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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 April 1, 1995
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 May 15, 1995, there were 21,686,139 shares outstanding of the
Registrant's Common Stock (par value $0.001 per share).
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EXABYTE CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Consolidated Balance Sheets --
April 1, 1995 and December 31, 1994 ............. 3
Consolidated Statements of Operations --
Three Months Ended April 1, 1995 and
April 2, 1994 (Unaudited)........................ 4
Consolidated Statements of Cash Flows --
Three Months Ended April 1, 1995 and
April 2, 1994 (Unaudited)........................ 5-6
Notes to Consolidated Financial Statements
(Unaudited)....................................... 7-8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations....................................... 9-13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................... 14-16
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PART I Item 1. Financial Statements
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS April 1, December 31,
1995 1994
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents............... $77,621 $46,233
Short-term investments.................. 2,084 34,111
Accounts receivable, less allowance
for doubtful accounts and customer
returns and credits of $4,431 and
$4,454, respectively.................. 61,491 64,940
Inventories............................. 67,454 48,236
Deferred income taxes................... 7,410 7,329
Other current assets.................... 3,364 2,750
-------- --------
Total current assets............... 219,424 203,599
Property and equipment, net.................. 33,092 29,166
Deferred Income Taxes........................ 6,458 6,458
Other assets................................. 3,406 3,542
-------- --------
$262,380 $242,765
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................ $28,874 $20,459
Accrued liabilities..................... 22,274 21,345
Accrued income taxes.................... 6,278 3,600
Obligations under capital leases........ 219 217
-------- --------
Total current liabilities.......... 57,645 45,621
Long-term obligations under capital leases... 185 237
-------- --------
Total liabilities.................. 57,830 45,858
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; 21,672 and 21,657
shares issued and outstanding,
respectively.......................... 22 22
Capital in excess of par value.......... 57,378 57,208
Treasury stock, at cost, 15 shares
outstanding for both periods........... (9) (9)
Retained earnings....................... 147,159 139,686
-------- --------
Total stockholders' equity 204,550 196,907
-------- --------
$262,380 $242,765
======== ========
</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
April 1, April 2,
1995 1994
------- --------
<S> <C> <C>
Net sales.................................... $96,193 $86,894
Cost of goods sold........................... 66,444 59,524
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Gross profit................................. 29,749 27,370
Operating expenses:
Selling, general and administrative..... 10,660 9,412
Research and development................ 8,857 7,617
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Income from operations....................... 10,232 10,341
Other income, net............................ 1,444 628
------- -------
Income before income taxes................... 11,676 10,969
Provision for income taxes................... 4,203 3,949
------- -------
Net income................................... $7,473 $7,020
======= =======
Net income per share......................... $0.34 $0.32
======= =======
Common and common
equivalent shares used in the
calculation of net income
per share 22,135 21,891
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 5
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
April 1, April 2,
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers............ $99,925 $86,718
Cash paid to suppliers and employees.... (94,063) (69,121)
Interest received....................... 1,006 387
Interest paid........................... (38) (36)
Income taxes paid....................... (1,607) (2,608)
Net cash provided by -------- --------
operating activities............. 5,223 15,340
-------- --------
Cash flows from investing activities:
Sale (purchase) of short-term
investments, net...................... 32,027 (28,000)
Capital expenditures.................... (5,982) (3,578)
Net cash provided (used) by -------- --------
investing activities............. 26,045 (31,578)
-------- --------
Cash flows from financing activities:
Net proceeds from issuance of
common stock.......................... 169 1,543
Principal payments under capital
lease obligations..................... (49) (84)
Net cash provided by -------- --------
financing activities............. 120 1,459
-------- --------
Net increase (decrease) in cash and cash
equivalents............................. 31,388 (14,779)
Cash and cash equivalents at beginning
of period............................... 46,233 44,995
-------- --------
Cash and cash equivalents at end
of period............................... $77,621 $30,216
