27
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934
For the period ended July 1, 1995.
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 0-14016
MAXTOR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 770123732
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) (Identification No.)
211 River Oaks Parkway, San Jose, CA 95134
(Address of principal executive offices) (Zip Code)
(408) 432-1700
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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.
X Yes No
----- -----
33,484,665 shares of Common Stock and 19,489,000 shares of Class A
Common Stock were issued and outstanding as of August 4, 1995.
This quarterly report on Form 10-Q contains 31 pages of which this is
page number 1.
MAXTOR CORPORATION
FORM 10-Q
July 1, 1995
INDEX
Part I. Financial Information Page
Item 1. Consolidated Financial Statements
Consolidated Statements of Operations -
Three Months Ended July 1, 1995
and June 25, 1994 3
Consolidated Balance Sheets-
July 1, 1995 and March 25, 1995 4-5
Consolidated Statements of Cash Flows-
Three Months Ended July 1, 1995
and June 25, 1994 6-7
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-14
Part II. Other Information
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signature Page 15
PART I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
MAXTOR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
-------------------------
July 1, June 25,
1995 1994
---------- ----------
Revenue $ 315,894 $ 218,310
Cost of revenue 286,033 194,286
---------- ----------
Gross margin 29,861 24,024
---------- ----------
Operating expenses:
Research and development 22,791 14,036
Selling, general and administrative 18,976 21,045
---------- ----------
Total operating expenses 41,767 35,081
---------- ----------
Loss from operations (11,906) (11,057)
Interest expense (1,820) (1,971)
Interest income 552 1,439
---------- ----------
Loss before income taxes (13,174) (11,589)
Provision for income taxes 653 600
---------- ----------
Net loss $ (13,827) $ (12,189)
========== ==========
Net loss per share $ (0.27) $ (0.24)
========== ==========
Shares used in computing net loss per share 52,085 49,925
========== ==========
See accompanying notes.
MAXTOR CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
July 1, March 25,
1995 1995
----------- -----------
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 82,227 $ 96,518
Short-term investments - 11,998
Accounts receivable, net of allowance
for doubtful accounts of $3,168 at
July 1, 1995 and $3,850 at
March 25, 1995 103,084 111,530
Inventories:
Raw materials 51,166 40,528
Work-in-process 30,623 28,398
Finished goods 35,113 20,754
---------- ----------
116,902 89,680
Prepaid expenses and other 11,837 8,695
---------- ----------
Total current assets 314,050 318,421
Property, plant and equipment, at cost:
Buildings 22,593 22,575
Machinery and equipment 165,804 146,020
Furniture and fixtures 12,381 12,177
Leasehold improvements 9,298 9,262
---------- ----------
210,076 190,034
Less accumulated depreciation and
amortization (140,002) (133,890)
---------- ----------
Net property, plant and equipment 70,074 56,144
Other assets 7,173 7,282
---------- ----------
$ 391,297 $ 381,847
========== ==========
See accompanying notes.
MAXTOR CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Continued)
July 1, March 25,
1995 1995
----------- ---------
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 30,000 $ 30,000
Accounts payable 157,084 136,746
Income taxes payable 7,003 6,807
Accrued payroll and payroll-related
expenses 13,755 14,802
Accrued warranty 22,495 25,058
Accrued special and restructuring 434 635
Accrued expenses 22,814 18,972
Long-term debt and capital lease
obligations due within one year 2,853 2,957
---------- ----------
Total current liabilities 256,438 235,977
Long-term debt and capital lease
obligations due after one year 101,354 101,967
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value,
5,000,000 shares authorized; no
shares issued or outstanding - -
Class A common stock, $0.01 par value,
19,480,000 shares authorized, issued
and outstanding 195 195
Common stock, $0.01 par value,
180,520,000 shares authorized;
issued and outstanding:
July 1, 1995 - 33,062,304 shares;
March 25, 1995 - 32,217,287 shares 331 322
Additional paid-in capital 330,777 327,357
Accumulated deficit (297,798) (283,971)
---------- ----------
Total stockholders' equity 33,505 43,903
---------- ----------
$ 391,297 $ 381,847
========== ==========
See accompanying notes.
MAXTOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
-------------------------
July 1, June 25,
1995 1994
----------- -----------
Increase (decrease) in cash and
cash equivalents
Cash flows from operating activities:
Net loss $ (13,827) $ (12,189)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 9,089 10,734
Loss on disposal of property, plant
and equipment 28 17
Change in assets and liabilities:
Accounts receivable 8,446 11,805
Inventories (27,222) (1,466)
Prepaid expenses and other (3,142) 1,026
Accounts payable 20,338 (24,494)
Income taxes payable 196 92
Accrued payroll and payroll-related
expenses (1,047) 730
Accrued warranty (2,563) (1,055)
Accrued special and restructuring (201) 182
Accrued expenses 3,842 (11,046)
----------- -----------
Total adjustments 7,764 (13,475)
----------- -----------
Net cash used in operating activities (6,063) (25,664)
----------- -----------
Cash flows from investing activities:
Purchase of available-for-sale investments - (25,094)
Proceeds from maturity of available-for-
sale investments 11,998 7,429
Purchase of property, plant and equipment (24,049) (5,445)
Proceeds from disposal of property, plant
and equipment 79 128
Other 1,153 (818)
----------- -----------
Net cash used in investing activities (10,819) (23,800)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of debt - 59
Principal payments on debt, including
capital lease obligations (838) (1,328)
Proceeds from issuance of common stock,
net of notes receivable, stock
repurchases and tax benefits 3,429 131
----------- -----------
Net cash provided by (used in) financing
activities 2,591 (1,138)
----------- -----------
Net change in cash and cash equivalents (14,291) (50,602)
Cash and cash equivalents at beginning
of period 96,518 144,520
----------- -----------
Cash and cash equivalents at end of period $ 82,227 $ 93,918
=========== ===========
See accompanying notes.
(In thousands)
(Unaudited) Three Months Ended
-----------------------------------------------------------------------
July 1, June 25,
1995 1994
-----------------------------------------------------------------------
Supplemental disclosures of cash flow
information:
Cash paid (received) for:
Interest $ 196 $ 279
Income taxes 470 248
Income tax refunds - (11)
Supplemental information on noncash
investing and financing activities:
Capital lease obligations $ 121 $ 22
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MAXTOR CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
1. Consolidated financial statements
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
consolidated financial statements include the accounts of Maxtor
Corporation (Maxtor or the Company) and its wholly-owned subsidiaries.
In connection with the sale of the assets of Storage Dimensions, Inc.
(SDI), formerly a wholly-owned subsidiary of the Company, Maxtor
acquired a 32.8% interest in the company formed for the purpose of
purchasing the net assets of SDI. Maxtor accounts for its investment
under the equity method. All significant intercompany transactions have
been eliminated in consolidation. All adjustments of a normal recurring
nature which, in the opinion of management, are necessary for a fair
statement of the results for the interim periods have been made. It is
recommended that the interim financial statements be read in conjunction
with the Company's consolidated financial statements and notes thereto
for the fiscal year ended March 25, 1995. Interim results are not
necessarily indicative of the operating results expected for later
quarters or the full fiscal year.
The Company maintains a 52/53-week fiscal year cycle. Fiscal year 1996
will be comprised of 53 weeks. The first quarter of fiscal year 1996
was comprised of 14 weeks; remaining quarters will be comprised of 13
weeks. Fiscal year 1995 was comprised of 52 weeks; all quarters were
comprised of 13 weeks.
