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 September 28, 1996.
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 0-14016
MAXTOR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 77-0123732
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
510 Cottonwood Drive, Milpitas, CA 95035
(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
No shares of Common Stock and 58,208,955 shares of Series A
Preferred Stock were issued and outstanding as of November 2,
1996.
This quarterly report on Form 10-Q contains 33 pages of which
this is page number 1.
MAXTOR CORPORATION
FORM 10-Q
September 28, 1996
INDEX
Part I. Financial
Information Page
Item 1. Consolidated Financial Statements
Consolidated Statements of Operations -
Three Months and Six Months Ended
September 28, 1996 and September 30, 1995 3
Consolidated Balance Sheets-
September 28, 1996 and March 30, 1996 4-5
Consolidated Statements of Cash Flows-
Six Months Ended September 28, 1996
and September 30, 1995 6-7
Notes to Consolidated Financial Statements 8-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11 - 17
Part II. Other Information
Item 1. Legal Proceedings 18
Item 6. Exhibits and Reports on Form 8-K 19
Signature Page 20
PART I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
MAXTOR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
Three Months Ended Six Months Ended
Sept. 28,Sept. 30, Sept. 28,Sept. 30,
1996 1995 1996 1995
Revenue $276,640 $277,312 $532,608 $586,034
Revenue from affiliates 7,859 4,094 13,229 11,266
Total revenue 284,499 281,406 545,837 597,300
Cost of revenue 282,883 277,703 611,234 557,331
Cost of revenue from
affiliates 7,973 3,656 13,388 10,061
Total cost of revenue 290,856 281,359 624,622 567,392
Gross margin (6,357) 47 (78,785) 29,908
Operating expenses:
Research and development 30,002 21,847 58,808 44,638
Selling, general and
administrative 19,800 19,486 44,044 38,462
Total operating expenses 49,802 41,333 102,852 83,100
Loss from operations (56,159) (41,286) (181,637) (53,192)
Interest expense (6,355) (2,511) (11,123) (4,331)
Interest income 296 107 585 659
Loss before income taxes (62,218) (43,690) (192,175) (56,864)
Provision for income taxes 221 798 453 1,451
Net loss $(62,439)$(44,488)$(192,628)$(58,315)
See accompanying notes.
MAXTOR CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
Sept. 28, March 30,
1996 1996
ASSETS
Current assets:
Cash and cash equivalents $24,393 $52,794
Accounts receivable, net of
allowance for doubtful accounts
of $4,963 at Sept. 28, 1996
and $5,196 at March 30, 1996 129,376 121,818
Accounts receivable from affiliates 6,658 4,426
Inventories:
Raw materials 35,996 76,505
Work-in-process 15,041 37,614
Finished goods 32,420 41,816
83,457 155,935
Prepaid expenses and other 7,812 11,642
Total current assets 251,696 346,615
Property, plant and equipment, at cost:
Buildings 29,193 24,984
Machinery and equipment 192,116 192,115
Furniture and fixtures 13,296 14,118
Leasehold improvements 13,097 13,870
247,702 245,087
Less accumulated depreciation
and amortization (155,047) (156,925)
Net property, plant and
equipment 92,655 88,162
Other assets 12,176 7,710
$356,527 $442,487
See accompanying notes.
MAXTOR CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
(Continued)
Sept. 28, March 30,
1996 1996
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Short-term borrowings $54,800 $110,595
Short-term borrowings due to
affiliate 70,000 65,000
Accounts payable 109,760 160,102
Accounts payable to affiliates 9,874 8,656
Income taxes payable 4,904 7,499
Accrued payroll and payroll-
related expenses 18,437 16,727
Accrued warranty 19,565 23,751
Accrued expenses 103,476 18,934
Long-term debt and capital lease
obligations due within one
year 381 1,879
Total current liabilities 391,197 413,143
Long-term debt and capital lease obligations
due after one year 229,095 100,181
Deferred tax liabilities - 300
Commitments and contingencies
Stockholder's deficit:
Series A Preferred Stock,
$0.01 par value, 95,000,000
shares authorized; 58,208,955
shares issued and outstanding
at September 28, 1996; (no shares
authorized, issued, or outstanding
at March 30, 1996); liquidation
value of $6.70 per share 582 -
Common Stock, $0.01 par value,
200,000,000 shares authorized;
no shares issued or outstanding at
September 28, 1996; (600 shares issued
and outstanding at March 30, 1996) - -
Additional paid-in capital 335,017 335,599
Accumulated deficit (599,364) (406,736)
Total stockholder's deficit (263,765) (71,137)
$356,527 $442,487
See accompanying notes.
MAXTOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
Sept. 28, Sept. 30,
1996 1995
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Net loss $(192,628) $(58,315)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 30,367 19,322
Reserves for lower of cost or market 33,414 -
Loss on disposal of property, plant
and equipment 116 47
Gain on sale of subsidiary (2,385) -
Other (242) -
Change in assets and liabilities:
Accounts receivable 27,508 (29,906)
Accounts receivable from affiliate (2,232)
Net collections of accounts receivable
sold to financing company 6,000 -
Inventories 44,034 (53,477)
Prepaid expenses and other 1,266 (4,714)
Accounts payable (37,844) 15,157
Accounts payable to affiliate 1,218 -
Income taxes payable (1,629) 480
Accrued payroll and payroll-related
expenses 4,364 2,180
Accrued warranty (3,792) (1,059)
Accrued expenses 1,074 2,249
Total adjustments 101,237 (49,721)
Net cash used in operating activities (91,391) (108,036)
Cash flows from investing activities:
Proceeds from sale of subsidiary 25,000 -
Proceeds from maturity of short-term
investments - 11,998
Purchase of property, plant and
equipment (36,715) (30,105)
Proceeds from disposal of property,
plant and equipment 256 133
Other (4,156) 3,288
Net cash used in investing activities (15,615) (14,686)
Cash flows from financing activities:
Net proceeds from (repayments of)
short-term borrowings (49,285) 42,000
Proceeds from borrowings under long term
credit facility 129,000 -
Principal payments on long-term debt (1,047) (1,403)
Principal payments under capital lease
obligations (63) (200)
Proceeds from issuance of common stock,
net of notes receivable, stock
repurchases and tax benefits - 5,184
Net cash provided by financing
activities 78,605 45,581
Net change in cash and cash equivalents (28,401) (77,141)
Cash and cash equivalents at beginning
of period 52,794 96,518
Cash and cash equivalents at end of
period $24,393 $19,377
See accompanying notes.
MAXTOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
Sept. 28, Sept. 30,
1996 1995
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $8,552 $ 237
Income taxes 1,747 929
Supplemental information on noncash investing and financing activities:
Capital lease obligations $ 156 $ 121
Purchase of property, plant & equipment
financed by accounts payable 8,522 4,072
Exchange of Common Stock for Series A
Preferred Stock 582 -
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. All significant intercompany
transactions have been eliminated in consolidation. Maxtor
Corporation operates as a wholly-owned subsidiary of Hyundai
Electronics America (HEA). Accordingly, no earnings per share
information is disclosed. 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 30,
1996. Interim results are not necessarily indicative of the
operating results expected for later quarters or the full fiscal
year. Balance sheet amounts at March 30, 1996 were derived from
the audited financial statements for the year ended March 30,
1996.
On July 26, 1996, the Company filed Form 8-K with the Securities
and Exchange Commission (SEC) to change its fiscal year end to be
consistent with the year end of HEA. The fiscal year end changed
from the last Saturday of March to the last Saturday of December
conforming to its 52/53-week year methodology. For calendar year
1996, the fiscal year will end on December 28. The fiscal nine-
month period ending December 28, 1996 will comprise 39 weeks,
three 13-week quarters. The fiscal year ended March 30, 1996
comprised 53 weeks, as the quarter ended July 1, 1995 included 14
weeks. All other quarters comprised 13 weeks.
2. Financing facilities
On August 31, 1995, the Company established a $100 million
unsecured, revolving line of credit through Citibank, N.A. and
syndicated among ten banks, which was guaranteed by Hyundai
Electronics Industries Co., Ltd. (HEI), the majority shareholder
of HEA. All outstanding principal and interest was paid on August
29, 1996, terminating this facility.
On March 30, 1996, the Company entered into an accounts receivable
securitization program with Citicorp Securities, Inc. Under this
program, the Company can sell up to $100 million of its eligible
trade accounts receivables on a non-recourse basis. The face
amount of the eligible receivables are discounted based on the
Capital Receivables Corporation commercial paper rate (5.26% as of
September 28, 1996) plus commission and is subject to a 10%
retention. As of September 28, 1996, $49.3 million in sales of
accounts receivable whereby proceeds had not yet been received
were included in accounts receivable, and $55.3 million in
collections of accounts receivable not yet remitted were included
in accrued expenses.
On January 31, 1996, the Company signed a one year credit facility
in the amount of $13.8 million to be used for capital equipment
requirements at the Singapore facility which bears interest at a
rate based on the LIBOR plus 0.8 percent. This credit facility is
guaranteed by HEI and all outstanding amounts of principal and
accrued interest are due and payable on February 2, 1997. As of
September 28, 1996, borrowings under this facility amounted to
$13.8 million.
On April 10, 1996, the Company obtained a $100 million
intercompany line of credit from HEA. This line of credit allows
for draw downs up to $100 million and interest is payable
quarterly at a rate per annum of 0.1 percent above HEA's average
monthly cost of borrowing. All outstanding amounts of principal
and accrued interest are due and payable on April 10, 1997. As of
September 28, 1996, $70 million was outstanding. The Company's
intention is to retire this line of credit by December 28, 1996.
On July 31, 1996, the Company obtained a $35 million credit
facility from HEA. This facility was primarily used for operating
purposes and bore interest at a rate based on the LIBOR plus 0.7
percent. All outstanding amounts of principle and accrued
interest were due and payable on December 31, 1996. On August 30,
1996, all outstanding principal and interest was paid. The
Company does not intend to borrow any additional funds under this
facility.
On August 29, 1996, the Company established two unsecured,
revolving lines of credit totaling $215 million (the Facilities)
through Citibank, N. A. and syndicated among fifteen banks. The
Facilities are guaranteed by HEI. $86 million of the Facilities
is a 364-day committed facility, renewable annually at the option
of the syndicate banks. The facility will be used primarily for
general operating purposes and bears interest at a rate based on
the LIBOR plus 0.53 percent. As of September 28, 1996, $41
million of borrowings under this line of credit were outstanding.
