<PAGE> 1
- - -----------------------------------------------------------------------------
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
10-Q
Quarterly Report Pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934
For the quarter ended October 1, 1994
Commission File No. 0-18033
EXABYTE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 84-0988566
(State of Incorporation) (I.R.S. Employer Identification No.)
1685 38th Street
Boulder, Colorado 80301
(Address of principal executive offices, including zip code)
(303) 442-4333
(Registrant's Telephone Number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past ninety days.
Yes /X/ No / /
As of November 3, 1994, there were 21,480,089 shares outstanding of the
Registrant's Common Stock (par value $0.001 per share).
<PAGE> 2
EXABYTE CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Consolidated Balance Sheets --
October 1, 1994 and January 1, 1994 ............... 3
Consolidated Statements of Operations --
Three Months Ended October 1, 1994 and
October 2, 1993 and Nine Months Ended October 1,
1994 and October 2, 1993(Unaudited).............. 4-5
Consolidated Statements of Cash Flows --
Nine Months Ended October 1, 1994 and
October 2, 1993 (Unaudited)...................... 6-7
Notes to Consolidated Financial Statements
(Unaudited)....................................... 8-9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations....................................... 10-14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................... 15-39
<PAGE> 3
PART I
Item 1. Financial Statements
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS Oct. 1, Jan. 1,
1994 1994
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents............... $31,475 $44,995
Short-term investments.................. 51,400 21,000
Accounts receivable, less allowance
for doubtful accounts and customer
returns and credits of $3,919 and
$2,258, respectively.................. 60,574 53,141
Inventories............................. 40,020 40,180
Deferred income taxes................... 11,424 7,575
Other current assets.................... 2,662 1,120
-------- --------
Total current assets............... 197,555 168,011
Property and equipment, net.................. 27,163 24,977
Other assets................................. 3,653 4,319
-------- --------
$228,371 $197,307
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................ $21,165 $19,669
Accrued liabilities..................... 18,863 14,193
Accrued income taxes.................... 3,020 4,159
Obligations under capital leases........ 227 297
-------- --------
Total current liabilities.......... 43,275 38,318
Long-term obligations under capital leases... 291 454
-------- --------
Total liabilities.................. 43,566 38,772
-------- --------
Stockholders' equity:
Preferred stock, $.001 par value;
14,000 shares authorized; no shares
issued and outstanding................ -- --
Common stock, $.001 par value; 50,000
shares authorized; 21,441 and 21,190
shares issued and outstanding,
respectively.......................... 21 21
Capital in excess of par value.......... 54,722 51,242
Treasury stock, at cost, 15 shares
outstanding for both periods........... (9) (9)
Retained earnings....................... 130,521 107,281
-------- --------
Total stockholders' equity 184,805 158,535
-------- --------
$228,371 $197,307
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 4
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
October 1, October 2,
1994 1993
------- --------
<S> <C> <C>
Net sales.................................... $99,001 $75,141
Cost of goods sold........................... 66,443 54,784
------- -------
Gross profit................................. 32,558 20,357
Operating expenses:
Selling, general and administrative..... 10,646 8,925
Research and development................ 8,671 7,674
------- -------
Income from operations....................... 13,241 3,758
Other income(expense), net................... 485 (98)
------- -------
Income before income taxes................... 13,726 3,660
Provision for income taxes................... 4,941 1,039
------- -------
Net income................................... $8,785 $2,621
======= =======
Net income per share......................... $0.40 $0.12
======= =======
Common and common
equivalent shares used in the
calculation of net income
per share 21,916 21,281
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 5
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
October 1, October 2,
1994 1993
-------- --------
<S> <C> <C>
Net sales.................................... $278,576 $227,110
Cost of goods sold........................... 188,831 162,517
-------- --------
Gross profit................................. 89,745 64,593
Operating expenses:
Selling, general and administrative..... 30,609 26,641
Research and development................ 24,421 23,387
-------- --------
Income from operations....................... 34,715 14,565
Other income, net............................ 1,598 955
-------- --------
Income before income taxes................... 36,313 15,520
Provision for income taxes................... 13,073 5,227
-------- --------
Net income................................... $23,240 $10,243
======== ========
Net income per share........................ $1.06 $0.48
======== ========
Common and common
equivalent shares used in the
calculation of net income
per share 21,878 21,339
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 6
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------
October 1, October 2,
1994 1993
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers............ $271,845 $217,467
Cash received from related party........ -- 1,594
Cash paid to suppliers and employees.... (231,209) (175,331)
Cash paid to related party.............. -- (31,523)
Interest received....................... 1,669 911
Interest paid........................... (104) (137)
Income taxes paid....................... (17,696) (5,968)
Net cash provided (used) by -------- --------
operating activities............. 24,505 7,013
-------- --------
Cash flows from investing activities:
Sale (purchase) of short-term
investments, net...................... (30,400) 10,950
Capital expenditures.................... (10,057) (5,632)
Acquisitions, net of cash acquired -- (6,437)
Net cash provided (used) by -------- --------
investing activities............. (40,457) (1,119)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of
common stock to employees............. 2,665 526
Principal payments under capital
lease obligations..................... (233) (251)
Net cash provided (used) by -------- --------
financing activities............. 2,432 275
-------- --------
Net increase (decrease) in cash and cash
equivalents............................. (13,520) 6,169
Cash and cash equivalents at beginning
of period............................... 44,995 34,244
-------- --------
Cash and cash equivalents at end
of period............................... $31,475 $40,413
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 7
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
------------------
October 1, October 2,
1994 1993
-------- --------
<S> <C> <C>
Reconciliation of net income to net cash
provided (used) by operating activities:
Net income................................ $23,240 $10,243
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depreciation, amortization
