<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
of
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 29, 1996
Commission File Number 0-10630
SEAGATE TECHNOLOGY, INC.
(Registrant)
Incorporated in the State of Delaware
I.R.S. Employer Identification Number 94-2612933
920 Disc Drive, Scotts Valley, California 95066
Telephone: (408) 438-6550
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
On March 29, 1996, 105,391,238 shares of the registrant's common stock were
issued and outstanding.
<PAGE>
INDEX
SEAGATE TECHNOLOGY, INC.
PART I FINANCIAL INFORMATION PAGE NO.
- ---------------------------------------------------------------------
Item 1. Financial Statements (Unaudited)
Consolidated condensed statements of income--
Three and nine months ended March 29, 1996 and
March 31, 1995 3
Consolidated condensed balance sheets--
March 29, 1996 and June 30, 1995 4
Consolidated condensed statements of cash flows--
Nine months ended March 29, 1996 and
March 31, 1995 5
Notes to consolidated condensed financial statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
PART II OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
2
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SEAGATE TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
March 29, March 31, March 29, March 31,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $2,093,326 $1,871,761 $6,573,822 $5,187,203
Cost of sales 1,755,745 1,536,028 5,386,318 4,216,101
Product development 111,504 85,707 314,192 256,264
Marketing and administrative 129,962 106,045 375,138 331,535
Amortization of goodwill and
other intangibles 16,456 9,126 38,501 24,275
In-process research and development 52,848 15,597 59,265 58,597
Restructuring costs 241,720 -- 241,720 --
---------- ---------- ---------- ----------
Total Operating Expenses 2,308,235 1,752,503 6,415,134 4,886,772
Income (loss) from Operations (214,909) 119,258 158,688 300,431
Interest income 25,325 22,753 74,817 64,371
Interest expense (12,192) (16,783) (45,817) (53,586)
Other 4,313 918 4,662 6,008
---------- ---------- ---------- ----------
Other Income 17,446 6,888 33,662 16,793
---------- ---------- ---------- ----------
Income (loss) before income taxes
and extraordinary gain (197,463) 126,146 192,350 317,224
Provision (benefit) for income taxes (39,985) 43,063 80,104 117,423
Income (loss) before
extraordinary gain (157,478) 83,083 112,246 199,801
Extraordinary gain net of
income taxes -- -- -- 6,171
---------- ---------- ---------- ----------
Net Income (loss) $(157,478) $ 83,083 $112,246 $205,972
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
INCOME (LOSS) PER SHARE BEFORE
EXTRAORDINARY GAIN:
Primary $ (1.57) $ 0.86 $ 1.11 $ 2.05
Fully diluted (1.57) 0.76 1.06 1.87
NET INCOME (LOSS) PER SHARE:
Primary $ (1.57) $ 0.86 $ 1.11 $ 2.11
Fully diluted (1.57) 0.76 1.06 1.92
NUMBER OF SHARES USED IN
PER SHARE COMPUTATIONS:
Primary 100,412 96,436 101,330 97,458
Fully diluted 100,412 122,402 111,761 120,163
</TABLE>
See notes to consolidated condensed financial statements.
3
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SEAGATE TECHNOLOGY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 29, June 30,
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 573,993 $ 890,667
Short-term investments 836,987 709,759
Accounts receivable 1,095,529 1,113,415
Inventories 759,780 591,956
Deferred income taxes 230,897 177,592
Other current assets 159,550 165,763
---------- ----------
Total Current Assets 3,656,736 3,649,152
Property, equipment and leasehold improvements, net 1,252,322 912,929
Goodwill and other intangibles, net 249,734 240,276
Other assets 163,508 97,475
---------- ----------
Total Assets $5,322,300 $4,899,832
---------- ----------
---------- ----------
LIABILITIES
Accounts payable $ 804,269 $ 748,294
Accrued employee compensation 173,537 156,313
Accrued expenses 557,117 351,249
Accrued income taxes 43,948 112,312
Current portion of long-term debt 3,219 13,782
---------- ----------
Total Current Liabilities 1,582,090 1,381,950
Deferred income taxes 416,235 385,043
Other liabilities 196,069 130,386
Long-term debt, less current portion 799,241 1,066,321
---------- ----------
Total Liabilities 2,993,635 2,963,700
---------- ----------
STOCKHOLDERS' EQUITY
Common stock 1,054 971
Additional paid-in capital 1,086,130 686,224
Retained earnings 1,292,320 1,275,410
Deferred compensation (47,653) (2,600)
Treasury common stock at cost (2,146) (22,839)
Foreign currency translation adjustment (1,040) (1,034)
---------- ----------
Total Stockholders' Equity 2,328,665 1,936,132
---------- ----------
Total Liabilities and Stockholders' Equity $5,322,300 $4,899,832
---------- ----------
---------- ----------
</TABLE>
See notes to consolidated condensed financial statements.
4
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SEAGATE TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
March 29, March 31,
1996 1995
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 112,246 $ 205,972
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization 300,370 224,586
Deferred income taxes (8,749) 20,402
In-process research and development 59,265 58,597
Write-offs due to restructure 97,209 --
Gain from sale of building -- (6,098)
Extraordinary gain from early retirement of debt -- (6,171)
Other 12,001 1,682
Changes in operating assets and liabilities:
Accounts receivable (27,466) (238,488)
Inventories (269,021) (58,826)
Other current assets (110,366) 1,802
Accounts payable 85,940 153,341
Accrued employee compensation 20,830 --
Accrued expenses 140,004 (6,360)
Accrued income taxes (37,316) (30,714)
Other liabilities 119,092 48,988
----------- -----------
Net cash provided by operating activities 494,039 368,713
INVESTING ACTIVITIES:
Acquisition of property, equipment and leasehold
improvements, net (676,067) (286,846)
Purchases of short-term investments (2,584,885) (2,004,416)
Sales of short-term investments 2,524,749 2,100,604
Acquisitions of businesses, net of cash acquired (33,223) (126,922)
Equity investments (11,434) (20,317)
Decrease (increase) in other non-current assets, net 56,341 (1,823)
Other, net (2) 29,756
----------- -----------
Net cash used in investing activities (724,521) (309,964)
FINANCING ACTIVITIES:
Repayment of long-term debt (13,920) (118,809)
Sale of common stock 75,915 39,111
Purchase of treasury stock (123,727) (113,409)
Other, net (192) --
----------- -----------
Net cash used in financing activities (61,924) (193,107)
Effect of exchange rate changes on cash and cash equivalents 7,638 (1,433)
----------- -----------
Decrease in cash and cash equivalents (284,768) (135,791)
Elimination of Conner's net cash activity for the six
months ended December 31, 1995 (31,906) --
Cash and cash equivalents at the beginning of the period 890,667 1,007,103
----------- -----------
Cash and cash equivalents at the end of the period $573,993 $871,312
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE>
SEAGATE TECHNOLOGY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
On February 2, 1996 the Company merged with Conner Peripherals,
Inc. ("Conner") in a transaction accounted for as a pooling of
interests and, as a result, the Company's previously issued
financial statements for the periods presented in this Form 10-Q
have been restated to include the assets, liabilities and operating
results of Conner in accordance with generally accepted accounting
principles and the instructions in Regulation S-X.