$129 million of the Facilities is a three year committed facility
that will also be used primarily for general operating purposes
and bears interest at a rate based on the LIBOR plus 0.53 percent.
As of September 28, 1996, $129 million of borrowings under this
line of credit were outstanding.
Under the terms of the 364-day committed facility, the Company can
seek $35 million of additional credit extension from banks that
are either part of the existing syndication or other banks willing
to join the syndication. The Company has decided to seek an
additional $35 million under this provision and as of September
28, 1996, one existing syndicate member had agreed to a $10
million commitment increase.
3. 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
litigation between the Company and Rodime was then stayed pending
an appeal by Rodime. In November 1995, the Federal Circuit Court
of Appeals affirmed the lower court decision. In February 1996,
Rodime filed a petition with the U.S. Supreme Court requesting
review of the Federal Circuit Court's opinion, which was denied.
Rodime subsequently proposed that this matter be dismissed.
Following negotiations, an agreement was reached regarding the
terms of release and dismissal among the parties. In September
1996, the releases were executed, and dismissal of this matter was
entered in October 1996.
In November 1995, three separate actions (Wacholder v. Gallo, et
al., Silver v. Maxtor, et al., and Barrington v. Gallo, et al.)
were filed in the Court of Chancery of the State of Delaware, in
and for New Castle County. Each of the foregoing actions
generally alleged a breach of fiduciary duty by the Company's
directors in connection with the offer to purchase the Company by
Hyundai Electronics America and sought class certification,
preliminary and permanent injunctive relief to prevent the
acquisition, and damages and attorneys' fees. These actions were
subsequently consolidated with a similar California action
(Campanella
v. Maxtor, et al.). Thereafter, following negotiations among
counsel to parties to the consolidated action, an agreement in
principle for settlement was reached. A memorandum of
understanding was executed by the parties which provided that in
exchange for certain additional disclosures to the Company's
shareholders regarding the circumstances of the tender offer, the
foregoing actions would be settled, subject to completion of
confirmatory discovery, approval by the Court of Chancery, and
payment by the Company of plaintiffs' counsel fees and costs in an
amount not to exceed $315,000. Following agreement among the
parties on the final terms of settlement and completion of the
actions contemplated thereby, settlement documents were submitted
to the Court of Chancery. In August, the Court issued a
Scheduling Order which set a hearing date of October 22, 1996.
Within 30 days of the Order, the Company caused to be mailed to
each member of the settlement class (as defined by the terms of
settlement) a "Notice of Pendency of Class Action, Proposed
Settlement of Class Action and Settlement Hearing." The
Settlement Hearing was held as scheduled, and an order approving
the terms of settlement was entered on October 23, 1996. If there
is no appeal by dissenters within a 30-day period, the Delaware
order will become final on November 23, 1996. The Company plans
to file a motion to dismiss the Campanella action in California
court. Within five days of such dismissal, the Company will
effect payment to plaintiffs' counsel.
In March 1996, a pro se complaint was filed in U. S. District
Court for the Southern District of New York by Morton Berman
(Berman v. Maxtor Corporation, et al.). The complaint alleged
certain claims arising out of violation of U.S. Securities law,
Racketeer Influenced Corrupt Organization Act of 1970, and
common law doctrines of fraud, negligence and negligent
misrepresentation, against the Company and several former and
current executive officers of the Company. In April 1996, a
motion for dismissal was filed on behalf of the Company and the
other defendants. In June 1996, Berman filed papers opposing
the motion and the Company replied. Also in June 1996, Berman
filed a motion to amend his complaint and the Company opposed the
motion, requesting that the court defer adjudication of Berman's
motion to amend until it ruled upon the Company's motion to
dismiss. In September 1996, the Court denied Berman's motion to
amend his complaint and granted the Company's motion. An order
dismissing Berman's claims was entered on September 27, 1996
and became final on October 27, following expiration of the
30-day appeal period.
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 claims
described above, will not have a material adverse effect, if any,
on the Company's financial position, results of operations or cash
flows.
4. Subsequent Event
As of October 18, 1996, the Company had arranged to obtain a $10
million uncommitted, unsecured credit facility from the Seoul,
Korea branch of Banque Paribas bearing interest at a rate based on
the LIBOR plus 0.5 percent. The full amount of this line was
drawn on October 31, 1996. This line is guaranteed by HEI and
will be used primarily to meet working capital needs.
This report includes a number of forward-looking statements which
reflect the Company's current views with respect to future events
and financial performance. These forward-looking statements are
subject to certain risks and uncertainties, including those
discussed in Item 2. Management's Discussions and Analysis of
Financial Condition and Results of Operations, "-General", "-
Industry Characteristics", "-Manufacturing Characteristics," and "-
Liquidity and Capital Resources", and elsewhere in this report,
that could cause actual results to differ materially from
historical results or those anticipated. In this report, the
words "anticipates," "believes," "expects," "intends," "future,"
"will," "may" and similar expressions identify forward-looking
statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date
hereof.