2. Short-term borrowings
In September 1993, the Company obtained a secured, asset-based revolving
line of credit. The original committed line of credit provided for
borrowings up to $76.0 million over a two-year term and is secured by
receivables, certain inventories and other assets. This revolving line
of credit includes sublines for letters of credit and bears interest at
various rates. Borrowings under this line of credit are limited to a
percentage of eligible receivables. The agreement includes covenants to
maintain certain financial ratios and precludes the Company from paying
cash dividends. On June 17, 1994, the Company received an amendment to
its line of credit for the minimum operating profit which is measured at
the end of each quarter. With such amendment, the Company was in
compliance with all financial covenants during the quarter ended June
25, 1994. On October 11, 1994, the Company received an unconditional
waiver of defaults of minimum operating profit, minimum net worth and
leverage ratio covenants defaults that occurred as of the fiscal quarter
ended September 24, 1994. On October 31, 1994, the Company received
another amendment to its line of credit with respect to each of the
financial covenants that are measured at the end of each fiscal quarter
and fiscal year end. The amendment extended the commitment on the
revolving line of credit for an additional year, thereby providing for
borrowings over a two-year term, ending September 1996. The Company
also elected to reduce its line of credit from $76.0 million to $50.0
million. On August 2, 1995, the Company received an unconditional
waiver of defaults of minimum operating profit and capital expenditures
covenants that occurred as of the fiscal quarter ended July 1, 1995.
This waiver enables the Company to borrow, if necessary, through the
fiscal quarter ending September 30, 1995. As of July 1, 1995, $30.0
million of borrowings and $1.3 million of letters of credit were
outstanding. The $30.0 million of borrowings was fully repaid the first
week after fiscal quarter end. The balance available for additional
borrowings under this line of credit at July 1, 1995 was approximately
$15.5 million using the July 1, 1995 borrowing base.
On July 20, 1995, the Company and Hyundai Electronics Industries Co.,
Ltd. (HEI) entered into a memorandum of understanding under which HEI
will provide a $100 million corporate guarantee, subject to negotiation
and execution of a definitive agreement. The Company intends to obtain
a $100 million credit facility supported by the HEI guarantee during the
second quarter of fiscal year 1996.
3. Net loss per share
Net loss per share is based upon the weighted average number of shares
of all classes of common stock outstanding during the quarters ended
July 1, 1995 and June 25, 1994.
4. Contingencies
As part of the acquisition of the MiniScribe business in June 1990, the
Company was assigned a patent license agreement between MiniScribe and
Rodime plc (Rodime) covering patents related to 3.5-inch disk drives.
The Company believes that the assignment was valid; however, Rodime has
taken the position that the assignment was invalid and would not in any
event cover 3.5-inch drives manufactured and sold by the Company before
the acquisition of MiniScribe's assets. In February 1993, Maxtor
commenced an action for declaratory relief in the U. S. Bankruptcy Court
in Denver, Colorado seeking a judgment that the assignment was valid.
Rodime filed a denial and counterclaim for patent infringement. In
April 1994, the relevant claims of the Rodime patent at issue in
Rodime's counterclaims were declared invalid in litigation between
Rodime and another disk drive manufacturer. The Company's litigation
with Rodime has been stayed pending Rodime's appeal of the finding of
invalidity.
Certain other claims, including other patent infringement claims,
against the Company have arisen in the course of its business. There is
presently no litigation involving such claims, and the Company believes
the outcome of these claims and the claim concerning Rodime described
above will not have a material adverse effect, if any, on the Company's
financial position or results of operations.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.
RESULTS OF OPERATIONS
General
Since its inception in 1982, Maxtor Corporation (Maxtor or the Company)
has been subject to the highly cyclical nature of the disk drive
industry. The industry is subject to rapid technological change and
short product life cycles. The industry is also intensely competitive
and significant price erosion is typical during the life of a product.
At times the industry is subject to excess production capacity, and
component cost and availability pressures. In addition to being
impacted by these industry factors, the Company has been less successful
than its competitors in managing product transitions and has been unable
to bring certain products to market in a timely and cost effective
manner. Further, many of the Company's competitors have greater
financial and other resources and broader product lines than the Company
with which to compete in this environment.
As a result of the factors discussed above and others, the Company has
incurred operating losses during each of the last ten consecutive fiscal
quarters, including the fourth quarter of fiscal year 1995 for which the
Company reported net income of approximately $1.1 million as a result of
a non-recurring gain of approximately $10 million from the sale of the
Company's interest in Maxoptix Corporation. Primarily as a result of
continuing pricing pressures and other competitive factors, component
availability, cost and time-to-market issues with regard to its new
products, and general industry conditions, the Company was not
profitable during the first quarter of fiscal year 1996 and the Company
does not expect to be profitable during the remainder of fiscal year
1996.
As noted above, the disk drive industry is subject to rapid
technological change and short product life cycles as data storage
manufacturers continually strive for smaller form factors, larger
storage capacities, higher performance and lower cost. Shorter product
life cycles also increase the importance of the Company's ability to
successfully manage product transitions. The Company has been less
successful than its competitors in managing product transitions, and
successful new products introduced by competitors have tended to
displace older products, including the Company's products. The failure
to adequately manage product transitions could result in the loss of
market opportunities, decreased sales of existing products, cancellation
of products or product lines, the accumulation of obsolete and excess
inventory and unanticipated charges related to obsolete capital
equipment. The Company's ability to anticipate market trends and to
successfully develop, manufacture in volume and sell new products in a
timely manner and at favorable gross margins will be important factors
affecting the Company's future results and there can be no assurance
that the Company will be successful in such efforts.
The disk drive industry is intensely competitive and significant price
erosion is typical during the life of a product. As a result of the
rapid technological change and short product life cycles characteristic
of the industry, bringing new products to market on a timely basis has
become increasingly critical to competing in this price competitive
environment. When a new product is not brought to market on a timely
basis, the selling price of older products generally must be reduced in
order to compete effectively with competitors' new products, which are
being produced at lower costs. If competitors introduce products which
offer greater capacity, better performance, lower prices or any
combination of these factors, the Company's results of operations would
be adversely affected. Due to the narrowness of the Company's product
offerings relative to its competition, any delay in bringing a product
to market will have a more significant adverse effect on the Company's
results of operations than a similar delay would have on its
competitors' results of operations. Although the Company expects that
price erosion for certain products will continue during fiscal year 1996
at a level near or below the erosion experienced in the first quarter of
fiscal year 1996, there can be no assurance that price erosion will not
increase substantially.
As a result of volatile business conditions in the personal computer
(PC) industry, including the trend toward consolidation among PC
manufacturers, sales to original equipment manufacturers (OEMs) have
become increasingly important to the success of the disk drive industry
participants. Although the Company intends to continue in its efforts
to increase its share of the OEM market, there can be no assurance that
the Company will be successful in such efforts. The Company continues
to be heavily dependent on the distribution channel, which subjects the
Company to certain pricing pressures and other factors unique to that
channel, including historically higher levels of product returns
compared to the levels of returns experienced with OEM customers.
The quality and yield of the Company's products is highly dependent on
the Company's ability to obtain high-quality components and sub-
assemblies, and its internal manufacturing processes. In the past, the
Company's operating results have been affected by production delays and
quality problems resulting from its inability to obtain certain key
components and by the failure of certain components to meet requisite
quality standards. However, the Company has implemented a number of
programs to improve the quality of its key components and subassemblies,
and its internal manufacturing processes. As a result of these efforts,
the Company has made significant strides in improving the quality of its
products. The Company believes that it must continue to focus on
product quality to improve its competitive position in the disk drive
industry.
The Company's manufacturing process requires large volumes of high-
quality and low-cost components supplied by outside suppliers. The
Company periodically receives communication from vendors that they may
be unable to supply required volumes of certain key components. While
the Company has qualified and continues to qualify multiple sources for
many components, it is reliant on, and will continue to be reliant on,
single sources for many semi-custom and custom integrated circuits and
other key components. The Company does not have long-term supply
contracts with most of its single source vendors, some of which are
companies with limited financial and operational resources. The Company
intends to continue to pursue qualification of alternative sources for
single source components where practicable; the Company believes,
however, that it will have to continue to utilize leading edge
components which may only be available from a single source. With the
expansion of production experienced by the disk drive industry during
fiscal year 1995 and continuing into fiscal year 1996, shortages of
certain key components for the disk drive industry have increased, the
Company has experienced shortages, and the Company expects that industry
shortages and increased costs of key components will continue into
future quarters. The Company will continue to aggressively work with
its vendor base to minimize its component supply exposure. There can be
no assurance, however, that the Company will be successful in such
efforts or that in the future the Company's vendors will meet the
Company's needs for required volumes of high-quality components in a
timely and cost effective manner.
