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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
[x] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the Quarterly Period ended MARCH 31, 1996 or
---------------
[ ] 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 0-13381
MYLEX CORPORATION
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(Exact name of registrant as specified in its charter)
FLORIDA 59-2291597
- ------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
34551 Ardenwood Blvd., Fremont, California 94555
___________________________________________ _______
(Address of principal executive offices) ZIP Code
Registrant's telephone number (including area code): (510) 796-6100
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $.01 par value 19,844,786 shares
____________________________ __________________
Class Outstanding at March 31,1996
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS*
MYLEX CORPORATION
CONSOLIDATED BALANCE SHEET
(IN $000'S)
ASSETS
MAR 31 DEC 31
1996 1995
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CURRENT ASSETS:
CASH AND EQUIVALENTS $ 10,423 $11,733
SHORT-TERM MARKETABLE INVESTMENT $ 25,750 $25,708
ACCOUNTS RECEIVABLE 29,534 23,788
ALLOWANCE FOR DOUBTFUL ACCOUNTS (959) (707)
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ACCOUNTS RECEIVABLE, NET 28,575 23,081
INVENTORIES 41,982 26,521
PREPAID EXPENSES & OTHER CUR. ASSETS 4,448 4,444
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TOTAL CURRENT ASSETS $111,178 $91,487
PROPERTY AND EQUIPMENT, NET 3,769 3,021
OTHER ASSETS 134 112
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TOTAL ASSETS $115,081 $94,620
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 24,193 $ 12,243
ACCRUED LIABILITIES 8,614 5,969
CURRENT PORTION OF LONG-TERM
CAPITAL LEASE OBLIGATIONS 335 308
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TOTAL CURRENT LIABILITIES $ 33,142 $ 18,520
LONG-TERM CAPITAL LEASE OBLIGATIONS 72 203
STOCKHOLDERS' EQUITY
COMMON STOCK 198 196
ADDITIONAL PAID-IN CAPITAL 53,154 52,310
RETAINED EARNINGS 28,515 23,391
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TOTAL STOCKHOLDERS' EQUITY $ 81,867 $ 75,897
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 115,081 $ 94,620
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SEE NOTES TO FINANCIAL STATEMENTS
* SEE NOTE C WITH RESPECT TO THE ACQUISITION OF BUSLOGIC, INC.
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MYLEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS, THREE MONTHS ENDED
UNAUDITED
(IN $000'S, EXCEPT SHARE DATA)
MAR 31 MAR 31
1996 1995
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NET SALES $48,497 $23,931
COST OF SALES 29,967 14,620
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GROSS PROFIT 18,530 9,311
OPERATING EXPENSES:
SELLING AND MARKETING 3,755 2,770
RESEARCH AND DEVELOPMENT 3,171 1,962
GENERAL AND ADMINISTRATION 3,426 1,323
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TOTAL OPERATING EXPENSES $10,352 $6,055
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OPERATING PROFIT 8,178 3,256
INTEREST INCOME 430 58
INTEREST EXPENSE (6) (57)
OTHER EXPENSE (60) (20)
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INCOME BEFORE TAXES $ 8,542 $ 3,237
INCOME TAX EXPENSE 3,417 1,133
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NET INCOME $ 5,125 $ 2,104
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EARNINGS PER COMMON SHARE:
PRIMARY 0.24 0.11
FULLY DILUTED 0.24 0.11
AVERAGE COMMON SHARE OUTSTANDING:
PRIMARY 21,297,100 18,702,600
FULLY DILUTED 21,408,900 18,703,500
SEE NOTES TO FINANCIAL STATEMENTS
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MYLEX CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS, THREE MONTHS ENDED
UNAUDITED
(IN $000'S)
MAR 31 MAR 31
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 5,125 $ 2,104
TAX BENEFIT RELATED TO DISQUALIFYING
DISPOSITIONS OF STOCK OPTIONS 383 --
DEPRECIATION AND AMORTIZATION 458 319
AMORTIZATION OF DISCOUNT/PREMIUM ON
SHORT-TERM MARKETABLE INVESTMENTS (42) --
CHANGES IN OPERATING ASSETS & LIABILITIES
ACCOUNTS RECEIVABLE, NET (5,494) (4,414)