and other............................. 11,390 9,836
Writedown of fixed assets............... -- 453
Deferred income tax provision........... (3,848) (1,553)
Provision for doubtful accounts,
customer returns, and marketing
programs.............................. 4,185 467
Change in assets and liabilities, net of acquisitions:
Accounts receivable....................... (11,618) (9,431)
Inventories............................... (2,700) 4,962
Other current assets...................... (1,542) (32)
Other assets.............................. 7 (222)
Accounts payable.......................... 1,496 (8,833)
Accrued liabilities....................... 4,670 171
Accrued income taxes...................... (775) 862
------- -------
Net cash provided (used) by
operating activities............... $24,505 $7,013
======= =======
Supplemental schedule of non-cash
investing and financing activities:
Transfer of inventories to
property and equipment.................. $2,859 $1,672
Disposal of fully depreciated
property and equipment.................. 1,242 512
Capital lease obligations................. -- 105
Fair market value of assets
acquired, including goodwill............ -- 8,677
Acquisition liabilities
assumed................................. -- 2,177
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 8
EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1--ACCOUNTING PRINCIPLES
The consolidated balance sheet as of October 1, 1994, the consolidated
statements of operations for the three and nine months ended October 1, 1994
and October 2, 1993, as well as the consolidated statements of cash flows for
the nine months ended October 1, 1994 and October 2, 1993, have been prepared
by the Company without an audit. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments necessary for a
fair presentation thereof, have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
consolidated financial statements be read in conjunction with financial
statements and notes thereto included in the Company's January 1, 1994 annual
report to stockholders heretofore filed with the Commission as Part II to the
Company's Annual Report on Form 10-K. The results of operations for interim
periods presented are not necessarily indicative of the operating results for
the full year.
Note 2--INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
October 1, January 1,
1994 1994
-------- ----------
(In thousands)
<S> <C> <C>
Raw materials and component parts............ $25,259 $24,278
Work-in-process.............................. 3,652 2,690
Finished goods............................... 11,109 13,212
------- -------
$40,020 $40,180
======= =======
</TABLE>
Note 3--ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
October 1, January 1,
1994 1994
-------- ---------
(In thousands)
<S> <C> <C>
Wages and employee benefits.................. $6,697 $6,126
Warranty and other related costs............. 10,993 6,993
Other........................................ 1,173 1,074
------- -------
$18,863 $14,193
======= =======
</TABLE>
<PAGE> 9
Note 4--NET INCOME PER SHARE
Net income per common share is based on the weighted average number of shares
of common stock and common stock equivalents (dilutive stock options)
outstanding during each respective period. Proceeds from the exercise of the
dilutive stock options are assumed to be used to repurchase outstanding
shares of the Company's common stock at the average fair market value during
the period.
Note 5--EVENTS SUBSEQUENT TO OCTOBER 1, 1994
On October 4, 1994, the Company acquired all the outstanding common shares of
Grundig Data Scanner GmbH for a purchase price of $2.9 million. The Company
was immediately renamed as Exabyte Magnetics GmbH ("EMG"). EMG is engaged in
the design and manufacture of heads and scanners for incorporation in high-
performance helical-scan tape drives and is located in Feurth, Germany.
The acquisition will be accounted for using the purchase method; accordingly,
EMG's assets and liabilities were recorded at their estimated fair values at
the date of acquisition. The excess of the purchase price over the net
assets acquired of $2.1 million will be charged to operations during the
fourth quarter of 1994 as "Purchased research and development" in accordance
with Statement of Financial Accounting Standards No. 2, "Accounting for
Research and Development Costs." The pro forma impact of the acquisition on
the Company's results of operations was not significant.
On October 31, 1994, the Company liquidated its wholly-owned subsidiaries,
R-Byte, Inc. and Exabyte Storage Solutions Corporation.
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Company's stock price may be subject to significant volatility.
Any shortfall in revenue or earnings from levels expected by securities
analysts could have an immediate and significant adverse effect on the
trading price of the stock. The Company's Results of Operations may be
subject to material risks including but not limited to: i) delays in the
timely development and introduction of new products, including delays in the
announced Mammoth product (currently scheduled for introduction in the second
quarter of 1995 and for general availability in the second half of 1995);
ii) any inability by the Company to maintain with Sony Corporation or with
other third parties, who may also be competitors with the Company, the
required commercial and supply relationships on acceptable terms and
conditions or to establish other commercial and supply relationships as may
be required from time to time; iii) the development by others, including
competitors with and current suppliers to and customers of the Company, of
products, including 8mm and library products and alternative technologies,
which are competitive with those of the Company; and iv) any inability by the
Company to procure from third parties any necessary patent or other
intellectual property licenses on commercially reasonable terms; v) any
adverse fluctuations in the currency exchange rates applicable to the
Company's component supply agreements with foreign vendors; vi) any inability
by the Company to maintain the necessary product quality standards and any
resulting loss of key customers; vii) the loss for any reason of one or more
of the Company's largest customers (in the nine month period ended October 1,
1994, three customers together represented 31% of total Company revenue);
viii) any sudden and significant price erosion in the market for the
Company's products as a result of competitive offerings or otherwise; ix) any
unanticipated shortfall in sales order rates, particularly in the value-added
reseller and distribution sales channels, which generally provide shorter
order lead times and therefore less visibility to the Company; x) any loss of
key Company executives or any inability by the Company to attract and retain
qualified employees; xi) any inability by the Company to develop and maintain
the necessary information systems to support the development or manufacture
of the Company's products; and xii) any uninsured defense or settlement costs
incurred by the Company resulting from any claims asserted by shareholders,
including class actions or derivative actions, arising from a drop in the
price of the Company's common stock (there are no such claims currently
pending). Stockholders are also advised to review the Company's Form 10-K,
filed February 24, 1994, for a more complete discussion of risks applicable
to the Company's business.
