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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
|X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended March 31, 1996
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from _____ to_____
Commission file number: 0-11778
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SEEQ TECHNOLOGY INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 94-2711298
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
47200 Bayside Parkway
Fremont, California 94538
(510) 226-7400
(Address, including zip code, of Registrant's principal
executive offices and telephone number, including area code)
--------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No __
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $0.01 par value 30,132,759
(Class of common stock) (Shares outstanding at April 30, 1996)
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This report on Form 10-Q, including all exhibits, contains 16 pages.
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SEEQ TECHNOLOGY INCORPORATED
FORM 10-Q
Table of Contents
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Condensed Financial Statements..................................................................... 3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................................................... 13
Item 2. Changes in Securities............................................................................... 13
Item 3. Defaults upon Senior Securities..................................................................... 13
Item 4. Submission of Matters to a Vote of Security Holders................................................. 14
Item 5. Other Information................................................................................... 14
Item 6. Exhibits and Reports on Form 8-K.................................................................... 14
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SEEQ TECHNOLOGY INCORPORATED
CONDENSED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
-------------------- --------------------
Mar. 31, Mar. 31, Mar. 31, Mar. 31,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 7,387 $ 6,189 $ 12,188 $ 12,369
Costs and expenses:
Cost of revenues 4,874 3,932 8,361 8,263
Research and development 918 809 1,704 1,644
Marketing, general and administrative 1,121 1,017 2,042 1,872
Restructuring (benefit) and other, net -- (41) -- (326)
-------- -------- -------- --------
Total costs and expenses 6,913 5,717 12,107 11,453
-------- -------- -------- --------
Income from operations 474 472 81 916
Interest expense (36) (108) (119) (195)
Interest and other income, net 58 113 241 255
-------- -------- -------- --------
Income before income taxes 496 477 203 976
Provision for income taxes (6) (7) (6) (12)
-------- -------- -------- --------
Net income $ 490 $ 470 $ 197 $ 964
======== ======== ======== ========
Net income per share:
Primary $ 0.02 $ 0.02 $ 0.01 $ 0.04
======== ======== ======== ========
Fully diluted $ 0.02 $ 0.02 $ 0.01 $ 0.03
======== ======== ======== ========
Shares used in per share calculation:
Primary 31,929 26,737 32,072 26,646
======== ======== ======== ========
Fully diluted 31,929 28,498 32,072 28,457
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed financial statements.
3
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SEEQ TECHNOLOGY INCORPORATED
CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Mar. 31, Sep. 30,
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,087 $ 3,682
Restricted cash -- 3,000
Accounts receivable, less allowances 6,153 3,900
Inventories 3,120 2,230
Other current assets 489 212
--------- ---------
Total current assets 11,849 13,024
Property and equipment, net 2,394 1,500
Other assets 4,738 4,410
--------- ---------
Total assets $ 18,981 $ 18,934
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to bank $ -- $ 3,000
Accounts payable 3,800 1,938
Accrued salaries, wages and employee benefits 459 467
Other accrued liabilities 699 950
Current portion of long-term obligations 534 287
--------- ---------
Total current liabilities 5,492 6,642
Long-term obligations 2,129 1,524
--------- ---------
Total liabilities 7,621 8,166
--------- ---------
Stockholders' equity:
Common stock, $0.01 par value; 40,000,000 shares
authorized, 30,096,644 and 29,769,766 shares outstanding 301 298
Additional paid-in capital 123,246 122,854
Accumulated deficit (112,187) (112,384)
--------- ---------
Total stockholders' equity 11,360 10,768
--------- ---------
Total liabilities and stockholders' equity $ 18,981 $ 18,934
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
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SEEQ TECHNOLOGY INCORPORATED
CONDENSED STATEMENTS OF CASH FLOWS
(Increase/(Decrease) in cash and cash equivalents, in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
----------------------
Mar. 31, Mar. 31,
1996 1995
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 197 $ 964
Adjustments to reconcile net income (loss) to net cash
used for operating activities:
Depreciation and amortization 472 350
(Benefit) provision for restructuring -- (326)
(Gain) loss on equipment disposal -- (34)
Changes in assets and liabilities:
Accounts receivable (2,253) (693)
Inventories (890) (780)
Other current assets (342) 622
Other assets (328) 131
Accounts payable 1,862 668
Accrued salaries, wages and employee benefits (8) (59)
Other accrued liabilities (251) (1,309)
Other long-term obligations (53) (232)
------- -------
Net cash used for operating activities (1,594) (698)
------- -------
INVESTING ACTIVITIES
Capital expenditures (89) (228)
Proceeds on disposal of equipment -- 45
Short-term investments in restricted account 3,000 --
------- -------
Net cash provided by (used for) investing activities 2,911 (183)
------- -------
FINANCING ACTIVITIES
Payments on short term borrowings (3,000) --
Payments of capital lease obligations (307) (362)
Proceeds from issuance of stock 395 194
------- -------
Net cash used for financing activities (2,912) (168)
------- -------
Net decrease in cash and cash equivalents (1,595) (1,049)
Cash and cash equivalents at beginning of period 3,682 2,253
------- -------
Cash and cash equivalents at end of period $ 2,087 $ 1,204
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 141 $ 218
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITY:
Capital lease obligations incurred for the acquisition
of equipment $ 1,212 $ --
Issuance of stock for settlement of litigation $ -- $ 527
</TABLE>
See notes to condensed financial statements.