The consolidated condensed financial statements have been prepared
by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations. The Company believes the disclosures
included in the unaudited consolidated condensed financial
statements, when read in conjunction with the consolidated
financial statements of the Company as of June 30, 1995 included in
the Company's 1995 10-K and its Joint Proxy Statement/Prospectus
dated January 4, 1996 are adequate to make the information
presented not misleading.
The consolidated condensed financial statements reflect, in the
opinion of management, all adjustments necessary to summarize
fairly the consolidated financial position, results of operations
and cash flows for such periods. Such adjustments are of a normal
recurring nature, except for the restructuring costs and other
merger-related costs and the write-offs of in-process research and
development recorded in the three and nine months ended March 29,
1996.
The results of operations for the nine months ended March 29, 1996
are not necessarily indicative of the results that may be expected
for the entire year ending June 28, 1996.
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 and fiscal 1996
will end on June 28, 1996.
2. NET INCOME (LOSS) PER SHARE
For the periods in which the Company had net income, primary net
income per share was based on the weighted average number of shares
of common stock and common stock equivalents outstanding during the
period. For the same periods fully diluted net income per share
further assumed the conversion of the Company's convertible
subordinated debentures for the period of time that they were
outstanding. For the period in which the Company had a net loss,
the net loss per share was computed using only the weighted average
number of shares of common stock outstanding during the period.
6
<PAGE>
3. BALANCE SHEET INFORMATION
(In thousands)
<TABLE>
<CAPTION>
March 29, June 30,
1996 1995
---- ----
<S> <C> <C>
Accounts Receivable:
Accounts receivable $1,165,879 $1,185,117
Allowance for non-collection (70,350) (71,702)
---------- ----------
$1,095,529 $1,113,415
---------- ----------
---------- ----------
Inventories:
Components $ 331,765 $ 304,106
Work-in-process 152,297 110,798
Finished goods 275,718 177,052
---------- ----------
$ 759,780 $ 591,956
---------- ----------
---------- ----------
Property, Equipment and Leasehold Improvements:
Property, equipment and leasehold improvements $2,247,269 $1,906,551
Allowance for depreciation and amortization (994,947) (993,622)
---------- ----------
$1,252,322 $912,929
---------- ----------
---------- ----------
</TABLE>
4. INCOME TAXES
The effective tax rate used to compute the income tax provision for
the nine months ended March 29, 1996 and March 31, 1995 is based on
the Company's estimate of its domestic and foreign operating income
for each respective year. The effective tax rate for the nine
months ended March 29, 1996 was 42% compared with 37% for the
comparable period last year. The increase in the effective tax rate
for the current period was attributable to certain restructuring
costs, non-recurring merger-related costs and the write-off of
in-process research and development that are not deductible for
domestic tax purposes. Excluding restructuring costs,
non-recurring merger-related costs and the write-off of in process
research and development, the effective tax rate was 30% in the
current period. Excluding the write-off of in-process research and
development in the comparable period last year, the effective tax
rate was 30%.
The Company's anticipated 30% effective tax rate for fiscal 1996
(excluding restructuring costs, non-recurring merger-related costs
and the write-off of in-process research and development) is less
than the domestic statutory rate because a portion of the foreign
operating income is not subject to foreign income taxes and is
considered to be permanently invested in non-US operations.
Accordingly, taxes are not provided on such income.
The Company expects its effective tax rate for the quarter ending
June 28, 1996 to be in excess of 30% primarily due to write-offs of
in-process research and development resulting from a recently
completed acquisition of and contemplated acquisitions of
7
<PAGE>
software companies. The overall effective tax rate for the year will be
higher than 30%.
5. STOCKHOLDERS' EQUITY
Shares authorized and outstanding are as follows:
<TABLE>
<CAPTION>
Shares Outstanding
------------------
March 29, June 30,
1996 1995
---- ----
<S> <C> <C>
Preferred stock, par value $.01 per share,
1,000,000 shares authorized -- --
Common stock, par value $.01 per share,
200,000,000 shares authorized (shares
outstanding exclude treasury shares of
33,853 at March 29, 1996 and 856,234
at June 30, 1995) 105,391,238 96,196,300
</TABLE>
6. SUPPLEMENTAL CASH FLOW INFORMATION
(In thousands)
<TABLE>
Nine Months Ended
-----------------
March 29, March 31,
1996 1995
---- ----
<S> <C> <C>
Cash paid for interest $ 50,722 $ 57,716
Cash paid for income taxes 118,354 131,715
</TABLE>
7. CERTAIN INVESTMENTS
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.
8
<PAGE>
The following is a summary of available-for-sale securities at March 29,
1996 (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAIN LOSS FAIR VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Corporate Bonds $ 155,423 $ 684 $ 65 $ 156,042
U.S. Government
Obligations 206,333 440 154 206,619
Commercial Paper 281,358 443 1 281,800
Money Market
Mutual Funds 125,920 - - 125,920
Municipal Bonds 90,718 62 208 90,572
Repurchase Agreements 59,340 - - 59,340
Taxable Auction Rate
Preferred Stock 135,494 - 5 135,489
Certificates of Deposit
and Bankers' Acceptances 87,029 40 77 86,992
Other 36,188 19 253 35,954
---------- ---------- ---------- ----------
Total $1,177,803 $1,688 $763 $1,178,728
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Included in short-term investments $836,987
Included in cash and cash equivalents 341,741
----------
Total $1,178,728
----------
----------
</TABLE>
The gross realized gains and losses on the sale of
available-for-sale securities were immaterial for the nine month
periods ended March 29, 1996 and March 31, 1995.