RESULTS OF OPERATIONS
The following table sets forth unaudited operating results for the three and
nine month periods ended October 1, 1994 and October 2, 1993 as a percentage
of sales in each of these periods. This data has been derived from the
unaudited consolidated financial statements.
<PAGE> 11
<TABLE>
<CAPTION>
Three Months Ended
---------------------
October 1, October 2,
1994 1993
------ ------
<S> <C> <C>
Net sales.................................... 100.0% 100.0%
Cost of goods sold........................... 67.1 72.9
------ ------
Gross margin................................. 32.9 27.1
Operating expenses:
Selling, general and administrative.......... 10.7 11.9
Research and development..................... 8.8 10.2
------ ------
Income from operations....................... 13.4 5.0
Other income(expense), net................... 0.5 (0.1)
------ ------
Income before income taxes................... 13.9 4.9
Provision for income taxes................... 5.0 1.4
------ ------
Net income................................... 8.9% 3.5%
====== ======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
---------------------
October 1, October 2,
1994 1993
------ ------
<S> <C> <C>
Net sales.................................... 100.0% 100.0%
Cost of goods sold........................... 67.8 71.6
------ ------
Gross margin................................. 32.2 28.4
Operating expenses:
Selling, general and administrative.......... 11.0 11.7
Research and development..................... 8.8 10.3
------ ------
Income from operations....................... 12.4 6.4
Other income, net............................ 0.6 0.4
------ ------
Income before income taxes................... 13.0 6.8
Provision for income taxes................... 4.7 2.3
------ ------
Net income................................... 8.3% 4.5%
====== ======
</TABLE>
<PAGE> 12
NET SALES
Net sales for the three and nine month periods ended October 1, 1994 of $99.0
million and $278.6 million, respectively, represented increases over the
corresponding periods in 1993 of 31.8% and 22.7%, respectively. These sales
increases were the result of increased shipments of 8mm half-high, 4mm and
quarter-inch drives and library products. Partially offsetting these
increases was a reduction in the shipments of 8mm full-high drives as well
as decreases in the average selling prices of most products.
During the first nine months of 1994, sales of the half-high EXB-8505
product increased to 42.1% of sales from 19.0% for the same period in
1993. Sales of the Company's initial product, the EXB-8200, decreased to
6.3% for the first nine months of 1994 compared to 16.9% in the same period
during 1993. Sales of the Company's EXB-8500 product also decreased to 15.4%
from 33.7% for the same period in 1993. The decrease in sales of the full-
high EXB-8200 and EXB-8500 products was primarily due to shifting customer
demand to the half-high EXB-8505 tape subsystem. This trend is expected to
continue for the remainder of fiscal 1994. The remainder of sales during
the first nine months of 1994 and 1993 along with a recap of the products
described above are listed in the following table.
PRODUCT MIX TABLE
(As a Percentage of Net Sales)
<TABLE>
<CAPTION>
Nine Months Ended
------------------
October 1, October 2,
1994 1993
------- -------
<S> <C> <C>
8mm products:
- - ------------
EXB-8200.......................... 6.3% 16.9%
EXB-8500.......................... 15.4 33.7
EXB-8205.......................... 3.2 1.4
EXB-8505.......................... 42.1 19.0
Stand-alone subsystems
(for above products)............ 6.4 5.7
EXB-10 and 210.................... 6.8 4.7
EXB-120 and 60.................... 2.5 1.8
4mm and quarter-inch cartridge products:
- - ----------------------------------------
EXB - 4200........................ 4.4 1.2
EXB - 2501........................ 1.4 0.1
Consumables............................ 8.2 7.9
Service, spares and other.............. 3.3 7.6
------ ------
100.0% 100.0%
====== ======
</TABLE>
<PAGE> 13
The customer mix during the first nine months of 1994 shifted from value
added resellers ("VARs") to distributors. The percentage of sales to
original equipment manufacturers ("OEMs") remained relatively stable. OEM
customers accounted for 41% and 41% of net sales, respectively, for the third
quarter and first nine months of 1994 compared to 40% and 44% for the
comparable periods of 1993. VARs contributed 24% and 25% of net sales,
respectively, for the third quarter and first nine months of 1994 compared to
34% and 35% for the comparable periods of 1993. Sales to distributors
increased to 35% and 34% of net sales, respectively, for the third quarter
and first nine months of 1994 from 26% and 21% of net sales for the
comparable periods of 1993. This shift in customer mix was primarily the
result of an expansion of the Company's distribution channel through the
addition of several new commercial distributors. Sales in the distribution
channel are expected to remain as a greater percentage of net sales for the
remainder of 1994 than they represented in 1993.
