.
Mr. Carballo was General Manager, Product Line Management for the Company's
Oklahoma City operations at the time of the Company's acquisition of Imprimis in
1989. In 1990 he was promoted to Vice President, Product Line Management,
Oklahoma City operations, in September 1991 he was promoted to Senior Vice
President, Sales, Marketing and Product Line Management and in March 1995 he was
promoted to Executive Vice President Worldwide Sales, Marketing, Product Line
Management and Customer Service. Prior to joining the Company, Mr. Carballo had
seventeen years with Control Data/Imprimis.
14
<PAGE>
Dr. Hegarty joined Control Data/Imprimis in 1988 as Vice President,
Thin-Film Heads. In October 1989 he was named Seagate's Vice President of
Component Operations in Bloomington, Minnesota, and in August 1990 was promoted
to Senior Vice President and Chief Technical Officer. In March 1995 he was
promoted to Executive Vice President, Chief Operating Officer, Components Group.
From October 1990 to October 1993 Dr. Hegarty was also a Director of the
Company. Prior to joining Control Data/Imprimis, Dr. Hegarty had twenty-one
years with IBM in the U.K., Netherlands and the U.S.
Mr. Luczo joined the Company in October 1993 as Senior Vice President,
Corporate Development. In March 1995 he was promoted to Executive Vice
President, Corporate Development and Chief Operating Officer of the Software
Group. Prior to joining the Company he was Senior Managing Director of the
Global Technology Group of Bear, Stearns & Co. Inc., an investment banking firm,
from September 1993 to October 1993. He served as Co-Head of the Global
Technology Group of Bear, Stearns & Co. Inc. from February 1992 to October 1993.
Prior to joining Bear, Stearns & Co. Inc., Mr. Luczo was with Salomon Brothers
Inc., an investment banking firm, from 1984 to February 1992, most recently as
Vice President and Head of West Coast Technology.
Mr. Verdoorn joined the Company in 1983. From 1987 to 1991 he was Vice
President, Far East Manufacturing and in November 1991 he was promoted to Senior
Vice President, Manufacturing Operations. In March 1995 he was promoted to
Executive Vice President, Chief Operating Officer of the Storage Products Group.
Mr. Waite joined the Company in 1983 as Vice President of Finance and Chief
Financial Officer, and was promoted to Senior Vice President, Finance in 1984.
In March 1995 he was promoted to Executive Vice President, Chief Administrative
Officer and Chief Financial Officer.
Mr. Greenspan joined the Company in September 1987 as Vice President,
Process Development. In 1991 he was made Vice President, Manufacturing
Operations for Singapore and California operations. He was promoted to Senior
Vice President, Quality and Customer Service in November 1991. Prior to joining
the Company, Mr. Greenspan had over twenty years experience in computer-related
industries, including nineteen years with IBM.
Dr. Moghadam was Vice President, Engineering of Control Data/Imprimis from
December 1986 until October 1989 when he became Vice President, Engineering at
Seagate concurrent with the Company's acquisition of Imprimis Technology. Dr.
Moghadam was promoted to Senior Vice President and Chief Technical Officer, Data
Storage Products in August 1993.
Mr. Sandie joined the Company in 1983 as Vice President, Materials. He was
promoted to Senior Vice President, Corporate Materials in November 1991.
Mr. Filler was appointed Senior Vice President and Chief Financial Officer
of Diamond Multimedia Systems, Inc. in January 1995. Diamond Multimedia Systems,
Inc. designs, manufacturers and markets high-performance multimedia solutions.
From February 1994 until June 1994 he served as Executive Vice President and
Chief Financial Officer at ASK Group, Inc. From December 1989 to May 1993 he
served as Chairman of the Board of Directors and Chief Executive Officer of
Burke Industries, a manufacturer of rubber products for military and industrial
usage. Mr. Filler was Chairman of the Board of Seagate from September 1991 until
October 1992. From October 1990 until September 1991 Mr. Filler served as Vice
Chairman of the Board of Directors of the Company.
Dr. Haughton is an engineering consultant. He was a Vice President of
Engineering at DaVinci Graphics, a plotter manufacturer, from May 1990 until
August 1991. Prior to that he was a consultant from May 1989 to May 1990. From
August 1988 to May 1989 Dr. Haughton was Professor of Mechanical Engineering at
Santa Clara University. Dr. Haughton is also a Director of Solectron
Corporation.
Mr. Kleist has been President, Chief Executive Officer and a Director of
Printronix, Inc., a manufacturer of computer printers, since 1974.
15
<PAGE>
Mr. Perlman presently holds the position of Chairman of the Board of
Directors and Chief Executive Officer of Ceridian Corporation (formerly Control
Data Corporation), an information services and defense electronics company. He
previously held several executive positions at Control Data Corporation
including President and CEO of Imprimis. Prior to Control Data Corporation, he
was in the private practice of law and at Medtronic, where he served as
Executive Vice President for U.S. Pacemaker Operations. He also serves on a
number of other corporate boards including Inter-Regional Financial Group, Inc.,
Computer Network Technology Corporation , Valspar Corporation, Bio-Vascular,
Inc. and Kmart Corporation.
General Stafford, a former astronaut, has been Vice Chairman of Stafford,
Burke and Hecker, Inc., a consulting firm based in Alexandria, Virginia since
1982. He also serves as a Director for the following companies: Allied-Signal
Corporation, Pacific Scientific, Inc., Tremont, Inc., CMI, Inc., Fisher
Scientific International, Inc., Wackenhut, Inc. and Wheelabrator Technologies,
Inc.
Dr. Wilkening has served as Chancellor of the University of California,
Irvine since July 1, 1993. From September 1988 to June 30, 1993 she was Provost
and Vice President of Academic Affairs at the University of Washington. From
1991 to 1993 Dr. Wilkening also served as Chairwoman of the Space Policy
Advisory Board of the National Space Council.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
Company's Proxy Statement to be filed with the Commission within 120 days of the
end of the Registrant's fiscal year pursuant to General Instruction G(3) to Form
10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
Company's Proxy Statement to be filed with the Commission within 120 days of the
end of the Registrant's fiscal year pursuant to General Instruction G(3) to Form
10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
Company's Proxy Statement to be filed with the Commission within 120 days of the
end of the Registrant's fiscal year pursuant to General Instruction G(3) to Form
10-K.
16
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Report:
1. FINANCIAL STATEMENTS. The following Consolidated Financial Statements
of Seagate Technology, Inc. and subsidiaries and Report of Independent
Auditors are incorporated by reference in Item 8:
Report of Independent Auditors
Consolidated Balance Sheets -- June 30, 1995 and July 1, 1994.
Consolidated Statements of Income -- Years Ended June 30, 1995, July 1,
1994 and July 2, 1993.
Consolidated Statements of Shareholders' Equity -- Years Ended June 30,
1995, July 1, 1994 and July 2, 1993.
Consolidated Statements of Cash Flows -- Years Ended June 30, 1995, July
1, 1994 and July 2, 1993.
Notes to Consolidated Financial Statements.
Separate financial statements of Seagate Technology, Inc. have not been
presented because it is primarily an operating company and its subsidiaries
included in the Consolidated Financial Statements are wholly-owned.
2. FINANCIAL STATEMENT SCHEDULE. The following consolidated financial
statement schedule of Seagate Technology, Inc. and subsidiaries is filed
as part of this Report and should be read in conjunction with the
Consolidated Financial Statements of Seagate Technology, Inc. and
subsidiaries:
<TABLE>
<CAPTION>
SCHEDULE PAGE
-------- ----
<S> <C><C> <C>
II -- Valuation and Qualifying Accounts............................................................................. 21
</TABLE>
Schedules not listed above have been omitted because they are not applicable
or are not required or the information required to be set forth therein is
included in the Consolidated Financial Statements or notes thereto.
3. EXHIBITS: NOTES:
<TABLE>
<C> <S> <C>
3.1 Certificate of Incorporation of Registrant, as amended. (A)
3.2 By-Laws of Registrant, as amended. (B)
4.1 Indenture dated May 6, 1987 between the Registrant and
Chemical Bank. (A)
4.2 Indenture dated as of December 1, 1993 between Registrant
and Chemical Bank. (K)
10.1 1981 Incentive Stock Option Plan and form of Stock Option
Agreement. (C)
10.2 1983 Incentive Stock Option Plan and form of Stock Option
Agreement. (D)
10.3 Seagate Technology Employee Stock Purchase Plan. (C)
10.4 Grenex, Inc. 1984 Stock Option Plan and form of Stock
Agreement. (E)
10.5 Ground and building lease dated March 31, 1983 between the
Registrant and First Scotts Valley, Inc. (D)
</TABLE>
17
<PAGE>
<TABLE>
<C> <S> <C>
10.6 Ground lease dated July 15, 1982 between the Registrant and
First Scotts Valley, Inc. (F)
10.7 Grant Deed dated June 25, 1983 between the Registrant and
Albert L. and Anne Russo. (A)
10.8 Lease Agreement dated May 20, 1985 between Seagate
Singapore, Pte., Ltd. and Jurong Town Corporation, and
related Mortgage Agreement. (G)
10.9 Lease Agreements dated from April 1, 1983 through May 16,
1985 between Seagate Technology Singapore, Pte., Ltd. and
Jurong Town Corporation. (G)
10.10 Lease Agreement dated September 11, 1984 between Seagate
Technology Singapore, Pte., Ltd. and the Science Counsel of
Singapore. (H)
10.11 Lease Agreement dated from August 16, 1985 through June 8,
1988 between Seagate Technology Singapore, Pte., Ltd. and
Jurong Town Corporation. (H)
10.12 Deed of Assignment dated February 18, 1987 between Seagate
Technology Singapore, Pte., Ltd. and the Hong Kong and
Shanghai Banking Corporation. (H)
10.13 Factory Development Master Agreement dated December 14, 1987
and Amendment 1 thereto dated January 21, 1988 between
Seagate Technology (Thailand) Ltd. and Mrs. Curairat
Bonython. (H)
10.14 Master Agreement dated June 10, 1988 between Seagate
Technology (Thailand) Ltd. and Chokchai International Co.,
Ltd. (H)
10.15 Lease Agreement dated July 18, 1987 and Amendment No. 1
thereto dated June 10, 1988 between Seagate Technology
(Thailand) Ltd. and Chokchai International Co., Ltd. (H)
10.16 Industrial Lease dated December 31, 1983 between Mission
Business Company and Grenex, Inc. (G)
10.17 1991 Incentive Stock Option Plan and Form of Option
Agreement, as amended. (L)
10.18 Acquisition Agreement dated as of September 29, 1989 by and
among Seagate Technology, Inc. and Control Data
Corporation, Imprimis Technology Incorporated and Magnetic
Peripherals, Inc. (I)
10.19 Amended and Restated Directors' Option Plan and Form of
Option Agreement. (J)
11.1 Computation of Net Income per Share (see page 22).
13.1 1995 Annual Report to Shareholders.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney (included on page 20).
27 Financial Data Schedule
<FN>
------------------------
(A) Incorporated by reference to exhibits filed in response to Item 16,
"Exhibits," of the Company's Registration Statement on Form S-3 (File No.
33-13430) filed with the Securities and Exchange Commission on April 14,
1987.