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SEEQ TECHNOLOGY INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. THE COMPANY
SEEQ Technology Incorporated (the "Company"), incorporated in Delaware,
was formed on January 13, 1981 to engage in the development and sale of
semiconductor devices.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements of SEEQ
Technology Incorporated ("SEEQ" or the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. These financial statements reflect, in the opinion of management,
all adjustments (which include only normal recurring adjustments, except for
those adjustments related to certain restructuring and other expenses) necessary
to present fairly the financial position and results of operations as of and for
the periods indicated.
For purposes of presentation, the Company has shown its fiscal quarters
as ending on December 31, March 31, June 30 and September 30; whereas, in fact,
the Company operates on a 52/53-week fiscal year ending on the last Sunday in
September of each year. The fiscal quarter ends are actually December 31, March
31, June 30 and September 29 for the year ending September 30, 1996 and December
25, March 26, June 25, and September 24 for fiscal 1995.
The accompanying condensed financial statements should be read in
conjunction with the financial statements and the notes thereto included in the
Company's Annual Report to Stockholders for the fiscal year ended September 30,
1995.
The results of operations for the three month and six month periods
ended March 31, 1996 are not necessarily indicative of the results expected for
the year ending September 30, 1996.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined on a first-in, first-out basis. Inventories consist of the following:
<TABLE>
<CAPTION>
Mar. 31, Sep. 30,
1996 1995
------ ------
(in thousands)
<S> <C> <C>
Raw materials $ 18 $ 16
Work in process 1,493 1,379
Finished goods 1,609 835
------ ------
$3,120 $2,230
====== ======
</TABLE>
Property and Equipment
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Property and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the assets,
generally five years. Depreciation of leasehold improvements is computed using
the shorter of the remaining term of the leases or the estimated useful lives of
the improvements. Depreciation for federal income tax purposes is computed using
accelerated methods. The following table sets forth property and equipment
during the periods indicated:
<TABLE>
<CAPTION>
Mar. 31, Sep. 30,
1996 1995
------- -------
(in thousands)
<S> <C> <C>
Machinery and equipment $ 6,695 $ 5,596
Furniture and fixtures 2,608 2,446
Leasehold improvements 361 321
------- -------
Total property and equipment, at cost 9,664 8,363
Less: Accumulated depreciation and amortization (7,270) (6,863)
------- -------
Total property and equipment, net $ 2,394 $ 1,500
======= =======
</TABLE>
Non-recurring production transfer costs
Non-recurring costs such as tooling, engineering and pre-production
wafers resulting from the transfer of in-production product to new foundries are
capitalized and amortized to cost of revenues over the shorter of: the remaining
life of the product, the term of the foundry agreement or two years.
Nonrecurring costs which are associated with the development of new products are
expensed as research and development costs when incurred. During the six month
period ending March 31, 1996 the Company capitalized $546,000 of non-recurring
production transfer costs of which $64,000 has been amortized in the same
period. Non-recurring production transfer costs in fiscal 1995 were not
material.
Net Income (Loss) Per Share
Primary and fully diluted net income per share for the three and six
month periods ended March 31, 1996 were determined using the treasury stock
method. Primary income (loss) per common and common equivalent share is computed
using the weighted average number of shares outstanding during the respective
periods, including dilutive stock options and warrants. Fully diluted income per
common and common equivalent share is computed by adjusting net income and
primary shares outstanding for the potential effect of conversion of stock
option and warrant exercises. Fully diluted earnings per share also reflects
additional dilution related to stock options due to the use of the market price
at the end of the period, when higher than the average price for the period.