FIRST QUARTER FISCAL YEAR 1996 COMPARED TO FIRST QUARTER FISCAL YEAR
1995
-------------------------------------------------------------
(In millions) July 1, June 25,
Fiscal quarter ended 1995 1994 Change
-------------------------------------------------------------
Revenue $ 315.9 $ 218.3 $ 97.6
Gross margin $ 29.9 $ 24.0 $ 5.8
As a percentage of revenue 9.5% 11.0%
Net loss $ (13.8) $ (12.1) $ (1.6)
As a percentage of revenue (4.4%) (5.6%)
Net loss per share $ (0.27) $ (0.24) $ (0.03)
-------------------------------------------------------------
Revenue
Revenue for the first quarter of fiscal year 1996 increased by nearly
45% from the same quarter of the prior fiscal year generally as a result
of an increase in unit volumes and a shift in product mix to higher-
capacity product offerings, offset in part by competitive pricing
pressures. Unit volumes increased by nearly 80% from approximately 1.0
million units for the first quarter of fiscal year 1995 to approximately
1.9 million units for the first quarter of fiscal year 1996. In terms
of a shift in product mix, approximately 90% of the Company's first
quarter fiscal year 1996 unit volume was comprised of drives with a
capacity of 540 megabytes (MB) or higher, whereas the Company's unit
volume for the first quarter of the prior fiscal year was primarily
comprised of drives with a capacity of 540MB or less. In terms of
competitive pricing pressures, average unit selling prices, in terms of
megabyte per dollar, dropped substantially between the first quarters of
fiscal years 1995 and 1996, particularly related to 540MB or less
product offerings. Revenue for the first quarter of fiscal year 1996
also reflects a 14-week quarter as compared to a 13-week quarter for the
same quarter of the prior year. The first quarter was extended to
realign fiscal year end periods for the 53-week fiscal year 1996; all
other fiscal year 1996 quarters are 13-week quarters. Revenue for the
first quarter of fiscal year 1995 was negatively impacted by a
significant shortage in required volumes of a key component which
delayed certain product shipments into the second quarter of fiscal year
1995; the prior year first quarter was also negatively impacted as a
result of the Company's decision in the latter half of fiscal year 1994
to discontinue certain unprofitable products.
During the first quarter of fiscal year 1996, the Company did not have
any customer which accounted for 10% or greater of the Company's
revenue. During the first quarter of fiscal year 1995, the Company had
one customer which accounted for approximately 14% of the Company's
revenue.
Gross margin
Gross margin as a percentage of revenue declined to 9.5% for the first
quarter of fiscal year 1996 from 11.5% for the first quarter of fiscal
year 1995. Despite the significant increase in unit volume and the
shift to higher capacity products as discussed earlier, gross margin
declined primarily as a result of the substantial drop in average unit
selling prices, in terms of megabytes per dollar. In addition, as a
result of industry-wide growth in unit volumes, shortages of certain key
components occurred during the first quarter of fiscal year 1996 which
negatively impacted the Company's margin.
As discussed earlier, the Company expects that industry shortages and
increased costs of key components will continue into future quarters.
The Company will continue to aggressively work with its vendor base to
minimize its component supply exposure. There can be no assurance,
however, that the Company will be successful in such efforts or that in
the future the Company's vendors will meet the Company's needs for
required volumes of high-quality components in a timely and cost
effective manner.
Given the cyclical nature of the disk drive industry and the uncertainty
of the pricing environment in particular, there can be no assurance that
the Company will be able to sustain its current gross margin and the
Company anticipates that gross margin will decline during the second
quarter of fiscal year 1996. The Company will continue its efforts to
reduce its average unit manufacturing costs and to introduce and produce
in volume new higher-margin products in an effort to improve gross
margin during the remainder of fiscal year 1996. However, there can be
no assurance that average unit selling prices will not decline at a more
rapid rate or that the Company will be successful in its efforts to
improve gross margin.
Operating expenses
---------------------------------------------------------------------
(In millions) July 1, June 25,
Fiscal quarter ended 1995 1994 Change
---------------------------------------------------------------------
Research and development $ 22.8 $ 14.0 $ 8.8
As a percentage of revenue 7.2% 6.4%
Selling, general and administrative $ 19.0 $ 21.0 $ (2.0)
As a percentage of revenue 6.0% 9.6%
---------------------------------------------------------------------
Research and development (R&D) expenses increased in absolute dollars
and as a percentage of revenue primarily as a result of the Company's
continued commitment to make substantial investments in R&D since the
timely introduction and transition to volume production of new products
is essential to its future success. A portion of the increase is due to
the Company's efforts in designing a new drive platform which the
Company believes will improve both the Company's bill of materials and
value added in the near future. R&D spending in absolute dollars is
expected to flatten during the remainder of fiscal year 1996 until the
Company is able to improve its margins and achieve profitability.
Although the Company has no technology purchases currently planned, R&D
expenses may fluctuate in the future resulting from the cost of
acquiring rights to new technologies.
Selling, general and administrative (SG&A) expenses decreased as a
percentage of revenue in the first quarter of fiscal year 1996 compared
to the same period of the prior fiscal year primarily due to the
increase in the revenue base. SG&A spending in absolute dollars
decreased and reflects the Company's ongoing efforts to control costs
and expenditures. The Company's efforts will continue into future
quarters, however, there can be no assurance that the Company will be
successful in such efforts.
Interest expense and interest income
-------------------------------------------------------------------
(In millions) July 1, June 25,
Fiscal quarter ended 1995 1994 Change
-------------------------------------------------------------------
Interest expense $ 1.8 $ 2.1 $ (0.3)
Interest income $ .6 $ 1.4 $ (0.9)
-------------------------------------------------------------------
Interest expense decreased as a result of a lower rate of interest on
outstanding borrowings during the first quarter of fiscal year 1996 as
compared to the same quarter of the prior fiscal year. Interest income
decreased as a result of lower cash and short-term investments balances
during the first quarter of fiscal year 1996 compared to the same
quarter of the prior fiscal year.
Provision for income taxes
-------------------------------------------------------------------
(In millions) July 1, June 25,
Fiscal quarter ended 1995 1994 Change
-------------------------------------------------------------------
Provision for income taxes $ 0.7 $ 0.6 $ 0.1
-------------------------------------------------------------------
The provision for income taxes consists primarily of foreign taxes. The
Company's effective tax rate for the first quarters of both fiscal year
1996 and 1995 differs from the combined federal and state rate due to
the repatriation of foreign earnings absorbed by current year losses and
the Company's U.S. operating losses not providing current tax benefits,
offset in part by the tax savings associated with the Company's
Singapore operations and valuation of temporary differences. Income
from the Singapore operations is not taxable in Singapore as a result of
the Company's pioneer tax status.
LIQUIDITY AND CAPITAL RESOURCES
------------------------------------------------------------
July 1,
(In millions) 1995
------------------------------------------------------------
Cash and cash equivalents $ 82.2
Short-term borrowings 30.0
Net cash used in operating activities 6.1
Net cash used in investing activities 10.8
Net cash provided by financing activities 2.6
------------------------------------------------------------
As of July 1, 1995, the Company had cash and cash equivalents of $82.2
million as compared to $108.5 million as of March 25, 1995, a decrease
of $26.3 million. The decrease in the Company's cash and cash
equivalents was primarily the result of operating losses as well as
purchases of inventory and property, plant and equipment.
