<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 28, 1997
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 28, 1997, 245,232,430 shares of the registrant's common stock were
issued and outstanding.
1
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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 28, 1997 and
March 29, 1996 3
Consolidated condensed balance sheets--
March 28, 1997 and June 28, 1996 4
Consolidated condensed statements of cash flows--
Nine months ended March 28, 1997 and
March 29, 1996 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 19
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 28, March 29, March 28, March 29,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $2,501,823 $2,093,326 $6,962,804 $6,573,822
Cost of sales 1,870,989 1,755,745 5,397,695 5,386,318
Product development 118,965 111,504 339,358 314,192
Marketing and administrative 130,590 129,962 367,916 375,138
Amortization of goodwill and
other intangibles 18,100 16,456 41,026 38,501
In-process research and development 2,876 52,848 2,876 59,265
Restructuring costs - 241,720 (9,554) 241,720
Unusual items 13,446 - 13,446 -
----------- ----------- ----------- -----------
Total Operating Expenses 2,154,966 2,308,235 6,152,763 6,415,134
Income (Loss) from Operations 346,857 (214,909) 810,041 158,688
Interest income 23,490 25,325 59,561 74,817
Interest expense (4,002) (12,192) (22,016) (45,817)
Other (9,748) 4,313 (16,043) 4,662
----------- ----------- ----------- -----------
Other Income 9,740 17,446 21,502 33,662
----------- ----------- ----------- -----------
Income (loss) before income taxes 356,597 (197,463) 831,543 192,350
Provision (benefit) for income taxes 99,847 (39,985) 232,832 80,104
----------- ----------- ----------- -----------
Net Income (Loss) $ 256,750 $ (157,478) $ 598,711 $ 112,246
=========== =========== =========== ===========
Net income (loss) per share:
Primary $1.01 $(0.78) $2.53 $0.55
Fully diluted 1.01 (0.78) 2.36 0.53
Number of shares used in
per share computations:
Primary 255,298 200,824 236,320 202,660
Fully diluted 255,304 200,824 260,855 223,522
</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 28, June 28,
1997 1996 (1)
---------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $1,021,067 $ 503,754
Short-term investments 1,335,793 670,308
Accounts receivable 1,249,255 1,066,519
Inventories 632,666 790,821
Deferred income taxes 299,436 222,355
Other current assets 185,755 145,523
---------- ----------
Total Current Assets 4,723,972 3,399,280
Property, equipment and leasehold improvements, net 1,618,512 1,399,883
Goodwill and other intangibles, net 213,465 274,046
Other assets 149,120 166,426
---------- ----------
Total Assets $6,705,069 $5,239,635
========== ==========
LIABILITIES
Accounts payable $ 713,942 $ 715,396
Accrued employee compensation 210,758 180,126
Accrued expenses 589,253 490,752
Accrued income taxes 74,420 49,437
Current portion of long-term debt 1,338 2,425
---------- ----------
Total Current Liabilities 1,589,711 1,438,136
Deferred income taxes 529,302 351,527
Other liabilities 209,433 185,579
Long-term debt, less current portion 701,916 798,305
---------- ----------
Total Liabilities 3,030,362 2,773,547
---------- ----------
STOCKHOLDERS' EQUITY
Common stock 2,452 2,134
Additional paid-in capital 1,887,387 1,132,328
Retained earnings 1,919,066 1,390,322
Deferred compensation (54,857) (57,656)
Treasury common stock at cost (78,700) -
Foreign currency translation adjustment (641) (1,040)
---------- ----------
Total Stockholders' Equity 3,674,707 2,466,088
---------- ----------
Total Liabilities and Stockholders' Equity $6,705,069 $5,239,635
========== ==========
</TABLE>
(1) The information in this column was derived from the Company's audited
consolidated balance sheet as of June 28, 1996.
See notes to consolidated condensed financial statements.