Primary and fully diluted net income per share for the three and six
month periods ended March 31, 1995 were determined using the modified treasury
stock method. Under the modified treasury stock method, certain adjustments can
occur with respect to both weighted average shares and net income amounts
utilized in the calculation of earnings per share. The modified treasury stock
method can result in different earnings per share than those calculated using
the treasury stock method. Under the modified treasury stock method, all common
equivalents are assumed exercised whether dilutive or not, and the proceeds from
assumed exercise are applied in steps. First, stock is assumed to be repurchased
up to a maximum of 20% of the actual outstanding shares. Net income is then
adjusted to reflect the effect of using the remaining proceeds to reduce debt
and then acquire U.S. Government Securities. Fully diluted earnings per share is
computed by adjusting the primary shares outstanding for the effect on the
common stock equivalents of using the quarter end close price to compute the
equivalent buyback.
7
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3. LITIGATION
On November 28, 1995, Level One Communications Incorporated ("Level One") filed
a complaint against the Company, in the United States District Court of Northern
California, alleging patent infringement. In the complaint, Level One claims
that the Company has used and sold products in violation of two of Level One's
patents. Level One seeks immediate and permanent injunctive relief preventing
the Company from making, using, or selling any devices that infringe such
patents and unspecified damages. Management believes that the claims asserted by
Level One are without merit and that the outcome of these legal proceedings will
not have a material adverse effect on the Company's financial position or
results of operations.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Interim
Condensed Financial Statements and Notes thereto and the SEEQ Technology
Incorporated Annual Report and Form 10-K for the fiscal year ended September 30,
1995.
This Quarterly Report of Form 10-Q contains forward-looking statements
that involve risks and uncertainties. The Company's actual results may differ
materially from the results discussed in the forward-looking statements. Factors
that might cause such a difference include, but are not limited to, those
discussed under the caption "Factors Affecting Operating Results" contained
herein.
RESULTS OF OPERATIONS
Revenues
Net revenues were $7,387,000 in the second quarter of fiscal 1996 and
$12,188,000 for the six month period ended March 31, 1996, representing an
increase of $1,198,000 from net revenues of $6,189,000 for the second quarter of
fiscal 1995 and a decrease of $181,000 from net revenues of $12,369,000 for the
six month period ended March 31, 1995. Apple Computer stopped ordering LAN
subsystem products in March 1995. Consequently, there were no LAN subsystem
product sales in the second quarter of fiscal 1996 nor for the six month period
ended March 31, 1996, compared to LAN subsystem product revenues of $1,814,000
for the second quarter of fiscal 1995 and $3,940,000 for the six months ended
March 31, 1995. Data communication integrated circuit sales in the second
quarter of fiscal 1996 were $7,387,000, which represented an increase of
$3,012,000, or 69%, over the second quarter of fiscal 1995. Data communication
integrated circuit revenues for the six month period ended March 31, 1996 were
$12,188,000, which represented an increase of $3,759,000, or 45%, over the six
month period ended March 31, 1995. These increases were due primarily to
increases in unit sales volumes of 45% in the second fiscal quarter ending March
31, 1996 and 42% for the six month period ended March 31, 1996 over their
respective periods in the prior fiscal year. During the first quarter of fiscal
1996, production volumes were not sufficient to meet demand due primarily to
issues relating to the transfer of products to new foundries. In the second
quarter of fiscal 1996, production volumes from three foundries increased which
contributed significantly to the increase in revenue volumes.
Gross Product Margins
The Company includes in cost of revenues all costs associated with the
subcontract manufacturing, electrical testing, subcontract assembly and final
test of its integrated circuits and subsystems, warehousing, shipping, product
returns and reserves for inventory obsolescence. Allowances for product returns
are netted against revenues. Gross profit for the second quarter of fiscal 1996
was $2,513,000, an increase of $256,000 over the second quarter of fiscal 1995
primarily attributable to higher sales. Gross profit for the six month period
ended March 31, 1996 was $3,827,000, a decrease of $279,000 from the six month
period ended March 31, 1995 primarily due to increased costs associated with
start-up production costs for new products. Gross margins in future periods will
be affected primarily by revenue levels and product mix, average selling prices,
wafer yields, the introduction of new products and changes in manufacturing
costs.