The fair value of the Company's investment in debt securities at
March 29, 1996, by contractual maturity, is as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Due in less than 1 year $ 711,520
Due in 1 to 2-1/2 years 214,222
----------
Total $ 925,742
----------
----------
</TABLE>
8. MERGER WITH CONNER
In October 1995 the Company and Conner Peripherals, Inc. ("Conner")
signed a definitive agreement to merge the two companies. On
February 2, 1996 the merger was consummated after approval by the
stockholders of both companies. To effect the combination Seagate
issued 24,478,022 shares of its common stock in exchange for all
the outstanding common stock of Conner and issued options to
purchase 2,469,580 shares of Seagate common stock in exchange for
all the outstanding options to purchase Conner common stock. The
merger has been accounted for as a pooling of interests and,
accordingly, all prior periods presented in the accompanying
consolidated financial statements have been restated to include the
accounts and operations of Conner. Conner
9
<PAGE>
designs, manufactures and sells information storage products
including disc drives, tape drives and storage management software.
Because of differing fiscal year ends of the two companies, the
combined consolidated condensed statements of income combine
Seagate's three and nine month periods ended March 29, 1996 and
March 31, 1995 with Conner's three and nine month periods ended
March 29, 1996 and September 30, 1995, respectively. The combined
consolidated condensed balance sheets combine Seagate's March 29,
1996 and June 30, 1995 periods with Conner's March 29, 1996 and
December 30, 1995 periods, respectively. Combined and separate
results of the Company and Conner for the periods prior to the
acquisition were as follows:
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
In thousands Mar. 29, 1996 Mar. 31, 1995 Mar. 29, 1996 Mar. 31, 1995
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(Unaudited)
Net Sales:
Prior to Dec. 30, 1995:
Seagate $ - $1,184,582 $3,016,590 $3,247,291
Conner 687,179 1,463,906 1,939,912
Combined results after Dec. 29, 1995 2,093,326 - 2,093,326 -
---------- ---------- ---------- ----------
$2,093,326 $1,871,761 $6,573,822 $5,187,203
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net Income (Loss):
Prior to Dec. 30, 1995:
Seagate $ - $ 70,586 $ 232,473 $ 171,326
Conner 12,497 37,251 34,646
Combined results after Dec. 29, 1995 (157,478) - (157,478) -
---------- ---------- ---------- ----------
$ (157,478) $ 83,083 $ 112,246 $ 205,972
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The two companies maintained a majority of similar accounting
practices. However, as a result of certain differing accounting
practices relating to the capitalization of fixed assets and
inventory, certain adjustments to net assets, which were not
material to any period presented, were made to conform accounting
practices of the two companies.
An increase in retained earnings resulted from the change in fiscal
year. Previously, Conner's fiscal year ended on the Saturday
closest to December 31. To change Conner's fiscal year end to
conform with Seagate's June 28, 1996 fiscal year end, the operating
results of Conner for the six months ended December 31, 1995 are
included in the combined statement of operations for both fiscal
years 1996 and 1995. The Conner results of operations for the six
months ended December 30, 1995 were as follows:
<TABLE>
<CAPTION>
Six Months Ended
In thousands December 30, 1995
---------------------------------------------------------
<S> <C>
(Unaudited)
Net sales $1,463,906
Operating expenses 1,403,098
Other income (expense) (4,501)
Net income 37,251
</TABLE>
10
<PAGE>
As a result of the merger the Company recorded restructuring costs
of $241.7 million in the quarter ended March 29, 1996. The
restructuring costs comprised $60.7 million for employee severance
benefits, $97.2 million to write off or write down equipment,
inventory, intangibles and other assets, $45.1 million for closure
of duplicate and excess facilities, $24.0 million for fees of
financial advisors, attorneys and accountants and $14.7 million for
contract cancellations and other expenses. During the same quarter
$97.3 million was charged against the restructuring reserve leaving
a balance of $144.4 million at March 29, 1996. The $97.3 million
comprised $19.4 million for employee severance benefits, $56.1
million to write off or write down equipment, inventory,
intangibles and other assets, $10.3 million for closure of
duplicate and excess facilities, $10.5 million for fees of
financial advisors, attorneys and accountants and $1.0 million for
contract cancellations and other expenses. The cash outflows
related to the $241.7 million charge are estimated to be
approximately $128.4 million of which $97.7 million remains to be
expended at March 29, 1996.
9. ACQUISITIONS
In connection with the merger with Conner, on February 16, 1996 the
Company acquired the minority interest in Arcada Holdings, Inc.
("Arcada"), formerly a majority-owned subsidiary of Conner.
Seagate acquired the minority interest in Arcada by exchanging
1,276,670 shares of Seagate common stock and 906,968 options to
purchase shares of Seagate common stock for all the outstanding
common stock and options to purchase common stock of Arcada.
Arcada develops, markets and supports data protection and storage
management software products that operate across multiple desktop
and client/server environments. This acquisition was accounted for
as a purchase and, accordingly, Arcada's results of operations have
been included in the consolidated financial statements from the
date of acquisition. Goodwill and other intangibles arising from
the acquisition are being amortized on a straight-line basis over
periods ranging from two to seven years. As a result of the
acquisition, the Company incurred a one-time write-off of
in-process research and development of $43.9 million.
On March 29, 1996, the Company acquired OnDemand Software, Inc., a
network software distribution manufacturer. This acquisition was
accounted for as a purchase and, accordingly, the results of
operations of the acquired business have been included in the
consolidated financial statements from the date of acquisition.
The total cost of the acquisition, including acquisition costs, was
$13,231,000, net of cash acquired. Goodwill and other intangibles
arising from the acquisition are being amortized on a straight-line
basis over periods ranging from four to seven years. As a result
of the acquisition, the Company incurred a one-time write-off of
in-process research and development of $8.9 million.
10. CONVERSION OF DEBENTURES
In February 1996 the Company called for a March 18, 1996 redemption
of all of its 6-3/4% Convertible Subordinated Debentures due 2012.
Holders were given the option to convert their debentures into
shares of the Company's common stock at a price of $42.50 per share
through March 18, 1996 or have their debentures redeemed at a total
redemption price of $1,039.38 per $1,000 principal amount of
debentures consisting of $1,013.50 principal amount plus accrued
interest of $25.88. Any debentures not
11
<PAGE>
converted by 5:00pm ET on March 18, 1996 were automatically
redeemed. Approximately $265.5 million principal amount of the
debentures were converted to approximately 6.2 million shares and
approximately $1.1 million principal amount were redeemed.
11. LITIGATION
See Part II, Item 1 of this Form 10-Q for a description of legal
proceedings.
12
<PAGE>
SEAGATE TECHNOLOGY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CERTAIN FORWARD-LOOKING INFORMATION:
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934. These statements include the paragraph
below relating to customs duties, the paragraph below relating to the
restructuring costs, the paragraph below relating to the effective tax rate,
the statements below under "Factors Affecting Future Operating Results," the
statements regarding capital expenditures under "Liquidity and Capital
Resources" and the statements under "Part II Other Information - Item 1.