INVENTORIES (15,461) (2,092)
PREPAID EXPENSES AND
OTHER CURRENT ASSETS (5) (481)
ACCOUNTS PAYBLE 11,950 1,843
ACCRUED LIABILITIES 2,645 1,294
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NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES (441) (1,427)
CASH FLOWS FROM INVESTING ACTIVITIES:
CAPITAL EXPENDITURES (1,206) (308)
DECREASE(INCREASE) IN OTHER ASSETS (22) 35
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NET CASH (USED)PROVIDED BY INVESTING ACTIVITIES (1,228) (273)
CASH FLOWS FROM FINACING ACTIVITIES:
(REPAYMENTS) BORROWINGS AGAINST
LINE OF CREDIT -- (1,850)
REPAYMENT OF CAPITAL LEASE OBLIGATIONS (104) (102)
EXERCISE OF STOCK OPTIONS 463 496
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NET CASH PROVIDED(USED) BY FINANCING ACTIVITIES 359 (1,456)
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NET CHANGE IN CASH AND EQUIVALENT (1,310) (3,156)
CASH AND CASH EQUIVALENTS: AT BEGINNING
OF PERIOD $11,733 $ 8,792
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CASH AND CASH EQUIVALENTS: AT END OF PERIOD $10,423 $5,636
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CASH PAID DURING THE PERIOD:
CASH PAID FOR INTEREST $6 $57
CASH PAID FOR INCOME TAXES $767 $300
SEE NOTES TO FINANCIAL STATEMENTS
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MYLEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
In the opinion of the Company, the accompanying financial statements
contain all adjustments (consisting only of normal recurring adjustments)
necessary to fairly present the Company's financial position and its results of
operations and cash flows as of the dates and for the periods indicated.
Certain information and footnote disclosures normally contained in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. These condensed financial
statements should be read in conjunction with the financial statements
incorporated by reference in the Company's Form 10-K for the year ended
December 31, 1995. The results of operations for the three months ended March
31, 1996, are not necessarily indicative of the operating results for the
full year.
PER SHARE DATA
Primary earnings per share is based on the weighted average common and,
when dilutive, common equivalent shares outstanding each period. Common
equivalent shares consist of dilutive shares issuable upon the exercise of stock
options and warrants.
NOTE B. INVENTORIES (IN $000'S)
March 31, December 31,
1996 1995
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Raw Material $25,159 $17,665
Work-in-process 10,452 6,588
Finished Goods 6,371 2,268
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Total $41,982 $26,521
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NOTE C. MERGER WITH BUSLOGIC
In February 1996, the Company closed a business combination pursuant
to which it issued 2,710,738 shares of its common stock for all of the
capital stock of BusLogic Inc. (BusLogic), a supplier of storage input/output
solutions for use in network file servers, personal computers, and
workstations. This business combination has been accounted for as a pooling
of interests, and accordingly, the consolidated financial statements for
periods prior to the combination have been restated to include the results of
operations, financial position and cash flows of BusLogic. There were no
significant transactions between the Company and BusLogic prior to the
combination, which required elimination, and no adjustments were required to
conform accounting policies.
The results of operations for the separate enterprises and the combined
amounts presented in the accompanying consolidated financial statements are
summarized below.
Three months Three months
ended ended
(in 000's) March 31, 1996 March 31, 1995
-------------- --------------
REVENUE:
Mylex $ 43,181 $17,085
BusLogic 5,316 6,845
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Combined $ 48,497 $23,930
NET INCOME:
Mylex $ 6,190 $ 2,040
BusLogic (1,065) 64
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Combined $ 5,125 $ 2,104
NOTE D. CONTINGENCIES
In October 1994, the former Chief Executive Officer of the Company, Dr.