Of the net cash used in operating activities during the first quarter of
fiscal year 1996, net loss less non-cash depreciation and amortization
accounted for approximately $4.7 million. An increase in inventory
accounted for a net use of cash of approximately $27.2 million. Despite
the Company's efforts to balance production with demand and control
inventory purchases, inventories increased as a result of unanticipated
changes in market demand as well as planned purchases of certain key
components in anticipation of future industry-wide component shortages.
Partially offsetting the increase in inventory however, accounts
receivable decreased and accounts payable increased. The decrease in
accounts receivable of $8.4 million primarily reflects a higher
concentration of sales during the last month of the quarter for the
quarter ended March 25, 1995 compared to the quarter ended July 1, 1995.
Accounts payable increased by approximately $20.3 million primarily due
to the timing of purchases and disbursement of payments for inventory
and manufacturing equipment during the quarter.
Net cash used in investing activities during the first quarter of fiscal
year 1996 was primarily attributable to $24.0 million of capital
expenditures offset in part by $12.0 million of short-term investment
maturities, net of purchases. A significant portion of the capital
expenditure activity was related to the acquisition of manufacturing
equipment. Depending on business conditions, including the successful
introduction of new products, the Company currently expects to make
capital expenditures of approximately $75 million during fiscal year
1996. The Company expects to fund these capital expenditures through
bank and equipment financing and cash flow from operations.
Net cash provided by financing activities during the first quarter of
fiscal year 1996 primarily reflects proceeds from the issuance of common
stock under the Company's stock purchase plan and stock option plans,
offset in part by cash used to reduce outstanding debt.
In September 1993, the Company obtained a secured, asset-based revolving
line of credit. The original committed line of credit provided for
borrowings up to $76.0 million over a two-year term and is secured by
receivables, certain inventories and other assets. This revolving line
of credit includes sublines for letters of credit and bears interest at
various rates. Borrowings under this line of credit are limited to a
percentage of eligible receivables. The agreement includes covenants to
maintain certain financial ratios and precludes the Company from paying
cash dividends. On June 17, 1994, the Company received an amendment to
its line of credit for the minimum operating profit which is measured at
the end of each quarter. With such amendment, the Company was in
compliance with all financial covenants during the quarter ended June
25, 1994. On October 11, 1994, the Company received an unconditional
waiver of defaults of minimum operating profit, minimum net worth and
leverage ratio covenants defaults that occurred as of the fiscal quarter
ended September 24, 1994. On October 31, 1994, the Company received
another amendment to its line of credit with respect to each of the
financial covenants that are measured at the end of each fiscal quarter
and fiscal year end. The amendment extended the commitment on the
revolving line of credit for an additional year, thereby providing for
borrowings over a two-year term, ending September 1996. The Company
also elected to reduce its line of credit from $76.0 million to $50.0
million. On August 2, 1995, the Company received an unconditional
waiver of defaults of minimum operating profit and capital expenditure
covenants that occurred as of the fiscal quarter ended July 1, 1995.
This waiver enables the Company to borrow, if necessary, through the
fiscal quarter ending September 30, 1995. As of July 1, 1995, $30.0
million of borrowings and $1.3 million of letters of credit were
outstanding. The $30.0 million of borrowings were fully repaid the
first week after fiscal year end. The balance available for additional
borrowings under this line of credit at July 1, 1995 was approximately
$15.5 million using the July 1, 1995 borrowing base.
The liquidity of the Company has been adversely affected by significant
losses from operations and liquidity has been significantly reduced
compared to the same period last year. The Company is implementing
ongoing measures with the goal of improving liquidity. In addition to
attempting to improve operating margins on product sales through the
introduction of new products and reduction of manufacturing costs, the
Company remains focused on controlling other operating expenses. As
discussed earlier, the Company believes that it must continue to make
substantial investments in R&D since the timely introduction and
transition to volume production of new products is essential to its
future success, but expects that R&D expenses will flatten in future
quarters until margins improve and the Company is profitable. The
Company anticipates a very non-linear shipment pattern during the second
quarter of fiscal year 1996, which coupled with continued losses is
expected to result in a further substantial reduction in liquidity.
Given the above as well as the uncertainties of the disk drive industry
and the risks inherent in accomplishing the above measures, the Company
is currently seeking additional sources of financing. On July 20, 1995,
the Company and Hyundai Electronics Industries Co., Ltd. (HEI) entered
into a memorandum of understanding under which HEI will provide a $100
million corporate guarantee, subject to negotiation and execution of a
definitive agreement. The Company has initiated discussions with
various parties and intends to obtain a $100 million credit facility
secured by the HEI guarantee during the second quarter of fiscal year
1996. The Company also continues to pursue other financing
alternatives.
Subject to unforeseen changes in general business conditions, the
Company believes that the combination of the measures described above
and other available actions, together with its balances of cash and cash
equivalents, expected cash flow from operations, equipment financing and
line of credit borrowing capabilities will be sufficient to fund the
Company's working capital and capital expenditure requirements through
fiscal year 1996.
DIVIDEND POLICY
The Company has never paid cash dividends on its capital stock. It is
the present policy of the Board of Directors to retain earnings for use
in the business. The Company does not anticipate paying cash dividends
in the near future. Under the terms of the Company's line of credit and
term loan facilities, the Company may not declare or pay any dividends
without the prior consent of its lenders.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
As part of the acquisition of the MiniScribe business in June 1990, the
Company was assigned a patent license agreement between MiniScribe and
Rodime plc (Rodime) covering patents related to 3.5-inch disk drives.
The Company believes that the assignment was valid; however, Rodime has
taken the position that the assignment was invalid and would not in any
event cover 3.5-inch drives manufactured and sold by the Company before
the acquisition of MiniScribe's assets. In February 1993, Maxtor
commenced an action for declaratory relief in U. S. Bankruptcy Court in
Denver, Colorado seeking a judgment that the assignment was valid.
Rodime filed a denial and counterclaim for patent infringement. In
April 1994, the relevant claims of the Rodime patent at issue in
Rodime's counterclaims were declared invalid in litigation between
Rodime and another disk drive manufacturer. The Company's litigation
with Rodime has been stayed pending Rodime's appeal of the finding of
invalidity.
Certain other claims, including other patent infringement claims,
against the Company have arisen in the course of its business. There is
presently no litigation involving such claims, and the Company believes
the outcome of these claims and the claim concerning Rodime described
above will not have a material adverse effect, if any, on the Company's
financial position or results of operations.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
b) Reports on Form 8-K:
None
c) Exhibits:
See Index to Exhibits on pages 16 to 25 hereof.
SIGNATURE
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.
MAXTOR CORPORATION
Date: August 11, 1995 By: /s/ Nathan Kawaye
-------------------
Nathan Kawaye
Vice President, Finance,
Corporate Controller and
Chief Accounting Officer
INDEX TO EXHIBITS
Exhibit No. Description Sequentially
Numbered
Pages
------------------------------------------------------------------------
3.1 (6) Certificate of Incorporation
3.2 (8) Certificate of Amendment of Certificate of
Incorporation of Maxtor Corporation, dated
December 23, 1987
3.3 (8) By-Laws as amended July 21, 1987
3.4 (21) Amended and Restated By-Laws of Maxtor
Corporation, A Delaware Company, effective
February 3, 1994
3.5 (21) Restated Certificate of Incorporation of
Maxtor Corporation effective February 3, 1994
4.1 (3) Form of Certificate of Shares of Registrant's
Common Stock
4.2 (7) Maxtor Corporation Rights Plan
4.3 (22) Amendment to Rights Agreement between
Registrant and the First National Bank of
Boston, dated September 10, 1993
10.1 (1) Omnilease Corporation Master Lease Agreement
No. 300362, dated as of January 14, 1983 and
addenda thereof
10.2 (1) Lease Agreement between Orchard Investment
Company No. 801, formerly Nelo, a California
general partnership and Registrant, dated
March 23, 1984
10.3 (1) Lease Commitment between Walter E. Heller &
Company and Registrant, dated as of March 11,
1985
10.4 (1) Stock Purchase Agreement between Steven P.