During the third quarter and first nine months of 1994, one OEM customer
accounted for 18% and 20% respectively of sales compared to 16% and 18%
respectively of sales for the same periods in 1993. A different OEM customer
accounted for 11% of sales for the first nine months of 1993. No other
customers accounted for 10% or more of sales in any of these periods. Since
these two major customers also sell competing products and continually
review new technologies, there can be no assurance that sales to these
customers will continue to represent such a significant portion of the
Company's future revenue.
GROSS MARGIN
Gross margin percentages for the third quarter and the first nine months of
1994 were 32.9% and 32.2%, respectively, compared to 27.1% and 28.4% for the
comparable periods in 1993. The increases were generally the result of (1) a
shift in 8mm sales mix to higher margin half-high drives; (2) increased
sales of library products; and (3) the effect of product cost reduction
efforts. The Company expects continued price erosion on all of its products
due to the competitive nature of the storage peripherals business. Future
product costs may be adversely impacted by the effect of the current weakness
of the U.S. dollar versus the yen.
OPERATING EXPENSES
Selling, general and administrative expenses decreased as a percentage of
sales to 10.7% and 11.0% of sales, respectively, for the third quarter and
first nine months of 1994 from 11.9% and 11.7% for the comparable periods in
1993. In absolute dollars, these expenses for the third quarter and first
nine months of 1994 increased $1.7 million and $4.0 million respectively over
the same periods in the previous year. The principal components of these
sales-related costs include salaries and benefits, sales commissions,
advertising and promotions expenses.
Research and development expenditures decreased as a percentage of sales to
8.8% and 8.8% of sales, respectively, for the third quarter and first nine
months of 1994 from 10.2% and 10.3% for the comparable periods in 1993. In
absolute dollars, these expenses increased $1.0 million and $1.0 million
respectively over the same periods in the previous year These expenditures
primarily reflect continued spending on the development of recently announced
new products and unannounced products.
<PAGE> 14
OTHER INCOME, NET
Other income (expense), net, consists primarily of interest income, royalty
income, interest expense, royalty expense, state franchise taxes and other
miscellaneous items.
TAXES
The provision for income taxes for the first nine months of 1994 increased to
36.0% of income before taxes from 34.0% in the comparable period of 1993.
Effective November 1, 1994, the Company liquidated two wholly-owned
subsidiaries, R-Byte, Inc. and Exabyte Storage Solutions Corporation.
As a result of the liquidation of R-Byte, a deferred tax valuation
allowance on acquired operating loss and tax credit carryforwards is no
longer considered necessary. The net impact of the reversal of the
deferred tax valuation allowance will be to increase the recorded
dererred tax asset and reduce the provision for income taxes by
approximately $3,000,000 in the fourth quarter. As a result the Company
currently expects the effective tax rate for 1994 to be approximately 33%.
NET INCOME
Net income per share increased to $0.40 and $1.06 in the third quarter and
first nine months of 1994 compared to $0.12 and $0.48 in the third quarter
and first nine months of 1993. This increase was primarily the result of
increased revenues, higher gross margins and lower operating expense ratios
in the third quarter and first nine months of 1994.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1994, the Company generated $24.5 million of
cash from operating activities, generated $2.7 million in proceeds from the
sale of common stock and expended $10.1 million for capital equipment and
$233,000 on capital lease obligations. Together, these activities resulted
in a net increase in the combined balance of cash and short-term investments
of $16.9 million to a quarter-ending balance of $82.9 million. The Company's
working capital increased to $154.3 million on October 1, 1994 from $129.7
million on January 1, 1994.
The Company has a $15 million bank line of credit which expires April 30,
1995, with borrowings under the line limited to 80% of eligible accounts
receivable plus 25% of eligible inventory. On October 1, 1994 the amount
available under the line was $15 million and no borrowings were outstanding.
Borrowings under the line of credit bear interest at the bank's prime rate.
The ability to borrow under this line of credit is dependent upon the
Company's adherence to a set of financial covenants, including the need to be
profitable on a quarterly basis. The Company is currently in compliance with
all such covenants.
The Company believes its existing sources of liquidity and funds expected to
be generated from operations will provide adequate cash to fund the Company's
anticipated working capital and other cash requirements through fiscal 1995.
<PAGE> 15
PART II.
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
(a) Exhibit Index
Exhibit
Number Description
------- -----------
<S> <S>
10.0 Agreement for the sale and transfer of all the
shares in Grundig Data Scanner GmbH dated
September 13, 1994. (Schedules omitted
pursuant to Item 601(b)(2) of Regulation
S-K. The Company undertakes to furnish such
schedules to the Commission suplementally
upon request.)
11.0 Statement regarding computation of per share
earnings.
27.0 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K: There were no reports on Form 8-K for the
three month period ended October 1, 1994.
<PAGE> 16
SIGNATURES
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.