Legal Proceedings," among others. Actual results could differ materially
from those projected in the forward-looking statements as a result of the
risk factors set forth below under "Factors Affecting Future Operating
Results".
RESULTS OF OPERATIONS:
Effective February 2, 1996 the Company merged with Conner Peripherals, Inc.
("Conner"). Conner designs, manufactures and sells information storage
products including disc drives, tape drives and storage management software.
The merger was accounted for as a pooling of interests and accordingly all
prior period financial statements have been restated as if the merger took
place at the beginning of such periods. Conner had a fiscal year which ended
on the Saturday closest to December 31. Accordingly Conner's statements of
income for the three and nine month periods ended September 30, 1995 have
been combined with Seagate's statements of income for the three and nine
months ended March 30, 1995, respectively. In order to conform Conner's year
end to Seagate's fiscal year end, the consolidated condensed statement of
income for the nine months ended March 29, 1996 includes three months (July,
August and September 1995) for Conner which are also included in the
consolidated condensed statement of income for the nine months ended March
31, 1995. The comparisons to prior periods discussed below should be read in
light of this. See Note 8, Merger with Conner, to the accompanying
consolidated condensed financial statements.
Net sales for the quarter ended March 29, 1996 were $2,093,326,000 as
compared with $1,871,761,000 for the comparable year-ago quarter, and
$2,339,691,000 for the immediately preceding quarter ended December 29, 1995.
Net sales for the nine months ended March 29, 1996 were $6,573,822,000 as
compared with $5,187,203,000 for the comparable year-ago period. The
increase in net sales from the comparable year-ago quarter and the comparable
nine month period last year was primarily due to a higher level of unit
shipments and a shift in mix to the Company's higher priced products
partially offset by a continuing decline in the average unit sales prices of
the Company's products as a result of competitive market conditions. The
decrease in net sales from the immediately preceding quarter was primarily
due to a reduced level of unit shipments and a continuing decline in the
average unit sales prices of the Company's products partially offset by a
shift in mix to the Company's higher priced products. The reduced level of
unit shipments from the immediately preceding quarter was primarily due to a
delay in the introduction of new products, production delays caused by
component shortages and a decline in the shipment of tape drives.
During calendar 1995 Singapore progressively lost its status as a beneficiary
country under the European Union's ("EU") General System of Preferences
("GSP"). As a result, hard disc drives produced in Singapore and imported
into the EU have realized no reduction from full Most Favored Nation customs
duties (generally 1.6% at the present time) since December 31, 1995 whereas
disc drives imported into the EU from certain other GSP favored countries are
subject to more favorable customs duties than those imported from Singapore.
In addition, there is currently under consideration within the Commission of
the European Union, a proposal to reclassify certain electronic and computer
components and equipment. Under this proposal, duties would be assessed at a
rate of 14% whereas under the current code duties would decline to zero
within two years. The imposition of such customs duties would negatively
impact revenues or increase costs and adversely impact gross margins.
13
<PAGE>
Gross margin as a percentage of net sales was 16.1% and 18.1% for the three
and nine months ended March 29, 1996, respectively, compared with 17.9% and
18.7% for the comparable periods last year and 19.4% for the immediately
preceding quarter. The decrease in gross margin as a percentage of net sales
from the comparable year-ago periods and the immediately preceding quarter
was primarily due to a continuing decline in the average unit sales prices of
the Company's products as a result of competitive market conditions and
certain one-time charges incurred as a result of the merger with Conner
partially offset by a shift in mix to the Company's newer, higher capacity
disc drives and a reduction in material costs per unit.
Product development expenses for the three and nine months ended March 29,
1996 were $111,504,000 and $314,192,000 respectively, an increase of
$25,797,000 and $57,928,000 when compared with the comparable periods last
year and an increase of $6,133,000 when compared with the immediately
preceding quarter ended December 29, 1995. These expenses represented 5.3%
and 4.8% of net sales for the three and nine months ended March 29, 1996
compared with 4.6% and 4.9%, respectively, for the comparable year-ago
periods and 4.5% for the immediately preceding quarter. The increase in
expenses from the comparable year-ago periods was primarily due to increases
in salaries and related costs, ongoing product development expenses of the
Company's network management software businesses acquired late in the prior
fiscal year and an overall increase in the Company's product development
efforts.
Marketing and administrative expenses for the three and nine months ended
March 29, 1996 were $129,962,000 and $375,138,000 respectively, an increase
of $23,917,000 and $43,603,000 respectively, when compared with the
comparable year-ago periods and an increase of $1,355,000 when compared with
the immediately preceding quarter ended December 29, 1995. These expenses
represented 6.2% and 5.7% of net sales for the three and nine months ended
March 29, 1996, compared with 5.7% and 6.4% for the comparable year-ago
periods, and 5.5% for the immediately preceding quarter. The increase in
expenses from the comparable year-ago periods was primarily due to increases
in salaries and related costs, ongoing marketing and administrative expenses
of the Company's network management software businesses acquired late in the
prior fiscal year and increases in legal expenses and outside services.
Amortization of goodwill and other intangibles increased by $7,330,000 and
$14,226,000 for the three and nine months ended March 29, 1996, when compared
with the comparable year-ago periods and $5,195,000 when compared with the
immediately preceding quarter ended December 29, 1995. The increases were
primarily due to additional goodwill and other intangibles arising from the
acquisition of the minority interest in Arcada and other investments in and
acquisitions of businesses during fiscal 1996, and write-offs of certain
intangible assets in the Company's tape drive and software businesses whose
value had become impaired.
Write-offs of in-process research and development for the three and nine
months ended March 29, 1996 were $52,848,000 and $59,265,000 respectively.
For the quarter ended March 29, 1996, the one time write-offs were incurred
in connection with the acquisitions of OnDemand Software and the minority
interest in Arcada Software, Inc. The write-offs were $8.9 million and $43.9
million respectively. In addition, the nine months ended March 29, 1996
included write-offs of in-process research and development of $3.6 million
and $2.8 million in connection with an additional investment in SanDisk to
maintain the Company's 25% ownership and the acquisition of Sytron
Corporation, respectively.
As a result of the merger the Company recorded restructuring costs of $241.7
million in the quarter ended March 29, 1996. The restructuring costs
comprised $60.7 million for employee
14
<PAGE>
severance benefits, $97.2 million to write off or write down equipment,
inventory, intangibles and other assets, $45.1 million for closure of
duplicate and excess facilities, $24.0 million for fees of financial
advisors, attorneys and accountants and $14.7 million for contract
cancellations and other expenses. The cash outflows related to the $241.7
million charge are estimated to be approximately $128.4 million of which
$97.7 million remains to be expended at March 29, 1996.