Kitrosser and Registrant, dated May 21, 1985
10.5 (1) Stock Purchase Agreement between James McCoy
and Registrant, dated May 21, 1985
10.6 (1) Equipment Lease Agreement between Pacific
Western (formerly Pacific Valley) Bank and
Registrant, dated June 26, 1985
10.7 (1) Continuing Guaranty between Maxtor Singapore
Limited and Bank of America N.T. & S.A.,
dated July 27, 1985
10.8 (9) Lease Agreement between John Arrillaga,
Separate Property Trust, Richard T. Perry,
Separate Property Trust and Registrant, dated
August 27, 1986
10.9 (3) Marketing and Distribution Agreement between
Ricoh Company, Ltd. and Registrant, dated
October 14, 1986
10.10 (3) Land Lease Agreement between Housing and
Development Board, Singapore and Maxtor
Singapore Limited, dated December 22, 1986
10.11 (3) Indenture dated February 16, 1987
10.12 (8) Stock Bonus Plan and Cash Bonus Plan between
Storage Dimensions, Inc. and Registrant dated
June 15, 1987
10.13 (8) Merger Agreement between MAXSUB II, Inc., and
Storage Dimensions, Inc. dated October 26, 1987
10.14 (3) 1986 Outside Directors' Stock Option Plan
10.15 (3) Commitment from Union Bank to Registrant
regarding letters of credit for the benefit of
the officers and directors of the Registrant
10.16 (4) Agreement and Plan of Reorganization
10.17 (9) Revised Equipment Lease Agreement between
Capital Associates International, Inc. and
Registrant, dated September 28, 1988
10.18 (9) Credit Agreement between Bank of America
National Trust and Savings Association and
Registrant, dated October 18, 1988
10.19 (9) Equipment Lease Agreement between Pitney Bowes
Credit Corporation and Registrant, dated
November 2, 1988
10.20 (9) Equipment Lease Agreement between Concord
Leasing (Asia) Pte Ltd. and Maxtor Singapore,
Limited, dated November 16, 1988
10.21 (9) Lease Agreement between Maxtor Singapore,
Limited and Jurong Town Corporation, dated
November 16, 1988
10.22 (9) Lease Agreement between Greylands Business Park
Phase II and Storage Dimensions, Inc., dated
December 14, 1988
10.23 (8) Stock Purchase Agreement among Registrant,
Storage Dimensions, Inc., David A. Eeg, Gene E.
Bowles, Jr., David P. Williams and David Lance
Robinson
10.24 (8) Fiscal 1988 Stock Option Plan
10.25 (8) Employee Stock Purchase Plan
10.26 (8) Dual Currency Loan Agreement between Maxtor
Singapore Limited, Maxtor Delaware, Maxtor
California and American Express Bank Limited
10.27 (8) Amended and Restated Fiscal 1985 Stock Option
Plan, including the Immediately Exercisable
Incentive Stock Option Agreement and the
Immediately Exercisable Nonqualified Stock
Option Agreement
10.28 (9) Loan Agreement between Probo Pacific Pte Ltd. and
Maxtor Singapore Limited, dated March 20, 1989
10.29 (9) Loan Agreement between Concord Leasing (Asia)
Pte, Ltd. and Maxtor Singapore Limited, dated
April 14, 1989
10.30 (10) Product Discontinuance Agreement between
Matsushita Communication Industrial Co., Ltd.
(MCI) and Registrant, dated August 23, 1989
10.31 (10) Equipment Lease Agreement between Capital
Associates International, Inc. and Registrant,
dated October 17, 1989
10.32 (10) Maxoptix Corporation 1989 Stock Option Plan
10.33 (9) Forms for Promissory Note and Amended and
Restated Promissory Note
10.34 (10) Amended and Restated Credit Agreement between
Bank of America National Trust and Savings
Association and Registrant, dated January 31,
1990
10.35 (10) Amendment to Lease Agreement between Orchard
Investment Company No. 801, formerly Nelo, a
California general partnership, and Registrant,
dated February 15, 1990
10.36 (10) Sublease Agreement between RACAL-VADIC, a
Division of Racal Data Communications, Inc.
("Sublessor"), and Storage Dimensions, Inc.
("Sublessee"), dated February 16, 1990
10.37 (10) Collateral Sharing and Subordination Agreement
between Registrant and Standard Chartered Bank,
dated April 5, 1990
10.38 (10) Loan and Security Agreement between Registrant
and MiniScribe Corporation, dated April 5, 1990
10.39 (11) Agreement for the Sale and Purchase of Shares in
Tratford Pte. Ltd. between the Registrant,
MiniScribe Peripherals (Pte) Ltd. and certain
Individuals, dated May 8, 1990
10.40 (11) Agreement for the Sale and Purchase of Shares in
Silkmount Limited between MaxSub Corporation,
Silkmount Limited and certain Individuals,
dated May 18, 1990
10.41 (11) Assignment of Debt between Registrant, MiniScribe
(Hong Kong) Limited and certain Individuals,
dated May 18, 1990
10.42 (10) Asset Purchase Agreement between Registrant,
MiniScribe Corporation and Standard Chartered
Bank, dated May 30, 1990
10.43 (14) License Agreement with Rodime PLC, dated
December 8, 1987 assigned to Registrant on
June 29, 1990
10.44 (14) Patent Cross License Agreement with IBM dated
October 1, 1984 assigned to Registrant
effective June 30, 1990
10.45 (14) Lease Agreement between MiniScribe Corporation
and 345 Partnership dated June 6, 1990, assigned
to the Registrant effective June 30, 1990
10.46 (14) Lease Agreement between Maxtor Colorado and
Pratt Partnership (Lot 1A), dated July 5, 1990
10.47 (14) Lease Agreement between Maxtor Colorado and
Pratt Partnership (Lot 1C), dated July 5, 1990
10.48 (14) Lease Agreement between Maxtor Colorado and
Pratt Partnership (Lot 4), dated July 5, 1990
10.49 (14) Agreement for the Purchase of Land and
Improvements between Registrant and Nixdorf,
dated August 16, 1990
10.50 (15) Grant Agreement dated 25 October 1990 between
the Industrial Development Authority, Maxtor
Ireland Limited and Registrant
10.51 (12) Amendment of Agreement between Registrant,
Maxtor Colorado, Maxtor California and Standard
Chartered Bank, dated November 6, 1990
10.52 (14) Guarantee for Dastek between Registrant, Dastek
and Silicon Valley Bank, dated November 30, 1990
10.53 (10) Judgment, William Lubliner vs. Maxtor Corporation,
James M. McCoy, William J. Dobbin, B.J. Cassin,
W. Charles Hazel and George M. Scalise
10.54 (10) Settlement Agreement, William Lubliner vs. Maxtor
Corporation, et al
10.55 (10) Fiscal 1991 Profit Sharing Plan Document
10.56 (10) Board of Director Compensation Approved for
Fiscal 1991
10.57 (14) Resignation Agreement and General Release of
Claims between Alexander E. Malaccorto and the
Registrant, dated January 11, 1991
10.58 (14) Employment Agreement between James M. McCoy and
Registrant, dated January 17, 1991
10.59 (14) Resignation Agreement and General Release of
Claims between James N. Miler and the Registrant,
dated January 20, 1991
10.60 (14) Letter Agreement between George Scalise and the
Registrant, dated February 22, 1991
10.61 (14) Resignation Agreement and General Release of
Claims between Steven Strain and the Registrant,
dated February 22, 1991