M.A. Chowdry, filed a complaint against the Company and its outside directors,
claiming breach of an employment agreement that he entered into with the Company
approximately three months prior to his termination as the Company's Chief
Executive Officer. The complaint alleges compensatory and consequential damages
of over $6 million (which would vary based on the price of the Company's Common
Stock) and unspecified punitive damages. The Company believes it has meritorious
defenses and will vigorously defend this lawsuit. Nonetheless, given the
unpredictable nature of legal proceedings, there can be no assurance that the
Company will prevail.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATION
Mylex designs, manufactures and markets RAID controllers that provide
high performance, capacity enhancing fault tolerant storage and input/output
solu-tions for client/server computer networks. Mylex controllers integrate
the Company's proprietary ASICs, firmware and software with standard industry
components. More than twenty leading network file server and storage
subsystem OEMs, including IBM, Hewlett-Packard Company, Digital Equipment
Corporation, and NEC, have designed Mylex RAID controllers into their server
and storage subsystem products. The Company was incorporated under the laws
of the State of Florida in May 1983. The shareholders of the
Company have approved the reincorporation of the Company to
Delaware. The incorporation will be effective on or before
July 1, 1996.
During the late 1980s and early 1990s, the Company's principal business
involved the production and sale of system boards (so-called "mother boards")
for personal computers. In the early 1990s, Mylex responded to changes in the
computer industry by undertaking a series of product development initiatives
designed to reposition the Company to address the storage and input/output,
or "I/O," challenges facing the emerging client/server computing environment.
In 1992, the Company introduced its first RAID controller product into the
personal computer network market. Sales of RAID controller products have
grown rapidly since 1992, and represented 87% of the Company's net sales
during the first quarter of 1996. In February 1996 Mylex consummated the
acquisition of BusLogic Inc., a Santa Clara, California-based supplier of
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high-performance SCSI (Small Computer Systems Interface) I/O solutions used in
network file servers, personal computers and workstations.
The trend toward client/server computing that began in the mid-1980s has
placed particular demands on network storage systems and related I/O
functions. The development of faster microprocessors and more robust computer
bus architectures in network systems has often outstripped the capabilities
of data storage and I/O technologies, leading to systems "bottlenecks." To
alleviate or avoid such bottlenecks, networks require continual improvements
in stored data retrieval speed. In addition, the development of more complex
applications and operating systems has created the need for increased network
storage capacity. Meanwhile, the mission critical, enterprise-wide nature of
networked computing often requires a high level of "fault tolerance," or the
ability to preserve data from loss and to provide uninterrupted system
service even if an individual data storage device fails. The emergence of
data-intensive applications such as multimedia and video-on-demand are
further driving the demands for speed, capacity and reliability in network
storage devices.
RAID controllers enable increased speed, greater capacity, and a high
degree of fault tolerance in network storage and I/O functions. RAID, which
stands for redundant array of independent disks, is a method for distributing
data across several disk drives and allowing the server microprocessor to
access those drives simultaneously, thus increasing system storage I/O
performance. RAID controllers support all major operating systems and bus
types, and the Company endeavors to rapidly develop products for new bus,
operating system, and platform standards as they are defined. RAID controller
products based on the recently introduced PCI bus standard represented a
majority of the Company's disk array product sales in 1996. Along with the
technology that the Company has developed for the RAID market, the Company
believes that its acquisition of BusLogic should strengthen the Company by
adding significant SCSI technology and ASIC (Application Specific Integrated
Circuit) development capabilities.
As of May 3, 1995, the Company and BusLogic had approximately 383
employees. None of the employees are represented by labor union or employed
under any collective bargaining agreement.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1996 the Company financed its operations
primarily from existing cash balances and cash generated from operations.