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SEAGATE TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------
March 28, March 29,
1997 1996
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 598,711 $ 112,246
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 446,157 300,370
Deferred income taxes 99,217 (8,749)
In-process research and development 2,876 59,265
Unusual items 13,446 -
Write-offs due to restructure - 97,209
Other 34,569 12,001
Changes in operating assets and liabilities:
Accounts receivable (177,847) (27,466)
Inventories 110,584 (269,021)
Other current assets (38,964) (110,366)
Accounts payable 18,623 85,940
Accrued employee compensation 30,632 20,830
Accrued expenses (29,450) 140,004
Accrued income taxes 67,395 (37,316)
Other liabilities 131,229 119,092
----------- -----------
Net cash provided by operating activities 1,307,178 494,039
INVESTING ACTIVITIES:
Acquisition of property, equipment and leasehold
improvements, net (606,524) (676,067)
Purchases of short-term investments (3,207,918) (2,584,885)
Maturities and sales of short-term investments 2,541,963 2,524,749
Other, net 16,121 11,682
----------- -----------
Net cash used in investing activities (1,256,358) (724,521)
FINANCING ACTIVITIES:
Issuance of long-term debt 698,592 -
Sale of common stock 71,982 75,915
Purchase of treasury stock (297,393) (123,727)
Other, net (8,049) (14,112)
----------- -----------
Net cash provided by (used in) financing activities 465,132 (61,924)
Effect of exchange rate changes on cash and cash equivalents 1,361 7,638
----------- -----------
Increase (decrease) in cash and cash equivalents 517,313 (284,768)
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 503,754 890,667
----------- -----------
Cash and cash equivalents at the end of the period $ 1,021,067 $ 573,993
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
5
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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 periods
prior to that date 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 28, 1996 and notes thereto,
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
following: in the three months ended September 27, 1996, certain
restructuring costs previously incurred in connection with the Conner
merger were reversed and certain other non-recurring merger-related costs
were incurred; in the three and nine months ended March 28, 1997, the
Company wrote off in-process research and development and compensation
expense in connection with additional amounts to be paid with respect to
the acquisition of Holistic Systems Ltd. and wrote off or wrote down
certain intangible assets related to the acquisitions of certain of the
Company's software businesses; and, in the three and nine months ended
March 29, 1996, the Company recorded restructuring costs and other merger-
related costs incurred in connection with the Conner merger and wrote off
in-process research and development incurred in connection with
acquisitions of software businesses.
The results of operations for the nine months ended March 28, 1997 are not
necessarily indicative of the results that may be expected for the entire
year ending June 27, 1997.
In November 1996, the Company effected a two-for-one stock split in the
form of a stock dividend. Prior periods have been restated to reflect the
stock split in the form of a stock dividend. All references to number of
shares and per share amounts are on a post-split basis.
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
1996 was 52 weeks and
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ended on June 28, 1996 and fiscal 1997 will be 52 weeks and will end on
June 27, 1997. Fiscal 1998 will be 53 weeks and will end on July 3, 1998.
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.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which is required to be adopted in the
Company's fiscal quarter ended January 2, 1998. At that time, the Company
will be required to change the method currently used to compute net income
per share and to restate all prior periods. Under the new requirements for
calculating primary net income per share, the dilutive effect of stock
options will be excluded. If Statement No. 128 had been effective for the
three and nine months ended March 28, 1997 and March 29, 1996, its impact
on primary and fully diluted net income (loss) per share would not have
been material.
3. Balance Sheet Information
-------------------------
(In thousands)
March 28, June 28,
1997 1996
----------- -----------
Accounts Receivable:
Accounts receivable $ 1,310,089 $ 1,133,175
Allowance for non-collection (60,834) (66,656)
----------- -----------
$ 1,249,255 $ 1,066,519
=========== ===========
Inventories:
Components $ 397,625 $ 295,169
Work-in-process 111,769 138,854
Finished goods 123,272 356,798
----------- -----------
$ 632,666 $ 790,821
=========== ===========
Property, Equipment and Leasehold
Improvements:
Property, equipment and leasehold
improvements $ 2,834,331 $ 2,404,538
Allowance for depreciation and amortization (1,215,819) (1,004,655)
----------- -----------
$ 1,618,512 $ 1,399,883
=========== ===========
7
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4. Income Taxes
------------
The effective tax rate used to compute the income tax provision for the
nine months ended March 28, 1997 and March 29, 1996 was 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 28,
1997 was 28% compared with 42% for the comparable period last year. The
Company's overall effective tax rate for the nine months ended March 28,
1997 was less than the domestic statutory rate because a portion of its
operating income is not subject to foreign income taxes and is considered
to be permanently invested in non-US operations. Accordingly, taxes have
not been provided on such income. The higher effective tax rate in the
comparable period last year was attributable to certain restructuring
costs, non-recurring merger-related costs and the write-off of in-process
research and development costs that were not deductible for domestic tax
purposes. Excluding the restructuring costs, non-recurring merger-related
costs and the write-off of in-process research and development costs in the
comparable period last year, the effective tax rate was 30%.
5. Stockholders' Equity
--------------------
Shares authorized and outstanding are as follows:
Shares Outstanding
------------------------
March 28, June 28,
1997 1996
--------- --------
Preferred stock, par value $.01 per share,
1,000,000 shares authorized - -
Common stock, par value $.01 per share,
600,000,000 shares authorized 245,232,430 213,430,184
6. Supplemental Cash Flow Information
----------------------------------
(In thousands)
Nine Months Ended
----------------------
March 28, March 29,
1997 1996
--------- ---------
Cash Transactions:
Cash paid for interest $ 24,402 $ 50,722
Cash paid for income taxes 58,811 118,354
Non-Cash Transactions:
Conversion of 6-3/4%, 6-1/2% and 5% debentures 788,020 265,500
8
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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 stockholders' 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.