======== ========
</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>
Three Months Ended
------------------
April 1, April 2,
1995 1994
-------- --------
<S> <C> <C>
Reconciliation of net income to net cash
provided by operating activities:
Net income................................ $ 7,473 $ 7,020
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, amortization
and other............................. 2,958 3,583
Deferred income tax provision........... (81) (1,209)
Provision for losses and reserves
on accounts receivable................ 730 964
Change in assets and liabilities:
Accounts receivable....................... 2,719 (1,525)
Inventories............................... (19,900) (677)
Other current assets...................... (614) (647)
Other assets.............................. (84) (248)
Accounts payable.......................... 8,415 5,322
Accrued liabilities....................... 929 207
Accrued income taxes...................... 2,678 2,550
------- -------
Net cash provided by
operating activities............... $ 5,223 $15,340
======= =======
Supplemental schedule of non-cash
investing and financing activities:
Transfer of inventories to
property and equipment.................. $ 682 $ 776
Disposal of fully depreciated
property and equipment.................. 581 333
Capital lease obligations................. -- 418
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 7
EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1--ACCOUNTING PRINCIPLES
The consolidated balance sheet as of April 1, 1995, the consolidated
statements of operations for the three months ended April 1, 1995 and
April 2, 1994, as well as the consolidated statements of cash flows for the
three months ended April 1, 1995 and April 2, 1994, 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 December 31, 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>
April 1, December 31,
1995 1994
-------- ----------
(In thousands)
<S> <C> <C>
Raw materials and component parts............ $39,170 $34,125
Work-in-process.............................. 2,710 1,914
Finished goods............................... 25,574 12,197
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$67,454 $48,236
======= =======
</TABLE>
Note 3--ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
April 1, December 31,
1995 1994
-------- ---------
(In thousands)
<S> <C> <C>
Wages and employee benefits.................. $ 6,530 $ 7,917
Warranty and other related costs............. 11,815 11,839
Other........................................ 3,929 1,589
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$22,274 $21,345
======= =======
</TABLE>
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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> 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Shareholders are advised to review Item 1 of the Company's Form 10-K, filed
March 17, 1995 ("1994 Form 10K") for a discussion of risks applicable to the
Company's business as well as a general discussion of the Company's business.
Subsequent to the filing of the 1994 Form 10-K, the Company withdrew the
previously announced EXB-2502 and EXB-2502c products based upon quarter-inch
technology. The Company has also ceased development of the previously
announced EXB-4402 and EXB-4402c products based upon 4mm technology. The
Company has further announced the consolidation of its 4mm research and
development facility in San Jose, California and its quarter-inch research and
development facility in Ann Arbor, Michigan to a facility to be located at or
around the Company's headquarters in Boulder, Colorado.
The Company wrote off in the first quarter certain inventories associated with
the EXB-2502 and EXB-2502c that were deemed to be obsolete as a result of the
withdrawal of these products. In addition, the Company continues to assess
any further financial risks associated with the discontinuance of the above
products as well as of the end-of-life line of 5 1/4" full-high tape
subsystems and related libraries. Management is currently of the opinion that
inventory not written off in the first quarter is generally applicable to the
final production of such products or is otherwise applicable to the
manufacture of other of the Company's products. However, there can be no
assurance that the finished goods, work-in-process or raw material inventory
associated with any discontinued products will not be deemed by the Company at
some point in the future to be excess to the Company's requirement or
otherwise obsolete. Any such determination would result in a write-off and
such write-off could have a material adverse effect on the Company's results
of operations. In addition, there can be no assurance that the Company will
not sell such discontinued products at a price below the cost of manufacturing
such products and thereby adversely affect the Company's overall gross margin
which could have a material adverse effect on the Company's results of
operations.
RESULTS OF OPERATIONS
The following table sets forth unaudited operating results for the three
month periods ended April 1, 1995 and April 2, 1994 as a percentage
of sales in each of these periods. This data has been derived from the
unaudited consolidated financial statements.