As of March 31, 1996, the Company's working capital increased to $78.0
million from $73.0 million at December 31, 1995. This increase in working
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capital was due primarily to a $5.5 million growth in accounts receivable and
a $15.5 million rise in inventories. This was offset by a decrease in cash
of $1.3 million, $12.0 million increase in accounts payable and a $2.6
million increase in accrued liabilities, for a net increase in working
capital of $5.0 million. Accounts receivable increased over the year end
1995 balance due to 20% greater sales volume from fourth quarter 1995 to the
first quarter of 1996.
Cash balances decreased by $1.3 million from $11.7 million at December
31, 1995, to $10.4 million at March 31, 1996. This decline in the cash
balance is due primarily to the funding of operations and capital
expenditures.
The Company has a revolving line of credit with Imperial Bank (the
"Bank"), secured by the Company's unencumbered assets, which expires in June,
1996. The line of credit bears interest at the Bank's prime rate and is
subject to an overall limit of $8,000,000. The Bank's agreement with the
Company contains covenants that include the maintenance of specific financial
ratios and prohibitions on additional indebtedness without the prior consent
of the Bank. As of March 31, 1996, the Company was in compliance with these
covenants. The Company is in discussion with the Bank to review the line of
credit for an additional year and, although no assurance can be given,
expects to renew the line of credit in the near future.
The Company presently expects to finance near-term and long-term
operations and capital requirements through cash provided by continuing
operations, existing cash balances, investments and borrowings under the
revolving bank line of credit. However, there can be no assurance that the
Company will not require additional financing over the long term, or, if
required, that such financing will be available on terms favorable to the
Company.
Accounts payable increased to $24.2 million at March 31, 1996, compared
to $12.2 million at December 31, 1995, an increase of $12.0 million, or 98%.
This increase was principally due to the Company's change in inventory
planning, which resulted in the increased funding of inventory to be built
over time which will approximate one month of sales in finished goods. This
inventory change was implemented to better serve our distribution customers
as well as respond to increases in demand. Additionally, a high percentage
of inventory purchases were made during the final month of the quarter.
Net accounts receivable increased to $28.6 million at March 31, 1996,
compared to $23.1 million at December 31, 1995, an increase of $5.5 million
or 24%. This increase was attributable to 20% higher sales volume over the
fourth quarter of 1995. The accounts receivable attributable to those sales
are anticipated by the Company to be collected in the second quarter.
RESULTS OF OPERATIONS
SALES AND GROSS PROFITS. The Company's net sales for the three months
ended March 31, 1996, totaled $48.5 million, compared to $23.9 million
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for the corresponding period of fiscal year 1995, an increase of
approximately 103%. Sales increased primarily due to increased shipments of
the Company's PCI bus disk array products, which more than offset the decline
in sales of the Company's older EISA bus disk array controllers, 486 and
pentium based system boards and other peripheral products during the first
quarter of 1996, as compared to the first quarter of 1995. Sales have not
been significantly impacted by inflation over the last three fiscal years.
Gross profit for the three months ended March 31, 1996, was $18.5
million or 38% of net sales, compared to $9.3 million or 39% of net sales for
the same period in 1995. The increase in gross profits were attributable to
the 103% increased in sales volume over the three months ended March 31,
1995. The gross margin percentage slightly declined due to the higher margin
host adapter products of BusLogic representing lower sales volumes and a
decreased percentage of the product mix. Gross profit margin on the RAID
products increased slightly in the first quarter of 1996 as compared to the
quarter one year ago. The Company expects additional price competition for
its products which will create pressure on the Company's gross margin. The
Company is taking steps to introduce feature and performance improved disk
array and host adapter products and to further reduce production and material
costs in its effort to offer competitive prices for its products without
significantly affecting its gross margin. However, there can be no assurance
that the Company will be able to develop and introduce such products in a
timely manner or that such products will gain or sustain market acceptance or
that it will be able to further reduce production or material cost.