EXABYTE CORPORATION
Registrant
Date By /s/ William L. Marriner
----------------------- ------------------------
Senior Vice President, Finance and
Administration, Chief Financial
Officer, Secretary and Treasurer
(Principal Financial and Accounting
Officer)
<PAGE> 17
EXABYTE CORPORATION AND SUBSIDIARIES
EXHIBIT 10.0 - Agreement for the sale and transfer or all the
shares in Grundig Scanner Data GmbH dated September
13, 1994
<PAGE 18>
1
6187/268
Number 260 of the Roll of Deeds for 1994
Transacted in Frankfurt am Main
on September 14, 1994
Before me, the undersigned notary
Dr. Bernhard Mielert
with official residence in Frankfurt am Main
there appeared today
1. Mr. Hans H.W. Seidenschnur, General Counsel, having his business address
at Kurgartenstrasse 37, 90762 Feurth, personally known, hereafter not
acting in his own name but on behalf of Grunding AG, Kurgartenstrasse
37, 90762 Feurth, by virtue of the power of attorney dated September 9,
1994 which is attached to this Protocol,
-hereafter referred to as "the Seller"-
<PAGE> 19
2
2. Dr. Wulf Merkel, Attorney-at-Law, having his business address at
Fredrich-Ebert-Anlage 14, 60325 Frankfurt am Main, personally known,
hereafter not acting in his own name but on behalf of Exabyte
Corporation, 1685 38th Street, Boulder, CO 80301, USA, by virtue of the
power of attorney dated September 13, 1994 which is attached to this
Protocol,
-hereafter referred to as "the Purchaser"-
As both the persons appearing and the acting notary have sufficient command
of the English language this Protocol was established in English upon the
request of the parties. The persons appearing asked for the following
AGREEMENT
for the Sale and Transfer of all the Shares
in Grundig Data Scanner GmbH
to be recorded.
Section 1
Sale and Transfer of Shares
(1) The Seller is the sole shareholder of Grundig Data Scanner GmbH
(hereafter referred to as "the Company") of Kurgartenstrasse 37,
90762 Feurth, Germany, registered in the commercial register of the
Feurth Lower Court under HRB 5478. The share capital of the Company
amounts to DM 50,000.- The Seller holds one share in the nominal
amount of DM 50,000.-.
The share is fully paid
(2) The Seller hereby sells and transfers to the Purchaser the said share
effective as of October 4, 1994 (the "Effective Date").
The Purchaser hereby accepts the transfer.
<PAGE> 20
3
Any profit or loss resulting from annual accounts of the Company as from the
Effective Date shall be for the benefit of or shall be borne by, as the case
may be, the Purchaser.
Section 2
Purchase Price
(1) The purchase price for the share is DM 4,340,000.-
The Purchaser shall pay promptly on the Effective Date an amount of DM
3,840,000.- into the Seller's account with Dresdner Bank AG Neurnberg,
account no. 1050 369 00(sorting code: 760 800 40).
(2) Subject to any rights the Purchaser may have pursuant to sec. 7 hereof,
the remaining balance to DM 4,340,000 shall be paid promptly after a
period of twelve months plus ten days from the Effective Date.
Section 3
Representations and Warranties
(1) The Seller represents that the statements contained in sec. 1 with
respect to the capital share are correct, that the Company validly
exists under German law, that the Articles of Association of the
Company as delivered to the Purchaser are presently in effect, that
the Seller can freely dispose of the transferred share and that this
share is not encumbered with any rights of third parties.
(2) The Seller further represents and guarantees that:
(a) the Acquisition Balance Sheet as of September 30, 1994 (Exhibit 1)
was established in accordance with generally accepted accounting
principles, as they are in effect in Germany, consistently applied
and completely and correctly reflect the financial situation of the
Company as of the relevant date; the acquisition balance sheet
correctly and completely reflects the
<PAGE> 21
4
financial situation of the Company as of the Effective Date taking
account only of adjustments resulting from the ordinary course of
business;
(b) the fixed assets and the current assets as shown in the Acquisition
Balance Sheet are the property of the Company, are not encumbered
with rights of third parties (with exception of the encumbrances
listed in Exhibit 2 and customary retentions of title) and together
with the leased assets rflected in Exhibit 3 comprise all assets
necessary for the business operations of the Company, i.e., the
design, development and production of high performance scanners,
as of the balance sheet date;
(c) the accounts receivable shown in the Acquisition Balance Sheet
can be fully collected within normal commercially acceptable time
periods insofar as they were not reduced by an allowance for
doubtful accounts;
(d) the reserves shown in the Acquisition Balance Sheet cover all
pension liabilities and other liabilities booked under other
reserves ("sonstige Reuckstellungen");
(e) except for those shown in the Acquisition Balance Sheet and those
described in Exhibit 4, there exist no liabilities, including
warranty and, to the Seller's best knowledge, contingent
liabilities of the Company;
(f) the net book value of its assets for the same period is at least
DM 50,000.-;
(g) as of the Effective Date the Company is in compliance with all
legal requirements in the areas of safety and environmental
protection applicable to its operations;
(h) as of the Effective Date, there are no agreements giving anybody
a right to participate in the profits of the Company.