Net other income increased by $10,558,000 and $16,869,000 for the three and
nine months ended March 29, 1996 when compared with the comparable year-ago
periods and increased by $6,058,000 from the immediately preceding quarter
ended December 29, 1995. The increase in net other income from the
comparable year-ago quarter was primarily due to a reduction in interest
expense as a result of capitalization of interest on construction of new
manufacturing facilities and the redemptions or conversion of certain of the
Company's subordinated debentures, a gain on the sale of the Company's
investment in Verity and higher interest income from higher interest rates on
the Company's invested cash. The increase in net other income from the
comparable nine month period last year was primarily due to higher interest
income from higher interest rates on the Company's invested cash and a
reduction in interest expense as a result of capitalization of interest on
construction of new manufacturing facilities and the redemptions or
conversion of certain of the Company's subordinated debentures, partially
offset by increased losses on foreign currency translation. The increase in
net other income from the immediately preceding quarter was primarily due to
a reduction in interest expense as a result of the redemption or conversion
of certain of the Company's subordinated debentures and capitalization of
interest on construction of new manufacturing facilities as well as a gain on
the sale of the Company's investment in Verity.
The effective tax rate for the nine months ended March 29, 1996 was
approximately 42% compared with 37% for the comparable period last year. The
increase in the effective tax rate for the current period was attributable to
certain restructuring costs, non-recurring merger-related costs and the
write-off of in-process research and development that are not deductible for
domestic tax purposes. Excluding restructuring costs, non-recurring
merger-related costs and the write-off of in process research and
development, the effective tax rate was 30% in the current period. Excluding
the write-off of in-process research and development in the comparable period
last year, the effective tax rate was 30%.
The Company's anticipated 30% effective tax rate for fiscal 1996 (excluding
restructuring costs, non-recurring merger-related costs and the write-off of
in-process research and development) is less than the domestic statutory
rate because a portion of the foreign operating income is not subject to
foreign income taxes and is considered to be permanently invested in non-US
operations. Accordingly, taxes are not provided on such income.
The Company expects its effective tax rate for the quarter ending June 28,
1996 to be in excess of 30% primarily due to write-offs of in-process
research and development resulting from a recently completed acquisition of
and contemplated acquisitions of software companies. The overall effective
tax rate for the year will be higher than 30% due to higher effective tax
rates in the previous quarters.
FACTORS AFFECTING FUTURE OPERATING RESULTS:
The disc drive and tape drive industries in which the Company competes are
subject to a number of risks, each of which has affected the Company's
operating results in the past and could impact the Company's future operating
results. The demand for disc drive and tape drive products
15
<PAGE>
depends principally on demand for computer systems and storage upgrades to
computer systems, which has historically been volatile. Changes in demand
for computer systems often have an exaggerated effect on the demand for disc
drive and tape drive products in any given period, and unexpected slowdowns
in demand for computer systems generally cause sharp declines in demand for
such products. The disc drive and tape drive industries have been
characterized by periodic situations in which the supply of drives exceeds
demand, resulting in higher than anticipated inventory levels and intense
price competition. Even during periods of consistent demand, these
industries are characterized by intense competition and ongoing price erosion
over the life of a given drive product. The Company expects that competitors
will offer new and existing products at prices necessary to gain or retain
market share and customers. The Company expects that price erosion in the
drive industries will continue for the foreseeable future. This competition
and continuing price erosion could adversely affect the Company's results of
operations in any given quarter and such adverse effect often cannot be
anticipated until late in any given quarter. In addition, the demand of
drive customers for new generations of products has led to short product life
cycles that require the Company to constantly develop and introduce new drive
products on a cost effective and timely basis. In addition, the Company's
future success will require, in part, that the market for computer systems,
storage upgrades to computer systems and multimedia applications, such as
digital video and video on demand, and hence the market for disc drives,
remain strong. In addition, the Company's operating results have been and
may in the future be subject to significant quarterly fluctuations as a
result of a number of other factors, including the timing of orders from and
shipment of products to major customers, product mix, pricing, delays in
product development, introduction and production, competing technologies,
variations in product cost, component availability due to single or limited
sources of supply, high fixed costs resulting from the Company's vertical
integration strategy, foreign exchange fluctuations, increased competition
and general economic and industry fluctuations. The Company's future
operating results may also be adversely affected by an adverse judgment or
settlement in the legal proceedings in which the Company is currently
involved (see "Part II, Item 1. Legal Proceedings").
The Company's future operating results will also be impacted by its ability
to combine successfully the operations of Seagate and Conner. The transition
to a combined Company requires substantial attention from the Company's
management. The diversion of the attention of management and any
difficulties encountered in the transition process could have an adverse
impact on the revenues and operating results of the Company. The combination
of the Company and Conner also requires integration of the companies' product
offerings and the coordination of their research and development and sales
and marketing efforts. The difficulties of assimilation may be increased by
the necessity of coordinating geographically separated organizations,
integrating personnel with disparate business backgrounds and combining two
different corporate cultures. In addition, the process of combining the two
organizations has caused and could continue to cause the interruption of, or
loss of momentum in, the activities of the Company's businesses, which could
have a material adverse effect on the Company. There can be no assurance
that the Company will retain its technical and other key personnel nor
realize any of the technological or other benefits of the Merger.
The Company is in the process of incorporating its software businesses into a
single entity called Seagate Software, Inc. and intends to offer its
employees an opportunity for an equity interest in the software business.
Although the Company's software businesses currently represent less than 2%
of the Company's total revenues, a shortfall in revenue from the Company's
software businesses would have a disproportionate and adverse impact on the
Company's gross margins and net income. The software business is subject to
a number of risks including the highly
16
<PAGE>
competitive nature of the business, the Company's ability to successfully
integrate its various software business acquisitions, possible delays in
product development and introduction, competitors' technological innovations
and loss of key personnel. The Company intends to continue its expansion
into software and other complementary businesses. As a result, the Company
expects that it will continue to incur charges as it acquires businesses,
including charges for the write-off of in-process research and development.
The timing of such write-offs has in the past and may in the future lead to
fluctuations in the Company's operating results on a quarterly and annual
basis.
LIQUIDITY AND CAPITAL RESOURCES:
At March 29, 1996, the Company's cash, cash equivalents and short-term
investments totaled $1,410,980,000, a decrease of $189,446,000 from the June
30, 1995 balance. This decrease was primarily a result of the Company's
additions to property, equipment and leasehold improvements and the
repurchase by the Company of 1,900,000 shares of its common stock, partially
offset by proceeds from employee stock option and stock purchase plans and
cash provided by operating activities. The Company's cash, cash equivalents
and short-term investments are being maintained in short-term liquid
investments until required for other purposes.