The Company's largest customer during the first quarter of 1996 was
Digital Equipment Corporation ("DEC"), which accounted for $11.4 million or
23% of the Company's net sales during that period. The Company's second and
third largest customers during the three month ending March 31, 1996 was IBM
and HP respectively. Sales to IBM were $9.0 million or 19% of the net sales
and sales to HP were $5.5 million or 11% of the net sales. While there are
OEM agreements in place that define the terms of the sales and support
services with some of the Company's largest customers, these agreements do
not include specific quantity commitments. The Company sells products to its
customers on a purchase order basis. As a result, historical sales cannot be
relied upon as an accurate indicator of future sales.
The Company's backlog as of March 31, 1996 totaled $40.0 million. This
ending backlog represents a $29.7 million increase from the corresponding
period of 1995. The Company attributes the increase in the backlog to the
industry wide acceptance of the PCI bus as the preferred bus as well as the
Company's understanding that its PCI products, DAC960P, PD and PL, have been
the disk array controllers of choice for this bus. Due to industry practice
with respect to customer changes in delivery schedules and cancellation of
orders, the Company believes that backlog as of any particular date may not
be indicative
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of actual net revenues for any succeeding period. Of the total $40.0 million
backlog at March 31, 1996, all but $4.7 million of the orders would have been
scheduled for delivery within the three months ended June 30, 1996.
During the last half of 1993, the Company shifted its principal activity
from the supply of system board products to the manufacture of intelligent I/O
devices and storage management enhancing computer peripheral products. Mylex
designs its products to provide solutions for all popular operating systems,
including Novell Netware, Windows NT, SCO UNIX, Solaris, Unixware and Banyan.
Mylex products also work with all popular platforms. These include personal
computer platforms that use PCI, EISA, and Micro Channel bus architectures and
workstation platforms, including Sun Microsystems, Silicon Graphics and IBM
RS-6000 workstations that use the Company's SCSI to SCSI products.
Raid Controllers
Each bus-based Mylex RAID controller includes a proprietary application
specific integrated circuit, or "ASIC," that serves as an interface with the
host computer, an Intel i960 RISC processor, up to five SCSI channels to
manage the transfer of data to and from the disk drives in the array and a
dynamic cache memory ranging in size from 2 to 64 MB, depending on the
product, to buffer the transfer of information to and from the disks. The
controller also includes Mylex firmware residing on an EEPROM that implements
the RAID algorithms and the algorithms necessary for the cache and supporting
software, including I/O drivers, configuration utilities and system
monitoring programs.
Mylex disk array controllers DAC960E, DAC960 Micro Channel, DAC960P and
DAC960PD provide high performance, fault tolerant data storage solutions for
EISA, Micro Channel and PCI bus platforms. The Mylex SCSI-to-SCSI disk array
controllers (DAC960S/SI) bring the performance of RAID technology to virtually
any hardware platform without requiring special host software. The Mylex disk
array products are designed for both internal and external storage options and
are compatible with most commonly used operating systems.
Disk array products currently under development include new SCSI to SCSI
controllers, a controller optimized for multimedia and video imaging,
controllers that will provide for high speed serial interfaces to disk
drives, a low-cost RAID solution and a RAID implementation for the system
board. There can be no assurance that the Company will introduce its products
under development. If these products are introduced, there can be no
assurance that they will gain market acceptance or that their sales will
produce adequate gross margins.
Host Adapters
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Through the acquisition of BusLogic in February, 1996, the Company has
gained a broad family of SCSI host adapter products. These products provide
a common interface to all of today's PC bus architectures, including PCI,
VESA, EISA, ISA and Micro Channel. Along with these products, the BusLogic
acquisition gives the Company significant SCSI technology and ASIC
development capabilities that could lead to future sales of SCSI chips.
However, there can be no assurances that any such chips will be introduced as
separate products or that, if introduced, they will gain market acceptance.
