<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
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, 1997
[ ] 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
--------------------
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 30,288,379
(Class of common stock) (Shares outstanding at March 31, 1997)
------------------------------------------------------------------------------
This report on Form 10-Q, including all exhibits, contains 15 pages.
1
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SEEQ TECHNOLOGY INCORPORATED
FORM 10-Q
Table of Contents
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements................................................................. 3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......... 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................................................. 12
Item 2. Changes in Securities.......................................................................... 12
Item 3. Defaults upon Senior Securities................................................................ 12
Item 4. Submission of Matters to a Vote of Security Holders............................................ 13
Item 5. Other Information.............................................................................. 13
Item 6. Exhibits and Reports on Form 8-K............................................................... 13
</TABLE>
2
<PAGE> 3
This Quarterly Report of Form 10-Q may contain forward-looking statements that
involve risks and uncertainties. The Company's actual results may differ
materially from the results discussed in any such forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed under the captions "Legal Proceedings" and "Factors Affecting
Operating Results" contained herein and under the caption "Business Risks" in
the Company's fiscal 1996 annual report on Form 10-K.
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,
1997 1996 1997 1996
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Revenues $ 8,031 $ 7,387 $ 14,655 $ 12,188
Cost of revenues 5,059 4,874 9,619 8,361
-------- -------- -------- --------
Gross profit 2,972 2,513 5,036 3,827
-------- -------- -------- --------
Operating expense
Research and development 902 918 1,682 1,704
Marketing, general and administrative 1,444 1,121 2,696 2,042
-------- -------- -------- --------
Total operating expenses 2,346 2,039 4,378 3,746
-------- -------- -------- --------
Income from operations 626 474 658 81
Interest expense (87) (36) (170) (119)
Interest and other income, net 95 58 181 241
-------- -------- -------- --------
Income before income taxes 634 496 669 203
Provision for income taxes 20 6 21 6
-------- -------- -------- --------
Net income $ 614 $ 490 $ 648 $ 197
======== ======== ======== ========
Net income per share: $ 0.02 $ 0.02 $ 0.02 $ 0.01
Shares used in per share calculation: 31,571 31,929 31,742 32,072
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE> 4
SEEQ TECHNOLOGY INCORPORATED
CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, September 30,
1997 1996
--------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,136 $ 3,974
Accounts receivable, less allowances 6,023 8,235
Inventories 5,504 5,352
Other current assets 292 368
------- -------
Total current assets 15,955 17,929
Property and equipment, net 4,321 4,258
Other assets 4,347 4,248
======= =======
Total assets $24,623 $26,435
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,531 $ 6,271
Accrued salaries, wages and employee benefits 662 586
Other accrued liabilities 1,037 1,024
Current portion of long-term obligations 983 895
------- -------
Total current liabilities 6,213 8,776
Long-term obligations 3,487 3,466
Stockholders' equity: 14,923 14,193
======= =======
Total liabilities and stockholders' equity $24,623 $26,435
======= =======
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE> 5
SEEQ TECHNOLOGY INCORPORATED
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
--------------------
Mar. 31, Mar. 31,
1997 1996
------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income/(loss) $ 648 $ 197
Adjustments to reconcile net income:
Depreciation and amortization 743 472
Changes in assets and liabilities:
Accounts receivable 2,212 (2,253)
Inventories (152) (890)
Prepaid expenses and other assets (162) (670)
Accounts payable (2,740) 1,862
Accrued liabilities and long term 26 (312)
obligations
------- -------
Net cash provided by (used for) operating activities 575 (1,594)
------- -------
INVESTING ACTIVITIES:
Capital expenditures (25) (89)
Short-term investments in restricted account -- 3,000
------- -------
Net cash provided by (used for) investing activities (25) 2,911
------- -------
FINANCING ACTIVITIES:
Payments on short term borrowings -- (3,000)
Payments of capital lease obligations (470) (307)
Proceeds from issuance of stock 82 395
------- -------
Net cash used for financing activities (388) (2,912)
------- -------
Net increase (decrease) in cash and cash equivalents 162 (1,595)
Cash and cash equivalents at beginning of period 3,974 3,682
======= =======
Cash and cash equivalents at end of period $ 4,136 $ 2,087
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 170 $ 141
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITY:
Capital lease obligations for the acquisition
of equipment $ 642 $ 1,212
</TABLE>
See accompanying notes to condensed financial statements.