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
(B) Incorporated by reference to exhibits filed in response to Item 14 (a),
"Exhibits," of the Company's Form 10-K, as amended, for the year ended June
30, 1990.
(C) Incorporated by reference to exhibits filed in response to Item 30(b),
"Exhibits," of the Company's Registration Statement on Form S-1 and
Amendment No. 1 thereto (File No. 2-73663), as declared effective by the
Securities and Exchange Commission on September 24, 1981.
(D) Incorporated by reference to exhibits filed in response to Item 14(a),
"Exhibits," of the Company's Form 10-K for the year ended June 30, 1983.
(E) Incorporated by reference to exhibits filed in response to Item 20,
"Exhibits," of the Company's Registration Statement on Form S-8/S-3 (file
No. 2-98486) filed with the Securities and Exchange Commission on June 19,
1985.
(F) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
2-78672) filed with the Securities and Exchange Commission on August 3,
1982.
(G) Incorporated by reference to exhibits filed in response to Item 14(a),
"Exhibits," of the Company's 10-K for the year ended June 30, 1985.
(H) Incorporated by reference to exhibits filed in response to Item 14(a),
"Exhibits," of the Company's Form 10-K for the year ended June 30, 1988.
(I) Incorporated by reference to exhibits filed in response to Item 7(c),
"Exhibits," of the Company's Current Report on Form 8-K dated October 2,
1989.
(J) Incorporated by reference to exhibits filed in response to Item 14(a),
"Exhibits," of the Company's Form 10-K for the year ended June 30, 1991.
(K) Incorporated by reference to exhibits filed in response to Item 7(c),
"Exhibits," of the Company's Current Report on Form 8-K dated December 17,
1993.
(L) Incorporated by reference to exhibits filed in response to Item 14(a),
"Exhibits," of the Company's Form 10-K for the year ended July 2, 1993.
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the Company
during the quarter ended June 30, 1995.
</TABLE>
19
<PAGE>
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.
SEAGATE TECHNOLOGY, INC.
By: /s/ ALAN F. SHUGART
-----------------------------------
(ALAN F. SHUGART, CHAIRMAN OF THE
BOARD,
PRESIDENT AND CHIEF EXECUTIVE
OFFICER)
Dated: August 4, 1995
POWER OF ATTORNEY
Know All Men By These Presents, that each person whose signature appears
below constitutes and appoints Alan F. Shugart and Donald L. Waite, jointly and
severally, his or her attorney-in-fact, each with the power of substitution, for
him or her in any and all capacities, to sign any amendments to this Report on
Form 10-K and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
------------------------------------------------------ ------------------------------------ -------------------
<C> <S> <C>
/s/ ALAN F. SHUGART
------------------------------------------- Chairman of the Board, President and August 4, 1995
(Alan F. Shugart) Chief Executive Officer
Executive Vice President, Chief
/s/ DONALD L. WAITE Administrative Officer and Chief
------------------------------------------- Financial Officer (Principal August 4, 1995
(Donald L. Waite) Financial and Accounting Officer)
/s/ GARY B. FILLER
------------------------------------------- Director August 4, 1995
(Gary B. Filler)
/s/ KENNETH HAUGHTON
------------------------------------------- Director August 4, 1995
(Kenneth Haughton)
/s/ ROBERT A. KLEIST
------------------------------------------- Director August 4, 1995
(Robert A. Kleist)
/s/ LAWRENCE PERLMAN
------------------------------------------- Director August 4, 1995
(Lawrence Perlman)
/s/ THOMAS P. STAFFORD
------------------------------------------- Director August 4, 1995
(Thomas P. Stafford)
/s/ LAUREL L. WILKENING
------------------------------------------- Director August 4, 1995
(Laurel L. Wilkening)
</TABLE>
20
<PAGE>
SEAGATE TECHNOLOGY, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
---------------------------------------------------------- ------------ ----------- --------------- ----------- -----------
ADDITIONS
----------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER ACCOUNTS- DEDUCTIONS- END OF
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
---------------------------------------------------------- ------------ ----------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts........................... $ 42,830,000 $12,016,000 $ -- $ 1,447,000(1) $53,399,000
------------ ----------- --------------- ----------- -----------
------------ ----------- --------------- ----------- -----------
YEAR ENDED JULY 1, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts........................... $ 46,514,000 $14,091,000 $ -- $17,775,000(2) $42,830,000
------------ ----------- --------------- ----------- -----------
------------ ----------- --------------- ----------- -----------
YEAR ENDED JULY 2, 1993:
Deducted from asset accounts:
Allowance for doubtful accounts........................... $ 39,866,000 $34,922,000 $ -- $28,274,000(3) $46,514,000
------------ ----------- --------------- ----------- -----------
------------ ----------- --------------- ----------- -----------
<FN>
------------------------
(1) $1,447,000 uncollectible accounts written off, net of recoveries.
(2) $17,775,000 uncollectible accounts written off, net of recoveries.
(3) $25,748,000 uncollectible accounts written off, net of recoveries,
$2,526,000 reclassification to notes receivable.
</TABLE>
21
<PAGE>
SEAGATE TECHNOLOGY, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS NOTES
----------- ---------
<C> <S> <C>
3.1 Certificate of Incorporation of Registrant, as amended. (A)
3.2 By-Laws of Registrant, as amended. (B)
4.1 Indenture dated May 6, 1987 between the Registrant and Chemical Bank. (A)
4.2 Indenture dated as of December 1, 1993 between Registrant and Chemical Bank. (K)
10.1 1981 Incentive Stock Option Plan and form of Stock Option Agreement. (C)
10.2 1983 Incentive Stock Option Plan and form of Stock Option Agreement. (D)
10.3 Seagate Technology Employee Stock Purchase Plan. (C)
10.4 Grenex, Inc. 1984 Stock Option Plan and form of Stock Agreement. (E)
10.5 Ground and building lease dated March 31, 1983 between the Registrant and First Scotts Valley,
Inc. (D)
10.6 Ground lease dated July 15, 1982 between the Registrant and First Scotts Valley, Inc. (F)
10.7 Grant Deed dated June 25, 1983 between the Registrant and Albert L. and Anne Russo. (A)
10.8 Lease Agreement dated May 20, 1985 between Seagate Singapore, Pte., Ltd. and Jurong Town
Corporation, and related Mortgage Agreement. (G)
10.9 Lease Agreements dated from April 1, 1983 through May 16, 1985 between Seagate Technology
Singapore, Pte., Ltd. and Jurong Town Corporation. (G)
10.10 Lease Agreement dated September 11, 1984 between Seagate Technology Singapore, Pte., Ltd. and
the Science Counsel of Singapore. (H)
10.11 Lease Agreement dated from August 16, 1985 through June 8, 1988 between Seagate Technology
Singapore, Pte., Ltd. and Jurong Town Corporation. (H)
10.12 Deed of Assignment dated February 18, 1987 between Seagate Technology Singapore, Pte., Ltd. and
the Hong Kong and Shanghai Banking Corporation. (H)
10.13 Factory Development Master Agreement dated December 14, 1987 and Amendment 1 thereto dated
January 21, 1988 between Seagate Technology (Thailand) Ltd. and Mrs. Curairat Bonython. (H)
10.14 Master Agreement dated June 10, 1988 between Seagate Technology (Thailand) Ltd. and Chokchai
International Co., Ltd. (H)
10.15 Lease Agreement dated July 18, 1987 and Amendment No. 1 thereto dated June 10, 1988 between
Seagate Technology (Thailand) Ltd. and Chokchai International Co., Ltd. (H)
10.16 Industrial Lease dated December 31, 1983 between Mission Business Company and Grenex, Inc. (G)
10.17 1991 Incentive Stock Option Plan and Form of Option Agreement, as amended. (L)
10.18 Acquisition Agreement dated as of September 29, 1989 by and among Seagate Technology, Inc. and
Control Data Corporation, Imprimis Technology Incorporated and Magnetic Peripherals, Inc. (I)
10.19 Amended and Restated Directors' Option Plan and Form of Option Agreement. (J)
11.1 Computation of Net Income per Share (see page 22).
13.1 1995 Annual Report to Shareholders.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
24.1 Power of Attorney (included on page 20).
27 Financial Data Schedule
<FN>
------------------------
(A) Incorporated by reference to exhibits filed in response to Item 16,
"Exhibits," of the Company's Registration Statement on Form S-3 (File No.
33-13430) filed with the Securities and Exchange Commission on April 14,
1987.
(B) Incorporated by reference to exhibits filed in response to Item 14 (a),
"Exhibits," of the Company's Form 10-K, as amended, for the year ended June
30, 1990.
(C) Incorporated by reference to exhibits filed in response to Item 30(b),
"Exhibits," of the Company's Registration Statement on Form S-1 and
Amendment No. 1 thereto (File No. 2-73663), as declared effective by the
Securities and Exchange Commission on September 24, 1981.
(D) Incorporated by reference to exhibits filed in response to Item 14(a),
"Exhibits," of the Company's Form 10-K for the year ended June 30, 1983.
(E) Incorporated by reference to exhibits filed in response to Item 20,
"Exhibits," of the Company's Registration Statement on Form S-8/S-3 (file
No. 2-98486) filed with the Securities and Exchange Commission on June 19,
1985.
(F) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
2-78672) filed with the Securities and Exchange Commission on August 3,
1982.
(G) Incorporated by reference to exhibits filed in response to Item 14(a),
"Exhibits," of the Company's 10-K for the year ended June 30, 1985.
(H) Incorporated by reference to exhibits filed in response to Item 14(a),
"Exhibits," of the Company's Form 10-K for the year ended June 30, 1988.
(I) Incorporated by reference to exhibits filed in response to Item 7(c),
"Exhibits," of the Company's Current Report on Form 8-K dated October 2,
1989.
(J) Incorporated by reference to exhibits filed in response to Item 14(a),
"Exhibits," of the Company's Form 10-K for the year ended June 30, 1991.
(K) Incorporated by reference to exhibits filed in response to Item 7(c),
"Exhibits," of the Company's Current Report on Form 8-K dated December 17,
1993.
(L) Incorporated by reference to exhibits filed in response to Item 14(a),
"Exhibits," of the Company's Form 10-K for the year ended July 2, 1993.
</TABLE>
<PAGE>
EXHIBIT 11.1
SEAGATE TECHNOLOGY, INC.