The markets for the Company's products are characterized by rapidly
changing technology, evolving industry standards and relatively short product
life cycles. The Company's ability to compete successfully will depend on its
ability, on a timely and cost-effective basis, to enhance its existing
products and to introduce new products, such as its PCI and SCSI to SCSI disk
array product families, with features that meet changing customer
requirements and with competitive prices. There can be no assurance that the
Company will be successful in doing so. Delays in product enhancement and
development or the failure of the Company's new products or enhancements to
gain market acceptance could have a material adverse effect on the Company's
business and operating results.
Despite testing, new products may be affected by quality, reliability or
interoperability problems, which could result in returns, delays in
collecting accounts receivable, unexpected service or warranty expenses,
reduced orders and a decline in the Company's competitive position. In
addition, there can be no assurance that new products or technologies
developed by others, or the emergence of new industry standards, will not
render the Company's products or technologies noncompetitive or obsolete. For
example, efforts by the Company's OEM customers and other manufacturers to
integrate additional functions into system boards, to use chip sets that
incorporate additional functionality, or to design their own controllers,
host adapters and other devices, rather than purchase the Company's products
could have a material adverse effect on the Company's business and operating
results.
All of the Company's RAID controller products are based on the Intel
i960 processor. If another company develops a processor for RAID applications
which renders the i960 processor noncompetitive, whether as a result of cost,
specifications or other advantages of the new processor, or if Intel ceases
to produce the i960 processor or support the Company's efforts to develop
products based on the i960 processor, the Company will be forced to develop
new products based on another processor. Such development efforts will be
costly, and there can be no assurance that the Company will be able to timely
complete such development efforts or that such products, if developed, will
have the same degree of market acceptance or the same gross margin as the
Company's present RAID products.
SALES AND MARKETING EXPENSES
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Sales and marketing expenses for the three months ended March 31, 1996,
totaled $3.8 million, an increase of $985 thousand or 36% from the
corresponding period in 1995. Sales and marketing expenses represented 7.7%
of net sales for the three months ended March 31, 1996, compared to 11.6%
incurred during the three months ended March 31, 1995. Increases in sales
and marketing expenditures resulted from increased head count, higher
compensation and commission expenses as well as increased advertising,
promotional and travel expenses. The decrease in the sales and marketing
expenses as a percent of sales is attributable to the more than doubling of
sales from the comparable period last year. The Company expects that sales
and marketing expenses will increase during 1996 as its infrastructure is
expanded to support growing market opportunities through both domestic and
international channels.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses for the three months ended March 31,
1996, totaled $3.2 million, an increase of 62% from the $2.0 million incurred
during the corresponding period in 1995. Research and development expenses
represented 6.5% of net sales for the three months ended March 31, 1996 as
compared to 8.2% in 1995. Research and development expenses increased during
the first three months of 1995 due to increased staffing expense resulting
from higher salaries and increased head count. The Company expects to
increase its investment in research and development activities during 1996 in
an effort to achieve market acceptance of future products and to continue its
strategy of maintaining leadership in the RAID market, as well as to take
advantage of its existing and prospective SCSI host adapter technology. The
Company opened in April 1996 a research facility located in Boulder,
Colorado. This facility has initially been staffed with twelve engineering
personnel and plans to be working on the Company's current and future
SCSI-to-SCSI disk array products.
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the three months ended March 31,
1996, totaled $3.4 million, an increase of $2.1 million or 159% from the
corresponding period of 1995. General and administrative expenses totaled
7.1% of net sales for the three months ended March 31, 1996, compared to 5.5%
incurred during the three months ended March 31, 1995. General and
administrative expenses increased during the quarter due to BusLogic
acquisition expenses, higher bonuses and increased recruiting costs and
compensation and benefit expenses as a result of the addition of employees.
Legal expenses also increased over those incurred during the first quarter of
1995. The Company anticipates, except for the expenses related to the
BusLogic acquisition, that general and administrative expenses will continue
to increase during 1996. These expenses may vary as a percentage of net
sales in future periods as expenses related to litigation matters are
incurred.