10.62 (14) Foothill Capital Credit Facility between
Registrant, Certain of its Subsidiaries and
Foothill Capital Corporation, dated April 22, 1991
10.63 (14) Employment Agreement between Laurence Hootnick
and Registrant, dated May 3, 1991
10.64 (14) Employment Agreement between Roger Nordby and
Registrant, dated May 7, 1991
10.65 (14) Employment Agreement between Thomas F. Burniece
and the Registrant, dated May 12, 1991
10.66 (15) Amendment of the Registrant's Continuing
Guarantee in favor of Foothill Capital
Corporation, dated July 10, 1991
10.67 (15) Settlement, Resignation and General Release of
Claims between Registrant and Taroon C. Kamdar,
dated August 2, 1991
10.68 (15) Amendment of Registrant's Continuing Guarantee
in favor of Foothill Capital Corporation, dated
August 9, 1991
10.69 (15) Amendment No. 1 to Lease by and between John
Arrillaga, Trustee, and Richard T. Peery, Trustee,
and Registrant, dated August 23, 1991
10.70 (15) Amendment of Registrant's Continuing Guarantee
in favor of Foothill Capital Corporation, dated
September 20, 1991
10.71 (13) Amendment of Agreement between Registrant,
Maxtor Colorado, Maxtor California and Standard
Chartered Bank, dated December 27, 1990, and
further amended July 26, 1991 and October 4, 1991
10.72 (15) Lease Agreement between Registrant and Devcon
Associates 31, dated December 6, 1991
10.73 (15) Deed of Partial Discharge and Release between
Barclays Bank PLC and Maxtor Singapore Limited,
dated December 19, 1991
10.74 (15) Agreement for Purchase and Sale of Assets among
Registrant, Read-Rite International, Read-Rite
Corporation and Maxtor Singapore Limited, dated
November 14, 1991, and amended December 20, 1991
10.75 (15) Asset Purchase Agreement among Registrant, Storage
Dimensions, Inc. and USD Acquisition, Inc., dated
December 27, 1991
10.76 (15) Resignation Agreement and General Release of
Claims between Registrant and David S. Dury,
dated January 31, 1992
10.77 (15) Sublease between Registrant and Hauser Chemical
Research, Inc., dated March 23, 1992
10.78 (15) First Amendment to Lease Agreement between PCA
San Jose Associates and Registrant, dated
March 25, 1992
10.79 (15) Asset Purchase Agreement among Registrant,
Maxtor Singapore LTD., and Sequel, Inc., dated
March 12, 1992, and amended March 25, 1992
10.80 (5) Fiscal 1992 Stock Option Plan
10.81 (15) Form of Indemnity Agreement between the
Registrant and each of its Directors and
Executive Officers
10.82 (15) Maxtor/Sequel 8K/Panther Subcontract
Manufacturing and Warranty Services Agreement,
dated March 23, 1992
10.83 (15) Maxtor Corporation 1992 Employee Stock Purchase
Plan
10.84 (15) Maxtor Corporation 1991 Employee Stock Purchase
Plan
10.85 (15) Maxtor Corporation FY'93 Incentive Plan Summary
10.86 (15) Fiscal 1992 Profit Sharing Plan Document
10.87 (17) Security Agreement between Registrant and
Chrysler Capital Corporation, dated
April 14, 1992
10.88 (17) Subordination, Non-Disturbance, Estoppel and
Attornment Agreement between Loma Mortgage USA,
Inc. and Registrant, dated June 4, 1992
10.89 (17) Office Lease between Cabot Associates and
Registrant, dated July 23, 1992
10.90 (17) Revolving Credit Agreement among Registrant,
Barclays Bank PLC and The First National Bank
of Boston, dated as of September 9, 1992
10.91 (17) Security Agreement between Registrant and the
CIT Group/Equipment Financing, Inc., dated
September 18, 1992
10.92 (17) Deed of Priorities among Maxtor (Hong Kong)
Limited, Registrant and General Electric
Capital Corporation, dated September 25, 1992
10.93 (17) Lease among Dares Developments (Woking)
Limited, Maxtor Europe Limited and Registrant,
dated October 1992
10.94 (16) Stock Purchase and Asset Acquisition Agreement
amoung David A. Eeg, Gene E. Bowles, Jr.,
CP Acquisition, L.P. No. 4A, CP Acquisition,
L.P. No. 4B, Capital Partners, Inc., FGS, Inc.,
Registrant, Storage Dimensions, Inc. and SDI
Acquisition Corporation, dated December 4, 1992
10.95 (17) Loan and Security Agreement between Registrant and
Household Bank, f.s.b., dated December 11, 1992
10.96 (17) Global Master Rental Agreement between Comdisco,
Inc. and Registrant, dated December 16, 1992
10.97 (17) Amendment No. 1 to Lease between Devcon Associates
31 and Registrant, dated December 21, 1992
10.98 (17) Continuing Guaranty among Maxtor Peripherals (S)
Pte., Ltd., Barclays Bank PLC and Registrant,
dated January 26, 1993
10.99 (17) Amendment No. 2 to Lease between Devcon Associates
31 and Registrant, dated February 1, 1993
10.100 (17) Instrument of Resignation, Appointment and
Acceptance among Registrant, The First National
Bank of Boston and Bank of America National Trust
and Savings, dated as of March 22, 1993
10.101 (17) Waiver and First Amendment to Credit Agreement
among Registrant, Barclays Bank PLC and the
First National Bank of Boston, dated as of
April 16, 1993
10.102 (17) Waiver and First Amendment to Continuing
Guaranty Among Registrant, Barclays Bank PLC
and the Lenders dated as of April 19, 1993
10.103 (17) Security Agreement between Registrant and
Barclays Bank PLC, dated April 16, 1993
10.104 (17) Lease Agreement between Registrant and Pratt
Partnership, dated April 30, 1993
10.105 (17) Agreement for Stock Transfer Services between
Registrant and The First National Bank of
Boston, dated May 6, 1993
10.106 (17) Maxtor Corporation CY93 Profit Sharing Plan
10.107 (17) Maxtor Corporation Management Incentive Plan
for CY93
10.108 (18) Production Agreement between International
Business Machines Corporation and Registrant,
dated July 27, 1993 (with certain information
deleted and indicated by blackout text)
10.109 (19) Letter of Intent between Registrant and Hyundai
Electronics Co., Ltd., dated August 18, 1993
10.110 (20) Financing Agreement between Registrant and The
CIT Group/Business Credit, Inc., dated
September 16, 1993
10.111 (21) Form Letter Agreement between Registrant and
All of Its Named Executive Officers, except
Laurence Hootnick, dated November 17, 1993
10.112 (21) Waiver to Financing Agreement among Registrant
and The CIT Group/Business Credit, Inc., dated
January 12, 1994
10.113 (21) Stock Purchase Agreement between Registrant and
Hyundai Electronics Industries Co., Ltd., Hyundai
Heavy Industries Co., Ltd., Hyundai Corporation,
and Hyundai Merchant Marine Co., Ltd., dated
September 10, 1993
10.114 (22) Confidential Resignation Agreement and General
Release of Claims between Registrant and Thomas
F. Burniece III, dated February 4, 1994
10.115 (22) License Agreement between Registrant and MiniStor
Peripherals Corporation, dated February 23, 1994
10.116 (22) Confidential Resignation Agreement and General
Release of Claims between Registrant and John P.