As of March 29, 1996, the Company had a domestic credit facility consisting
of a $20 million line of credit which can be used for letters of credit and
bankers' guarantees, but not borrowings. Of the $20 million, approximately $7
million had been utilized for letters of credit at March 29, 1996.
Additionally, the Company had approximately $28 million of non-domestic lines
of credit which can be used for borrowings as well as letters of credit,
bankers' guarantees, and overdraft facilities. Although there were no
borrowings under these lines at March 29, 1996, approximately $4 million had
been utilized for bankers' guarantees. The Company also had approximately
$79 million of lines of credit worldwide which can be used for letters of
credit and bankers' guarantees, but not borrowings. Of the $79 million,
approximately $6 million had been utilized at March 29, 1996.
The Company expects investments in property and equipment in the current
fiscal year to approximate $1.1 billion, of which approximately $706 million
had been incurred as of March 29, 1996. The Company plans to finance these
investments from existing cash balances and cash flows from operations. The
$706 million comprised $356 million for manufacturing facilities and
equipment related to the Company's subassembly and disc drive final assembly
and test facilities in the United States, Far East and Ireland, $173 million
for manufacturing facilities and equipment for the thin-film head operations
in the United States, Malaysia and Northern Ireland, $147 million for
expansion of the Company's thin-film media operations in California and
Singapore and $30 million for other purposes.
During the quarter ended March 29, 1996 the Company acquired 1,900,000 shares
of its common stock for approximately $124 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 were
authorized to be acquired in the open market. As of May 13, 1996 6,357,500
shares have been repurchased under this program.
17
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The following discussion contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These statements relate to the Company's
legal proceedings described below. Litigation is inherently uncertain and may
result in adverse rulings or decisions. Additionally, the Company may enter
into settlements or be subject to judgments which may, individually or in the
aggregate, have a material adverse effect on the Company's results of
operations. Accordingly, actual results could differ materially from those
projected in the forward-looking statements.
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. 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. All briefing has been completed and the
parties currently await the Court's scheduling of a hearing date.
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 case has recently been
reassigned to a different U. S. District Court Judge who has vacated the
February 10, 1997 trial date.
In 1993 a series of lawsuits were filed in Federal Court for the Northern
District of California against Conner Peripherals, Inc. which is now a wholly
owned subsidiary of the Company, now known as Seagate Peripherals, Inc.
These class action lawsuits allege violations of the federal securities laws
and seek damages on behalf of a class of purchasers of Conner's securities.
Discovery is continuing and the Court has not set a trial date.
The Company believes the 1988, 1991 and 1993 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
and either have shared or likely will share in the costs associated with such
sites. Investigative and/or remedial activities are ongoing at the sites.
18
<PAGE>
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
expected payments by the Company 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 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.
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, Hewlett-Packard and a number of Japanese
companies have reportedly made payments to and taken licenses from Rodime.
In 1995 the Court granted the Company's motions for summary judgment holding
that 1) certain claims of the Rodime patent were invalid, and 2) certain
accused products did not infringe as a matter of law, except that fact issues
remain to be decided regarding the ST157, a product no longer in production.
19
<PAGE>
This case has been reassigned to a different U.S. District Court Judge. A
pretrial conference has been scheduled for September 9, 1996 and a trial date
set for October 1, 1996. The Court has granted the Company leave to file two
additional motions for summary judgment, one of which is directed to the two
remaining state claims in the case and the other of which is directed to the
intervening rights in the only family of products left in the case. Rodime
has also been granted leave to file one motion for summary judgment directed
to the Company's defense of inequitable conduct.
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.
The applications for Reexamination of the patents involved in the White case
are still pending and the suit remains stayed pending completion of the
Reexaminations. In both Reexaminations, the Examiner has allowed some claims
and rejected some claims, and the Company believes, based on a preliminary
evaluation, that it does not infringe any of the claims that have been
allowed.
TAX DEFICIENCY
The Company has received a Notice of Deficiency (the "Notice") from the
Internal Revenue Service for fiscal years 1988 through 1990. 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.
Proposed adjustments to income and tax credits in the Notice resulted in
proposed tax deficiencies of approximately $66,000,000 plus penalties and
interest of approximately $65,900,000 as of March 29, 1996. 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 of approximately $7,300,000 as of March 29, 1996. The
Company filed a Petition with the United States Tax Court in June 1994
contesting the proposed deficiencies and related penalties.
Conner Peripherals, Inc. ("Conner") received a Notice of Deficiency (the
"Conner Notice") for its fiscal years 1989 and 1990. The majority of the
proposed adjustments to income in the Conner Notice related to the allocation
of income between Conner and its foreign manufacturing subsidiaries.
Proposed adjustments to income in the Conner Notice resulted in proposed tax
deficiencies of approximately $43,000,000 plus interest of approximately
$28,000,000 as of March 29, 1996. Conner filed a Petition with the United
States Tax Court in March 1995 contesting the proposed deficiencies. On May
9, 1996, the parties settled this matter by a stipulation of settlement in
the United States Tax Court which will result in a tax deficiency of
approximately $5,400,000 and interest of approximately $4,300,000 as of April
30, 1996.
In addition, the Company's federal income tax returns for the fiscal years
1991 through 1993 are presently under examination by the Internal Revenue
Service. Conner's federal income tax returns for the fiscal years 1991 and
1992 are also under examination by the Internal Revenue
20
<PAGE>
Service. The Company believes that the likely outcome of these matters will
not have a material adverse effect on the Company's financial condition or
results of operations.
BUSINESS 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 asserted many affirmative defenses. Discovery is completed and trial
began in London on April 16, 1996 and is expected to continue through July,
1996. The Company continues to defend itself vigorously but believes that,
should Amstrad prevail on its liability claims, a judgment in a material
amount could be awarded against the Company. However, the Company also
believes that it has meritorious defenses to Amstrad's claim, including
substantial objections to the methodology and calculation of Amstrad's
alleged damages.
The Company is involved in a number of other judicial and administrative
proceedings incidental to its business. Although occasional adverse
decisions (or settlements) may occur, the Company believes that the final
disposition of such matters will not have a material adverse effect on the
Company's financial position or results of operations.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held a special meeting of stockholders on February 2, 1996. The
following is a brief description of each matter voted upon at the meeting and
a statement of the number of votes cast for, against or withheld and the
number of abstentions and broker non-votes with respect to each matter. Both
proposals were approved by the stockholders.