(i) as of the Effective Date the Company has not given guarantees nor
assumed any other obligations with respect to liabilities or
obligations of third parties;
<PAGE> 22
5
(j) the Seller has taken reasonable steps to ensure the continued
availability of the employee base listed in Exhibit 5;
(k) as of the Effective Date the Company has all required operating
licenses and government approvals to conduct its business;
(l) with the exception of the agreement listed in Exhibit 6 the
Company is not a party to any agreement that enables the other
contracting party to cancel such agreement or accelerate any
rights thereunder because of the purchase concluded herein and
any and all agreements concluded by the Company were entered into
in the normal course of business and can be properly performed by
the Company as it is sold hereunder.
(m) the proprietary rights licensed to the Company in section 6 hereof
are validly existing and to the best knowledge of the Seller have
not been challenged; to the best knowledge of the Seller the rights
licensed in section 6 hereof are all the proprietary rights the
Company needs to satisfy its licensing requirements as of the
Effective Date.
(3) The Seller further warrants that during the period from March 17, 1994
until the signing date of this Agreement
(a) The business of the Company has been conducted in accordance with
proper business principles and no extraordinary transactions have
been engaged in, except for those described in Exhibit 7. This
applies in particular for:
(aa) pension promises or other substantive benefits to employees;
(bb) contracts valuing in excess of DM 100,000.- for each contract
and not exceeding KM 500,000.- in total;
(cc) sales, withdrawals or other disposals of items of the fixed
assets;
<PAGE> 23
6
(b) the scope and contents of the business activity of the Company have
not been substantially changed since inception of the Company;
(c) the fixed assets and the current assets of the Company have been
preserved and supplemented in accordance with proper business and
accounting principles, the portion of the accounts receivable which
must be adjusted by allowances has not increased and no new pension
liabilities were incurred;
(d) no extraordinary events have occurred or, to the best knowledge of
the Seller, are threatened which could negatively affect the
present or future business activity of the Company.
(4) The Seller further represents that on the signing date of this Agreement
(a) the Company is not committed by lease contracts or other contracts
having a term of more that two years or presumably resulting in
annual expenses of the Company of more than DM 10,000.- per
contract, unless such contracts are listed in Exhibit 8 to this
Agreement;
(b) the Company is not participating in litigation or proceedings
before authorities or arbitration panels and, to the best
knowledge of the Seller, no such litigation or proceedings have
been threatened, except as listed in Exhibit 9.
(5) The Seller gives no guarantee as to the earning capacity of the Company.
Section 4
Termination Costs
The Seller shall assume any financial and other responsibility for complying
with any statutory, contractual or other requirements regarding terminated
employees with respect to any employee of the Company whose employment is
terminated by the Company within one year after the Effective Date. The
financial and other responsibilities of the Seller shall include, without
limitation, severance payments, litigation costs, provided,
<PAGE> 24
7
however, that the Seller's obligation to fund any such payments and costs
shall not exceed DM 1,000,000.- in the aggregate.
Section 5
Pension Obligations
The parties shall reimburse each other for any adjustments to be made to
the pension obligations that occur between September 8, 1994 and the
Effective Date. The Purchaser shall reimburse the Seller for any pension
reserves for terminated employees if the pertinent reserves in the Company's
balance sheet may be dissolved in accordance with generally accepted
accounting principles.
Section 6
Technology Licenses
The Seller shall grant to or, as the case may be, procure for the Company,
in particular from Grundig EMV Elektro-Mechanische Versuchsanstalt Max
Grundig Hollandische Stiftung & Co. KG, the licences listed in Exhibit 10
and shall ensure that the Company continues to have the rights under these
licences for the period of time during which such rights are protectible.
These licences shall be free of charge, non-exclusive, non tranferable
(with the exception of transfers to the Purchaser or its affiliates) and be
effective in the territory for which according to the Seller they are
registered. In the event that the Seller or an affiliate of the Seller
who owns a right to be licensed hereunder decides to abandon any of such
rights, the Purchaser shal have a right of first refusal thereto. Related
transfer costs shall be borne by the Purchaser, otherwise transfers of rights
listed in Exhibit 10 shall be free of charge. The Seller procured an
enabling licence from Philips Electronics N.V. and/or its affiliates in the
terms of Exhibit 11.
Section 7
Liability
(1) In the event that any one of the warranties and representation made
above is or becomes partly or completely incorrect, the Seller shall be
obligated by way of
<PAGE> 25
8
damages to put the Purchaser and/or - at the Purchaser's option - the
Company in a position which they would have been if the warranty and
representation had been correct. The Purchaser shall have the right to
request that this be done by way of monetary compensation, provided,
however, that the maximum aggregate liability of the Seller shall not
exceed the amount of DM 6,400,000.
(2) However, the Purchaser cannot assert claims pursuant to para (1) if in
the aggregate they do not exceed DM 20,000.-; however, this shall not
apply for claims because of the incorrectness of individual warranties
and representations which on an individual basis exceed DM 5,000.-
Section 8
Statute of Limitations
The claims of the Purchaser shall be subject to a statute of limitations
period of one year after the signing of this Agreement. Claims resulting
from requests of tax authorities because of tax audits relating to periods
before the Effective Date and not covered by reserves in the Acquisition
Balance Sheet shall be subject to a statute of limitations period of six
months after the tax assessment has become final which is issued because of
the tax audit. Provided notice of a claim was given to the Seller within the
said limitation periods, the Purchaser may bring court or other appropriate
actions within an additional one year period without losing its rights.