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------
JUNE 30, JULY 1, JULY 2,
1995 1994 1993
----------- ----------- -----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
PRIMARY
Weighted average number of common shares outstanding during the year................... 71,758 70,629 67,379
Incremental common shares attributable to exercise of outstanding options (assuming
proceeds would be used to purchase treasury stock).................................... 2,081 2,435 2,442
----------- ----------- -----------
Total shares....................................................................... 73,839 73,064 69,821
----------- ----------- -----------
----------- ----------- -----------
Net income:
Income before extraordinary gain..................................................... $ 260,082 $ 225,110 $ 195,434
Extraordinary gain, net of tax effect................................................ -- -- --
----------- ----------- -----------
Net income......................................................................... $ 260,082 $ 225,110 $ 195,434
----------- ----------- -----------
----------- ----------- -----------
Net income per share:
Income before extraordinary gain..................................................... $ 3.52 $ 3.08 $ 2.80
Extraordinary gain, net of tax effect................................................ -- -- --
----------- ----------- -----------
Net income......................................................................... $ 3.52 $ 3.08 $ 2.80
----------- ----------- -----------
----------- ----------- -----------
FULLY DILUTED
Weighted average number of common shares outstanding during the year................... 71,758 70,629 67,379
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................................................... 19,716 14,383 8,886
----------- ----------- -----------
Total shares....................................................................... 91,474 85,012 76,265
----------- ----------- -----------
----------- ----------- -----------
Net income:
Income before extraordinary gain..................................................... $ 260,082 $ 225,110 $ 195,434
Add 6 3/4% convertible subordinated debentures interest, net of income tax effect.... 11,239 11,239 11,419
Add 5% convertible subordinated debentures interest, net of income tax effect........ 8,447 4,592 --
----------- ----------- -----------
Income before extraordinary gain, as adjusted........................................ 279,768 240,941 206,853
Extraordinary gain, net of tax effect................................................ -- -- --
----------- ----------- -----------
Net income, as adjusted............................................................ $ 279,768 $ 240,941 $ 206,853
----------- ----------- -----------
----------- ----------- -----------
Net income per share:
Income before extraordinary gain, as adjusted........................................ $ 3.06 $ 2.83 $ 2.71
Extraordinary gain, net of tax effect, as adjusted................................... -- -- --
----------- ----------- -----------
Net income......................................................................... $ 3.06 $ 2.83 $ 2.71
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
22
<PAGE>
EXHIBIT 13.1
SEAGATE TECHNOLOGY, INC.
ANNUAL REPORT TO SHAREHOLDERS
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30, JULY 1, JULY 2, JUNE 30, JUNE 30,
In thousands except per share data 1995 1994 1993 1992 1991
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $4,539,570 $3,500,103 $3,043,604 $2,875,273 $2,676,980
Gross profit 931,909 704,282 672,928 487,637 484,491
Income from operations 372,622 310,957 269,027 106,046 111,285
Income before extraordinary gain 260,082 225,110 195,434 63,183 62,845
Net income 260,082 225,110 195,434 63,183 67,458
Primary income per share before
extraordinary gain 3.52 3.08 2.80 .92 .95
Primary net income per share 3.52 3.08 2.80 .92 1.02
Fully diluted income per share
before extraordinary gain 3.06 2.83 2.71 .91 .94
Fully diluted net income per share 3.06 2.83 2.71 .91 1.01
Total assets 3,361,262 2,877,530 2,031,193 1,816,604 1,880,060
Long-term debt, less current portion 539,874 549,492 281,276 320,528 393,425
Shareholders' equity $1,541,768 $1,328,399 $1,045,241 $ 862,068 $ 766,340
Number of shares used in per share
computations:
Primary 73,839 73,064 69,821 68,860 66,140
Fully diluted 91,474 85,012 76,265 69,805 66,584
</TABLE>
The 1995 results of operations include a $70,360 write-off of in-process
research and development incurred in connection with the acquisition of
software companies.
<TABLE>
<CAPTION>
QUARTERLY/1995
Unaudited, in thousands except per share data 1ST 2ND 3RD 4TH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 933,146 $1,129,563 $1,184,582 $1,292,279
Gross profit 198,145 226,531 230,917 276,316
Income from operations 47,480 106,542 96,782 121,818
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Net income 22,537 79,269 70,265 88,011
Net income per share:
Primary .30 1.07 .97 1.19
Fully diluted .30 .93 .84 1.02
Price range per share:
Low 20-1/16 21-7/8 23-5/8 27
High $27 $26-3/4 $28-1/4 $42-7/8
</TABLE>
The results for the first, third and fourth quarters include in-process
research and development charges of $43,000, $12,780, and $14,580
respectively, in connection with business acquisitions.
<TABLE>
<CAPTION>
QUARTERLY/1994
UNAUDITED, IN THOUSANDS EXCEPT PER SHARE DATA 1ST 2ND 3RD 4TH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 773,878 $ 815,890 $ 909,270 $1,001,065
Gross profit 139,858 154,731 193,352 216,341
Income from operations 48,485 60,176 94,097 108,199
Net income 36,068 42,742 67,046 79,254
Net income per share:
Primary .51 .59 .91 1.07
Fully diluted .50 .57 .80 .93
Price range per share:
Low 15-3/4 16-7/8 22 19
High $21 $25 $28-3/8 $26-3/4
</TABLE>
STOCK AND DIVIDEND INFORMATION
The Company's common stock trades on the New York Stock Exchange under
the symbol "SEG". Until December 12, 1994 the Company's stock traded on the
Nasdaq National Market under the symbol "SGAT". The price range per share,
reflected in the above tables, is the highest and lowest sale prices for the
Company's stock as reported by the New York Stock Exchange or Nasdaq, as
applicable, during each quarter. The Company's present policy is to retain its
earnings to finance future growth. The Company has never paid cash dividends
and has no present intention to pay cash dividends. At June 30, 1995 there
were approximately 4,552 shareholders of record.
2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the five-year
summary of selected financial data and the Company's consolidated financial
statements and the notes thereto. All references to years represent fiscal
years unless otherwise noted.
BUSINESS The Company designs, manufactures and markets a broad line of
rigid magnetic disc drives and disc drive components for use in computer
systems ranging from notebook computers and desktop personal computers to
workstations and supercomputers as well as in multimedia applications such as
digital video and video-on-demand.
The Company sells its products to original equipment manufacturers for
inclusion in their computer systems or subsystems, and to distributors,
resellers and dealers.
The Company has pursued a strategy of vertical integration and accordingly
designs and manufactures rigid disc drive components including recording
heads, discs, substrates, motors and custom integrated circuits. It also
assembles certain of the key subassemblies for use in its products including
printed circuit board and head stack assemblies.
The Company has also invested in, and continues to investigate
opportunities to invest in software activities. The Company anticipates that
users of computer systems will increasingly rely upon client/server network
computing environments and believes that as this reliance increases, users
will demand software that more efficiently and securely manages and provides
access to data across computer networked environments. As such, the Company
is broadening its core competencies to include software products to meet
these requirements.
OPERATIONS The following table sets forth certain items in the Company's
Consolidated Statements of Income as a percentage of net sales for each of
the three years ended June 30, 1995.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
1995 1994 1993
----------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100% 100% 100%
Cost of sales 79 80 78
--- --- ---
Gross profit 21 20 22
Product development 5 5 5
3
<PAGE>
Marketing and administrative 5 6 7
Amortization of goodwill and other intangibles 1 -- --
In-process research and development 2 -- --
Restructuring costs -- -- 1
--- --- ---
Income from operations 8 9 9
Other income, net 1 -- --
--- --- ---
Income before income taxes 9 9 9
Provision for income taxes (3) (3) (3)
---- ---- ----
Net Income 6% 6% 6%
---- ---- ----
---- ---- ----
</TABLE>
1995 VS 1994 Net sales in 1995 were 30% higher than those reported in
1994. The increase 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
continuing 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 believes this characteristic will
continue.
The increase in gross margin as a percentage of net sales over the prior
year 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 the competitive market conditions described above.
Effective January 1, 1995, the European Union ("EU") established a new
General System of Preferences (GSP). Under this revised code certain products
which had been exempt from customs duties under the previous GSP rules,
including hard disc drives imported into the EU from Singapore, again became
subject to such duties (although at a rate lower than Most Favored Nation
[MFN] duties). In addition, during calendar 1995 Singapore is progressively
losing its status as a beneficiary country under GSP. As a result, hard disc
drives produced in Singapore and imported into the EU will realize no
reduction from full MFN customs duties after December 31, 1995. 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.
4
<PAGE>
Product development expenses increased by $48,117,000 (28%) compared with
1994, primarily due to increases in salaries and related costs, ongoing
product development expenses of the recently acquired businesses, and costs
incurred in connection with joint development agreements with Sony
Corporation, Japan and Headway Technologies, Inc., as well as an overall
increase in the Company's product development efforts.
Marketing and administrative expenses increased by $37,117,000 (18%)
compared with 1994, primarily due to ongoing marketing and administrative
expenses of the Company's recently acquired businesses and increases in
salaries and related costs, advertising and promotion and telephone expenses
partially offset by decreases in the provision for bad debts, legal expenses
and travel and entertainment expenses.
Amortization of goodwill and other intangibles increased by $10,368,000
(81%) compared with 1994, primarily due to additional goodwill and other
intangibles arising from various investments in and acquisitions of
businesses in 1995 (see Acquisitions note to consolidated financial
statements).
The $70,360,000 charge for in-process research and development in 1995
consists of one time write-offs incurred in connection with the acquisitions
of Palindrome Corporation, Network Computing, Inc., Netlabs Inc., Frye
Computer Systems, Inc. and Creative Interaction Technologies, Inc. The
Company intends to continue its expansion into software and other
complementary businesses and is actively pursuing discussions with companies
that fit with its strategy. As a result, the Company expects that it will
continue to incur charges for in-process research and development as it
acquires businesses.
Net other income increased by $26,088,000 compared with 1994, primarily
due to higher interest income from higher levels of average invested cash and
higher interest rates, partially offset by higher interest expense from
higher average debt outstanding.
The provision for income taxes increased from $96,476,000 in 1994 to
$149,257,000 in 1995 primarily due to the increase in pre-tax earnings in
1995 and an increase in the Company's effective tax rate from 30% in 1994 to
36% in 1995. The increase in the effective tax rate was due to the
$70,360,000 write-off of in-process research and development incurred in
connection with the acquisitions of software companies (see Acquisitions note
to consolidated financial statements) that is not deductible for domestic
tax purposes. The Company's Far East manufacturing operations in Singapore,
Thailand and Malaysia operate under various tax holidays which expire in
whole or in part during fiscal years 1997 and 1999. The Company provided
income taxes at the U.S. statutory rate
5
<PAGE>
in 1995 on approximately 59% of earnings from foreign subsidiaries compared
with approximately 61% of such earnings in 1994. A substantial portion of the
earnings from the foreign subsidiaries is free of foreign taxes. The net
impact of these tax holidays was to increase net income by approximately
$46,989,000 ($0.51 per share, fully diluted) in 1995, approximately
$29,624,000 ($0.35 per share, fully diluted) in 1994, and approximately
$28,543,000 ($0.37 per share, fully diluted) in 1993.
The Company's effective tax rate before the write-off of in-process
research and development was 30%. While the Company expects the fiscal year
1996 effective tax rate to approximate 30%, the actual effective tax rate may
be higher than 30% if the Company incurs additional non-deductible charges in
connection with future acquisitions.
OTHER 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. These sites were acquired by the Company from Ceridian
Corporation ("Ceridian") (formerly Control Data Corporation) in fiscal 1990.
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 such sites.
The Company's portion of the estimated cost of investigation and
remediation of known contamination at the sites to be incurred after June
30, 1995 was approximately $14,900,000. Through June 30, 1995 the Company
had recovered approximately $2,500,000 from Ceridian through its
indemnification and cost sharing agreements with Ceridian and, in addition,
expects to recover approximately $9,800,000 from Ceridian over the next 30
years. After deducting the expected recoveries from Ceridian, the expected
aggregate undiscounted liability was approximately $5,100,000 at June 30,
1995 with payments expected to begin in 1999. The total liability for all
sites recorded by the Company after considering the estimated effects of
inflation, reimbursements by Ceridian and discounting was approximately
$3,000,000 at June 30, 1995.
