<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 July 2, 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 August 11, 1994, there were 21,400,285 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 --
July 2, 1994 and January 1, 1994 ................ 3
Consolidated Statements of Operations --
Three Months Ended July 2, 1994 and
July 3, 1993 and Six Months Ended July 2,
1994 and July 3, 1993(Unaudited)................. 4-5
Consolidated Statements of Cash Flows --
Six Months Ended July 2, 1994 and
July 3, 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 4. Submission of Matters to a Vote of Security Holders.... 15
Item 6. Exhibits and Reports on Form 8-K....................... 15-17
<PAGE> 3
PART I
Item 1. Financial Statements
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS July 2, Jan.1,
1994 1994
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents............... $37,107 $44,995
Short-term investments.................. 40,800 21,000
Accounts receivable, less allowance
for doubtful accounts and customer
returns and credits of $2,650 and
$2,258, respectively.................. 58,383 53,141
Inventories............................. 38,425 40,180
Deferred income taxes................... 9,959 7,575
Other current assets.................... 3,010 1,120
-------- --------
Total current assets............... 187,684 168,011
Property and equipment, net.................. 27,129 24,977
Other assets................................. 3,959 4,319
-------- --------
$218,772 $197,307
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................ $21,809 $19,669
Accrued liabilities..................... 16,988 14,193
Accrued income taxes.................... 4,075 4,159
Obligations under capital leases........ 246 297
-------- --------
Total current liabilities.......... 43,118 38,318
Long-term obligations under capital leases... 343 454
-------- --------
Total liabilities.................. 43,461 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; 21,397 and 21,190
shares issued and outstanding,
respectively.......................... 21 21
Capital in excess of par value.......... 53,562 51,242
Treasury stock, at cost, 15 shares
outstanding for both periods........... (9) (9)
Retained earnings....................... 121,737 107,281
-------- --------
Total stockholders' equity 175,311 158,535
-------- --------
$218,772 $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
July 2, July 3,
1994 1993
------- --------
<S> <C> <C>
Net sales.................................... $92,681 $75,763
Cost of goods sold........................... 62,863 56,002
------- -------
Gross profit................................. 29,818 19,761
Operating expenses:
Selling, general and administrative.......... 10,552 9,316
Research and development..................... 8,133 8,135
------- -------
Income from operations....................... 11,133 2,310
Other income, net............................ 485 233
------- -------
Income before income taxes................... 11,618 2,543
Provision for income taxes................... 4,182 933
------- -------
Net income................................... $7,436 $1,610
======= =======
Net income per share........................ $0.34 $0.08
======= =======
Common and common
equivalent shares used in the
calculation of net income
per share 21,828 21,339
======= =======
</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>
Six Months Ended
July 2, July 3,
1994 1993
-------- --------
<S> <C> <C>
Net sales.................................... $179,575 $151,969
Cost of goods sold........................... 122,388 107,733
-------- --------
Gross profit................................. 57,187 44,236
Operating expenses:
Selling, general and administrative.......... 19,963 17,716
Research and development..................... 15,750 15,713
-------- --------
Income from operations....................... 21,474 10,807
Other income, net............................ 1,113 1,053
-------- --------
Income before income taxes................... 22,587 11,860
Provision for income taxes................... 8,131 4,238
-------- --------
Net income................................... $14,456 $7,622
======== ========
Net income per share........................ $0.66 $0.36
======== ========
Common and common
equivalent shares used in the
calculation of net income
per share 21,860 21,368
======= =======
</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>
Six Months Ended
----------------------
July 2, July 3,
1994 1993
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers............ $174,871 $147,407
Cash received from related party........ -- 1,003
Cash paid to suppliers and employees.... (148,020) (118,482)
Cash paid to related party.............. -- (27,305)
Interest received....................... 1,095 645
Interest paid........................... (75) (96)
Income taxes paid....................... (10,414) (5,406)
Net cash provided (used) by -------- --------
operating activities............. 17,457 (2,234)
-------- --------
Cash flows from investing activities:
Sale (purchase) of short-term
investments, net...................... (19,800) 11,950
Capital expenditures.................... (7,517) (5,621)
Acquisitions, net of cash acquired -- (6,437)
Net cash provided (used) by -------- --------
investing activities............. (27,317) (108)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of
common stock to employees............. 2,134 487
Principal payments under capital
lease obligations..................... (162) (140)
Net cash provided (used) by -------- --------
financing activities............. 1,972 347
-------- --------
Net increase (decrease) in cash and cash
equivalents............................. (7,888) (1,995)
Cash and cash equivalents at beginning
of period............................... 44,995 34,244
-------- --------
Cash and cash equivalents at end
of period............................... $37,107 $32,249
======== ========
</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>
Six Months Ended
------------------
July 2, July 3
1994 1993
-------- --------
<S> <C> <C>
Reconciliation of net income to net cash
provided (used) by operating activities:
Net income.............................. $14,456 $7,622
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depreciation, amortization
and other........................... 7,482 7,371
Deferred income tax provision......... (2,384) (1,680)
Provision for doubtful accounts,
customer returns, and marketing
programs............................ 2,160 241
Change in assets and liabilities, net of acquisitions:
Accounts receivable..................... (7,402) (4,309)
Inventories............................. 77 (5,471)
Other current assets.................... (1,889) (126)
Other assets............................ (79) (143)
Accounts payable........................ 2,140 (7,647)