Livingston, dated April 8, 1994
10.117 (22) Tenancy Agreement between Barinet Company
Limited and Maxtor (Hong Kong) Limited, dated
April 26, 1994
10.118 (23) Confidential Resignation Agreement and General
Release of Claims between Registrant and Laurence
R. Hootnick, dated June 14, 1994
10.119 (23) Confidential Resignation Agreement and General
Release of Claims between Registrant and Mark
Chandler, dated June 28, 1994
10.120 (24) Amendment No.2 to Lease between John Arrillaga &
Richard T. Peery and Registrant, dated June 28, 1994
10.121 (24) Amendment No. 3 to Lease between Devcon Associates
31 and Registrant, dated June 28, 1994
10.122 (24) Confidential Resignation Agreement and General
Release of Claims between Registrant and Skip
Kilsdonk, dated September 7, 1994
10.123 (24) Confidential Resignation Agreement and General
Release of Claims between Registrant and Sallee
Peterson, dated September 23, 1994
10.124 (24) Waiver to Financing Agreement among Registrant
and The CIT Group/Business Credit, Inc., dated
October 11, 1994
10.125 (24) Amendment No. 1 to Financing Agreement between
Registrant and The CIT Group/Business Credit,
Inc., dated October 31, 1994
10.126 (27) License agreement between Registrant and NEC
Corporation, dated October 18, 1994
10.127 (27) Lease Agreement for Premises Located at 1821
Lefthand Circle, Suite D, between Registrant and
Pratt Land Limited Liability Company, dated
October 19, 1994
10.128 (27) Lease Agreement for Premises Located at 1841
Lefthand Circle between Registrant and Pratt
Land Limited Liability Company, dated October
19, 1994
10.129 (27) Lease Agreement for Premises Located at 1851
Lefthand Circle between Registrant and Pratt
Land Limited Liability Company, dated October
19, 1994
10.130 (27) Lease Agreement for Premises Located at 2121
Miller Drive between Registrant and Pratt Land
Limited Liability Company, dated October 19, 1994
10.131 (27) Lease Agreement for Premises Located at 2190 Miller
Drive between Registrant and Pratt Land Limited
Liability Company, dated October 19, 1994
10.132 (27) Confidential Resignation Agreement and General
Release of Claims between Registrant and Patricia
M. Roboostoff, dated November 30, 1994
10.133 (27) Stock Purchase Agreement between Registrant,
Maxoptix Corporation and Kubota Electronics
America Corporation, dated December 26, 1994
10.134 (28) Confidential Resignation Agreement and General
Release of Claims between Registrant and Larry
J. Smart, dated Feburuary 7, 1995
10.135 (28) Lease Agreement by and between 345 Partnership
and Registrant, dated February 24, 1995
10.136 (28) Lease Agreement for Premises Located at 1900
Pike Road, Suite A, Longmont, CO, between
Registrant as Tenant and Pratt Land Limited
Liability Company as Landlord, dated
February 24, 1995
10.137 (28) Lease Agreement for Premises Located at 2040
Miller Drive, Suite A, B, & C between Registrant
as Tenant and Pratt Land Limited Liability
Company as Landlord, dated February 24, 1995
10.138 (28) Manufacturing and Purchase Agreement by and
Between Registrant and Hyundai Electronics
Industries Co., Ltd., dated April 27, 1995
(with certain information deleted and
indicated by blank spaces)
10.139 (28) Lease Agreement for Premises Located at 2040
Miller Drive, Suites D, E, & F, Longmont, CO,
between Registrant as Tenant and Pratt
Management Company, LLC as Landlord
10.140 Memorandum of Understanding concerning Guarantee
by Hyundai Electronics Co., Ltd. of Credit
Facility for Registrant, dated July 17, 1995 26 - 27
10.141 Waiver to Financing Agreement among Registrant
and the CIT Group/Business Credit, Inc., dated
August 2, 1995 28 - 29
11.1 Computation of Net Loss Per Share 30
20.1 (25) Maxtor Corporation 1995 Stock Option Plan
20.2 (26) Maxtor Corporation Individual Stock Option
Agreement, dated November 8, 1994
27 Financial Data Schedule 31
------------------------------------------------------------------------
(1) Incorporated by reference to exhibits to Registration Statement No.
2-98568 effective August 7, 1985
(2) Incorporated by reference to exhibits to Registration Statement No.
33-4092 effective April 2, 1986
(3) Incorporated by reference to exhibits to Registration Statement No.
33-12123 effective February 26, 1987
(4) Incorporated by reference to exhibits to Registration Statement No.
33-12768 effective April 23, 1987
(5) Incorporated by reference to exhibits to Registration Statement No.
33-43172 effective October 7, 1992
(6) Incorporated by reference to exhibits to Registration Statement No.
33-8607 effective September 10, 1986
(7) Incorporated by reference to exhibits of Form 8-K filed February 8,
1988
(8) Incorporated by reference to exhibits to Annual Report on Form 10-K
effective June 24, 1988
(9) Incorporated by reference to exhibits to Annual Report on Form 10-K
effective June 24, 1989
(10) Incorporated by reference to exhibits to Annual Report on Form 10-K
effective June 1, 1990
(11) Incorporated by reference to exhibits of Form 8-K filed July 13,
1990
(12) Incorporated by reference to exhibits of Form 8 filed November 13,
1990
(13) Incorporated by reference to exhibits of Form 8 filed January 8,
1991
(14) Incorporated by reference to exhibits to Annual Report on Form 10-K
effective July 15, 1991
(15) Incorporated by reference to exhibits to Annual Report on Form 10-K
effective June 25, 1992
(16) Incorporated by reference to exhibits of Form 8-K filed January 8,
1993
(17) Incorporated by reference to exhibits to Annual Report on Form 10-K
effective May 27, 1993
(18) Incorporated by reference to exhibits of Form 10-Q filed August 10,
1993
(19) Incorporated by reference to exhibits of Form 8-K filed August 19,
1993
(20) Incorporated by reference to exhibits of Form 10-Q filed November
8, 1993
(21) Incorporated by reference to exhibits of Form 10-Q filed February
7, 1994
(22) Incorporated by reference to exhibits of Form 10-K filed June 24,
1994
(23) Incorporated by reference to exhibits of Form 10-Q filed August 5,
1994
(24) Incorporated by reference to exhibits of Form 10-Q filed November
8, 1994
(25) Incorporated by reference to exhibits to Registration Statement No.
33-56405 effective November 10, 1994
(26) Incorporated by reference to exhibits to Registration Statement No.
33-56407 effective November 10, 1994
(27) Incorporated by reference to exhibits of Form 10-Q filed February
7, 1995
(28) Incorporated by reference to exhibits to Annual Report on Form 10-K
effective June 23, 1995
- 2 -
MAXTOR CONFIDENTIAL
Disclose Solely to Employees of Maxtor
Having a Need to Know
MEMORANDUM OF UNDERSTANDING CONCERNING
GUARANTEE BY HYUNDAI ELECTRONICS CO., LTD. OF
CREDIT FACILITY FOR MAXTOR CORPORATION
This Memorandum of Understanding dated July 17, 1995 will confirm the
intent of Hyundai Electronics Industries Co., Ltd., a Korean corporation
("Hyundai"), to guarantee a credit facility for Maxtor Corporation
("Corporate Guarantee"), and certain related matters.
Hyundai will provide to Maxtor a $100 Million Corporate Guarantee,
commencing September 1, 1995. The Corporate Guarantee will be provided
in two phases: the first phase will be for $50 Million to be completed
by September 1, 1995; and the second phase will be for a second $50
Million to be established by December 1, 1995.
This Memorandum of Understanding is conditioned upon the parties
entering into a definitive agreement for Corporate Guarantee, which will
address, among other items, the recourse to be provided to Hyundai to
secure its guarantee. Additionally, the guarantee will also be provided
subject to requisite approvals, which may include the approvals of
Maxtor's stockholders and Board of Directors, as well as the approval of
the Securities and Exchange Commission and various other U.S. and Korean
governmental agencies.
This Memorandum of Understanding is a good faith commitment of the
parties' intent to proceed as set forth herein. However, neither party
will incur any obligation hereunder until a written definitive agreement
is executed by the parties, which agreement will entirely supersede this
Memorandum of Understanding. The parties commit to negotiate in good
faith and put into place such definitive agreement within 30 days from
the effective date of this Memorandum of Understanding.
In witness whereof, the parties have caused their duly authorized
representatives to sign this Memorandum of Understanding as of the date
first above written.
MAXTOR CORPORATION HYUNDAI ELECTRONICS
INDUSTRIES CO., LTD.