The Company believes that the indemnification and cost-sharing agreements
entered into with Ceridian and the reserves that the Company has established
with respect to its future environmental costs are such that, based on
6
<PAGE>
present information available to it, future environmental costs related to
currently known contamination will not have a material adverse effect on its
financial condition or results of operations.
The effect of inflation on operating results has been insignificant. The
Company believes this is due to the absence of any significant inflation
factors in the industry in which the Company participates.
Gains and losses resulting from translation of foreign financial
statements into U.S. dollars have not had a significant effect on the results
from operations.
The Company may enter into foreign currency forward exchange and option
contracts to manage exposure related to certain foreign currency commitments,
certain foreign currency denominated balance sheet positions and anticipated
foreign currency denominated expenditures. Gains and losses on contracts to
hedge identifiable foreign currency commitments are deferred and accounted
for as part of the related foreign currency transaction. Gains and losses on
all other forward exchange and option contracts are included in income
currently. Transaction gains and losses have not been material.
1994 VS 1993 Net sales in 1994 were 15% higher than those reported in
1993. The increase over 1993 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 continuing decline in the average unit sales prices of
the Company's products as a result of competitive market conditions. Although
price erosion for the Company's lower capacity products slowed considerably
during the last half of 1994, price erosion for the Company's higher capacity
products became more severe during this time period, particularly due to more
aggressive marketing of disc drives into the merchant market channels by
large OEM computer manufacturers.
The decrease in gross margin as a percentage of net sales from the prior
year was primarily due to a decline in the average unit sales prices of the
Company's products as a result of the competitive market conditions described
above, partially offset by a shift in mix to the Company's newer, higher
capacity disc drives, lower unit overhead costs resulting from increased unit
production and reduced material costs.
Product development expenses increased by $17,902,000 (12%) compared with
1993, primarily due to an increased level of new product introductions and
increased salaries and related costs partially offset by decreased material
costs.
7
<PAGE>
Marketing and administrative expenses decreased by $13,377,000 (6%)
compared with 1993. The decrease in expenses from 1993 was primarily due to a
decrease in the provision for bad debts partially offset by net increases in
other expense categories including legal expenses and salaries and related
costs.
Net other income increased by $8,220,000 compared with 1993, primarily due
to higher interest income from higher levels of average invested cash
partially offset by higher interest expense from higher average debt
outstanding.
The provision for income taxes increased from $76,002,000 in 1993 to
$96,476,000 in 1994 primarily due to the increase in pre-tax earnings in 1994
and an increase in the Company's effective tax rate from 28% in 1993 to 30%
in 1994. The Company provided income taxes at the U.S. statutory rate in 1994
on approximately 61% of earnings from foreign subsidiaries compared with
approximately 59% of such earnings in 1993. A substantial portion of the
earnings from the foreign subsidiaries is free of foreign taxes.
Effective July 3, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). As
permitted by SFAS 109, the Company elected not to restate the financial
statements of any prior years. The change had no effect on pretax income from
continuing operations; however, the cumulative effect of the change increased
net income by $3,000,000 or $.04 per share. The change was not material;
therefore, 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 1993, the President signed the Revenue Reconciliation Act of
1993 which, among other things, increased the U.S. statutory rate to 35% from
34% retroactive to January 1, 1993. Net income was decreased and provision
for income taxes was increased by approximately $2,900,000 for the quarter
ended October 1, 1993 to adjust the net deferred tax liabilities for the
cumulative impact of this rate change.
OTHER MATTERS The effect of inflation on operating results has been
insignificant. The Company believes this is due to the absence of any
significant inflation factors in the industry in which the Company
participates.
Gains and losses resulting from translation of foreign financial
statements into U.S. dollars have not had a significant effect on the results
from operations. Transaction gains and losses resulting from hedging
activities have not been material.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES At June 30, 1995, the Company's cash, cash
equivalents and short-term investments totaled $1,246,626,000, a decrease of
$86,916,000 from the prior year-end balances. This decrease was primarily a
result of the Company's additions to property, equipment and leasehold
improvements, its business acquisitions and equity investments and the
repurchase by the Company of 4,457,500 shares of its common stock, largely
offset by cash provided by operating activities and proceeds from the
exercise of stock options and stock sales under the Company's Employee Stock
Purchase Plan. The Company's cash, cash equivalents and short-term
investments are being maintained in short-term liquid investments until
required for other purposes.
In May 1993 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" (SFAS 115), which requires a change in the
method used to account for certain investments. The Company adopted SFAS 115
effective July 2, 1994. The cumulative effect as of July 2, 1994 of the
adoption of SFAS 115 did not have a material effect on the Company's financial
condition or results of operations.
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 being 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 arise. Such
opportunities have thus far included the acquisitions of and investment in,
complementary businesses, products and technologies.
At June 30, 1995, accounts receivable were $567,747,000, an increase of
$175,516,000 from the July 1, 1994 balance. This increase was primarily a
result of the Company's higher sales volume.
As of June 30, 1995, 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 June 30, 1995 although approximately $11 million had been utilized
for letters of credit. Additionally, the Company had approximately $33
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 June 30, 1995,
approximately $3 million had been utilized for bankers' guarantees and
letters of credit. The Company also had approximately $27 million of lines of
credit worldwide which can be used for letters of credit and bankers'
guarantees, but not borrowings. Of the $27 million, approximately $6 million
had been utilized at June 30, 1995.
9
<PAGE>
The Company made investments in property and equipment in 1995 totaling
$364 million. This amount comprised $147 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, $137 million for
manufacturing facilities and equipment for the thin-film head operations in
the U.S., Malaysia and Northern Ireland, $55 million for expansion of the
Company's thin-film media operations in California and $25 million for other
purposes. The Company presently anticipates investments of approximately $950
million in property and equipment in 1996. The Company plans to finance these
investments from existing cash balances and cash flows from operations.
During the year ended June 30, 1995 the Company acquired 4,457,500 shares
of its common stock for approximately $113 million. The repurchase of these
shares was in connection with a stock repurchase program announced in July
1994 in which up to 7,000,000 shares of the Company's common stock may be
acquired in the open market. The purpose of the stock repurchase program is
to enhance shareholder value. The repurchase program also provides shares to
be issued under the Company's employee stock plans and thereby reduces
dilution from such plans. The Company is uncertain as to whether any further
repurchases of its shares will be made in the foreseeable future.
The Company anticipates that users of computer systems will increasingly
rely upon client/server network computing environments and believes that as
this reliance increases, users will demand software that more efficiently and
securely manages data across computer networked environments. As such, the
Company is broadening its core competencies to include software products that
meet these requirements. During the year ended June 30, 1995, the Company
acquired Palindrome Corporation, a storage management software company, and
Network Computing, Inc., NetLabs Inc., Frye Computer Systems, Inc., and
Creative Interaction Technologies, Inc., all network management software
companies.
The Company is also pursuing a strategy to establish itself as a leading
supplier of selected magnetic recording components, including thin-film
heads, to other manufacturers. In line with this strategy, the Company,
during the year ended June 30, 1995, acquired Applied Magnetics Corporation's
tape head subsidiary, a manufacturer of magnetic recording tape heads for
digital data storage.
The total cost of all businesses acquired during the year ended June 30,
1995, including acquisition costs, was $142,052,000 net of cash acquired. The
Company intends to continue its expansion into software and other
10
<PAGE>
complementary businesses and is actively pursuing discussions with companies
that fit with its strategy. The Company plans to finance this expansion
primarily through cash flows from operations and existing cash balances.
However, it is also possible that the Company may utilize funds raised
through equity or debt financing.
The Company believes that its cash balances together with cash flows from
operations and its borrowing capacity will be sufficient to meet its working
capital needs for the foreseeable future.