Section 9
Prohibition to Compete
The Seller undertakes to refrain from directly or indirectly competing with
the business of the Company as it is conducted as of the Effective Date,
including holding directly or indirectly interests in competitors of the
Company for a period of three years from the date of this Agreement.
Any breach of this non-competition undertaking shall make the Seller liable
to the Purchaser for payment of contractual penalties in the amount of
DM 500,000 per each week of breach.
<PAGE> 26
9
For each officer or key employee who leaves the Company to work for either
the Seller or iR3 Video International GmbH in the first year after the
Effective Date, the Seller shall repay to the Purchaser DM 500,000 of the
purchase price.
Section 10
Recission
Any right of recission or cancellation of this agreement shall be excluded.
Section 11
Miscellaneous
(1) The Purchaser shall cause the Company without undue delay to change its
name to a name excluding the term "Grundig".
(2) The Seller will continue to lease at the present rate the existing
business premises to the Company for at least 12 months from the
Effective Date and shall ensure continued access at commercially
reasonable terms to any necessary services the Company is using upon the
signing hereof with the exception of accounting and bookkeeping
services.
(3) Each party hereto shall bear its own costs and expenses in connection
with this Agreement and its implementation. The parties agree that no
finder or broker was involved by them in this transaction. The notarial
fees incurred by this Protocol and its implementation will be borne by
the Purchaser.
(4) If one or several provision of this Agreement is or becomes invalid, the
remaining provisions shall remain unaffected.
(5) This Agreement shall be governed by the law of the Federal Republic of
Germany. Exclusive place of jurisdiction shall be Frankfurt am Main.
<PAGE> 27
10
(6) The acquisition of the Company by the Purchaser is, if necessary, to be
reported or notified to the Federal Cartel Office. Both parties
undertake to do all that is necessary to effect any necessary report or
notification.
This Protocol and its annexes were read to the persons appearing, approved by
them and signed as follows:
/s/Hans Seidenschnur
- - --------------------------
/s/Wulf Merkel
- - --------------------------
/s/Bernhard Mielert, Notar
- - --------------------------
<PAGE> 28
9214/256
Kostenberechnung gem.
SS 32.33.141.154 KostO
Geschaeftswert: DM 4,340,000.00
20/10 Gebeuhr gem. S 36 (2) KostO DM 13.240,00
15% Mehrwertsteuer DM 1.986,00
---------
DM 15.226,00
=========
/s/ Bermhard Mielert
---------------------
Dr. Bernhard Mielert
Notar
<PAGE> 29
POWER OF ATTORNEY
We, the undersigned
GRUNDIG Aktiengesellschaft
Kurgartenstrasse 37
90762 Feurth/Bayern
herewith authorize
Mr. Hans Seidenschnur
to sell the share in GRUNDIG Data Scanner GmbH, Feurth, in the nominal amount
of DM 50.000,-- to Exabyte Corporation, Boulder Colorado 80301, USA, and to
accept the assignment thereof.
The proxy shall be authorized to make all statements necessary or appropriate
in this connection.
The proxy shall be relieved from the restrictions of Section 181 Civil Code
and shall be authorized to delegate this power of attorney.
Feurth, Septemeber 9, 1994
GRUNDIG
Aktiengesellschaft
/s/ Harmsen
- - ------------
Harmsen
<PAGE> 30
POWER OF ATTORNEY
Exabyte Corporation
1685 38th Street
Boulder, Colorado 80301
USA
hereby authorises Dr. Wulf Merkel of Friedrich-Ebert-Anlage 2-14, 60325
Frankfurt am Main to represent us for the purpose of entering into an
agreement for the purchase and transfer of all the shares in Grundig Data
Scanner GmbH, registered in the Commercial Register of the Feurth Lower
Court under HRB 5478 with Grundig AG and to make all the declarations
necessary or useful to achieve the purpose of the transaction. The person
authorised shall have the right to delegate his authority and shall be
exempted from the restrictions of sec. 181 of the German Civil Code, i.e.,
the prohibition of self dealing and multiple representation.
September 13, 1994
for and behalf of Exabyte Corporation:
/s/ David L Riegel
- - ------------------
by:
David L Riegel
Sr. VP Operations, Exabyte
<PAGE> 31
6937/200
Exhibit 1
Balance Sheet of the Company as of September 30, 1994
Actual status Sept. 30, 1994
Fixed Assets 1.413 Mio DM
accounts receivable
BTS .031 Mio DM
Exabyte .355 Mio DM
Cash .051 Mio DM
-------------
Total Assets 1.850 Mio DM
Goodwill 3.300 Mio DM
-------------
5.150 Mio DM
Liabilities
pension reserve .380 Mio DM
other empl. cost res. .130 Mio DM
accounts payable extern. .300 Mio DM
------------
Net purchase price 4.340 Mio DM
<PAGE> 32
Exhibit 10
Technology Licences
1. DE-C-35 44 090
2. DE-C-38 70 586
3. DE-A-37 42 228
4. DE-C-37 43 219
5. DE-U-87 18 117
6. DE-U-88 16 929
7. DE-A-40 20 353
8. DE-C-41 19 625
9. DE-U-91 16 346
10. DE-U-91 16 378
11. DE-U-92 16 030
12. DE-C-43 00 756
13. DE-U-93 17 435
14. DE-U-93 19 313
15. DE-U-93 20 374
16. DE-C-43 26 567
17. DE-U-93 20 517
<PAGE> 33
Exhibit 11
Enabling Licence
<PAGE> 34
(Philips International B.V. fax letterhead)
Grundig AG.