Research and Development
Research and development expenditures increased from $809,000 in the
second quarter of fiscal 1995 to $918,000 in the second quarter of fiscal 1996
primarily due to an increase in new product development. As a percentage of net
revenues, research and development expenditures decreased from 13% in the second
quarter of fiscal 1995 to 12% in the second quarter of fiscal 1996 due to higher
revenues. For the six month period ended March 31, 1996, research and
development expenditures
9
<PAGE> 10
increased to $1,704,000 or 14% of revenues from $1,644,000 or 13% of revenues
for the six month period ended March 31, 1995. The Company expects that the
level of research and development spending will increase in absolute dollars in
the next several quarters as a result of increased development efforts on new
LAN products, but may vary as a percentage of net revenues.
Marketing, General and Administrative Expenses
Marketing, general and administrative expenses increased from
$1,017,000 in the second quarter of fiscal 1995 to $1,121,000 in the second
quarter of fiscal 1996, and decreased as a percentage of revenues from 16% to
15% for the same periods, respectively. For the six months ended March 31, 1996,
marketing, general and administrative expenses increased to $2,042,000 from
$1,872,000 for the six months ended March 31, 1995, representing an increase as
a percentage of revenues from 15% to 17% for the same periods, respectively.
These increases are attributable primarily to an increase in commissions payable
to outside sales representatives. The Company anticipates that the level of
marketing, general and administrative expenses will remain at similar levels in
absolute dollars in future quarters during the remainder of this fiscal year,
but are expected to vary as a percentage of net revenues.
Restructuring
During the first six months of fiscal 1995, the Company sublet the
entire facility in which its headquarters and operations were located at a
higher rental rate than previously estimated, and as a result recorded an
$842,000 reduction to its restructuring reserves. Offsetting this benefit, the
Company recorded changes in estimates to the restructuring reserves for the
EEPROM Asset Sale, litigation costs and end-user Ethernet adapter board products
write-off of $516,000, resulting in a net benefit for the six months of
$326,000. There was no restructuring charge or benefit during the first six
months of fiscal 1996. The restructuring reserve balance at September 30, 1995
of $996,000 was reduced by $252,000 to $744,000 during the six month period
ended March 31, 1996. This reduction in the reserve resulted from payments of
$185,000 for costs associated with the settlement agreement with Hualon
Microelectronics Corporation. In addition, $67,000 for rent payments in excess
of the sublease on the Company's former facility were made during the six month
period ended March 31, 1996
Interest Expense
Interest expense has resulted primarily from borrowings under the
Company's credit facility and from equipment under capital leases. Interest
expense decreased from $108,000 in the second quarter of fiscal 1995 to $36,000
in the second quarter of fiscal 1996 and from $195,000 for the six month period
ended March 31, 1995 to $119,000 for the six month period ended March 31, 1996,
as a result of the lower average balances of borrowings on the Company's credit
facility.
Interest Income and Other, Net
Interest income and other, net decreased from $113,000 in the second
quarter of fiscal 1995 to $58,000 in the second quarter of fiscal 1996 and from
$255,000 for the six month period ended March 31, 1995 to $241,000 for the six
month period ended March 31, 1996, primarily due to lower cash balances and
lower interest rates from investments of the cash balances in cash, restricted
cash and cash held in escrow invested in short-term investment instruments.
Income Taxes
The Company's provision for income taxes is computed by applying the
estimated annual effective tax rate to income before taxes. The estimated annual
effective tax rate takes into account the effects of net operating loss
carryforwards and alternative minimum taxes.
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Factors Affecting Operating Results
The Company's quarterly operating results have varied significantly in
the past and are likely to vary significantly in the future, depending on a
number of factors, many of which are outside the control of the Company. These
factors include fluctuations in manufacturing yields, the timing of introduction
of new products by the Company and its competitors, changes in the markets
addressed by the Company's products, market acceptance of the Company's and it's
customers' products, the volume and timing of orders received, changes in the
Company's product mix and customer base, the timing and extent of research and
development expenditures, the availability and cost of semiconductor wafers from
outside foundries, product obsolescence, price erosion, competitive factors,
cyclical semiconductor industry conditions and general economic conditions. The
Company's net revenue and cost of sales vary depending upon the mix of products
sold. Any unfavorable changes in manufacturing yields or product mix, delays in
new product introductions, underutilization of manufacturing capacity, increased
price competition or other factors could have a material adverse effect on the
Company's operating results and financial condition. Historically, average
selling prices in the semiconductor industry have decreased over the life of any
particular product. There can be no assurance that the average selling prices of
the Company's current or future products will not be subject to significant
pricing pressures. In addition, the Company's business is characterized by
short-term orders and shipment schedules, and customer orders typically can be
canceled or rescheduled without significant penalty to the customer. Due to the
absence of substantially noncancellable backlog, the Company typically plans its
production and inventory levels based on internal forecasts of customer demand,
which are highly unpredictable and can fluctuate substantially. In addition, the
Company is limited in its ability to reduce costs quickly in response to any
revenue shortfalls, which could have a material adverse effect on the Company's
business, operating results and financial condition. Due to all of the foregoing
factors, it is likely that in some future quarter the Company's operating
results will be below the expectations of public market analysts and investors.