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INCOME TAXES
The Company's effective tax rate during the quarter ended March 31, 1996,
was 40%, as compared to 35% in the corresponding period of the prior year. The
tax rate for the first quarter of 1996 reflects the impact in the reduction of
available tax benefits.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In October 1994, the former Chief Executive Officer of the Company, Dr.
M.A. Chowdry, filed a complaint against the Company and its outside directors,
claiming breach of an employment agreement that he entered into with the Company
approximately three months prior to his termination as the Company's Chief
Executive Officer. The complaint alleges compensatory and consequential damages
of over $6 million (which would vary based on the price of the Company's Common
Stock) and unspecified punitive damages. The Company believes it has meritorious
defenses and will vigorously defend this lawsuit. Nonetheless, given the
unpredictable nature of legal proceedings, there can be no assurance that the
Company will prevail.
The Company has incurred and expects to continue to incur substantial
legal expenses in defending against Dr. Chowdry's suit. Those expenses may
fluctuate from quarter to quarter and are likely to increase. Although there
can be no assurance given with respect to the results of legal proceedings,
based on information currently available to the Company, it believes that it
does not have potential liability with respect to these proceedings that
would have a material adverse effect on the Company.
In addition to matters discussed above, the Company is a party to routine
suits and claims arising in the ordinary course of its business which the
Company does not believe will have a material adverse effect on its business.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in Fremont, California, on
the 15th day of May 1996.
MYLEX CORPORATION
By /s/ Colleen Gray
_____________________
Colleen Gray
Vice President of Finance and
Chief Financial Officer
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INDEX TO EXHIBITS
Mylex Corporation
Quarterly Report on Form 10-Q
Sequentially
Exhibit No. Description Numbered Page
- ----------- ------------------------- -------------
11.1 Statement re Computation
of Per Share Earnings 16-17
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EXHIBIT 11.1
MYLEX CORPORATION
EARNINGS PER SHARE COMPUTATION
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
The basis for computing net income per common share is described in Note A to
the financial statements, beginning on page 5 of the Company's Quarterly Report
on Form 10-Q for the three months ended March 31, 1996.
The computation of primary and fully diluted earnings per share is as follows:
PRIMARY EARNINGS PER SHARE THREE MONTHS ENDED
MAR 31 MAR 31
1996 1995
------------ --------------
NET EARNINGS $ 5,125,200 $ 2,104,200
WEIGHTED AVERAGE NUMBER ON COMMON
SHARES OUTSTANDING DURING THIS PERIOD 19,643,300 17,373,500
NUMBER OF COMMON SHARE EQUIVALENTS RESULTING
FROM STOCK OPTIONS AND WARRANTS, COMPUTED
USING THE TREASURY STOCK METHOD 1,653,800 1,329,100
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NUMBER OF COMMON AND COMMON SHARE EQUIVALENTS
USED IN COMPUTATION 21,297,100 18,702,600
PRIMARY EARNINGS PER SHARE $0.24 $0.11
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FULLY DILUTED EARNINGS PER SHARE THREE MONTHS ENDED
MAR 31 MAR 31
1996 1995
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NET EARNINGS $5,125,200 $ 2,104,200
WEIGHTED AVERAGE NUMBER ON COMMON
SHARES OUTSTANDING DURING THIS PERIOD 19,643,300 17,373,500
NUMBER OF COMMON SHARE EQUIVALENTS RESULTING
FROM STOCK OPTIONS AND WARRANTS, COMPUTED
USING THE TREASURY STOCK METHOD 1,765,600 1,330,000
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WEIGHTED AVERAGE COMMON AND DILUTIVE COMMON
SHARES OUSTANDING 21,408,900 18,703,500
FULLY DILUTED EARNINGS PER SHARE $0.24 $0.11
17