11
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, JULY 1,
IN THOUSANDS EXCEPT SHARE DATA 1995 1994
----------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 702,194 $ 804,717
Short-term investments 544,432 528,825
Accounts receivable 567,747 392,231
Inventories 395,838 342,537
Deferred income taxes 127,769 95,784
Other current assets 106,906 82,351
----------- ----------
Total Current Assets 2,444,886 2,246,445
----------- ----------
Property, equipment and leasehold improvements, net 615,251 415,038
Goodwill and other intangibles, net 189,328 126,395
Other assets 111,797 89,652
----------- ----------
Total Assets $3,361,262 $2,877,530
----------- ----------
----------- ----------
LIABILITIES
Accounts payable $ 460,213 $ 363,709
Accrued employee compensation 112,988 83,843
Accrued expenses 251,696 190,377
Accrued income taxes 74,288 64,687
Current portion of long-term debt 10,561 168
----------- ----------
Total Current Liabilities 909,746 702,784
----------- ----------
Deferred income taxes 244,731 218,801
Other liabilities 125,143 78,054
Long-term debt, less current portion 539,874 549,492
----------- ----------
Total Liabilities 1,819,494 1,549,131
----------- ----------
Commitments and Contingencies
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value--1,000,000 shares
authorized; none issued or outstanding -- --
Common stock, $.01 par value -- 200,000,000 shares authorized;
shares issued -- 72,846,505 in 1995 and
72,832,351 in 1994 729 728
Additional paid-in capital 393,849 373,296
Retained earnings 1,171,067 955,419
Treasury common stock at cost, 856,234 shares in 1995 (22,839) --
Foreign currency translation adjustment (1,038) (1,044)
----------- ----------
Total Shareholders' Equity 1,541,768 1,328,399
----------- ----------
Total Liabilities and Shareholders' Equity $3,361,262 $2,877,530
----------- ----------
----------- ----------
<FN>
See notes to consolidated financial statements
</TABLE>
12
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
JUNE 30, JULY 1, JULY 2,
FOR THE YEARS ENDED, IN THOUSANDS EXCEPT PER SHARE DATA 1995 1994 1993
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $4,539,570 $3,500,103 $3,043,604
Cost of sales 3,607,661 2,795,821 2,370,676
Product development 220,024 171,907 154,005
Marketing and administrative 245,811 208,694 222,071
Amortization of goodwill and other intangibles 23,092 12,724 12,825
In-process research and development 70,360 -- --
Restructuring costs -- -- 15,000
---------- ---------- ----------
Total Operating Expenses 4,166,948 3,189,146 2,774,577
---------- ---------- ----------
Income from Operations 372,622 310,957 269,027
Interest income 65,560 37,191 23,659
Interest expense (32,966) (26,339) (23,511)
Other 4,123 (223) 2,261
---------- ---------- ----------
Other Income, net 36,717 10,629 2,409
Income before income taxes 409,339 321,586 271,436
Provision for income taxes (149,257) (96,476) (76,002)
---------- ---------- ----------
Net Income $ 260,082 $ 225,110 $ 195,434
---------- ---------- ----------
---------- ---------- ----------
Net Income per Share:
Primary $ 3.52 $ 3.08 $ 2.80
Fully diluted 3.06 2.83 2.71
Number of shares used in per share computations:
Primary 73,839 73,064 69,821
Fully Diluted 91,474 85,012 76,265
<FN>
See notes to consolidated financial statements
</TABLE>
13
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
JUNE 30, JULY 1, JULY 2,
FOR THE YEARS ENDED, IN THOUSANDS 1995 1994 1993
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $260,082 $225,110 $195,434
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 215,358 173,998 188,734
Deferred income taxes (18,259) 33,308 25,566
In-process research and development 70,360 -- --
Other 585 2,607 9,027
Changes in operating assets and liabilities:
Accounts receivable (168,954) (34,550) 43,767
Inventories (90,816) 37,542 (114,003)
Accounts payable 87,213 109,411 11,368
Accrued income taxes 30,154 31,084 21,202
Other assets and liabilities 120,993 41,181 7,635
--------- --------- --------
Net cash provided by operating activities 506,716 619,691 388,730
INVESTING ACTIVITIES
Acquisition of property, equipment and
leasehold improvements, net (353,431) (197,684) (173,570)
Purchases of short-term investments (1,292,697) (870,867) (335,566)
Maturities and sales of short-term investments 1,279,475 541,782 203,414
Acquisitions of businesses, net of cash acquired (142,052) -- --
Equity Investments (29,811) -- --
Other 1,296 (17,619) (32,550)
--------- --------- --------
Net cash used in investing activities (537,220) (544,388) (338,272)
FINANCING ACTIVITIES
Issuance of long-term debt -- 270,750 --
Repayment of long-term debt (1,466) (3,931) (40,204)
Sale of common stock 45,124 37,836 20,153
Purchase of treasury stock (113,409) -- (36,602)
--------- --------- --------
Net cash provided by (used in) financing activities (69,751) 304,655 (56,653)
Effect of exchange rate changes on
cash and cash equivalents (2,268) (1,335) (7)
--------- --------- --------
Increase (decrease) in cash and cash equivalents (102,523) 378,623 (6,202)
Cash and cash equivalents at the beginning of the year 804,717 426,094 432,296
--------- --------- --------
Cash and cash equivalents at the end of the year $702,194 $804,717 $426,094
--------- --------- --------
--------- --------- --------
<FN>
See notes to consolidated financial statements
</TABLE>
14
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOREIGN
JUNE 30, 1995, JULY 1, COMMON STOCK ADDITIONAL TREASURY CURRENCY
1994 AND JULY 2, -------------- PAID-IN COMMON DEFERRED TRANSLATION RETAINED
1993, IN THOUSANDS SHARES AMOUNT CAPITAL STOCK COMPENSATION ADJUSTMENT EARNINGS TOTAL
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1992 68,288 $682 $301,894 $(793) $(2,303) $1,316 $561,272 $862,068
Sale of stock 2,372 24 20,129 20,153
Purchase of treasury
stock at cost (36,602) (36,602)
Retirement of
treasury stock (2,505) (25) (10,576) 37,395 (26,794) ---
Amortization of deferred
compensation 1,843 1,843
Income tax benefit from
stock options exercised 4,122 4,122
Foreign currency
translation adjustment (1,777) (1,777)
Net Income 195,434 195,434
------- ----- --------- --------- ---------- -------- ---------- ----------
Balance at July 2, 1993 68,155 681 315,569 -- (460) (461) 729,912 1,045,241
Sale of stock 3,940 40 37,796 37,836
Amortization of deferred
compensation 460 460
Income tax benefits, primarily
from stock options exercised 19,938 19,938
Merger with Crystal
Computer Services, Inc. 737 7 (7) 397 397
Foreign currency
translation adjustment (583) (583)
Net Income 225,110 225,110
------- ----- --------- --------- ---------- -------- ---------- ----------
Balance at July 1, 1994 72,832 728 373,296 -- -- (1,044) 955,419 1,328,399
Sale of stock 15 1 1
Purchase of treasury
stock at cost (113,409) (113,409)
Issuance of treasury stock 90,570 (45,447) 45,123
Income tax benefit
from stock options exercised 20,553 20,553
Foreign currency
translation adjustment 6 6
Unrealized gain on
marketable securities 1,013 1,013
Net Income 260,082 260,082
------- ----- --------- --------- ---------- -------- ---------- ----------
Balance at June 30, 1995 72,847 $729 $393,849 $(22,839) $ -- $(1,038) $1,171,067 $1,541,768
------- ----- --------- --------- ---------- -------- ---------- ----------
------- ----- --------- --------- ---------- -------- ---------- ----------
<FN>
See notes to consolidated financial statements
</TABLE>
15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries after eliminations.
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
1995 ended on June 30, 1995, fiscal 1994 ended on July 1, 1994 and
fiscal 1993 ended on July 2, 1993. All fiscal years comprised 52 weeks.
All references to years in these notes to consolidated financial statements
represent fiscal years unless otherwise noted.
FOREIGN CURRENCY TRANSLATION The U.S. dollar is the functional currency
for most of the Company's foreign operations. Gains and losses on the
translation into U.S. dollars of amounts denominated in foreign currencies
are included in net income for those operations whose functional currency is
the U.S. dollar and as a separate component of shareholders' equity for those
operations whose functional currency is the local currency.
The Company may enter into foreign currency forward exchange and option
contracts to manage exposure related to certain foreign currency commitments,
certain foreign currency denominated balance sheet positions and anticipated
foreign currency denominated expenditures. Gains and losses on contracts to
hedge identifiable foreign currency commitments are deferred and accounted
for as part of the related foreign currency transaction. Gains and losses on
all other forward exchange and option contracts are included in income
currently. Transaction gains and losses have not been material.
REVENUE RECOGNITION AND PRODUCT WARRANTY Revenue from sales of products is
generally recognized upon shipment to customers. The Company warrants its
products against defects in design, materials and workmanship generally for
three to five years depending upon the capacity category of the disc drive,
with the higher capacity products being warranted for the longer periods. A
provision for estimated future costs relating to warranty expense is recorded
when products are shipped.
INVENTORY Inventories are valued at the lower of standard cost (which
approximates actual cost using the first-in, first-out method) or market.
PROPERTY, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS Land, equipment, buildings
and leasehold improvements are stated at cost. Equipment and buildings are
depreciated using the straight-line method over the
16
<PAGE>
estimated useful lives of the assets. Leasehold improvements are amortized
using the straight-line method over the shorter of the estimated life of the
asset or the remaining term of the lease.
INCOME TAXES The Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109), effective
July 3, 1993. 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. In
1993, income tax expense was determined using Accounting Principles Board
Opinion No. 11 (APB 11).
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 year. Common stock equivalents consist of stock
options. Fully diluted net income per share further assumes the conversion of
the Company's 5% and 6-3/4% convertible subordinated debentures for the
period they were outstanding.
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS The Company considers
all highly liquid investments with a remaining maturity of 90 days or less at
the time of purchase to be cash equivalents. Cash equivalents are carried at
cost which approximates fair value. The Company's short-term investments
comprise readily marketable debt securities with remaining maturities of more
than 90 days at the time of purchase. Where the remaining maturity is more
than one year the securities are classified as short-term investments as the
Company's intention is to convert them into cash within one year.
Effective July 2, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". In accordance with the Statement, prior period
financial statements have not been restated to reflect the change in
accounting principle. The cumulative effect as of July 2, 1994 of the
adoption of SFAS No. 115 did not have a material effect on the Company's
financial condition or results of operations.
The Company has classified its entire investment portfolio as
available-for-sale. Available-for-sale securities are stated at fair value
with unrealized gains and losses included in shareholders' equity. The
amortized cost of debt securities is adjusted for amortization of premiums
and accretion of discounts to maturity. Such amortization is included in
interest income. Realized gains and losses are included in other income
(expense). The cost of securities sold is based on the specific
identification method.
17
<PAGE>
CONCENTRATION OF CREDIT RISK The Company designs, manufactures and markets
a line of rigid magnetic disc drives for sale throughout the world to
original equipment manufacturers, distributors, resellers and dealers.
Financial instruments which potentially subject the Company to concentrations
of credit risk are primarily accounts receivable, cash equivalents and
short-term investments. The Company performs ongoing credit evaluations of
its customers' financial condition and, generally, requires no collateral
from its customers. The allowance for non-collection of accounts receivable
is based upon the expected collectibility of all accounts receivable. The
Company places its cash equivalents and short-term investments in investment
grade, short-term debt instruments and limits the amount of credit exposure
to any one commercial issuer.
GOODWILL AND OTHER INTANGIBLES Goodwill represents the excess of the
purchase price of acquired companies over the estimated fair value of the
tangible and intangible net assets acquired. Goodwill and other intangibles
are being amortized on a straight-line basis over periods ranging from eight
months to fifteen years. Accumulated amortization was $82,265,000 and
$59,421,000 as of June 30, 1995 and July 1, 1994, respectively.
FINANCIAL INSTRUMENTS
The following is a summary of available-for-sale securities at June 30,
1995:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
Cost Gain Loss Fair Value
In thousands
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Corporate Bonds $374,999 $523 $(58) $375,464
U.S. Government Obligations 201,482 615 (116) 201,981
Commercial Paper 218,734 45 (10) 218,769
Money Market Instruments 112,151 515 -- 112,666
Municipal Bonds 72,200 46 -- 72,246
Taxable Auction Rate Preferred Stock 108,099 -- (546) 107,553
---------- ------- ----- ----------
Total $1,087,665 $1,744 $(730) $1,088,679
---------- ------- ----- ----------
---------- ------- ----- ----------
Included in short-term investments $544,432
Included in cash and cash equivalents 544,247
----------
Total $1,088,679
----------
----------
</TABLE>
18
<PAGE>
The gross realized gains and losses on the sale of available-for-sale
securities were immaterial for the year ended June 30, 1995.
The fair value of the Company's investment in debt securities at June 30,
1995, by contractual maturity, is as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Due in less than 1 year $680,214
Due in 1 to 2-1/2 years 188,246
--------
Total $868,460
--------
--------
</TABLE>
FAIR VALUE DISCLOSURES The carrying value of cash and cash equivalents
approximates fair value. The fair values of short-term investments,
convertible subordinated debentures (See Long-Term Debt and Lines of Credit
footnote) and foreign currency forward exchange and option contracts are
estimated based on quoted market prices. The fair value of the Company's 7.7%
note payable approximated its carrying value.