Accrued liabilities..................... 2,795 1,396
Accrued income taxes.................... 101 512
------- -------
Net cash provided (used) by
operating activities............. $17,457 $(2,234)
======= =======
Supplemental schedule of non-cash
investing and financing activities:
Transfer of inventories to
property and equipment................ $1,677 $1,314
Disposal of fully depreciated
property and equipment................ 689 1,185
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 July 2, 1994, the consolidated
statements of operations for the three and six months ended July 2, 1994 and
July 3, 1993, as well as the consolidated statements of cash flows for the
six months ended July 2, 1994 and July 3, 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>
July 2, January 1,
1994 1994
-------- ----------
(In thousands)
<S> <C> <C>
Raw materials and component parts............ $28,105 $24,278
Work-in-process.............................. 3,262 2,690
Finished goods............................... 7,058 13,212
------- -------
$38,425 $40,180
======= =======
</TABLE>
Note 3--ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
July 2, January 1,
1994 1994
-------- ----------
(In thousands)
<S> <C> <C>
Wages and employee benefits.................. $6,651 $6,126
Warranty and other related costs............. 9,656 6,993
Other........................................ 681 1,074
------- -------
$16,988 $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.
<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 required commercial and supply
relationships with third parties, including Sony Corporation, or to establish
other commercial and supply relationships as may be required from time to
time; iii) the development by others, including current customers of the
Company, of products which are competitive with those of the Company; and
iv) any inability by the Company to attract qualified employees or to develop
the necessary information systems to support the development or manufacture
of the Company's product. 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
six month periods ended July 2, 1994 and July 3, 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
---------------------
July 2, July 3,
1994 1993
------ ------
<S> <C> <C>
Net sales.................................... 100.0% 100.0%
Cost of goods sold........................... 67.8 73.9
------ ------
Gross margin................................. 32.2 26.1
Operating expenses:
Selling, general and administrative.......... 11.4 12.3
Research and development..................... 8.8 10.7
------ ------
Income from operations....................... 12.0 3.1
Other income, net............................ 0.5 0.3
------ ------
Income before income taxes................... 12.5 3.4
Provision for income taxes................... 4.5 1.3
------ ------
Net income................................... 8.0% 2.1%
====== ======
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
---------------------
July 2, July 3,
1994 1993
------ ------
<S> <C> <C>
Net sales.................................... 100.0% 100.0%
Cost of goods sold........................... 68.2 70.9
------ ------
Gross margin................................. 31.8 29.1
Operating expenses:
Selling, general and administrative.......... 11.1 11.7
Research and development..................... 8.7 10.3
------ ------
Income from operations....................... 12.0 7.1
Other income, net............................ 0.6 0.7
------ ------
Income before income taxes................... 12.6 7.8
Provision for income taxes................... 4.5 2.8
------ ------
Net income................................... 8.1% 5.0%
====== ======
</TABLE>
<PAGE> 12
NET SALES
Net sales for the three and six month periods ended July 2, 1994 of $92.7
million and $179.6 million, respectively, represented increases over the
corresponding periods in 1993 of 22.3% and 18.2%, 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 six months of 1994, sales of the half-high EXB-8505
product increased to 38.5% of sales from 16.2% for the same period in
1993. Sales of the Company's initial product, the EXB-8200, decreased to
7.7% for the first six months of 1994 compared to 19.7% in the same period
during 1993. Sales of the Company's EXB-8500 product also decreased to 18.1%
from 35.8% 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 six 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 Total Net Sales)
<TABLE>
<CAPTION>
Six Months Ended
------------------
July 2, July 3,
1994 1993
------- -------
<S> <C> <C>
8mm products:
- - ------------
EXB-8200.......................... 7.7% 19.7%
EXB-8500.......................... 18.1 35.8
EXB-8205.......................... 3.2 1.1
EXB-8505.......................... 38.5 16.2
Stand-alone subsystems
(for above products)............ 6.0 5.4
EXB-10 and 210.................... 6.1 4.3
EXB-120 and 60.................... 2.4 1.7
4mm and quarter-inch cartridge products:
- - ----------------------------------------
EXB - 4200........................ 4.1 0.9
EXB - 2501........................ 1.3 0.4
Consumables............................ 8.6 7.8
Service, spares and other.............. 4.0 6.7
------ ------
100.0% 100.0%
====== ======
</TABLE>
<PAGE> 13
The customer mix during the first six months of 1994 shifted from original
equipment manufacturers ("OEMs") and value added resellers ("VARs") to
distributors. OEM customers accounted for 46% and 41% of net sales,
respectively, for the second quarter and first six months of 1994 compared to
45% and 46% for the comparable period of 1993. VARs contributed 24% and 26%
of net sales, respectively, for the second quarter and first six months of
1994 compared to 38% and 36% for the comparable period of 1993. Sales to
distributors increased to 30% and 33% of net sales, respectively, for the
second quarter and first six months of 1994 from 17% and 18% of net sales for
the comparable period 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 total sales in 1994
than they represented in 1993
During the second quarter and first six months of 1994, one OEM customer
accounted for 26% and 21% respectively of sales compared to 20% and 19%
respectively of sales for the same period in 1993. A different OEM customer
accounted for 11% of sales for the first six 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 second quarter and the first six months of
1994 were 32.2% and 31.8%, respectively, compared to 26.1% and 29.1% for the
comparable periods in 1993. The increases were generally the result of (1) a
shift in sales mix to higher margin 8mm 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. The Company expects this potentially
adverse impact to be offset by the effect of continued product cost reduction
efforts and continued shifting toward 8mm half-high drives and libraries.