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
The Company is subject to the highly cyclical nature of the disk
drive industry. The industry is characterized by rapid
technological change, short product life cycles, intense
competition, and significant price erosion during a product life
cycle. At times, the industry is also subject to excess
production capacity and component cost pressures as a result of
key component shortages. Specifically, with the overall growth
experienced by the disk drive industry in fiscal 1996 and 1995,
shortages of certain key components for the industry occurred in
early 1996. Then during the quarter ended June 29, 1996, the
industry experienced excess capacity due to a consolidation in the
industry coupled with weak market demand. Toward the end of the
current quarter, the industry experienced an increase in market
demand which reduced excess capacity and inventories existing at
the end of the prior quarter. In addition to being impacted by
these industry factors, the Company has been less successful in
the past several years 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 had 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 fifteen
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, product cost and time-to-market issues with
regard to certain products, the Company has not been profitable
during 1996.
Industry Characteristics
Data storage manufacturers continually strive for larger storage
capacities, higher performance and lower cost resulting in
shortened product life cycles. Shorter product life cycles
increase the importance of a company's ability to successfully
manage product transitions Certain new products introduced by
competitors, as well as those introduced by the Company, tend to
displace older products. The failure to continuously manage
product transitions results in a loss of new market opportunities
and decreasing sales of existing products, cancellation of
products or product lines, the accumulation of obsolete and excess
inventory, and resulting 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. There
can be no assurance that the Company will be successful in such
efforts.
When competitors introduce products which offer greater capacity,
better performance, lower prices or any combination of these
factors, and when the Company's new products are not brought to
market on a timely basis, the selling price of its older products
generally must be reduced in order to compete effectively with
competitors' new products. Also 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. The Company experienced significant price erosion for
certain products in the first half of 1996 due to competitive
pricing pressures as competitors sold off excess and redundant
inventories. In the current quarter, the Company experienced a
decrease in pricing pressures due to improved market demand,
resulting in decreased inventory levels from the prior quarter.
The Company believes the industry has stabilized from the
excessive inventory position existing at the end of the prior
quarter. There can be no assurance that price erosion will not
continue to increase substantially.
Manufacturing Characteristics
The Company's manufacturing processes require large volumes of
high-quality 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.
Generally, 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. In
light of current industry conditions, including consolidation of
competitors and varying demand for hard disk storage products, the
Company is reassessing its requirements for volume components and
has reduced its commitments to vendors where appropriate.
The Company intends to continue to pursue qualification of
alternative sources for single source components where practical.
However, the Company believes that it will have to continue to
utilize leading edge components which may only be available from a
single source. 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.
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
adversely 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. The Company has implemented a number of programs to
improve the quality of its key components and subassemblies, and
its internal manufacturing processes. The Company continues to
strive to improve the quality of its products and believes that it
must continue to focus on product quality to improve its
competitive position in the disk drive industry. However, there
can be no assurance that the Company will be successful in
improving or maintaining its current quality standards.
Three Months Ended Six Months Ended
Sept. 28, Sept. 30, Sept. 28, Sept. 30,
(In millions) 1996 1995 1996 1995
Revenue $284.5 $281.4 $545.8 $597.3
Gross margin $ (6.4) $ 0.0 $(78.8) $ 29.9
As a percentage
of revenue (2.2%) 0.0% (14.4%) 5.0%
Net loss $(62.4) $(44.5) $(192.6) $(58.3)
As a percentage
of revenue (21.9%) (15.8%) (35.3%) (9.8%)
Revenue
Revenue for the quarter ended September 28, 1996 increased by 1%
from the same prior year period due to an increase in units sold
and a slightly higher average sales price related to the shift in
product mix, more than offsetting the negative impact on revenues
resulting from the sale of a majority interest in a wholly-owned
subsidiary occurring in June 1996. The Company is still feeling
the effects of pricing pressures resulting from a consolidation of
competitors. However demand increased during the quarter,
especially in September, as industry inventories of products which
have received market acceptance decreased. Unit volumes increased
by 5% for the current quarter compared to prior year. In terms of
a shift in product mix, substantially all of the Company's current
quarter unit volume comprised drives in excess of 1.0GB.
Comparing the current six month period with prior year, revenue
decreased 9% or $51.5M, primarily due to a slower market demand
period following a similar trend in the PC industry especially
during the first half of the current six month period. In
addition, revenue for the six months ended September 30, 1995
reflects a 27-week period compared to a 26-week period for the
current six month period. The quarter ended July 1, 1995 was
extended to realign fiscal year end periods for the 53-week fiscal
year 1996.
During the quarter ended September 28, 1996, the Company had two
customers which accounted for more than 10% of the Company's
revenue. Only one customer accounted for more than 10% of the
Company's revenues for the six month period ending September 28,
1996. During the quarter ended and the six months ended September
30, 1995, one customer accounted for 10% or greater of the
Company's revenue.
Gross margin
For the current quarter, gross margin was relatively comparable to
the prior year's period though average unit costs were slightly
higher due to the product mix shift previously discussed.