The carrying values and fair values of the Company's financial instruments
are as follows:
<TABLE>
<CAPTION>
In thousands June 30, 1995 July 1, 1994
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Carrying Estimated Carrying Estimated
amount fair value amount fair value
-----------------------------------------------------------------------------------------------------------
Cash and cash equivalents $702,194 $702,194 $804,717 $804,717
Short-term investments 544,432 544,432 528,825 528,825
5% convertible subordinated debentures 270,750 422,370 270,750 249,090
6 3/4% convertible subordinated debentures 266,838 280,180 266,838 224,811
7.7% note payable 10,000 10,000 10,000 10,000
Foreign currency forward exchange and option contracts -- (4,142) -- (946)
</TABLE>
DERIVATIVE FINANCIAL INSTRUMENTS The Company may enter into foreign
currency forward exchange and option contracts to manage exposure related to
certain foreign currency commitments, certain foreign currency denominated
balance sheet positions and anticipated foreign currency denominated
expenditures. The Company does not enter into derivative financial
instruments for trading purposes. At June 30, 1995,
19
<PAGE>
the Company had forward exchange contracts totaling $114,000,000 maturing
over the next twelve months for the purchase of Singapore dollars in support
of the expansion and modernization of its Singapore facility. In addition, at
June 30, 1995, the Company had approximately $60,000,000 of forward contracts
for the purchase of Malaysian Ringets, $56,000,000 of forward contracts for
the purchase of Singapore dollars, and had written option contracts amounting
to $140,000,000 for the purchase of Singapore dollars, all to be utilized for
ongoing operating requirements. The Malaysian forward contracts mature over
the next six months, the Singapore forward contracts mature over the next
three months, and the written option contracts for Singapore dollars mature
over the next fifteen months. The unrealized deferred loss on the Company's
foreign exchange contracts as of June 30, 1995, was not material.
While the contract or notional amounts of the Company's forward exchange
and option contracts provide one measure of the volume of these transactions,
they do not represent the amount of the Company's exposure to credit risk.
The amounts potentially subject to credit risk (arising from the possible
inability of counterparties to meet the terms of their contracts) are generally
limited to the amounts, if any, by which the counterparties' obligations exceed
the obligations of the Company. The Company controls credit risk through credit
approvals, limits and monitoring procedures. Credit rating criteria for
off-balance-sheet transactions are similar to those for investments.
ACCOUNTS RECEIVABLE
Accounts receivable are summarized below:
<TABLE>
<CAPTION>
In thousands 1995 1994
-------------------------------------------------------------------------
<S> <C> <C>
Accounts receivable $621,146 $435,061
Less allowance for non-collection 53,399 42,830
-------- --------
$567,747 $392,231
-------- ---------
-------- ---------
</TABLE>
20
<PAGE>
INVENTORIES
Inventories are summarized below:
<TABLE>
<CAPTION>
In thousands 1995 1994
------------------------------------------------------------------------------
<S> <C> <C>
Components $203,036 $188,477
Work-in-process 65,124 56,735
Finished goods 127,678 97,325
-------- --------
$395,838 $342,537
-------- --------
-------- --------
</TABLE>
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements consisted of the following:
<TABLE>
<CAPTION>
In thousands 1995 1994
-----------------------------------------------------------------------------------------
<S> <C> <C>
Land $9,148 $8,278
Equipment 956,808 742,215
Building and Leasehold Improvements 235,673 187,155
Construction in progress 100,389 33,205
---------- ---------
1,302,018 970,853
Less accumulated depreciation and amortization 686,767 555,815
---------- ---------
$615,251 $415,038
---------- ---------
---------- ---------
</TABLE>
Equipment and leasehold improvements include assets under capitalized
leases. Lease amortization is included in depreciation expense.
In 1993, the Company reduced the number of years over which certain
equipment is depreciated, resulting in additional depreciation expense of
approximately $15,000,000.
Depreciation expense was $163,771,000, $138,208,000 and $155,018,000 in
1995, 1994 and 1993, respectively.
ACCRUED WARRANTY
Accrued warranty of $103,246,000 and $66,105,000 is included in accrued
expenses in 1995 and 1994, respectively, and accrued warranty of $116,833,000
and $72,515,000 is included in other liabilities in 1995 and 1994,
respectively.
21
<PAGE>
LONG-TERM DEBT AND LINES OF CREDIT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
In thousands 1995 1994
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
6-3/4% convertible subordinated debentures, due 2012 $266,838 $266,838
5% convertible subordinated debentures, due 2003 270,750 270,750
7.7% note payable to Ceridian Corporation, due October 1995 10,000 10,000
Capitalized lease obligations with interest at 14% to 19.25% collateralized
by certain manufacturing equipment and buildings 2,847 2,072
-------- --------
550,435 549,660
Less: Current portion 10,561 168
-------- --------
$539,874 $549,492
-------- --------
-------- --------
</TABLE>
At June 30, 1995 future minimum principal payments on long-term debt and
capitalized lease obligations were as follows:
<TABLE>
<CAPTION>
In thousands
---------------------------------------------------------------------------
<S> <C>
1996 $10,561
1997 253
1998 103
1999 27
2000 3
After 2000 539,488
--------
$550,435
--------
--------
</TABLE>
The Company's 6-3/4% convertible subordinated debentures due 2012 are
convertible into 6,278,541 shares of common stock at $42.50 per share at any
time prior to maturity. Sinking fund payments begin in 1998 in an amount
sufficient to retire annually 5% of the aggregate principal amount of
debentures issued, calculated to retire 70% of the debentures prior to
maturity.
The Company's 5% convertible subordinated debentures due 2003 are
convertible into 10,314,286 shares of common stock at $26.25 per share at any
time prior to maturity. Subsequent to November 2, 1996 the debentures are
redeemable at the option of the Company, in whole or in part, initially at
103.5% and thereafter at prices
22
<PAGE>
declining to 100% at maturity, together with accrued interest. These
debentures were issued in an offering not registered or required to be
registered under the U.S. Securities Act of 1933, as amended and therefore
were offered only to "qualified institutional buyers" and "accredited
investors" as defined by the applicable Securities and Exchange Commission
regulations. These debentures are traded in the Private Offerings, Resales
and Trading through Automated Linkages ("PORTAL") Market. In 1994 holders
of the 5% convertible subordinated debentures due 2003 exercised their
registration rights with respect to the shares of common stock of the Company
into which such debentures are convertible. In 1995 the Company filed a
registration statement under the Securities Act of 1933, as amended, to
register such shares of common stock.
At June 30, 1995, the fair value of the Company's 6-3/4% convertible
subordinated debentures, based on the New York Stock Exchange quoted market
price, was approximately $280,180,000. At June 30, 1995, the fair value of the
Company's 5% convertible subordinated debentures was approximately
$422,370,000 based on the quoted market price from brokers of these
securities. The aggregate fair value of the Company's other long-term debt
approximated its carrying value at June 30, 1995.
The Company maintains an unsecured domestic credit facility consisting of
a $50 million line of credit under a credit agreement with four banks which
expires in June 1997. Borrowings under this agreement bear interest, as
defined in the agreement, at (1) the higher of the agent bank's prime rate
(9% at June 30, 1995) or the federal funds rate or (2) at the option of the
Company, an adjusted certificate of deposit rate or the London Interbank
Offered Rate. The credit agreement provides for a commitment fee and
restrictions on dividend payments and includes certain financial covenants.
Through its overseas subsidiaries, the Company has short-term credit and
overdraft borrowing facilities totaling approximately $33 million.
Additionally, the Company had approximately $27 million in lines of credit
worldwide which can be used for letters of credit and banker's guarantees,
but not borrowings. Any borrowings or other utilization under these
facilities are guaranteed by the parent company. For virtually all of the
borrowing lines, interest is at the banks' prime rates.
While there were no borrowings under these lines of credit at June 30,
1995, portions of the credit lines had been utilized to cover outstanding
letters of credit and bank guarantees as required in various supplier
agreements,
23
<PAGE>
and for forward purchases and sales of foreign currencies. As of June 30,
1995, the Company had available to it combined unused borrowing capacity of
$69 million under its lines of credit worldwide.
24
<PAGE>
STOCK OPTION AND STOCK PURCHASE PLANS
Options granted under the Company's stock option plans are granted at
fair market value, expire ten years from the date of the grant and generally
vest in four equal annual installments, commencing one year from the date of
the grant.
Following is a summary of stock option activity for the three years
ended June 30, 1995:
<TABLE>
<CAPTION>
Options Outstanding
-------------------------------------------
Options Aggregate
Available Exercise Price
For Grant Number Price Per Share
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance July 1, 1992 2,573,111 10,810,992 $105,506,342 $5.75-$15.875
Granted (1,399,000) 1,399,000 22,064,156 12.25-20.625
Exercised -- (1,880,693) (14,090,808) 5.75-15.375
Expired (258,523) -- -- --
Canceled 500,298 (500,298) (5,489,666) 5.75-18.75
---------- ---------- ----------- ------------
Balance July 2, 1993 1,415,886 9,829,001 107,990,024 5.75-20.625
Additional Authorizations -
1991 ISO Plan 6,000,000 -- -- --
Granted (2,882,972) 2,882,972 62,937,159 16.00-27.75
Exercised -- (3,396,187) (30,543,475) 5.75-19.625
Expired (104,372) -- -- --
Canceled 274,837 (274,837) (3,847,168) 5.75-27.75
---------- ---------- ----------- ------------
Balance July 1, 1994 4,703,379 9,040,949 136,536,540 5.75-27.75
Granted (2,422,611) 2,422,611 64,639,997 21.875-33.25
Exercised -- (3,208,048) (36,709,183) 5.75-27.75
Expired (96,591) -- -- --
Canceled 358,953 (358,953) (6,751,806) 7.50-27.75
---------- ---------- ----------- ------------
Balance June 30, 1995 2,543,130 7,896,559 $157,715,548 $5.75-$33.25
---------- ---------- ----------- ------------
---------- ---------- ----------- ------------
</TABLE>
25
<PAGE>
At June 30, 1995, options to purchase 1,923,533 shares of common
stock were exercisable.
In 1990, the Company established the Executive Stock Program and the
grant of rights to purchase 500,000 shares of the Company's common stock at
$.01 per share to each of three officers and directors of the Company.
Subsequently, two of those officers/directors resigned, one in 1991 and the
other in 1992. As a result of those resignations the Company repurchased
750,000 of the shares at their original purchase price, canceled the shares,
and reversed the associated amortization of deferred compensation. The
difference between the fair market value of the shares at the date of grant
and the exercise price was recorded as deferred compensation in the financial
statements and was charged to operations over a four year period. The amount
charged to operations was $460,000, and $1,843,000 in 1994 and 1993,
respectively.
The Company also maintains an Employee Stock Purchase Plan. A total of
6,800,000 shares of common stock have been authorized for issuance under the
Purchase Plan. The Purchase Plan permits eligible employees who have
completed thirty days of employment prior to the inception of the offering
period to purchase common stock through payroll deductions at the lower of
85% of the fair market value of the common stock at the beginning or at the
end of each six-month offering period. Under the plan, 422,699, 558,988 and
482,698 shares of common stock were issued in 1995, 1994 and 1993,
respectively.
Common stock reserved for future issuance under the Company's Stock
Option and Stock Purchase Plans aggregated 12,806,384 shares at June 30,
1995.
In July 1995 the Board of Directors 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, subject to shareholder
approval at the 1995 Annual Meeting of Shareholders.
EMPLOYEE PROFIT SHARING AND EXECUTIVE BONUS PLANS
The Company allocates a certain percentage of quarterly pre-tax profits
to its Employee Profit Sharing Plan which is currently distributed to
employees, excluding officers, employed for the full quarter. The Company
also allocates a certain percentage of quarterly pre-tax profits to its
Executive Bonus Plan. Distributions to corporate officers under this plan are
subject to the discretion of the Board of Directors. Charges to operations
for these Plans during 1995, 1994 and 1993 were $54,130,000, $34,487,000, and
$26,155,000, respectively.