(a) The stockholders approved the issuance of shares of Seagate Common
Stock pursuant to the terms of the Agreement and Plan of Reorganization dated
as of October 3, 1995, as amended by Amendment No. 1 thereto dated as of
December 18, 1995, entered into by and among Seagate, a newly-formed,
wholly-owned subsidiary of Seagate ("Sub") and Conner Peripherals, Inc., a
Delaware corporation ("Conner"), and a related Agreement of Merger between
Sub and Conner which provided for Sub to be merged with and into Conner, with
Conner being the surviving corporation and becoming a wholly-owned subsidiary
of Seagate (the "Merger").
BROKER
FOR AGAINST ABSTAIN NON-VOTE
51,928,584 244,825 424,080 7,727,757
(b) The stockholders ratified and approved amendments to the Company's
Executive Stock Plan.
BROKER
FOR AGAINST ABSTAIN NON-VOTE
42,820,282 17,264,301 221,217 19,446
21
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are included herein:
11.1 Computation of Net Income per Share
27 Financial Data Schedule
(b) Reports on Form 8-K
Reports on Form 8-K filed with the Securities and Exchange Commission during
the three months ended March 29, 1996:
A Form 8-K dated February 2, 1996 was filed on February 12, 1996. The
following items were reported:
Item 2: On February 2, 1996, Sub merged with and into Conner after the
Merger had been approved that morning at a special meeting of
Conner's stockholders and the issuance of additional shares of
Seagate's common stock pursuant to the Merger had been approved
that morning at a special meeting of Seagate's stockholders. As a
result, Conner became a wholly-owned subsidiary of Seagate.
The following financial statements were filed under Item 7:
(a) The Consolidated Balance Sheets of Conner as of December 31, 1994
and 1993, the related Consolidated Statements of Operations, Cash
Flows and Stockholders' Equity for the years ended December 31,
1994, 1993 and 1992, and the related Notes to Consolidated
Financial Statements.
(b) The Condensed Consolidated Balance Sheets of Conner as of September
30, 1995 and December 31, 1994, the Condensed Consolidated
Statements of Operations and Cash Flows for the nine months ended
September 30, 1995 and 1994, and the related Notes to Condensed
Consolidated Financial Statements (unaudited).
(c) Unaudited Pro Forma Combined Condensed Statements of Operations for
the years ended June 30, 1995, 1994, and 1993 and for the three
months ended September 30, 1995 and 1994 and related notes to
unaudited pro forma combined condensed financial statements.
Unaudited Pro Forma Combined Condensed Balance Sheet as of September 30,
1995.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEAGATE TECHNOLOGY, INC.
(Registrant)
DATE: May 13, 1996 BY: /s/ Donald L. Waite
___________________________
DONALD L. WAITE
Executive Vice President,
Chief Administrative Officer
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
DATE: May 13, 1996 BY: /s/ Alan F. Shugart
_______________________
ALAN F. SHUGART
Chairman of the Board,
President and Chief Executive
Officer (Principal Executive
Officer and Director)
23
<PAGE>
SEAGATE TECHNOLOGY, INC.
INDEX TO EXHIBITS
EXHIBIT
NUMBER
- -------
11.1 Computation of Net Income per Share
27 Financial Data Schedule
<PAGE>
EXHIBIT 11.1
SEAGATE TECHNOLOGY, INC.
COMPUTATION OF NET INCOME PER SHARE
(In thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
March 29, March 31, March 29, March 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY
Weighted average number of common
shares outstanding during the period 100,412 94,198 97,833 95,277
Incremental common shares attributable
to exercise of outstanding options
(assuming proceeds would be used to
purchase treasury stock) - 2,238 3,497 2,181
--------- ------- ------- -------
Total shares 100,412 96,436 101,330 97,458
--------- ------- ------- -------
--------- ------- ------- -------
Net income (loss):
Amount before extraordinary gain $(157,478) $ 83,083 $112,246 $199,801
Amount (157,478) 83,083 112,246 205,972
Per share before extraordinary gain $ (1.57) $ 0.86 $ 1.11 $2.05
Per share (1.57) 0.86 1.11 2.11
FULLY DILUTED
Weighted average number of common
shares outstanding during the period 100,412 94,198 97,833 95,277
Incremental common shares attributable
to exercise of outstanding options
(assuming proceeds would be used to
purchase treasury stock) and conversion
of 6-3/4%, 6-1/2% and 5% convertible
subordinated debentures - 28,204 13,928 24,886
--------- ------- ------- -------
Total shares 100,412 122,402 111,761 120,163
--------- ------- ------- -------
--------- ------- ------- -------
Net income (loss):
Amount $(157,478) $ 83,083 $112,246 $205,972
Add 6-3/4% convertible subordinated
debentures interest, net of income tax
effect - 2,810 - 8,429
Add 5% convertible subordinated
debentures interest, net of income
tax effect - 2,112 6,171 6,336
Add 6-1/2% convertible subordinated
debentures interest, net of income tax
effect - 2,967 - 4,170
Add 6-3/4% convertible subordinated
debentures interest, net of income tax
effect - 2,085 - 5,934
--------- ------- ------- -------
Total $(157,478) $ 93,057 $118,417 $230,841
--------- ------- ------- -------
--------- ------- ------- -------
Per share before extraordinary gain $ (1.57) $ 0.76 $ 1.06 $1.87
Per share (1.57) 0.76 1.06 1.92
--------- ------- ------- -------
--------- ------- ------- -------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-02-1994
<PERIOD-END> SEP-30-1994