Despite the shift to higher capacity products, gross margin for
the current six month period declined slightly compared to same
prior year period, due to a substantial drop in average unit
selling prices in the first half of the period. In addition,
during the current six month period, the Company incurred a $42.3
million charge for products in inventory and scheduled to be built
the remainder of the calendar year which have market prices lower
than cost. Of this amount, $33.4 million is reserved at September
28, 1996. Also occurring in the period was a one-time charge of
$6.5 million to consolidate certain manufacturing activities,
including the closure of a headstack assembly plant in Thailand
and a reduction of production shifts in Singapore.
The Company will continue its efforts to reduce its average unit
manufacturing costs. 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. In addition, given the cyclical nature of the disk
drive industry and the Company's dependence on the success of
certain products, as discussed earlier, there can be no assurance
that the Company will be able to improve or maintain its current
gross margin.
Operating expenses
Three Months Ended Six Months Ended
Sept. 28, Sept. 30, Sept. 28, Sept. 30,
(In millions) 1996 1995 1996 1995
Research and development $30.0 $21.8 $58.8 $ 44.6
As a percentage
of revenue 10.5% 7.7% 10.8% 7.5%
Selling, general and
administrative $ 19.8 $19.5 $44.0 $ 38.5
As a percentage
of revenue 7.0% 6.9% 8.1% 6.4%
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.
Although the Company has no technology purchases currently
planned, R&D expenses may fluctuate in the future if the Company
decides to acquire rights to new technologies.
For the current quarter, SG&A expenses as a percentage of revenue
and in absolute dollars were consistent with the same period in
the prior year. The stabilization of SG&A expenses during the
quarter is attributed to a headcount reduction and lower marketing
and advertising costs. Selling, general and administrative (SG&A)
expenses as a percentage of revenue for the current six months
increased from the same period in the prior year due to the
decrease in the revenue base as discussed earlier. SG&A spending
in absolute dollars increased primarily due to increased
administrative expenses for executive severances and bonuses, and
charges incurred for the relocation of the Corporate offices,
which offset the Company's ongoing efforts to reduce costs and
expenditures. The Company intends to continue efforts to reduce
costs in future quarters, however, there can be no assurance that
the Company will be successful in such efforts.
Interest expense and interest income
Three Months Ended Six Months Ended
Sept. 28, Sept. 30, Sept. 28, Sept. 30,
(In millions) 1996 1995 1996 1995
Interest expense $ 6.3 $ 2.5 $ 11.1 $ 4.3
Interest income $ 0.3 $ 0.1 $ 0.6 $ 0.7
Interest expense increased due to substantially higher average
borrowings on the Company's lines of credit required to fund the
Company's operations. The Company had $170 million of borrowings
outstanding under the $215 million Citibank, N.A. facilities and
$70 million outstanding on the intercompany line of credit from
HEA as of September 28, 1996. The Company expects to maintain
higher levels of borrowings through 1997. Interest income
remained consistent with prior periods.
Provision for income taxes
Three Months Ended Six Months Ended
Sept. 28, Sept. 30, Sept. 28, Sept. 30,
(In millions) 1996 1995 1996 1995
Provision for income
taxes $ 0.2 $ 0.8 $0.5 $1.5
The provision for income taxes consists primarily of foreign
taxes. In June 1996, the Company sold a majority interest in its
wholly-owned subsidiary, which had its primary operations in Hong
Kong, resulting in lower foreign taxes for the current quarter.
The Company's effective tax rate for fiscal years March 30, 1996
and March 25, 1995 differs from the combined federal and state
rates 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 and Thailand
operations is not taxable in Singapore or Thailand, as a result of
the Company's tax holiday in both locations.
LIQUIDITY AND CAPITAL RESOURCES
September 28,
(In millions) 1996
Cash and cash equivalents $24.4
Short-term borrowings $54.8
Short-term borrowings due
to affiliate $70.0
Net cash used in operating
activities $91.4
Net cash used in investing
activities $15.6
Net cash provided by financing
activities $78.6
As of September 28, 1996, the Company's cash and cash equivalents
decreased $28.4 million due primarily to operating losses.
Net cash used in operating activities during the current six
months was primarily attributable to the net loss from operations
net of non-cash depreciation and amortization, and net of a charge
for products in inventory and scheduled to be built through
calendar 1996 which have market prices that are lower than cost.
Also contributing to the decrease in cash from operating
activities is a decrease accounts payable, offset by decreases in
accounts receivable and inventories. The decrease in accounts
receivable is due to a decrease in revenues comparing September to
March. The decrease in inventories is due to strong shipments in
September coupled with an overall reduction of the Company's build
schedule. The reduction in the Company's build schedule combined
with an increase in borrowings contributed to the decrease in
accounts payable.
Net cash used in investing activities during the current six
months was primarily attributable to $36.7 million in capital
expenditures offset by $25 million in proceeds from the sale of a
majority interest of a wholly-owned subsidiary. The majority of
the capital expenditures activity related to the acquisition of
manufacturing and engineering equipment to develop new products
and enhance the productivity of the Singapore manufacturing
facility. In addition, $5.1 million was advanced to a supplier to
build certain key components under a volume purchase agreement.