5
<PAGE> 6
SEEQ TECHNOLOGY INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. 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 rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements and 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, 1996. These financial
statements reflect, in the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position and results of operations as of and for the periods indicated.
The results of operations for the six months ended March 31, 1997 are
not necessarily indicative of the results expected for the year ending September
30, 1997.
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 29, March
30, June 29 and September 28 for the year ending September 30, 1997 and December
31, March 31, June 30, and September 29 for the year ending September 30, 1996.
NOTE 2. INVENTORIES
Inventories were comprised of the following:
<TABLE>
<CAPTION>
Mar. 31, Sep. 30,
1997 1996
----------- -----------
(in thousands)
<S> <C> <C>
Raw materials $ 25 $ 22
Work in process 1,799 3,147
Finished goods 3,680 2,183
----------- -----------
$ 5,504 $ 5,352
=========== ===========
</TABLE>
NOTE 3. NON-RECURRING PRODUCTION TRANSFER COSTS
Non-recurring costs such as tooling and engineering costs resulting
from transferring production of current products 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.
Non-recurring costs which are associated with the development of new products
are expensed as research and development costs when incurred. During the six
month periods ended March 31, 1997 and March 31, 1996 the Company capitalized
$250,000 and $546,000 of non-recurring production transfer costs, respectively.
Amortization of these costs for the six month periods ended March 31, 1997 and
March 31, 1996 was $245,000 and $64,000, respectively.
6
<PAGE> 7
NOTE 4. NET INCOME PER SHARE
Primary and fully diluted net income (loss) per share for the three and
six month periods ended March 31, 1997 and March 31, 1996 were determined using
the treasury stock method. Net income 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.
Statement of Financial Accounting Standards No. 128 (FAS 128),
"Earnings Per Share (EPS)", was issued in February 1997. Under FAS 128, the
Company will be required to disclose basic EPS and diluted EPS, for all periods
for which an income statement is presented, which will replace the disclosures
currently being made for primary EPS and fully-diluted EPS. FAS 128 requires
adoption for fiscal periods ending after December 15, 1997. Pro forma disclosure
of basic EPS and diluted EPS for the current reporting and comparable periods in
the prior year are as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
--------------------- -----------------------
Mar. 31 Mar. 31, Mar. 31, Mar. 31,
Earnings Per Share: 1997 1996 1997 1996
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Basic $ 0.02 $ 0.02 $ 0.02 $ 0.01
Diluted $ 0.02 $ 0.02 $ 0.02 $ 0.01
</TABLE>
NOTE 5. 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. The Company intends to vigorously contest
all of Level One's claims. Based on the Company's 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, although there can be
no assurance as to such matters. 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.
On June 25, 1996, Praxair, Inc. ("Praxair") filed a complaint against
the Company arising out of a nitrogen supply contract between the Company and
the plaintiff. The Complaint purports to state causes of action for breach of
contract and promissory estoppel. The Complaint alleges that as a result of
purported breaches of the nitrogen supply contract, the Company is obligated to
pay plaintiff approximately $1,300,000 plus cost of suit, not including
attorney's fees. The Company intends to contest all of Praxair's claims
vigorously. Based on the Company's review to date, management believes that the
claims asserted by Praxair are without merit. However, there can be no assurance
that Praxair will not obtain a favorable result in the lawsuit which could have
a material adverse effect on the Company's business, financial condition and
results of operations.
7
<PAGE> 8
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,
1996.
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 any such forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed under the captions "Legal Proceedings" and "Factors Affecting
Operating Results" contained herein and under the caption "Business Risks" in
the Company's fiscal 1996 annual report on Form 10-K.