The following is a summary of available-for-sale securities at March 28,
1997 (in thousands):
Gross Gross
Amortized Unrealized Unrealized
Cost Gain Loss Fair Value
---------- ---------- ---------- ----------
Corporate Bonds $ 159,433 $ 273 $ (250) $ 159,456
U.S. Government Obligations 335,301 12 (757) 334,556
Commercial Paper 780,993 - - 780,993
Money Market Mutual Funds 110,600 - - 110,600
Municipal Bonds 57,356 35 (180) 57,211
Repurchase Agreements 75,700 - - 75,700
Auction Rate Preferred Stock 256,497 - - 256,497
Euro/Yankee
Time Deposits 480,289 - - 480,289
---------- ---------- ---------- ----------
Total $2,256,169 $ 320 $ (1,187) $2,255,302
========== ========== ========== ==========
Included in short-term investments $1,335,793
Included in cash and cash equivalents 919,509
----------
Total $2,255,302
==========
The gross realized gains and losses on the sale of available-for-sale
securities were immaterial for the nine month periods ended March 28, 1997
and March 29, 1996.
The fair value of the Company's investment in debt securities at March 28,
1997, by contractual maturity, is as follows (in thousands):
Due in less than 1 year $1,641,428
Due in 1 to 2-1/2 years 246,776
----------
Total $1,888,204
==========
9
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8. Merger with Conner
------------------
On February 2, 1996 the Company and Conner Peripherals, Inc. ("Conner")
merged after approval by the stockholders of both companies. To effect the
combination Seagate issued 48,956,044 shares of its common stock in
exchange for all the outstanding common stock of Conner and issued options
to purchase 4,939,160 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 periods
prior to the merger presented in the accompanying consolidated condensed
financial statements have been restated to include the accounts and
operations of Conner. Conner was involved in the design, manufacture and
marketing of information storage products including disc drives, tape
drives and storage management software.
Combined and separate results of the Company and Conner for the periods
prior to the acquisition were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ ------------------------
Mar. 28, Mar. 29, Mar. 28, Mar. 29,
In thousands 1997 1996 1997 1996
------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales:
Prior to Dec. 30, 1995:
Seagate $ - $ - $ - $3,016,590
Conner - - - 1,463,906
Combined results after Dec. 29, 1995 2,501,823 2,093,326 6,962,804 2,093,326
---------- ---------- ---------- ----------
$2,501,823 $2,093,326 $6,962,804 $6,573,822
========== ========== ========== ==========
Net Income (Loss):
Prior to Dec. 30, 1995:
Seagate $ - $ - $ - $ 232,473
Conner - - - 37,251
Combined results after Dec. 29, 1995 256,750 (157,478) 598,711 (157,478)
---------- ---------- ---------- ----------
$ 256,750 $ (157,478) $ 598,711 $ 112,246
========== ========== ========== ==========
</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 were made to conform accounting practices of the two companies.
None of these adjustments was material to any of the periods presented.
9. Restructuring Costs
-------------------
During fiscal year 1996, the Company recorded restructuring charges
totaling $241.7 million as a result of the merger with Conner. The
restructuring charges comprised $60.7
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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. In connection with the
restructure, the Company currently expects a total workforce reduction of
approximately 1,370 employees. Of that number, the employment of 1,308
employees has been terminated.
During the three months ended September 27, 1996 the Company reversed
approximately $9.6 million of its restructuring reserves as a result of the
completion of certain aspects of the restructuring plan at less than the
originally estimated cost. In addition, during the three months ended March
28, 1997 certain reclassifications were made among certain categories of
the restructure reserve, primarily between employee termination benefits,
and facilities and equipment. This was due to modifications to the
Company's estimates of costs associated with certain specific aspects of
the restructure plan as the plan approached completion. The Company expects
the implementation of the restructure plan to be substantially complete by
the end of this fiscal year.
The following table summarizes the Company's restructuring activity for the
nine months ended March 28, 1997 (in thousands):
<TABLE>
<CAPTION>
Equipment, Contract
Inventory, Cancellations
Severances Excess Intangibles Professional and Other
and Benefits Facilities* and Other Assets Fees Expenses Total
------------ ----------- ---------------- ------------ ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Reserve balances,
June 28, 1996 $ 33,166 $35,319 $ 11,954 $ 3,185 $ 9,792 $ 93,416
Cash charges (17,391) (8,325) - (1,760) (5,897) (33,373)
Non-cash charges - (4,655) (23,484) - 69 (28,070)
Adjustments and
reclassifications (14,500) (8,970) 11,530 (1,355) 3,741 (9,554)
-------- ------- -------- ------- ------- --------
Reserve balances,
March 28, 1997 $ 1,275 $13,369 $ - $ 70 $ 7,705 $ 22,419
-------- ------- -------- ------- ------- --------
</TABLE>
* Primarily relates to future lease payments and write-off of leasehold
improvements on facilities that will no longer be utilized.
10. Long-Term Debt
--------------
In October 1996, the Company called for redemption on November 22, 1996 all
of its 6-1/2% Convertible Subordinated Debentures due 2002. Holders were
given the option to convert their debentures into shares of the Company's
common stock at a price of $27.15 per share through November 22, 1996 or
have their debentures redeemed at a total redemption price of $1,053.63 per
$1,000 principal amount of debentures consisting of $1,039.00 principal
amount plus accrued interest of $14.63. All debentures not converted by
5:00pm eastern time on November 22, 1996 were automatically redeemed.