The Company entered into an agreement in June 1996, subsequently
amended in August 1996, with a supplier to build certain key
components. Under the terms of this agreement as amended, the
Company has agreed to advance up to $14 million to the supplier,
by March 31, 1997, to finance purchases of certain equipment
required to manufacture product volumes as committed under this
agreement. Such advances will be repaid to the Company in the
form of price discounts and are secured by the equipment
purchased. As of September 28, 1996, $5.1 million was advanced
under the agreement.
Net cash provided by financing activities during the current six
months is primarily due to $170 million in proceeds from
additional credit facility borrowings, offset by a $95 million
paydown on a previous credit facility.
On August 31, 1995, the Company established a $100 million
unsecured, revolving line of credit through Citibank, N.A. and
syndicated among ten banks, which was guaranteed by Hyundai
Electronics Industries Co., Ltd. (HEI), the majority shareholder
of HEA. All outstanding principal and interest was paid on August
29, 1996, terminating this facility.
On March 30, 1996, the Company entered into an accounts receivable
securitization program with Citicorp Securities, Inc. Under this
program, the Company can sell up to $100 million of its eligible
trade accounts receivables on a non-recourse basis. The face
amount of the eligible receivables are discounted based on the
Capital Receivables Corporation commercial paper rate (5.26% as of
September 28, 1996) plus commission and is subject to a 10%
retention. As of September 28, 1996, $49.3 million in sales of
accounts receivable whereby proceeds had not yet been received
were included in accounts receivable, and $55.3 million in
collections of accounts receivable not yet remitted were included
in accrued expenses.
On January 31, 1996, the Company signed a one year credit facility
in the amount of $13.8 million to be used for capital equipment
requirements at the Singapore facility which bears interest at a
rate based on the LIBOR plus 0.8 percent. This credit facility is
guaranteed by HEI and all outstanding amounts of principal and
accrued interest are due and payable on February 2, 1997. As of
September 28, 1996, borrowings under this facility amounted to
$13.8 million.
On April 10, 1996, the Company obtained a $100 million
intercompany line of credit from HEA. This line of credit allows
for draw downs up to $100 million and interest is payable
quarterly at a rate per annum of 0.1 percent above HEA's average
monthly cost of borrowing. All outstanding amounts of principal
and accrued interest are due and payable on April 10, 1997. As of
September 28, 1996, $70 million was outstanding. The Company's
intention is to retire this line of credit by December 28, 1996.
On July 31, 1996, the Company obtained a $35 million credit
facility from HEA. This facility was primarily used for operating
purposes and bore interest at a rate based on the LIBOR plus 0.7
percent. All outstanding amounts of principle and accrued
interest were due and payable on December 31, 1996. On August 30,
1996, all outstanding principal and interest was paid. The
Company does not intend to borrow any additional funds under this
facility.
On August 29, 1996, the Company established two unsecured,
revolving lines of credit totaling $215 million (the Facilities)
through Citibank, N. A. and syndicated among fifteen banks. The
Facilities are guaranteed by HEI. $86 million of the Facilities
is a 364-day committed facility, renewable annually at the option
of the syndicate banks. The facility will be used primarily for
general operating purposes and bears interest at a rate based on
the LIBOR plus 0.53 percent. As of September 28, 1996, $41
million of borrowings under this line of credit were outstanding.
$129 million of the Facilities is a three year committed facility
that will also be used primarily for general operating purposes
and bears interest at a rate based on the LIBOR plus 0.53 percent.
As of September 28, 1996, $129 million of borrowings under this
line of credit were outstanding.
Under the terms of the 364-day committed facility, the Company can
seek $35 million of additional credit extension from banks that
are either part of the existing syndication or other banks willing
to join the syndication. The Company has decided to seek an
additional $35 million under this provision and as of September
28, 1996, one existing syndicate member had agreed to a $10
million commitment increase.
As of October 18, 1996, the Company had arranged to obtain a $10
million uncommitted, unsecured credit facility from the Seoul,
Korea branch of Banque Paribas bearing interest at a rate based on
the LIBOR plus 0.5 percent. The full amount of this line was
drawn on October 31, 1996. This line is guaranteed by HEI and
will be used primarily to meet working capital needs.
As of November 2, 1996, the Company had $283.8 million of
borrowings drawn on existing credit facilities. This balance is
comprised of $200 million on the facilities through Citibank, $10
million on the Banque Paribas facility, $60 million on the HEA
facility, and $13.8 million on the Singapore capital equipment
loan.
The liquidity of the Company was adversely affected during fiscal
year ended March 30, 1996 by significant losses from operations
and liquidity has been significantly reduced compared to the same
period in the prior year. In addition to the $215 million in
credit facilities obtained during the current quarter, the Company
is implementing ongoing measures with the goal of decreasing
losses from operations and thus 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 reducing
operating expenses and improving asset management. The Company
believes, however, 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.
The Company expects that it will require additional sources of
liquidity, including alternative sources of financing through 1996
and 1997. The Company is engaged in ongoing discussions with
various parties, including HEI, HEA and certain financial
institutions regarding additional sources of financing, including
an infusion of equity. The Company intends to terminate its
current credit facilities with HEA by December 28, 1996 with the
understanding that new credit facilities may be available if
needed in 1997. While the Company believes that additional
sources of financing will be available, there can be no assurance
that financing will be available on terms which are favorable to
the Company.