RESULTS OF OPERATIONS
Revenues
Net revenues were $8,031,000 in the second quarter of fiscal 1997, an
increase of $644,000 or 9% over net revenues of $7,387,000 for the second
quarter of fiscal 1996. Net revenues were $14,655,000 in the six month period
ended March 31, 1997 compared to $12,188,000 for the six month period ended
March 31, 1996, an increase of $2,467,000 or 20%. During the first six months of
fiscal 1996, production volumes were not sufficient to meet demand due primarily
to issues relating to the transfer of products to new foundries. During the
first six months of fiscal 1997, the Company was obtaining adequate levels of
product from its foundries and experienced demand for its' Fast Ethernet
products. In the second quarter of fiscal 1997, products servicing the Fast
Ethernet market accounted for approximately 48% of revenues compared to 25% of
revenues for the second quarter of fiscal 1996. Revenues from Fast Ethernet
products were approximately 46% and 26% of total revenues for the six month
periods ended March 31, 1997 and 1996, respectively. Two customers, Bay Networks
and 3Com accounted for approximately 27% and 15% of revenues in the quarter
ended March 31, 1997, respectively. Bay Networks and Solectron accounted for
approximately 34% and 14% of revenues for the three months ended March 31, 1996,
respectively. For the six month period ended March 31, 1997, Bay Networks
accounted for approximately 23% of revenues; for the six month period ended
March 31, 1996, Bay Networks and Serial Systems accounted for approximately 23%
and 15% of revenues, respectively. No other customer accounted for more than 10%
of revenues for the three and six month periods ended March 31, 1997 and March
31, 1996.
Gross Product Margins
The Company includes in cost of revenues all costs associated with
subcontractor manufacturing, electrical testing, subcontractor 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 1997 was $2,972,000 or 37% of net revenues, an increase of $459,000 over
the second quarter of fiscal 1996's gross profit of $2,513,000 or 34% of net
revenues. For the six month period ended March 31, 1997, the gross profit margin
was $5,036,000 or 34% of net revenues, compared to $3,827,000 or 31% of revenues
for the comparable period of fiscal 1996. The increased gross profit margins are
primarily attributable to higher revenues, product mix, shift to higher margin
products and lower production costs which were partially offset by the
underutilization of manufacturing capacity. Gross margins in future periods will
be affected primarily by revenue levels and product mix, average selling prices,
factory utilization, wafer yields, the introduction of new products and changes
in manufacturing costs.
8
<PAGE> 9
Research and Development
Research and development expenditures decreased $16,000 from $918,000
in the second quarter of fiscal 1996 to $902,000 in the second quarter of fiscal
1997 primarily due to a decrease in outside consulting services for new product
development and partially offset by an increase in payroll costs. For the six
month periods ended March 31, 1996 and 1997, research and development expenses
decreased $22,000 from $1,704,000 to $1,682,000, respectively. As a percentage
of net revenues, research and development expenditures decreased from 12% in the
second quarter of fiscal 1996 to 11% in the second quarter of fiscal 1997 and
from 14% to 11% for the six month periods ended March 31, 1996 and 1997,
respectively, primarily due to higher revenues. 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
$1,121,000, or 15% of revenues in the second quarter of fiscal 1996 to
$1,444,000, or 18% or revenues in the second quarter of fiscal 1997. For the six
month periods ended March 31, 1996 and 1997, marketing, general and
administrative expenses increased from $2,042,000, or 17% of revenues to
$2,696,000, or 18% or revenues, respectively. These dollar increases are
primarily attributable to higher commissions payable to outside sales
representatives due to the growth in net revenues and increased expenses
associated with legal proceedings. The Company anticipates that the level of
marketing, general and administrative expenses will vary in future periods based
on expected revenue growth.
Interest and other, net
Interest and other income, net increased from $58,000 in the second
quarter of fiscal 1996 to $95,000 in the second quarter of fiscal 1997 and
decreased from $241,000 for the six months ended March 31, 1996 to $95,000 for
the six months ended March 31, 1997. The fluctuations in interest income are
directly affected by average cash balances. Interest expense increased from
$36,000 in the second fiscal quarter of 1996 to $87,000 in the second quarter of
fiscal 1997, due primarily to increased capital lease obligations. Interest
expense for the six month period ended March 31, 1997, decreased to 170,000
compared to $119,000 for the six months ended March 31, 1996 as a result of
lower average balances of borrowings on the Company's credit facility offset by
increases in interest expense from capital lease obligations.
Income Taxes
The Company's provision for income taxes is due primarily to expected
alternative minimum state and federal income taxes.
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 its
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,
litigation expenses, cyclical semiconductor industry conditions and general
economic conditions. The Company's net revenue and cost of revenues vary
depending upon the mix of products sold. Any unfavorable change 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
9
<PAGE> 10
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 significant 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 the foregoing factors, it is possible 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.
The Company 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 1997. 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 increased from
$3,974,000 as of September 30, 1996 to $4,136,000 as of March 31, 1997,
primarily from cash provided by operating activities, partially offset by
capital expenditures and payments of capital lease obligations.