In November 1996, the Company called for redemption on December 17, 1996
all of its 5% Convertible Subordinated Debentures due 2003 and on December
19, 1996 all of its 6-3/4% Convertible Subordinated Debentures due 2001.
Holders of the 5% debentures were given the option to convert their
debentures into shares of the Company's common stock at a price of $13.125
per share through December 16, 1996 or have their debentures redeemed at a
total redemption price of $1,041.39 per $1,000 principal amount of
debentures consisting of $1,035.00 principal amount plus accrued interest
of $6.39. All of the 5% debentures were converted. Holders of the 6-3/4%
debentures were given the option to convert their debentures into shares of
the Company's common stock at a price of $32.805 per share through December
19, 1996 or have their debentures redeemed at a total redemption price of
$1,054.00 per $1,000 principal amount of
11
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debentures consisting of $1,033.75 principal amount plus accrued interest
of $20.25. All 6-3/4% debentures not converted by 5:00pm eastern time on
December 19, 1996 were automatically redeemed.
Approximately $788 million principal amount of the 5%, 6-1/2% and 6-3/4%
debentures were converted to approximately 38.4 million shares of the
Company's common stock and approximately $1.2 million principal amount of
the 6-1/2% and 6-3/4% debentures were redeemed.
During the quarter ended March 28, 1997, the Company issued senior debt
securities totaling $700 million principal amount with interest rates
ranging from 7.125% to 7.875% and maturities ranging from seven years to 40
years. The Company intends to use the net proceeds for general corporate
purposes, including capital expenditures, and to meet working capital
needs. In addition, a portion may be used to repurchase shares of the
Company's outstanding common stock and for business acquisitions and
investments.
11. Unusual Items
-------------
During the quarter ended March 28, 1997, the Company had one time write-
offs of in-process research and development and compensation expense of
$2,876,000 and $13,446,000, respectively, in connection with additional
amounts to be paid with respect to the June 1996 acquisition of Holistic
Systems Ltd. The compensation expense of $13,446,000 is shown as unusual
items on the accompanying consolidated condensed statements of income.
12. Litigation
----------
See Part II, Item 1 of this Form 10-Q for a description of legal
proceedings.
12
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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 statements
relating to customs duties in the fourth paragraph under "Results of
Operations," the statements relating to restructuring charges in the eighth
paragraph under "Results of Operations," the statements relating to the
effective tax rate in the tenth paragraph under "Results of Operations," the
statements below under "Factors Affecting Future Operating Results," the
statements regarding capital expenditures in the fourth paragraph under
"Liquidity and Capital Resources" and the statements under "Part II Other
Information - Item 1. Legal Proceedings," among others. These forward-looking
statements are based on current expectations and entail various risks and
uncertainties that could cause actual results to differ materially from those
projected in the forward-looking statements. Such risks and uncertainties are
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 was involved in the design, manufacture and marketing of
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. 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 28, 1997 were $2,501,823,000 as compared
with $2,093,326,000 for the comparable year-ago quarter, and $2,400,156,000 for
the immediately preceding quarter ended December 27, 1996. Net sales for the
nine months ended March 28, 1997 were $6,962,804,000 as compared with
$6,573,822,000 for the comparable year-ago period. The increase in net sales
from the comparable periods last year and the immediately preceding quarter 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.
Gross margin as a percentage of net sales was 25.2% and 22.5% for the three and
nine months ended March 28, 1997, compared with 16.1% and 18.1% for the
comparable periods last year and 22.6% for the immediately preceding quarter.
The increase in gross margin as a percentage of net sales from the comparable
periods last year and the immediately preceding quarter was primarily due to
improvements in gross margins for the Company's desktop disc drive products, as
well as a shift in mix to the Company's newer, higher capacity and higher
performance disc drives, particularly those with capacities greater than 4
gigabytes, and a reduction in material costs per unit. These factors were
partially offset by a continuing decline in the average unit sales prices of the
Company's products as a result of competitive market conditions.
13
<PAGE>
There have been considerations within the Commission of the European Union,
regarding a proposal on so-called multimedia products (e.g., P.C.'s with
multimedia capabilities). 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. If this proposal were implemented, certain selected high-capacity
drives of the Company may be subjected to this higher tariff. The imposition of
such customs duties would negatively impact revenues or increase costs and
adversely impact gross margins.
Product development expenses for the three and nine months ended March 28, 1997
were $118,965,000 and $339,358,000 respectively, an increase of $7,461,000 and
$25,166,000 when compared with the comparable periods last year and an increase
of $5,335,000 when compared with the immediately preceding quarter ended
December 27, 1996. These expenses represented 4.8% and 4.9%, respectively, of
net sales for the three and nine months ended March 28, 1997 compared with 5.3%
and 4.8% for the comparable periods last year and 4.7% 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, materials,
supplies and equipment, and depreciation expense. The increase in expenses from
the immediately preceding quarter was primarily due to increases in materials,
supplies and equipment, and depreciation expense.