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, equipment financing and other borrowing
capabilities (supported by HEI) will be sufficient to fund the
Company's working capital and capital expenditure requirements for
the foreseeable future.
DIVIDEND POLICY
The Company has never paid cash dividends on its capital stock.
The holders of shares of Series A Preferred Stock shall be
entitled, when and as declared by the Board of Directors, to
dividends out of funds legally available therefor at a rate of
$0.40 per share, per annum (as adjusted to reflect certain
transactions), prior to the declaration, setting aside or payment
of any dividend to the holders of the Company's Common Stock. No
dividend shall be declared or set apart for payment with respect
to the Common Stock in any year, unless there shall have been
declared and paid (or set apart for payment) the full preferential
dividend set forth above with respect to the Series A Preferred
Stock during such year. Dividends shall not be cumulative and no
undeclared or unpaid dividend shall bear interest. Under the
terms of the Company's credit 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 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
litigation between the Company and Rodime was then stayed pending
an appeal by Rodime. In November 1995, the Federal Circuit Court
of Appeals affirmed the lower court decision. In February 1996,
Rodime filed a petition with the U.S. Supreme Court requesting
review of the Federal Circuit Court's opinion, which was denied.
Rodime subsequently proposed that this matter be dismissed.
Following negotiations, an agreement was reached regarding the
terms of release and dismissal among the parties. In September
1996, the releases were executed, and dismissal of this matter was
entered in October 1996.
In November 1995, three separate actions (Wacholder v. Gallo, et
al., Silver v. Maxtor, et al., and Barrington v. Gallo, et al.)
were filed in the Court of Chancery of the State of Delaware, in
and for New Castle County. Each of the foregoing actions
generally alleged a breach of fiduciary duty by the Company's
directors in connection with the offer to purchase the Company by
Hyundai Electronics America and sought class certification,
preliminary and permanent injunctive relief to prevent the
acquisition, and damages and attorneys' fees. These actions were
subsequently consolidated with a similar California action
(Campanella
v. Maxtor, et al.). Thereafter, following negotiations among
counsel to parties to the consolidated action, an agreement in
principle for settlement was reached. A memorandum of
understanding was executed by the parties which provided that in
exchange for certain additional disclosures to the Company's
shareholders regarding the circumstances of the tender offer, the
foregoing actions would be settled, subject to completion of
confirmatory discovery, approval by the Court of Chancery, and
payment by the Company of plaintiffs' counsel fees and costs in an
amount not to exceed $315,000. Following agreement among the
parties on the final terms of settlement and completion of the
actions contemplated thereby, settlement documents were submitted
to the Court of Chancery. In August, the Court issued a
Scheduling Order which set a hearing date of October 22, 1996.
Within 30 days of the Order, the Company caused to be mailed to
each member of the settlement class (as defined by the terms of
settlement) a "Notice of Pendency of Class Action, Proposed
Settlement of Class Action and Settlement Hearing." The
Settlement Hearing was held as scheduled, and an order approving
the terms of settlement was entered on October 23, 1996. If there
is no appeal by dissenters within a 30-day period, the Delaware
order will become final on November 23, 1996. The Company plans
to file a motion to dismiss the Campanella action in California
court. Within five days of such dismissal, the Company will
effect payment to plaintiffs' counsel.
In March 1996, a pro se complaint was filed in U. S. District
Court for the Southern District of New York by Morton Berman
(Berman v. Maxtor Corporation, et al.). The complaint alleged
certain claims arising out of
violation of U.S. Securities law, Racketeer Influenced Corrupt
Organization Act of 1970, and common law doctrines of fraud,
negligence and negligent misrepresentation, against the Company
and several former and current executive officers of the Company.
In April 1996, a motion for dismissal was filed on behalf of the
Company and the other defendants. In June 1996, Berman filed
papers opposing the motion and the Company replied. Also in June
1996, Berman filed a motion to amend his complaint and the Company
opposed the motion, requesting that the court defer adjudication
of Berman's motion to amend until it ruled upon the Company's
motion to dismiss. In September 1996, the Court denied Berman's
motion to amend his complaint and granted the Company's motion.
An order dismissing Berman's claims was entered on September 27,
1996 and became final on October 27, following expiration of the
30-day appeal period.
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 claims
described above, will not have a material adverse effect, if any,
on the Company's financial position, results of operations or cash
flows.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
b)Reports on Form 8-K:
On September 13, 1996, a current report on Form 8-K was filed
by the Registrant to report the establishment of two unsecured,
revolving lines of credit totaling $215 million through
Citibank, N. A. and syndicated among fifteen banks.
c)Exhibits:
See Index to Exhibits on pages 21 to 31 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:November 12, 1996 By:/s/ Paul J. Tufano
Paul J. Tufano
Vice President, Finance and
Chief Financial Officer
2.1 (31) Agreement and Plan
of Merger dated November 2, 1995 between Registrant, Hyundai
Electronics America and Hyundai Acquisition, Inc.