By /s/ Nathan Kawaye By /s/ K. S. Yoo
------------------- -----------------
The CIT Group/Business Credit
3rd Floor
300 South Grand Avenue
Los Angeles CA 90071
Tel: 213-613-2575
Fax: 213-613-2588
August 2, 1995
Maxtor Corporation
211 River Oaks Parkway
San Jose CA 95134
Ladies and Gentlemen:
We refer to the Financing Agreement by and among The CIT Group/Business
Credit, Inc., as Agent and Lender, Finova Capital Corporation, formerly
TriCon Capital Corporation, as Lender, and Maxtor Corporation, as
Borrower, dated September 16, 1993, as amended from time to time (the
"Agreement"). Capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to such terms in the Agreement.
You have advised us that as of July 1, 1995, Maxtor Corporation was not
in compliance with a) the Capital Expenditure covenant for the two
fiscal quarters ended July 1, 1995 as provided in Section 6.11 of the
Agreement, and b) the Operating Profit covenant for the one quarter
ended July 1, 1995 as provided in Section 6.16 of the Agreement.
We hereby confirm to you that (i) we hereby waive these violations of
the Agreement for the period(s) ending on the specified date, and (ii)
such violations shall not constitute Defaults or Events of Default under
the Agreement.
Additionally, and pursuant to mutual understanding, the Agreement shall
be, and hereby is amended, effective July 1, 1995, by deleting Section
3, Paragraph 1 thereof in its entirety and substituting the following in
lieu thereof:
"1. The Lenders agree, subject to the terms and conditions of this
Financing Agreement from time to time, and within x) the
Availability and y) the Line of Credit, but subject to the Lenders'
right to make "overadvances", to make loans and advances to the
Company on a revolving basis (i.e. subject to the limitations set
forth herein, the Company may borrow, repay and re-borrow Revolving
Loans). Such loans and advances shall be in amounts up to: x) if
the Company has reported an Operating Profit for the most recently
ended fiscal quarter of greater than zero: a) eighty-five percent
(85%) of the outstanding Eligible Domestic Accounts Receivable of
the Company, and b) forty-five percent (45%) of the outstanding
Eligible Foreign Accounts Receivable of the Company, or y) if the
Company has reported an Operating Profit for the most recently
ended fiscal quarter of zero or less: a) seventy-five percent (75%)
of the outstanding Eligible Domestic Accounts Receivable of the
Company, and b) twenty-five percent (25%) of the outstanding
Eligible Foreign Accounts Receivable of the Company. Any
applicable increase or decrease in advance rates as set forth above
will occur upon Agent's receipt and review of the Company's Form
10Q for the most recently ended quarter which has been filed with
the Securities and Exchange Commission ("SEC") (or Form 10K if
after fiscal year-end). Notwithstanding the above, and in the
event that within 45 days after the Company's most recently ended
fiscal quarter, x) the Company has not filed their Form 10Q or Form
10K with the SEC, or y) the Agent has not received a copy of such
Form 10Q or Form 10K, and until the Company files such Form 10Q or
10K with and provides a copy to the Agent for their review, loans
and advances under the Line of Credit will be in amounts up to: a)
seventy-five percent (75%) of the outstanding Eligible Domestic
Accounts Receivable of the Company, and b) twenty-five percent
(25%) of the outstanding Eligible Foreign Accounts Receivable of
the Company.
All requests for loans and advances must be received by an officer
of the Agent no later than 2:00 p.m., New York time, of the day on
which such loans and advances are required. Should the Agent for
any reason honor requests for advances in excess of the limitations
set forth herein, such advances shall be considered "overadvances"
and shall be made in the Agent's sole discretion, subject to any
additional terms the Agent or the Lenders deems necessary. On the
second Anniversary Date and each Anniversary Date thereafter and on
thirty (30) days prior written notice to the Agent and the Lenders,
the Company may reduce the Line of Credit, provided, however, that
x) each reduction in the Line of Credit shall constitute a
permanent reduction in the Line of Credit, y) the Company shall
immediately repay to the Agent the amount by which the Obligations
exceed the maximum amount thereof computed pursuant to the
definition of Availability, and z) each reduction must be for at
least $1,000,000.00 or whole multiples thereof."
In consideration of our execution and delivery of this waiver and
amendment letter, and to compensate us for processing you request for
such waivers, you have agreed to pay the Agent, for the ratable benefit
of the Lenders, an Accommodation Fee of $150,000.00, which will be due
and payable upon the date hereof. Payment shall be by means of a charge
to your loan account with us.
Except as otherwise herein specifically provided, no other charge,
amendment, or modification in or to any of the other terms or provisions
of the Agreement is hereby intended or implied. This letter shall not
constitute a waiver of any other existing Defaults or Events of Default
under the Agreement )whether of not we have knowledge thereof) and shall
not constitute a waiver of any future Defaults or Events of Default
whatsoever. If the foregoing is in accordance with your understanding,
please so indicate by signing and returning to us the enclosed copy of
this letter.
Very truly yours,
THE CIT GROUP/BUSINESS CREDIT, INC.
(as AGENT and LENDER)
By: /s/ Bonnie Schain
----------------------------------
Title: Assistant Vice President
FINOVA CAPITAL CORPORATION, formerly
Tricon Capital Corporation
(as Lender)
By: /s/ Jeff Wise
---------------------------
Title: Vice President
Read and Agreed to:
Maxtor Corporation:
By: /s/ Melonie C. Brophy 8/2/95
------------------------------------
Title: VP Finance & Treasurer
MAXTOR CORPORATION
EXHIBIT 11.1
COMPUTATION OF NET LOSS PER SHARE
For the Three Months Ended July 1, 1995 and June 25, 1994
(In thousands, except per share data)
Three Months Ended
-----------------------
July 1, June 25,
1995 1994
-----------------------
PRIMARY & FULLY DILUTED
Weighted average number of common
shares outstanding during the period 52,085 49,925
========== ==========
Net loss $ (13,827) $ (12,189)
========== ==========
Net loss per share $ (0.27) $ (0.24)
========== ==========
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000711039
<NAME> MAXTOR CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U. S. DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-25-1995
<PERIOD-START> MAR-26-1995
<PERIOD-END> JUL-01-1995
<EXCHANGE-RATE> 1
<CASH> 82,227
<SECURITIES> 0
<RECEIVABLES> 106,252
<ALLOWANCES> 3,168
<INVENTORY> 116,902
<CURRENT-ASSETS> 314,050
<PP&E> 210,076
<DEPRECIATION> 140,002
<TOTAL-ASSETS> 391,297
<CURRENT-LIABILITIES> 256,438
<BONDS> 101,354
<COMMON> 526 <F1>
0
0
<OTHER-SE> 32,979 <F2>
<TOTAL-LIABILITY-AND-EQUITY> 391,297
<SALES> 315,894
<TOTAL-REVENUES> 315,894
<CGS> 286,033
<TOTAL-COSTS> 286,033
<OTHER-EXPENSES> 41,767 <F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,820
<INCOME-PRETAX> (13,174)
<INCOME-TAX> 653
<INCOME-CONTINUING> (13,827)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,827)
<EPS-PRIMARY> (0.27)
<EPS-DILUTED> (0.27)
<FN>
<F1>COMMON INCLUDES: $195 FOR $0.01 PAR VALUE CLASS A COMMON (19,480,000
SHARES ISSUED AND OUTSTANDING); $331 FOR $0.01 PAR VALUE COMMON (33,062,304
SHARES ISSUED AND OUTSTANDING)
<F2>OTHER-SE INCLUDES ADDITIONAL PAID-IN CAPITAL OF $330,777 AND ACCUMULATED
DEFICIT OF $297,798
<F3>OTHER EXPENSES INCLUDE RESEARCH & DEVELOPMENT EXP OF $22,791 AND SELLING,
GENERAL AND ADMINISTRATIVE EXP OF $18,976
</FN>
</TABLE>