26
<PAGE>
INCOME TAXES
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
In thousands 1995 1994 1993
--------------------------------------------------------------------------------
Deferred
Liability Method Method
---------------- --------
<S> <C> <C> <C>
Federal
Current $129,203 $40,280 $35,687
Deferred (16,020) 34,351 26,077
-------- ------- -------
113,183 74,631 61,764
-------- ------- -------
State
Current 27,280 13,907 13,526
Deferred (8,762) (894) (2,669)
-------- ------- -------
18,518 13,013 10,857
-------- ------- -------
Foreign
Current 11,033 8,981 1,223
Deferred 6,523 (149) 2,158
-------- ------- -------
17,556 8,832 3,381
-------- ------- -------
Provision for Income Taxes $149,257 $96,476 $76,002
-------- ------- -------
-------- ------- -------
</TABLE>
The income tax benefit related to the exercise of stock options reduces
taxes currently payable and is credited to additional paid-in capital. Such
amounts approximated $20,553,000, $19,938,000 and $4,122,000 for 1995, 1994
and 1993, respectively.
27
<PAGE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
The significant components of the Company's deferred tax assets and
liabilities were as follows:
<TABLE>
<CAPTION>
In thousands June 30, 1995 July 1, 1994
------------------------------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX ASSETS
Receivable reserves $ 17,876 $ 15,268
Inventory valuation accounts 13,496 9,017
Accrued compensation and benefits 21,787 14,382
Warranty reserves 85,214 54,132
Foreign net operating loss carryforwards 13,208 11,129
Other reserves and accruals 19,764 25,903
Accrued taxes 10,114 5,787
Other 10,181 6,325
--------- ---------
Total Deferred Tax Assets 191,640 141,943
Valuation allowance (19,139) (17,522)
--------- ---------
Net Deferred Tax Assets $ 172,501 $ 124,421
--------- ---------
DEFERRED TAX LIABILITIES
Unremitted income of foreign subsidiaries $(245,206) $(199,766)
Acquisition related items (31,248) (25,099)
Property reserves (3,494) (12,242)
Other (9,515) (10,331)
--------- ---------
Total Deferred Tax Liabilities (289,463) (247,438)
--------- ---------
Net Deferred Tax Liabilities $(116,962) $(123,017)
--------- ---------
--------- ---------
</TABLE>
28
<PAGE>
The valuation allowance has been provided for deferred tax assets
related to foreign net operating loss carryforwards and future tax benefits
related to the merger with Crystal Computer Services, Inc. not realized
as of the combination date. The valuation allowance increased by $1,617,000
and $9,666,000 in 1995 and 1994, respectively.
The differences between the provision for income taxes at the U.S.
statutory rate and the effective rate are summarized as follows:
<TABLE>
<CAPTION>
In thousands 1995 1994 1993
--------------------------------------------------------------------------------
Deferred
Liability Method Method
---------------- --------
<S> <C> <C> <C>
Provision at U.S. statutory rate $143,269 $112,555 $92,288
State income taxes net of federal
income tax benefit 12,037 8,458 7,166
Benefit from net earnings of foreign
subsidiaries considered to be
permanently invested in non-U.S.
operations (52,668) (36,021) (31,244)
Foreign income taxes 14,529 5,539 2,431
Write-off of in-process research
and development 24,626 -- --
Other 7,464 5,945 5,361
-------- ------- -------
$149,257 $96,476 $76,002
-------- ------- -------
-------- ------- -------
</TABLE>
29
<PAGE>
The Company's Far East manufacturing operations in Singapore, Thailand
and Malaysia operate under various tax holidays which expire in whole or in
part during fiscal years 1997 and 1999. Certain tax holidays may be extended
if certain conditions are met. The net impact of these tax holidays was to
increase net income by approximately $46,989,000 ($0.51 per share, fully
diluted) in 1995, approximately $29,624,000 ($0.35 per share, fully diluted)
in 1994, and approximately $28,543,000 ($0.37 per share, fully diluted) in
1993. Cumulative undistributed earnings of the Company's Far East
subsidiaries for which no income taxes have been provided aggregated
approximately $751,489,000 at June 30, 1995. These earnings are
considered to be permanently invested in non-U.S. operations. Additional
taxes of approximately $263,021,000 would have to be provided if these
earnings were repatriated to the U.S.
The United States Tax Court's decision concerning the federal audit for
the fiscal years 1983 through 1987 became final during fiscal 1995. The
Company has paid substantially all of the related tax and interest for this
period. The result of the Tax Court's decision did not have a material adverse
effect on the Company's financial condition or results of operations.
In 1994, the Internal Revenue Service ("IRS") concluded a field audit of
the Company's income tax returns for the fiscal years 1988 through 1990 and
issued to the Company a "Notice of Deficiency" (the "Notice") for those fiscal
years. The majority of the proposed adjustments to income in those fiscal
years related to the allocation of income between the Company and its foreign
subsidiaries. The proposed adjustments to income and tax credits in the
Notice resulted in proposed tax deficiencies of approximately $66,000,000
plus penalties and interest. The proposed income adjustments would also
eliminate tax net operating loss and tax credit carryovers that have been
used to offset taxable income and tax liabilities in other fiscal years. The
impact on tax net operating losses and tax credit carryovers from the
adjustments proposed in the Notice would result in additional taxes of
approximately $22,000,000 for the three years ended July 2, 1993 plus
interest. The Company on June 7, 1994 filed a Petition in the United States
Tax Court entitled Seagate Technology, Inc. and Consolidated Subsidiaries v.
Commissioner of Internal Revenue, Docket No. 9535-94, contesting these
proposed deficiencies and related penalties. The IRS filed its Answer on
August 4, 1994. The Company believes that the likely outcome of this matter
will not have a material adverse effect on the Company's financial condition
or results of operations.
30
<PAGE>
The Company's federal income tax returns for the fiscal years 1991, 1992
and 1993 are presently under examination by the IRS. Certain foreign and
state tax returns for fiscal years 1990 through 1994 are also under
examination by taxing authorities. The Company believes that adequate amounts
of tax have been provided for any final assessments which may result from
these examinations.
RESTRUCTURING COSTS
In 1993, restructuring costs in the amount of $15,000,000 were provided
for a consolidation of the Company's worldwide manufacturing and repair
activities. This was a result of the Company's continuing aggressive pursuit
of product cost reductions, particularly through improvements in its
manufacturing processes and more efficient utilization of its most
cost-effective manufacturing sites.
BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates principally in a single line of business: The
design, development, manufacture and sale of a broad line of rigid magnetic
disc drives and disc drive components for use in computer systems ranging
from notebook computers and desktop personal computers to workstations and
supercomputers as well as in multimedia applications such as digital video
and video-on-demand.
The following tables summarize the Company's operations in different
geographic areas:
<TABLE>
<CAPTION>
Adjustments
United Far and
Year Ended June 30, 1995, in thousands States East Eliminations Consolidated
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $2,671,730 $1,867,840 $ -- $4,539,570
Transfers between geographic areas 779,561 2,281,806 (3,061,367) --
---------- ---------- ----------- ----------
Total net sales $3,451,291 $4,149,646 $(3,061,367) $4,539,570
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Income from operations $ 47,114 $ 325,508 $ -- $ 372,622
Other income, net 8,129 28,588 -- 36,717
---------- ---------- ----------- ----------
Income before income taxes $ 55,243 $ 354,096 $ -- $ 409,339
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Identifiable Assets $1,922,457 $1,438,805 $ -- $3,361,262
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Adjustments
United Far and
Year Ended July 1, 1994, in thousands States East Eliminations Consolidated
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $1,826,624 $1,673,479 $ -- $3,500,103
Transfers between geographic areas 601,512 1,342,269 (1,943,781) --
---------- ---------- ----------- ----------
Total net sales $2,428,136 $3,015,748 $(1,943,781) $3,500,103
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Income from operations $ 50,922 $ 260,035 $ -- $ 310,957
Other income, net (7,587) 18,216 -- 10,629
---------- ---------- ----------- ----------
Income before income taxes $ 43,335 $ $278,251 $ -- $ 321,586
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Identifiable Assets $1,694,770 $1,182,760 $ -- $2,877,530
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
</TABLE>
<TABLE>
<CAPTION>
Adjustments
United Far and
Year Ended July 2, 1993, in thousands States East Eliminations Consolidated
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $1,734,486 $1,309,118 $ -- $3,043,604
Transfers between geographic areas 611,507 1,231,510 (1,843,017) --
---------- ---------- ----------- ----------
Total net sales $2,345,993 $2,540,628 $(1,843,017) $3,043,604
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Income from operations $ 51,527 $ 217,500 $ -- $ 269,027
Other income, net (8,852) 11,261 -- 2,409
---------- ---------- ----------- ----------
Income before income taxes $ 42,675 $ 228,761 $ -- $ 271,436
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Identifiable Assets $1,073,088 $ 958,105 $ -- $2,031,193
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
</TABLE>
Sales and transfers between geographic areas are accounted for at arm's
length prices which, in general, provide a profit after coverage of all
manufacturing costs. Income from operations is net sales less operating
expenses.
The identifiable assets by geographic area are those assets used in the
Company's operations in each area. The Company's European operations have not
been disclosed as a separate geographic area because European sales are
recorded by subsidiaries in other geographic areas and European identifiable
assets are less than 10% of consolidated assets.
32
<PAGE>
No customer accounted for 10% or more of consolidated net sales in 1995
or 1994. In 1993 one customer accounted for more than 10% of consolidated net
sales for a total of $326,235,000.
Net foreign currency transaction gains (losses) included in the
determination of net income were $5,086,000, $4,164,000 and $(3,553,000) for
1995, 1994 and 1993, respectively.
LITIGATION
SECURITIES LITIGATION In 1988 a series of lawsuits were 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. On February 8, 1995 the Court granted
defendants summary judgment completely dismissing all claims against the
Company. On March 31, 1995 the Court also denied plaintiffs' motion for
reconsideration of the summary judgment decision. Plaintiffs have appealed
this judgment to the Ninth Circuit Court of Appeals.
In 1991 another series of lawsuits were 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. Discovery is continuing and the trial date has been
continued to October 7, 1996.
The Company believes the 1988 and 1991 series of securities lawsuits are
without merit and intends to vigorously contest them. The Company believes
that the outcome of these matters will not have a material adverse effect on
the Company's financial condition or results of operations.
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. These sites were acquired by the Company from
Ceridian Corporation ("Ceridian") (formerly Control Data Corporation) in fiscal
1990. 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 such sites.
The Company's portion of the estimated cost of investigation and
remediation of known contamination at the sites to be incurred after June 30,
1995 was approximately $14,900,000. Through June 30, 1995 the Company
33
<PAGE>
had recovered approximately $2,500,000 from Ceridian through its indemnification
and cost sharing agreements with Ceridian and, in addition, expects to
recover approximately $9,800,000 from Ceridian over the next 30 years. After
deducting the expected recoveries from Ceridian, the expected aggregate
undiscounted liability was approximately $5,100,000 at June 30, 1995 with
expected payments of approximately $600,000 in 1999, $304,000 in 2000 and the
remainder thereafter.