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
3.6 (36)Amended and Restated Certificate of Incorporation of
Maxtor Corporation, dated June 6, 1996
3.7 (36)Amended and Restated By-Laws, effective May 14, 1996
3.8 (37)Exchange Agreement effective June 18, 1996, between
Maxtor Corporation and Hyundai Electronics America
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
4.4 (32)Amendment No. 2 to Rights Agreement between Registrant
and the First National Bank of Boston, dated November 2, 1995.
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 among 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
February 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(29)Memorandum of Understanding concerning
Guarantee by Hyundai Electronics Co.,
Ltd. of Credit Facility for Registrant, dated July 17, 1995
10.141(29)Waiver to Financing Agreement among
Registrant and The CIT Group/Business
Credit, Inc., dated August 2, 1995
10.142(33)Credit Agreement among Registrant and The
Initial Lenders and the Issuing Bank and
Citibank, N.A., dated August 31, 1995
10.143(33)The Guaranty and Recourse Agreement among
Registrant and Hyundai Electronics
Industries Co., Ltd., dated August 31, 1995
10.144(33)Waiver to Financing Agreement among
Registrant and the CIT Group/Business
Credit, Inc., and Assignment Agreement
among Registrant, the CIT Group/Business
Credit, Inc., and Finova Capital
Corporation, dated October 11, 1995.
10.145(33)Amendment to the Financing Agreement among
Registrant and the CIT Group/Business
Credit, Inc., dated October 17, 1995
10.146(34)First Supplemental Indenture, dated as of January 11,
1996, between Maxtor and State Street Bank and Trust
Company
10.147(34)Credit Agreement, dated as of December 29, 1995 between
Maxtor Corporation and Hyundai Electronics
America
10.148(25)Maxtor Corporation 1995 Stock Option Plan
10.149(26)Maxtor Corporation Individual Stock Option
Agreement, dated November 8, 1994
10.150(30)Maxtor Corporation 1992 Employee Stock
Purchase Plan and 1996 Outside Directors Stock
Option Plan, dated October 9, 1995
10.151(36)Maxtor Corporation 1996 Stock Option Plan
10.152(36)Intercompany Loan Agreement, dated as of April
10, 1996, between Maxtor Corporation and
Hyundai Electronics America
10.153(36)Excerpts from the Execution Copy of
Receivables Purchase and Sale Agreement, dated
as of March 30, 1996, between Maxtor
Corporation and Corporate Receivables
Corporation and Citicorp North America,
Incorporated
10.154(35)Recapitalization Agreement among the Company,
International Manufacturing Services,
Incorporated and certain investors, dated as
of May 21, 1996
10.155(35)Redemption Agreement between Maxtor
Corporation and International Manufacturing
Services, Incorporated, dated as of May 21,
1996
10.156(35)Manufacturing Services Agreement between
Maxtor Corporation and International
Manufacturing Services, Incorporated, dated
June 13, 1996*
10.157(37)Credit Facility, dated as of July 31, 1996,
between Maxtor Corporation and Hyundai
Electronics America
10.158(38)364-Day Credit Agreement, dated August 29,
1996, among Maxtor Corporation, Citibank,
N.A., and Syndicate Banks
10.159(38)Credit Agreement, dated August 29, 1996, among
Maxtor Corporation, Citibank, N.A., and
Syndicate Banks
27
Financial Data Schedule
*
Confidential treatment has been requested for portions
of this document
- ------------------------------------------------------------------
(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
(29)Incorporated by reference to exhibits of Form 10-Q filed
August 14, 1995
(30)Incorporated by reference to exhibits to Registration
Statement No. 33-63295 effective October 10, 1995
(31)Incorporated by reference to exhibit III of Schedule 14D-9
filed November 9, 1995
(32) Incorporated by reference to exhibit VI of schedule 14D-9
filed November 9, 1995
(33)Incorporated by reference to exhibits of Form 10-Q filed
November 14, 1996
(34)Incorporated by reference to exhibits of Form 10-Q filed
February 14, 1996
(35)Incorporated by reference to exhibits of Form 8-K filed June
28, 1996
(36)Incorporated by reference to exhibits of Form 10-K filed July
1, 1996
(37)Incorporated by reference to exhibits of Form 10-Q filed
August 13, 1996
(38)Incorporated by reference to exhibits of Form 8-K filed
September 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> SEP-28-1996
<CASH> 24,393
<SECURITIES> 0
<RECEIVABLES> 140,997
<ALLOWANCES> 4,963
<INVENTORY> 83,457
<CURRENT-ASSETS> 251,696
<PP&E> 247,702
<DEPRECIATION> 155,047
<TOTAL-ASSETS> 356,527
<CURRENT-LIABILITIES> 391,197
<BONDS> 0
0
582
<COMMON> 0
<OTHER-SE> (264,347)<F1>
<TOTAL-LIABILITY-AND-EQUITY> 356,527
<SALES> 545,837
<TOTAL-REVENUES> 545,837
<CGS> 624,622
<TOTAL-COSTS> 624,622
<OTHER-EXPENSES> 102,852
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,123
<INCOME-PRETAX> (192,175)
<INCOME-TAX> 453
<INCOME-CONTINUING> (192,628)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (192,628)
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>Other SE includes Additional Paid in Capital of $335,017 and Accumulated
Deficit of $599,364
<F2>Earnings per share is not applicable
</FN>
</TABLE>