Marketing and administrative expenses for the three and nine months ended March
28, 1997 were $130,590,000 and $367,916,000 respectively, an increase of
$628,000 and a decrease of $7,222,000 when compared with the comparable periods
last year and an increase of $4,710,000 when compared with the immediately
preceding quarter ended December 27, 1996. These expenses represented 5.2% and
5.3%, respectively, of net sales for the three and nine months ended March 28,
1997 compared with 6.2% and 5.7% for the comparable year-ago periods and 5.2%
for the immediately preceding quarter. The decrease in expenses from the
comparable nine month period last year reflects cost savings resulting from the
combination of the operations of the Company and Conner pursuant to the February
1996 merger of the two companies. The decreases in expenses were primarily in
the areas of salaries and related costs, legal expenses, outside services,
advertising and promotion, allocated occupancy costs, and depreciation. These
decreases in expenses were substantially offset by increasing marketing and
administrative expenses related to the Company's software products and services.
The increase in expenses from the immediately preceding quarter was primarily
due to increasing marketing and administrative expenses related to the Company's
software products and services.
Amortization of goodwill and other intangibles increased by $1,644,000 and
$2,525,000 for the three and nine months ended March 28, 1997, when compared
with the comparable year-ago periods and increased by $5,584,000 when compared
with the immediately preceding quarter ended December 27, 1996. The increase in
amortization from the comparable year-ago periods and the immediately preceding
quarter was primarily due to the write-offs and write-downs of certain
intangible assets related to past acquisitions of software companies whose value
had become impaired and, with respect to the comparable year-ago periods,
additional goodwill and other intangibles arising from the acquisition of
Holistic Systems Ltd. in June 1996. The increase in amortization from the
comparable year-ago periods was partially offset by write-offs, in the quarter
ended March 29, 1996, of certain intangible assets related to past acquisitions
of tape drive and software companies whose value had become impaired.
During the quarter ended March 28, 1997, the Company had one time write-offs of
in-process research and development and compensation expense of $2,876,000 and
$13,446,000,
14
<PAGE>
respectively, in connection with additional amounts to be paid with respect to
the June 1996 acquisition of Holistic Systems Ltd.
During fiscal year 1996, the Company recorded restructuring charges totaling
$241.7 million as a result of the merger with Conner. During the three months
ended September 27, 1996 the Company reversed $9,554,000 of its restructuring
reserves as a result of the completion of certain aspects of the restructuring
plan at less than the originally estimated cost. The reversal consisted of
$4,567,000 in severances and benefits, $3,658,000 in excess facilities and
$1,329,000 in other expenses. In addition, during the three months ended March
28, 1997 certain reclassifications were made among certain categories of the
restructure reserve, primarily between employee termination benefits, and
facilities and equipment. This was due to modifications to the Company's
estimates of costs associated with certain specific aspects of the restructure
plan as the plan approached completion. The Company expects the implementation
of the restructure plan to be substantially complete by the end of this fiscal
year.
Net other income decreased by $7,706,000 and $12,160,000 for the three and nine
months ended March 28, 1997 when compared with the comparable year-ago periods
and increased by $3,935,000 from the immediately preceding quarter ended
December 27, 1996. The decrease in net other income from the comparable three
month period last year was primarily due to an increase in minority interest in
the Company's majority-owned subsidiary in Shenzhen, China, an increase in
amortization of the premium on foreign currency option contracts and lower
interest income due to lower interest rates partially offset by higher levels of
average invested cash. This decrease in net other income was partially offset by
lower interest expense as a result of the redemption or conversion of the
Company's 5%, 6-1/2% and 6-3/4% convertible subordinated debentures. The
decrease in net other income from the comparable nine month period last year was
primarily due to an increase in amortization of the premium on foreign currency
option contracts and lower interest income due to lower interest rates and lower
levels of average invested cash partially offset by lower interest expense as a
result of the redemption or conversion of the Company's 5%, 6-1/2% and 6-3/4%
convertible subordinated debentures. The increase in net other income from the
immediately preceding quarter was primarily due to lower interest expense as a
result of the factors described in the previous sentence and higher interest
income as a result of higher levels of average invested cash.
The effective tax rate for the nine months ended March 28, 1997 was 28% compared
with 42% for the comparable period last year. The effective tax rate used to
compute the income tax provision was based on the Company's estimate of its
domestic and foreign operating income for each respective year. The Company's
overall effective tax rate for the nine months ended March 28, 1997 was less
than the domestic statutory rate because a portion of its operating income is
not subject to foreign income taxes and is considered to be permanently invested
in non-U.S. operations. Accordingly, taxes have not been provided on such
income. The higher effective tax rate in the comparable period last year was
attributable to certain restructuring costs, non-recurring merger-related costs
and the write-off of in-process research and development costs that were not
deductible for domestic tax purposes. Excluding the restructuring costs, non-
recurring merger-related costs and the write-off of in-process research and
development costs in the comparable period last year, the effective tax rate was
30%.