OPERATING EXPENSES
Selling, general and administrative expenses decreased as a percentage of
sales to 11.4% and 11.1% of sales, respectively, for the second quarter and
first six months of 1994 from 12.3% and 11.7% for the comparable periods in
1993. In absolute dollars, these expenses for the second quarter and first
six months of 1994 increased $1.2 million and $2.2 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 8.7% of sales, respectively, for the second quarter and first six
months of 1994 from 10.7% and 10.3% for the comparable period in 1993. In
absolute dollars, these expenses remained stable at $8.1 million and $15.7
million for the second quarter and first six months of 1994 and 1993. 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 six months of 1994 increased to
36.0% of income before taxes from 35.7% in the comparable period of 1993.
The Company currently expects the effective tax rate for 1994 to be
approximately 36%.
NET INCOME
Net income per share increased to $0.34 and $0.66 in the second quarter and
first six months of 1994 compared to $0.08 and $0.36 in the second quarter
and first six months of 1993. This increase was primarily the result of
increased revenues, higher gross margins and lower operating expense ratios
in the second quarter and first six months of 1994.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of 1994, the Company generated $17.5 million of
cash from operating activities, generated $2.1 million in proceeds from the
sale of common stock and expended $7.5 million for capital equipment and
$162,000 on capital lease obligations. Together, these activities resulted
in a net increase in the combined balance of cash and short-term investments
of $11.9 million to a quarter-ending balance of $77.9 million.
The Company's working capital increased to $144.6 million on July 2, 1994
from $129.7 million on January 1, 1994. Inventories decreased by $1.8
million to $38.4 million during the first six months of 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 July 2, 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 announced that the Board approved a stock repurchase program for
the purchase of up to 1 million shares of the Company's common stock, subject
to financial and market conditions. Any repurchased shares would reduce the
Company's cash balance by the purchase price.
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 the remainder
of fiscal 1994.
<PAGE> 15
PART II.
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Stockholders held on May 11, 1994, James
M. McCoy and Mark W. Perry were re-elected to the Company's Board of
Directors. The vote was as follows:
Name of Director Total Vote For Total Vote Withheld
- - ---------------- -------------- -------------------
James M. McCoy 18,329,308 47,907
Mark W. Perry 18,329,334 47,881
In addition, the following matters were approved:
Total Total Total
Total Vote Vote Broker
Matter Being Voted Upon Vote For Against Abstaining Non-Vote
- - ----------------------- -------- ------- ----------- --------
Ratification and approval
of a new form of
Indemnification Agreement
between the Company and
its directors, officers and
other agents.............. 17,945,771 303,549 79,895 39,000
Ratification of Price
Waterhouse LLP as
independent accountants
of the Company............ 18,306,060 34,924 36,231 None
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
(a) Exhibit Index
Exhibit
Number Description
------- -----------
<S> <S>
11.0 Statement regarding computation of per share
earnings.
</TABLE>
(b) Reports on Form 8-K: There were no reports on Form 8-K for the
three month period ended July 2, 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 11.0 - Earnings Per Share Computations
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
July 2, July 3,
1994 1993
------- -------
Primary (1):
- - --------
<S> <C> <C>
Weighted average number of common
and common equivalent shares
outstanding(2).......................... 21,828 21,339
====== ======
Net income................................... $7,436 $1,610
====== ======
Net income per share......................... $0.34 $0.08
====== ======
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
---------------------
July 2, July 3,
1994 1993
------- -------
Primary(1):
- - --------
<S> <C> <C>
Weighted average number of common
and common equivalent shares
outstanding(2).......................... 21,860 21,368
====== ======
Net income................................... $14,456 $7,622
====== ======
Net income per share......................... $0.66 $0.36
====== ======
</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.