In such event, the price of the Company's Common Stock would likely be
materially adversely affected.
LIQUIDITY AND CAPITAL RESOURCES
The Company has satisfied its cash requirements principally through
cash flow from operations, borrowings under bank lines of credit, capital lease
financing and the public and private sale of securities.
Management believes that existing sources of liquidity, anticipated
cash flow from operations, and borrowings under the Company's credit facility
will be adequate to satisfy its cash requirements at least through the end of
fiscal 1996. However, there can be no assurance that the Company will have
adequate resources to satisfy such requirements. It may become necessary for the
Company to raise funds from debt and/or equity financing. There can be no
assurance that such funds will be available on terms acceptable to the Company,
if at all. Issuance of additional equity securities could result in dilution to
stockholders. The inability to fund capital requirements would have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company's cash and cash equivalents balance decreased from
$3,682,000 as of September 30, 1995 to $2,087,000 as of March 31, 1996,
primarily from cash used for operating activities and for the payment of capital
lease obligations which were offset by proceeds from stock option and warrant
exercises during the six month period ended March 31, 1996.
Operating Activities
Cash flows used for operating activities increased from $698,000 in the
six months ended March 31 1995 to $1,594,000 for the six month period ended
March 31, 1996, due primarily to increases in accounts receivable, inventory and
other asset balances, which was partially offset by an increase in accounts
payable. The increase in other current assets and other assets is primarily due
to the capitalization of non-recurring foundry transfer costs.
11
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Investing Activities
Cash flows provided by investing activities of $2,911,000 during the
first six months of fiscal 1996 includes $3,000,000 from the maturity of short
term investments of restricted cash, the proceeds of which were used to pay off
the Company's short term borrowings. Capital expenditures during the six month
period ended March 31, 1996 were $1,301,000 of which $1,212,000 was leased and
$89,000 was paid in cash.
Financing Activities
Cash flows used for financing activities was $2,912,000 in the six
month period ended March 31, 1996 compared to $168,000 in the six month period
ended March 31, 1995. During the six month period ended March 31, 1996, the
Company paid off short term borrowings of $3,000,000 with restricted cash. Net
proceeds from the issuance of stock pursuant to the exercise of warrants and
stock options and the company's employee periodic stock purchase plan was
$395,000 for the first six months of fiscal 1996 compared to $194,000 during the
first six months of fiscal 1995.
In November 1993, the Company entered into a two-year line of credit
agreement with The CIT Group ("CIT"). Although the Company was not required to
make use of the bank line of credit, during the second quarter of fiscal 1994 it
used cash resources to reduce its effective short-term credit borrowings
interest rate by borrowing the minimum required borrowings of $3,000,000 under a
secured bank line of credit with CIT, and investing the proceeds in a short-term
certificate of deposit. Effective November 22, 1995, the Company renewed the
credit facility with CIT for a two year term, subject to renewal thereafter.
Under the terms of the new credit agreement, the Company may borrow up to
$5,000,000 against eligible receivables. In addition, the minimum borrowing
requirement has been reduced to $1,500,000 and is only applicable in the event
the Company has a loan balance outstanding with CIT. The credit agreement does
not contain any restrictive or financial covenants. Interest on borrowings is
payable at the lender's reference prime rate plus 2.0% per annum. There were no
borrowings under this line as of March 31, 1996.