The Company expects its effective tax rate on operating income for the remaining
quarter of fiscal 1997 to approximate 28%. However, the actual effective tax
rate may vary from 28% if, for example, the Company incurs charges in connection
with future acquisitions.
15
<PAGE>
Factors Affecting Future Operating Results:
The data storage industry in which the Company competes is 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 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. 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. The data storage
industry has 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, this
industry is 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 data storage
industry 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. The demand of drive customers for products
with ever increasing storage capacity and more advanced technology has resulted
in increased dependence by the Company on sales of high capacity disc drives.
The increased difficulty and complexity associated with production of higher
capacity disc drives increases the likelihood of reliability, quality or
operability problems that could result in reduced bookings, increased
manufacturing rework costs, increased service and warranty costs and a decline
in the Company's competitive position. 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 the development, introduction and production of new products, delays
or interruptions in the production of existing products, 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 has experienced and expects to continue to experience intense
competition from a number of domestic and foreign companies. These companies
include the other leading independent disc drive manufacturers as well as large
integrated multinational computer manufacturers such as Fujitsu Limited,
International Business Machines Corporation, NEC Corporation and Toshiba
Corporation. Such competition could materially adversely affect the Company's
business, operating results and financial condition. There can be no assurance
that the Company will be able to compete successfully against current or future
competitors or that competitive pressures faced by the Company will not
materially adversely affect its business, operating results and financial
condition.
16
<PAGE>
The cost, quality and availability of certain components, including heads,
media, application specific integrated circuits, motors, printed circuit boards
and custom semiconductors are critical to the successful production of disc
drives. The Company's strategy of vertical integration has allowed it to
internally manufacture many of the critical components used in its products.
The Company also relies on independent suppliers for certain components used in
its products. The Company has in the past experienced production delays when
unable to obtain sufficient quantities of certain components Any prolonged
interruption or reduction in the supply of any key components could have a
material adverse effect on the Company's business, operating results and
financial condition.
The Company has significant offshore operations. Offshore operations are
subject to certain inherent risks, including delays in transportation, changes
in governmental policies, tariffs and import/export regulations, political
unrest, fluctuations in currency exchange rates and geographic limitations on
management controls and reporting. There can be no assurance that the inherent
risks of offshore operations will not adversely affect the Company's business,
operating results and financial condition in the future.
The Company has pursued a strategy of vertical integration of its manufacturing
process in order to reduce costs, control quality and assure availability and
quality of certain components. A strategy of vertical integration entails a
high level of fixed costs and requires a high volume of production and sales to
be successful. During periods of decreased production, these high fixed costs
have had, and could in the future have, a material adverse effect on the
Company's operating results and financial condition.
The Company is involved in a number of judicial and administrative proceedings
incidental to its business. There can be no assurance that these or future
proceedings will not result in an adverse decision that could have a material
adverse effect on the Company's business, operating results or financial
condition. For example, Amstrad PLC ("Amstrad") has initiated a lawsuit against
the Company in London, England concerning the Company's sale of allegedly
defective disc drives to Amstrad. Trial in this matter concluded on July 31,
1996. The Court has indicated it will render its decision in May 1997. The
Company believes that it asserted meritorious defenses to Amstrad's claim,
including substantial objections to the methodology and calculation of Amstrad's
alleged damages, but believes that, should Amstrad prevail on its liability
claims, a judgment in a material amount would be awarded against the Company.
The Company has incorporated several of its software acquisitions into a single
entity called Seagate Software, Inc. ("SSI") and is offering employees of SSI
and selected employees of the Company an opportunity to acquire an equity
interest in SSI. 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. The
Company intends to continue its expansion into software and other complementary
data technology 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.
17
<PAGE>
Liquidity and Capital Resources:
In November 1996, the Company effected a two-for-one stock split in the form of
a stock dividend. All references to the Company's common stock in the
discussion below are presented on a post-split basis.
At March 28, 1997, the Company's cash, cash equivalents and short-term
investments totaled $2.357 billion, an increase of $1.183 billion from the June
28, 1996 balance. This increase was primarily a result of cash provided by
operating activities and the issuance of $700 million principal amount of senior
notes and debentures, offset by the Company's additions to property, equipment
and leasehold improvements and the repurchase by the Company of approximately 7
million shares of its common stock. Until required for other purposes, the
Company's cash and cash equivalents are maintained in highly liquid investments
with remaining maturities of 90 days or less at the time of purchase, while its
short-term investments consist of readily marketable debt securities with
remaining maturities of more than 90 days at the time of purchase.
As of March 28, 1997, the Company had committed lines of credit of $79 million
which can be used for standby letters of credit and bankers' guarantees. At
March 28, 1997, approximately $75 million had been utilized.
The Company expects investments in property and equipment in the current fiscal
year to approximate $1 billion, of which approximately $639 million had been
incurred as of March 28, 1997. The Company plans to finance these investments
from existing cash balances and cash flows from operations. The $639 million
comprised $186 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, $191 million for manufacturing facilities
and equipment for the thin-film head operations in the United States, Malaysia
and Northern Ireland, $193 million for expansion of the Company's thin-film
media operations in California, Singapore and Northern Ireland and $69 million
for other purposes.