Operating Activities
Cash flows provided by operating activities were $575,000 for the six
months ended March 31, 1997 compared to cash flows used for operating activities
of $1,594,000 for the six months ended March 31, 1996. This reflects higher net
income and the collection of accounts receivable, offset in part by the decrease
in accounts payable.
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. Net capital expenditures were $89,000
during the six month period ended March 31, 1996 and $25,000 for the same period
ended March 31, 1997.
Financing Activities
Cash flows used for financing activities were $388,000 in the six month
period ended March 31, 1997 compared to $2,912,000 in the six month period ended
March 31, 1996. 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
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<PAGE> 11
compared to $82,000 during the first six months of fiscal 1997. Principal
payments against capital lease obligations were $307,000 for the six months
ended March 31, 1996 compared to $470,000 for the six months ended March 31,
1997.
In November 1993, the Company entered into a two-year line of credit
agreement, subject to renewal, 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 (restricted cash). Effective
November 22, 1995, the Company renewed the credit facility with CIT for a two
year term. Under the renewed credit agreement, the minimum borrowing requirement
was reduced to $1,500,000 and was only applicable in the event the Company had a
loan balance outstanding with CIT. Thus the Company liquidated its restricted
cash and repaid the note payable to bank in the first quarter of fiscal 1996.
The credit agreement with CIT was terminated by the Company in August 1996.
In August 1996, the Company entered into a one-year revolving line of
credit agreement with Silicon Valley Bank. Under the terms of the bank revolving
line of credit, the Company could borrow the lesser of $7,000,000 or an amount
determined by a formula applied to eligible accounts receivable, at a variable
interest rate equal to the prime rate plus 0.75%. The revolving line of credit
is secured by a security interest in the Company's assets, including
intellectual property and expires August 18, 1997. The loan agreement requires
the Company to maintain a profit each fiscal year and to maintain certain
financial ratios. The loan agreement also requires the Company to maintain a
level of tangible net worth which, in effect, limits the ability of the Company
to make payments of cash dividends. There were no borrowings outstanding under
this revolving line of credit as of March 31, 1997.
11
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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 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.
On June 25, 1996, Praxair, Inc. ("Praxair") filed a complaint against the
Company arising out of a nitrogen supply contract between the Company and the
plaintiff. The Complaint purports to state causes of action for breach of
contract and promissory estoppel. The Complaint alleges that as a result of
purported breaches of the nitrogen supply contract, the Company is obligated to
pay plaintiff approximately $1,300,000 plus cost of suit, not including
attorney's fees. The Company intends to contest all of Praxair's claims
vigorously. Based on the Company's review to date, management believes that the
claims asserted by Praxair are without merit. However, there can be no assurance
that Praxair will not obtain a favorable result in the lawsuit which could 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 20, 1997 an Annual Meeting of Stockholders was held. The
following Directors were elected at this meeting:
Alan V. Gregory
Charles C. Harwood
Phillip J. Salsbury
Other matters voted Upon:
<TABLE>
<CAPTION>
Votes
----------------------------------------------------------
Affirmative Negative Abstain
----------------- ---------------- ---------------
<S> <C> <C> <C>
Ratify the appointment of Price
Waterhouse LLP as independent
accountants of the Company for the 25,597,273 88,373 92,102
fiscal year ending September 28,
1997
</TABLE>
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed for the period for which this
report is being filed.
13
<PAGE> 14
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 7, 1997 By:
_/s/ Phillip J. Salsbury
------------------------------------
Phillip J. Salsbury
President and Chief Executive Officer
Dated: May 7, 1997 By:
_/s/ Gary R. Fish
------------------------------------
Gary R. Fish
Vice President, Finance, Chief Financial
Officer and Secretary
14
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,136
<SECURITIES> 0
<RECEIVABLES> 6,023
<ALLOWANCES> 0
<INVENTORY> 5,504
<CURRENT-ASSETS> 15,955
<PP&E> 12,303
<DEPRECIATION> 7,982
<TOTAL-ASSETS> 24,623
<CURRENT-LIABILITIES> 6,213
<BONDS> 3,487
0
0
<COMMON> 303
<OTHER-SE> 14,620
<TOTAL-LIABILITY-AND-EQUITY> 24,623
<SALES> 14,655
<TOTAL-REVENUES> 14,655
<CGS> 9,619
<TOTAL-COSTS> 9,619
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 170
<INCOME-PRETAX> 669
<INCOME-TAX> 21
<INCOME-CONTINUING> 648
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 648
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