Kurgartenstrasse 37
D-90762 Feurth
Germany
Att: Mr. W. Dreykorn-Lindner
H 1235 +31 40 743385 9 June, 1994
BECK/AMS
Dear Mr. Dreykorn-Lindner,
Re: Sale of Grundig Data Scanner GmbH to Exabyte Corp. USA.
With reference to the enclosed Definitions it is herewith confirmed that
after the conclusion of the above sale, Philips Electronics N.V. will not
assert against Exabyte Corp. USA any of its Patents as far as the use in
Scanners, or the use in the manufacture of such Scanners is concerned.
It is however specifically understood that the above non-assertion does
not extend to any scanner for use in 8 mm Video Recorder systems.
Yours faithfully,
/s/H.F.M. Beckers
H.F.M. Beckers
Director Corporate Patents and Trademarks
PHILIPS ELECTRONICS N.V.
Enclosure
<PAGE> 35
(Philips letterhead)
BECK/AMS/RUT/CVW
17 June 1994
Definitions:
Patents: Any and all patents and patent applications owned and/or
controlled by Philips Electronics N.V. ("Philips") and its
Subsidiaries, and under which Philips and its Subsidiaries have
the right to grant licenses and/or to give non-assertions without
payment of royalties or other monetary consideration to third
parties and which have a first filing date or are entitled to a
first filing date prior to June 1, 1994.
Scanner: The rotating magnetic head scanner for 8 mm magnetic tape as has
been developed by Grundig Data Scanner GmbH prior to June 1, 1994
and to be transferred to Exabyte in the course of the sale of its
business for use in Exabyte's MAMMOTH**8 mm cartridge tape
subsystem.
** and sucessor generation of
<PAGE> 36
Corp. Legal Dept.
Ru/CvW/D12
17.6.1994
FACSIMILE MESSAGE
NUMBER OF PAGES (INCLUDING THIS COVER SHEET): 2
TO: Mr. Seidenschnur - Grundig AG
FACS NO.: 09-49 911 705 540
- - --------------------------------------------------------------------
FROM: J.A. Rutgers
General Secretary
COMPANY: PHILIPS INTERNATIONAL B.V.
CORP. LEGAL DEPT. - BLDG. VO-1
EINDHOVEN, THE NETHERLANDS
TEL. NO.: +31-40-783236
FACS.NO.: +31-40-788842
IN CASE OF PROBLEMS WITH FAXES PLEASE CALL: +31-40-784417
- - --------------------------------------------------------------------
Anbei eine abgeanderte Anlage (zweimal "Subsidiaries" zugefeugt
und von mir paraphiert).
/s/J.A. Rutgers
J.A. Rutgers
<PAGE> 37
9251/256
Die wortliche Ubereinstimmung der vorstehenden Fotokopie mit der
Urschrift der Urkunde Nr. 260/1994 wird hiermit beglaubigt.
Frankfurt am Main, den 21. September 1994
/s/ Dr. Bernhard Mielert
Dr. Bernhard Mielert
Notar
<PAGE> 38
EXABYTE CORPORATION AND SUBSIDIARIES
Exhibit 11.0 - Earnings Per Share Computations
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
October 1, October 2,
1994 1993
------- -------
Primary (1):
- - --------
<S> <C> <C>
Weighted average number of common
and common equivalent shares
outstanding(2).......................... 21,916 21,281
====== ======
Net income................................... $8,785 $2,621
====== ======
Net income per share......................... $0.40 $0.12
====== ======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
---------------------
October 1, October 2,
1994 1993
------- -------
Primary(1):
- - --------
<S> <C> <C>
Weighted average number of common
and common equivalent shares
outstanding(2).......................... 21,878 21,339
====== ======
Net income................................... $23,240 10,243
====== ======
Net income per share......................... $1.06 $0.48
====== ======
</TABLE>
(1) Fully diluted earnings per share is not presented since it results in
identical earnings per share as primary earnings per share calculations.
(2) Includes weighted average number of common shares outstanding and common
shares issuable upon assumed exercise of stock options.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET AS OF OCTOBER 1, 1994 AND THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 1,
1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> OCT-1-1994
<CASH> 31,475
<SECURITIES> 51,400
<RECEIVABLES> 64,493
<ALLOWANCES> 3,919
<INVENTORY> 40,020
<CURRENT-ASSETS> 197,555
<PP&E> 27,163
<DEPRECIATION> 3,653
<TOTAL-ASSETS> 228,371
<CURRENT-LIABILITIES> 43,275
<BONDS> 0
<COMMON> 21
0
0
<OTHER-SE> 184,784
<TOTAL-LIABILITY-AND-EQUITY> 228,371
<SALES> 278,576
<TOTAL-REVENUES> 278,576
<CGS> 188,831
<TOTAL-COSTS> 188,831
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 57
<INTEREST-EXPENSE> 104
<INCOME-PRETAX> 36,313
<INCOME-TAX> 13,073
<INCOME-CONTINUING> 23,240
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,240
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.06
</TABLE>