During the nine months ended March 28, 1997 the Company acquired approximately 7
million shares of its common stock for approximately $297 million. The
repurchase of these shares was in connection with a stock repurchase program
announced in September 1996 in which up to 14 million shares of the Company's
common stock were authorized to be acquired in the open market.
During the quarter ended December 27, 1996, the Company called for redemption
all of its 5%, 6-1/2% and 6-3/4% debentures. By the end of that quarter, all of
the debentures had been redeemed or converted to the Company's common stock.
Approximately $788 million principal amount of the 5%, 6-1/2% and 6-3/4%
debentures were converted to approximately 38.4 million shares of the Company's
common stock and approximately $1.2 million principal amount of the 6-1/2% and
6-3/4% debentures were redeemed.
During the quarter ended March 28, 1997, the Company issued senior debt
securities totaling $700 million principal amount with interest rates ranging
from 7.125% to 7.875% and maturities ranging from seven years to 40 years. The
Company intends to use the net proceeds for general corporate purposes,
including capital expenditures, and to meet working capital needs. In addition,
a portion may be used to repurchase shares of the Company's outstanding common
stock and for business acquisitions and investments.
18
<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.
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 affirmative defenses. Trial began April 16, 1996 and concluded on July
31, 1996. The Court has indicated it will issue a decision in May 1997. The
Company believes that it asserted meritorious defenses to Amstrad's claim,
including substantial objections to the methodology and calculation of Amstrad's
alleged damages but believes that should Amstrad prevail on its liability
claims, a judgment in a material amount would be awarded against the Company.
Securities Litigation
- ---------------------
In 1991 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.
The parties have agreed to settle this series of lawsuits. The settlement is
expected to receive final approval during the last quarter of the Company's
fiscal year ending June 27, 1997.
In 1993 a series of lawsuits were filed in Federal Court for the Northern
District of California against Conner Peripherals, Inc. As a result of the
merger with Conner the Company assumed the defense of this litigation. 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. The parties
have agreed to settle this series of lawsuits. The settlement is expected to
receive final approval during the last quarter of the Company's fiscal year
ending June 27, 1997.
The Company believes that the final settlement of the 1991 and 1993 lawsuits
will have an insignificant effect on the Company's financial condition and
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.
19
<PAGE>
The Company's portion of the estimated cost of investigation and remediation of
known contamination at the sites to be incurred after June 28, 1996, is
approximately $16,000,000. Through June 28, 1996, the Company had recovered
approximately $3,500,000 from Ceridian through its indemnification and cost
sharing agreements with Ceridian and, in addition, expects to recover
approximately $9,900,000 from Ceridian over the next 30 years. After deducting
the expected recoveries from Ceridian, the expected aggregate undiscounted
liability was approximately $6,100,000 at June 28, 1996, with expected payments
by the Company of approximately $329,000 in 1999, $671,000 in 2000 and the
remainder after 2001.
Approximately $15,100,000 of the $16,000,000 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 the 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 $3,100,000 at June 28, 1996.
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 was the opinion
of the Company's patent counsel that the Company's products did 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. Other companies, however, 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 finding that all of the Company's accused products,
with the exception of the ST157, did not infringe any claims of the Rodime
patent, and that the majority of the claims in the Rodime patent were invalid as
a matter of law. The ST157 is no longer in production. This case was
reassigned to a different judge in July 1996. On October 21, 1996 the judge
granted in part Seagate's motion for summary judgment on intervening rights,
finding that the Company has no
20
<PAGE>
liability for any ST157 family products made before November 29, 1988, the date
when Rodime's reexamined patent was issued.
A patent law expert and a technical expert were appointed as advisors to the
Court, both of whom recommended an interpretation of the remaining patent
claims which, if adopted by the Court, may result in a judgment that the
Company's ST157 family products do not infringe. The Court received evidence on
February 25, 1997 regarding claim interpretation. The parties have submitted
post hearing briefs. It continues to be the opinion of the Company's patent
counsel that the Company's products do not infringe any valid or enforceable
claims of Rodime's patent. The Company intends to vigorously defend itself
against the remaining charges of infringement of Rodime's patent and Rodime's
other claims against the Company.
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. Both patents have
completed reexamination and the stay of the action has been lifted. Mr. White's
lawyers filed a motion seeking a preliminary injunction to stop the sale of
certain of the Company's products. It is the opinion of the Company's patent
counsel that the Company's products subject to the motion for a preliminary
injunction and charged with infringement do not infringe any of the claims
issued in either the reexamined '996 patent or the reexamined '519 patent. A
hearing on Dr. White's motion for a preliminary injunction is set for June 27,
1997.
On December 16, 1996, a patent infringement action was filed against the Company
by an individual, Virgil Hedgcoth, in the U.S. District Court for the Northern
District of California, San Jose Division, for alleged infringement of U.S.