12
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On November 28, 1995, Level One Communications Incorporated ("Level One") filed
a complaint against the Company, in the United States District Court of Northern
California, alleging patent infringement. In the complaint, Level One claims
that the Company has used and sold products in violation of two of Level One's
patents. Level One seeks immediate and permanent injunctive relief preventing
the Company from making, using, or selling any devices that infringe such
patents and unspecified damages. The Company intends to vigorously contest all
of Level One's claims. Based on the Company's limited review to date, management
believes that the claims asserted by Level One are without merit and that the
outcome of these legal proceedings will not have a material adverse effect on
the Company's financial position or results of operations. There can be no
assurance, however, that Level One will not obtain a favorable
determination in judicial proceeding, which could have a material adverse effect
on the Company's business, financial condition and results of operations. Patent
litigation is often highly complex, can extend for a protracted period of time,
can involve substantial cost to the Company and may divert the attention of the
Company's management and technical personnel, which can substantially increase
the cost of such litigation. There can be no assurance that such costs and
diversion of resources would not have a material adverse effect on the Company's
business, financial condition and results of operations.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 21, 1996 an Annual Meeting of Stockholders was held. The
following Directors were elected at this meeting:
Alan V. Gregory
Charles C. Harwood
Phillip J. Salsbury
Peter C. Chen
Other matters voted Upon:
<TABLE>
<CAPTION>
Votes
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Affirmative Negative Abstain
---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Amendment to increase the
number of shares of the
Company's common stock
available under the Company's 20,977,872 1,404,056 169,430
restated 1982 Stock Option Plan
by 1,400,000
Amendment to the Company's
1989 Non-Employee Director
Stock Option Plan to provide for a
special one-time option grants to 20,729,955 1,612,338 209,065
certain non-employee members of
the Company's Board of Directors
Ratify the appointment of Price
Waterhouse LLP as independent
accountants of the Company for 22,321,166 137,178 93,014
the fiscal year ending September
29, 1996
</TABLE>
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11.1 Schedule of Computation of Earnings Per Share
(b) No reports on Form 8-K were filed for the period for which this
report is being filed.
* * * * *
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEEQ TECHNOLOGY INCORPORATED
(Registrant)
Dated: May 10, 1996 By:
/s/Phillip J. Salsbury
-------------------------------------
Phillip J. Salsbury
President and Chief Executive Officer
Dated: May 10, 1996 By:
/s/Robert O. Hersh
-------------------------------------
Robert O. Hersh
Vice President, Finance, Chief Financial Officer
and Secretary
15
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EXHIBIT INDEX
Exhibit 11.1 Schedule of Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule
<PAGE> 1
SEEQ TECHNOLOGY INCORPORATED
EXHIBIT 11
SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------- ----------------------
Mar 31, Mar 31, Mar 31, Mar 31,
1996 1995 1996 1995
------- ------- ------- -------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
PRIMARY
Earnings:
Net income $ 490 $ 470 $ 197 $ 964
Add interest expense reduction
(as determined by the modified treasury
stock method) -- 12 -- 64
------- ------- ------- -------
As adjusted $ 490 $ 482 $ 197 $ 1,028
======= ======= ======= =======
Shares:
Average common shares outstanding 30,013 26,353 29,943 26,353
Add effect of dilutive options and warrants (as
determined by the treasury stock method and
the modified treasury stock method) 1,916 384 2,129 293
------- ------- ------- -------
As adjusted 31,929 26,737 32,072 26,646
======= ======= ======= =======
Primary earnings per share $ 0.02 $ 0.02 $ 0.01 $ 0.04
======= ======= ======= =======
FULLY DILUTED
Earnings:
Net income (loss) $ 490 $ 470 $ 197 $ 964
======= ======= ======= =======
Shares:
Average common shares outstanding 30,013 26,353 29,943 26,353
Add effect of dilutive options and warrants (as
determined by the treasury stock method and
the modified treasury stock method) 1,916 2,145 2,129 2,104
------- ------- ------- -------
As adjusted 31,929 28,498 32,072 28,457
======= ======= ======= =======
Fully diluted earnings per share $ 0.02 $ 0.02 $ 0.01 $ 0.03
======= ======= ======= =======
</TABLE>
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 2087
<SECURITIES> 0
<RECEIVABLES> 6153
<ALLOWANCES> 0
<INVENTORY> 3120
<CURRENT-ASSETS> 11849
<PP&E> 9664
<DEPRECIATION> 7270
<TOTAL-ASSETS> 18981
<CURRENT-LIABILITIES> 5492
<BONDS> 2129
0
0
<COMMON> 301
<OTHER-SE> 11059
<TOTAL-LIABILITY-AND-EQUITY> 18981
<SALES> 12188
<TOTAL-REVENUES> 12188
<CGS> 8361
<TOTAL-COSTS> 8361
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 119
<INCOME-PRETAX> 203
<INCOME-TAX> 6
<INCOME-CONTINUING> 197
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 197
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