<CASH> 845,365
<SECURITIES> 879,838
<RECEIVABLES> 840,730
<ALLOWANCES> 75,167
<INVENTORY> 634,621
<CURRENT-ASSETS> 3,411,569
<PP&E> 1,515,834
<DEPRECIATION> 849,471
<TOTAL-ASSETS> 4,360,447
<CURRENT-LIABILITIES> 1,185,619
<BONDS> 1,093,270
0
0
<COMMON> 960
<OTHER-SE> 1,648,313
<TOTAL-LIABILITY-AND-EQUITY> 4,360,447
<SALES> 1,543,541
<TOTAL-REVENUES> 1,543,541
<CGS> 1,253,615
<TOTAL-COSTS> 1,253,615
<OTHER-EXPENSES> 134,998
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,751
<INCOME-PRETAX> 54,520
<INCOME-TAX> 32,616
<INCOME-CONTINUING> 21,904
<DISCONTINUED> 0
<EXTRAORDINARY> 4,538
<CHANGES> 0
<NET-INCOME> 26,442
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-02-1994
<PERIOD-END> DEC-30-1994
<CASH> 779,733
<SECURITIES> 830,094
<RECEIVABLES> 995,363
<ALLOWANCES> 75,408
<INVENTORY> 623,035
<CURRENT-ASSETS> 3,454,777
<PP&E> 1,624,932
<DEPRECIATION> 912,192
<TOTAL-ASSETS> 4,455,777
<CURRENT-LIABILITIES> 1,205,368
<BONDS> 1,077,383
0
0
<COMMON> 963
<OTHER-SE> 1,711,021
<TOTAL-LIABILITY-AND-EQUITY> 4,455,777
<SALES> 3,315,442
<TOTAL-REVENUES> 3,315,442
<CGS> 2,680,073
<TOTAL-COSTS> 2,680,073
<OTHER-EXPENSES> 228,706
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,803
<INCOME-PRETAX> 191,078
<INCOME-TAX> 74,360
<INCOME-CONTINUING> 116,718
<DISCONTINUED> 0
<EXTRAORDINARY> 6,171
<CHANGES> 0
<NET-INCOME> 122,889
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.15
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-02-1994
<PERIOD-END> MAR-31-1995
<CASH> 871,312
<SECURITIES> 672,789
<RECEIVABLES> 1,076,664
<ALLOWANCES> 78,174
<INVENTORY> 617,985
<CURRENT-ASSETS> 3,483,727
<PP&E> 1,733,001
<DEPRECIATION> 961,115
<TOTAL-ASSETS> 4,554,565
<CURRENT-LIABILITIES> 1,208,957
<BONDS> 1,067,499
0
0
<COMMON> 965
<OTHER-SE> 1,774,402
<TOTAL-LIABILITY-AND-EQUITY> 4,554,565
<SALES> 5,187,203
<TOTAL-REVENUES> 5,187,203
<CGS> 4,216,101
<TOTAL-COSTS> 4,216,101
<OTHER-EXPENSES> 339,136
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53,586
<INCOME-PRETAX> 317,224
<INCOME-TAX> 117,423
<INCOME-CONTINUING> 199,801
<DISCONTINUED> 0
<EXTRAORDINARY> 6,171
<CHANGES> 0
<NET-INCOME> 205,972
<EPS-PRIMARY> 2.11
<EPS-DILUTED> 1.92
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-02-1994
<PERIOD-END> JUN-30-1995
<CASH> 890,667
<SECURITIES> 709,759
<RECEIVABLES> 1,185,117
<ALLOWANCES> 71,702
<INVENTORY> 591,956
<CURRENT-ASSETS> 3,649,152
<PP&E> 1,906,551
<DEPRECIATION> 993,622
<TOTAL-ASSETS> 4,899,832
<CURRENT-LIABILITIES> 1,381,950
<BONDS> 1,066,321
0
0
<COMMON> 971
<OTHER-SE> 1,935,161
<TOTAL-LIABILITY-AND-EQUITY> 4,899,832
<SALES> 7,256,209
<TOTAL-REVENUES> 7,256,209
<CGS> 5,882,824
<TOTAL-COSTS> 5,882,824
<OTHER-EXPENSES> 462,608
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 70,332
<INCOME-PRETAX> 487,476
<INCOME-TAX> 174,928
<INCOME-CONTINUING> 312,548
<DISCONTINUED> 0
<EXTRAORDINARY> 6,171
<CHANGES> 0
<NET-INCOME> 318,719
<EPS-PRIMARY> 3.26
<EPS-DILUTED> 2.90
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-28-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-29-1995
<CASH> 848,348
<SECURITIES> 748,004
<RECEIVABLES> 1,219,189
<ALLOWANCES> 81,679
<INVENTORY> 679,475
<CURRENT-ASSETS> 3,805,631
<PP&E> 1,984,716
<DEPRECIATION> 1,027,748
<TOTAL-ASSETS> 5,076,688
<CURRENT-LIABILITIES> 1,447,132
<BONDS> 1,067,765
0
0
<COMMON> 966
<OTHER-SE> 2,020,293
<TOTAL-LIABILITY-AND-EQUITY> 5,076,688
<SALES> 2,140,805
<TOTAL-REVENUES> 2,140,805
<CGS> 1,744,705
<TOTAL-COSTS> 1,744,705
<OTHER-EXPENSES> 110,918
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,539
<INCOME-PRETAX> 173,441
<INCOME-TAX> 52,632
<INCOME-CONTINUING> 120,809
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 120,809
<EPS-PRIMARY> 1.22
<EPS-DILUTED> 1.05
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-28-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-29-1995
<CASH> 585,432
<SECURITIES> 930,432
<RECEIVABLES> 1,341,540
<ALLOWANCES> 83,410
<INVENTORY> 658,864
<CURRENT-ASSETS> 3,870,627
<PP&E> 2,119,691
<DEPRECIATION> 952,205
<TOTAL-ASSETS> 5,363,566
<CURRENT-LIABILITIES> 1,501,550
<BONDS> 1,065,855
0
0
<COMMON> 973
<OTHER-SE> 2,195,311
<TOTAL-LIABILITY-AND-EQUITY> 5,363,566
<SALES> 4,480,496
<TOTAL-REVENUES> 4,480,496
<CGS> 3,630,573
<TOTAL-COSTS> 3,630,573
<OTHER-EXPENSES> 231,150
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,625
<INCOME-PRETAX> 389,813
<INCOME-TAX> 120,089
<INCOME-CONTINUING> 269,724
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 269,724
<EPS-PRIMARY> 2.70
<EPS-DILUTED> 2.31
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET AS OF MARCH 29, 1996 AND THE
CONSOLIDATED CONDENSED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED
MARCH 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-28-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-29-1996
<CASH> 573,993
<SECURITIES> 836,987
<RECEIVABLES> 1,165,879
<ALLOWANCES> 70,350
<INVENTORY> 759,780
<CURRENT-ASSETS> 3,656,736
<PP&E> 2,247,269
<DEPRECIATION> 994,947
<TOTAL-ASSETS> 5,322,300
<CURRENT-LIABILITIES> 1,582,090
<BONDS> 799,241
0
0
<COMMON> 1,054
<OTHER-SE> 2,327,611
<TOTAL-LIABILITY-AND-EQUITY> 5,322,300
<SALES> 6,573,822
<TOTAL-REVENUES> 6,573,822
<CGS> 5,386,318
<TOTAL-COSTS> 5,386,318
<OTHER-EXPENSES> 653,678
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,817
<INCOME-PRETAX> 192,350
<INCOME-TAX> 80,104
<INCOME-CONTINUING> 112,246
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 112,246
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.06
</TABLE>