Approximately $14,000,000 of the $14,900,000 total estimated costs
described above is attributable to one site in Omaha, Nebraska. In 1994 the
Company sold the Omaha property; however, 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 Ceridian and the Company for the Omaha site for several years and
has 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. The extent of contamination in the
groundwater has been investigated and generally defined. 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. A substantial portion of the Omaha
liability was discounted by applying a risk free rate of 6% 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 considering the
estimated effects of inflation, reimbursements by Ceridian and discounting
was approximately $3,000,000 at June 30, 1995.
The Company believes that the indemnification and cost-sharing
agreements entered into with Ceridian and the reserves that the Company has
established with respect to its future environmental costs are such that,
based on present information available to it, future environmental costs
related to currently known contamination 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. No trial date has been scheduled.
34
<PAGE>
On April 17, 1995 the Court granted the Company's motion for
summary judgment that certain of the Company's products did not infringe any
claims of Rodime's patent. With this Order only three (3) of the Company's
products (ST157, ST325 and ST351) remain accused in this action. The Company
currently has under submission with the Court another motion for summary
judgment seeking a judgment that the remaining three products do not infringe
the Rodime patent. In addition, the Company earlier filed a number of other
motions for summary judgment directed to issues other than non-infringement,
and certain of these motions have been denied. However, at the Court's
suggestion the Company has requested further argument on certain of these
motions. In the related action of Quantum Corporation v. Rodime, PLC, a
partially dispositive motion for summary judgment was granted by the District
Court of Minnesota resulting in a final judgment of invalidity of certain
claims of Rodime's U.S. Patent No. B1 4,638,383. Rodime appealed this adverse
judgment to the Court of Appeals for the Federal Circuit and the oral
argument of this appeal was heard on November 10, 1994. The Court of Appeals
has yet to render a decision on this appeal. If the district court's ruling is
upheld, it will establish precedent for the Company's defense, eliminating
certain products from the case.
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 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 reportedly made
payments to and taken licenses from Rodime.
On October 5, 1994, a patent infringement action was filed
against the Company by an individual James M. White in the U.S. District
Court for the Northern District of California for alleged infringement of
U.S. Patent Nos. 4,673,996 and 4,870,519. Both patents relate to air bearing
sliders. Prior to the filing of the lawsuit, the Company filed a Petition for
Reexamination of U.S. Patent No. 4,673,996 with the United States Patent and
Trademark Office ("PTO") and this Petition was granted shortly after the
lawsuit was filed. Subsequently, the Company filed a Petition for
Reexamination of U.S. Patent No. 4,870,519. This second petition has also
been granted by the PTO. The District Court stayed the action pending the
outcome of the reexaminations. It is the opinion of the Company's patent
counsel that the claims of the two White patents are invalid for the reasons
set forth in the two Petitions for Reexamination.
In May 1995, Personal Computer Peripherals Corporation
(PCPC) filed a complaint against one of the Company's newly acquired
subsidiaries, Palindrome Corporation, and a number of other unrelated
defendants,
-35-
<PAGE>
alleging infringement of U.S. Patent No. 5,133,066. The patent
relates to a computer program for backing up data and program files on
computer network systems. On July 31, 1995, without the Company having
answered the PCPC complaint, PCPC voluntarily dismissed the
patent infringement action against Palindrome without prejudice.
OTHER LITIGATION Amstrad PLC ("Amstrad") initiated a lawsuit
against the Company in London, England on December 11, 1992 concerning the
Company's sale of allegedly defective disc drives to Amstrad. The Company
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 continuing and a trial date has been set for April 1996 with various
earlier dates for exchange of fact and expert statements. The Company
believes this lawsuit is without merit and will continue to defend itself
vigorously. The Company believes that the outcome of this matter will not
have a material adverse effect on the Company's financial condition or results
of operations.
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.
COMMITMENTS
LEASES The Company leases certain property, facilities and
equipment under non-cancelable lease agreements. Land and facility leases
expire at various dates through 2082 and contain various provisions for
rental adjustments including, in certain cases, a provision based on
increases in the Consumer Price Index. All of the leases require the Company
to pay property taxes, insurance and normal maintenance costs.
Future minimum lease payments for operating leases with initial or
remaining terms of one year or more were as follows at June 30,1995:
<TABLE>
<CAPTION>
Operating
In thousands Leases
------------------------------------------------------------------------------
<S> <C>
1996 $24,426
-36-
<PAGE>
1997 18,297
1998 10,847
1999 7,777
2000 7,645
After 2000 41,056
------
$110,048
--------
--------
</TABLE>
Total rent expense for all land, facility and equipment operating
leases was approximately $27,000,000, $23,000,000 and $25,000,000 for 1995,
1994 and 1993, respectively.
CAPITAL EXPENDITURES The Company's commitments for construction
of manufacturing facilities approximated $226,000,000 at June 30, 1995.
SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
In thousands 1995 1994 1993
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Transactions:
Cash paid for interest $33,357 $24,654 $20,920
Cash paid for income taxes 137,362 31,021 29,234
Non-Cash Transaction:
Receipt of note receivable for sale of building -- 5,000 --
</TABLE>
ACQUISITIONS
During the year ended June 30, 1995 the Company acquired
Palindrome Corporation, a storage management software company, and Network
Computing, Inc., NetLabs Inc., Frye Computer Systems, Inc., and
Creative Interaction Technologies Inc., all network management software
companies, and Applied Magnetics Corporation's tape head subsidiary, a
manufacturer of magnetic recording tape heads for digital data storage. These
acquisitions were accounted for as purchases and, accordingly, the results of
operations of the acquired businesses have been included in the consolidated
financial statements from the date of acquisition. The total cost of the
acquired businesses, including acquisition costs was $142,052,000, net of
cash acquired. Goodwill and other intangibles arising from the acquisitions
are being amortized on a straight-line basis over periods ranging from eight
-37-
<PAGE>
months to ten years. As a result of the acquisitions, the Company incurred
one time write-offs of in-process research and development totaling
$70,360,000.
During the same period the Company acquired 25% of the outstanding
voting stock of Dragon Systems, Inc., a developer of advanced speech
recognition technology and products for personal computer and workstation
platforms, 34% of the outstanding voting stock of CVC Holdings, Inc.,
parent of CVC Products, Inc., makers of advanced fabrication equipment
used by semiconductor and data storage device manufacturers, and increased
its investment in SunDisk Corporation, a flash memory manufacturer. The
investment in Dragon Systems, Inc. and CVC Holdings, Inc., combined
with the additional investment in SunDisk Corporation totaled $29,811,000.
Goodwill arising from the investments in Dragon Systems, Inc. and CVC
Holdings, Inc. is being amortized on a straight-line basis over seven
years.
-38-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Seagate Technology
We have audited the accompanying consolidated balance sheets of Seagate
Technology and subsidiaries as of June 30, 1995 and July 1, 1994, and
the related consolidated statements of income, shareholders' equity and cash
flows for each of the three fiscal years in the period ended June 30,
1995. 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 in accordance with generally accepted auditing
standards. Those standards 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.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Seagate Technology and subsidiaries at June 30, 1995 and July 1, 1994,
and the consolidated results of their operations and their cash flows for
each of the three fiscal years in the period ended June 30, 1995, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
San Jose, California
July 11, 1995, except for the last
paragraph of the patent litigation note
as to which the date is July 31, 1995
-39-
<PAGE>
EXHIBIT 21.1
SEAGATE TECHNOLOGY, INC.
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
STATE OR OTHER JURISDICTION
NAME OF SUBSIDIARY OF INCORPORATION
------------------ ---------------------------
<S> <C>
Seagate Technology International Cayman Islands, BWI
Seagate Technology (Thailand) Limited Thailand
Seagate Microelectronics Limited Scotland
Penang Seagate Industries (M) Sdn. Bhd. Malaysia
Seagate Technology GmbH Germany
Nippon Seagate Inc. Japan
Seagate Technology Korea Limited South Korea
Seagate Technology S.A. France
Seagate Technology S.r.L Italy
Seagate Technology AB Sweden
Seagate Technology Australia Pty. Limited Australia
Seagate Technology (Ireland) Cayman Islands, BWI
P.T. Seagate Technology Indonesia
Seagate Technology Taiwan Ltd. Taiwan
Seagate Foreign Sales Corporation Virgin Islands
Seagate Technology International Holdings Cayman Islands, BWI
Crystal Computer Services, Inc. British Columbia, Canada
Palindrome Corporation Delaware
Seagate Tape Technology Inc. California
NetLabs, Inc. California
Network Computing, Inc. Texas
Creative Interaction Technologies, Inc. North Carolina
Frye Computer Systems, Inc. Massachusetts
Palindrome (UK) Limited United Kingdom
Palindrome Australia Pty. Ltd. Australia
Seagate Technology (Clonmel) Cayman Islands, BWI
Seagate Technology International (Wuxi) Ltd. Peoples Republic of China
Seagate Technology (Ireland Holdings) Cayman Islands, BWI
Seagate Software, Inc. Delaware
Seagate Software GmbH Germany
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form
10-K) of Seagate Technology, Inc. of our report dated July 11, 1995 (except
for the last paragraph of the patent litigation note as to which the date is
July 31, 1995), included in the 1995 Annual Report to Shareholders of Seagate
Technology, Inc.
Our audits also included the financial statement schedule of Seagate
Technology, Inc. listed in Item 14(a). This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
We also consent to the incorporation by reference in the Registration
Statements (Form S-8 No. 33-43911, 33-50973, 33-39916, 33-56215, 33-34793),
pertaining to the 1991 Incentive Stock Option Plan, the Employee Stock
Purchase Plan and the Executive Stock Option Plan of Seagate Technology,
Inc., and in the Registration Statements (Form S-3 No. 33-55249, 33-56027) of
Seagate Technology, Inc. and in the related prospectus, of our report dated
July 11, 1995 (except for the last paragraph of the patent litigation note as
to which the date is July 31, 1995), with respect to the consolidated
financial statements incorporated herein by reference, and our report
included in the preceding paragraph with respect to the financial statement
schedule included in this Annual Report (Form 10-K) of Seagate Technology,
Inc.
ERNST & YOUNG LLP
San Jose, California
August 3, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-02-1994
<PERIOD-END> JUN-30-1995
<CASH> 702,194
<SECURITIES> 544,432
<RECEIVABLES> 621,146
<ALLOWANCES> 53,399
<INVENTORY> 395,838
<CURRENT-ASSETS> 2,444,886
<PP&E> 1,302,018
<DEPRECIATION> 686,767
<TOTAL-ASSETS> 3,361,262
<CURRENT-LIABILITIES> 909,746
<BONDS> 539,874
<COMMON> 729
0
0
<OTHER-SE> 1,541,039
<TOTAL-LIABILITY-AND-EQUITY> 3,361,262
<SALES> 4,539,570
<TOTAL-REVENUES> 4,539,570
<CGS> 3,607,661
<TOTAL-COSTS> 3,607,661
<OTHER-EXPENSES> 559,287
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,966
<INCOME-PRETAX> 409,339
<INCOME-TAX> 149,257
<INCOME-CONTINUING> 260,082
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 260,082
<EPS-PRIMARY> 3.52
<EPS-DILUTED> 3.06
</TABLE>