Patent Nos. 4,735,840, 5,082,747 and 5,316,864. These patents relate to
sputtered magnetic thin-film recording discs for computers and their
manufacture. The Company answered the complaint denying infringement, alleging
that the patents are invalid and unenforceable, and counterclaiming for
declaratory judgment that a fourth Hedgcoth patent, No. 4,894,133, is invalid,
unenforceable and not infringed. It is the opinion of the Company's patent
counsel that the Company's products do not infringe any claims of the patents in
suit, and that the claims of the patents in suit are invalid.
Papst Licensing, Gmbh, has given the Company notice that it believes certain
former Conner Peripherals, Inc. disc drives infringe several of its patents
covering the use of spin motors in disc drives. It is the opinion of the
Company's patent counsel that the former Conner disc drives do not infringe any
claims of the patents and that the alleged claims of the patents are invalid.
In the normal course of business, the Company receives and makes inquiry with
regard to other possible intellectual property matters including alleged patent
infringement. Where deemed advisable, the Company may seek or extend licenses
or negotiate settlements.
21
<PAGE>
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 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
The following exhibits are included herein:
11.1 Computation of Net Income (Loss) per Share
27 Financial Data Schedule
(b) Reports on Form 8-K
On March 11, 1997, the Company filed a Current Report on Form 8-K to report
under Item 5 "Other Events" the completion of a multi-tranche debt offering of
$700,000,000 aggregate principal amount of Senior Notes and Senior Debentures.
The Company reported the sale of $200,000,000 principal amount of 7.125% Senior
Notes due 2004, $200,000,000 principal amount of 7.37% Senior Notes due 2007,
$100,000,000 principal amount of 7.875% Senior Debentures due 2017 and
$200,000,000 principal amount of 7.45% Senior Debentures due 2037. No financial
statements were filed as part of such report.
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 5, 1997 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 5, 1997 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 (Loss) per Share
27 Financial Data Schedule
<PAGE>
EXHIBIT 11.1
SEAGATE TECHNOLOGY, INC.
COMPUTATION OF NET INCOME (LOSS) PER SHARE
(In thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------- --------------------
Mar. 28, Mar. 29, Mar. 28, Mar. 29,
1997 1996 1997 1996
-------- --------- -------- --------
<S> <C> <C> <C> <C>
PRIMARY
Weighted average number of common
shares outstanding during the period 246,528 200,824 228,881 195,666
Incremental common shares attributable
to exercise of outstanding options
(assuming proceeds would be used to
purchase treasury stock) 8,770 - 7,439 6,994
-------- --------- -------- --------
Total shares 255,298 200,824 236,320 202,660
======== ========= ======== ========
Net income (loss):
Amount $256,750 $(157,478) $598,711 $112,246
Per share $ 1.01 $ (0.78) $2.53 $ 0.55
FULLY DILUTED
Weighted average number of common
shares outstanding during the period 246,528 200,824 228,881 195,666
Incremental common shares attributable
to exercise of outstanding options
(assuming proceeds would be used to
purchase treasury stock) and conversion
of convertible subordinated debentures 8,776 - 31,974 27,856
-------- --------- -------- --------
Total shares 255,304 200,824 260,855 223,522
======== ========= ======== ========
Net income (loss):
Amount $256,750 $(157,478) $598,711 $112,246
Add 5% convertible subordinated
debentures interest, net of income
tax effect - - 4,376 6,171
Add 6-1/2% convertible subordinated
debentures interest, net of income tax
effect - - 6,465 -
Add 6-3/4% convertible subordinated
debentures interest, net of income tax
effect - - 5,663 -
-------- --------- -------- --------
Total $256,750 $(157,478) $615,215 $118,417
======== ========= ======== ========
Per share $ 1.01 $ (0.78) $2.36 $ 0.53
======== ========= ======== ========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET AS OF MARCH 28, 1997 AND THE CONSOLIDATED
CONDENSED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED MARCH 28, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-27-1997
<PERIOD-START> JUN-29-1996
<PERIOD-END> MAR-28-1997
<CASH> 1,021,067
<SECURITIES> 1,335,793
<RECEIVABLES> 1,310,089
<ALLOWANCES> 60,834
<INVENTORY> 632,666
<CURRENT-ASSETS> 4,723,972
<PP&E> 2,834,331
<DEPRECIATION> 1,215,819
<TOTAL-ASSETS> 6,705,069
<CURRENT-LIABILITIES> 1,589,711
<BONDS> 701,916
0
0
<COMMON> 2,452
<OTHER-SE> 3,672,255
<TOTAL-LIABILITY-AND-EQUITY> 6,705,069
<SALES> 6,962,804
<TOTAL-REVENUES> 6,962,804
<CGS> 5,397,695
<TOTAL-COSTS> 5,397,695
<OTHER-EXPENSES> 387,152
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,016
<INCOME-PRETAX> 831,543
<INCOME-TAX> 232,832
<INCOME-CONTINUING> 598,711
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 598,711
<EPS-PRIMARY> 2.53
<EPS-DILUTED> 2.36
</TABLE>