<PAGE> 10
<TABLE>
<CAPTION>
Three Months Ended
---------------------
April 1, April 2,
1995 1994
------ ------
<S> <C> <C>
Net sales.................................... 100.0% 100.0%
Cost of goods sold........................... 69.1 68.5
------ ------
Gross margin................................. 30.9 31.5
Operating expenses:
Selling, general and administrative........ 11.1 10.8
Research and development................... 9.2 8.8
------ ------
Income from operations....................... 10.6 11.9
Other income, net............................ 1.5 0.7
------ ------
Income before income taxes................... 12.1 12.6
Provision for income taxes................... 4.3 4.5
------ ------
Net income................................... 7.8% 8.1%
====== ======
</TABLE>
NET SALES
Net sales for the three month period ended April 1, 1995 of $96.2 million,
represented an increase over the corresponding period in 1994 of 11%. This
sales increase was the result of increased shipments of 8mm half-high, 4mm and
quarter-inch drives and library products. Consumable sales and service
revenues also grew. 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 three months of 1995, sales of the Company's full-high
products have decreased as customer demand shifts toward the Company's
half-high products. This shift is evident in both drives and libraries.
It is expected to continue, especially as the full-high products reach
their end-of-life phase. Sales of the Company's full-high drives, the
EXB-8200 and EXB-8500, decreased to 1.0% and 5.2%, respectively, for the first
three months of 1995 compared to 7.7% and 21.5%, respectively, for the same
period during 1994. Demand for drives has shifted to the half-high EXB-8205
and EXB-8505, whose sales increased to 3.9% and 46.7% of sales, respectively,
during the first quarter of 1995 from 3.3% and 33.7%, respectively, for the
same period during 1994. Sales of the full-high library products, the EXB-10,
EXB-60 and EXB-120 decreased to 4.9% of sales during the first three months of
1995, compared to 8.5% for the same period in the prior year. Sales of
libraries have shifted to the half-high EXB-210, EXB-440 and EXB-480, whose
sales represented 11.2% during the first quarter of 1995, compared to 0.2% for
the same period in the prior year. The remainder of sales during the first
three months of 1995 and 1994, along with a recap of the products described
above are listed in the following table.
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PRODUCT MIX TABLE
(As a Percentage of Net Sales)
<TABLE>
<CAPTION>
Three Months Ended
------------------
April 1, April 2,
1995 1994
------- -------
<S> <C> <C>
8mm products:
- ------------
EXB-8200.......................... 1.0% 7.7%
EXB-8500.......................... 5.2 21.5
EXB-8205.......................... 3.9 3.3
EXB-8505.......................... 46.7 33.7
Stand-alone subsystems
(for above products)............ 4.9 7.1
EXB-10, 60 and 120................ 4.9 8.5
EXB-210, 440 and 480.............. 11.2 0.2
4mm and quarter-inch cartridge products:
- ----------------------------------------
EXB - 4200........................ 6.0 4.2
EXB - 2501........................ 1.9 1.3
Consumables............................ 9.5 8.4
Service, spares and other.............. 6.3 5.6
Sales allowances....................... (1.5) (1.5)
------ ------
100.0% 100.0%
====== ======
</TABLE>
The customer mix during the first quarter of 1995 shifted from value added
resellers ("VAR's") to original equipment manufacturers ("OEM's") and
distributors. OEM customers accounted for 39% of sales during the first
quarter of 1995 compared to 36% of sales for the comparable period in 1994.
VAR's accounted for 22% of sales during the first quarter of 1995 compared to
27% for the comparable period in 1994. Sales to distributors increased
slightly to 39% of sales during the first quarter of 1995 compared to 37% for
the comparable period in 1994. This shift in customer mix was primarily the
result of greater sales to existing OEM and distributor accounts.
During the first quarter of 1995, one OEM customer accounted for 17% of sales
compared to 15% of sales for the same period in 1994. No other customers
accounted for 10% or more of sales in any of these periods. Since this and
other major customers also sell competing products and continually review new
technologies, there can be no assurance that sales to this or any other
customers will continue to represent the same portion of the Company's future
revenue.
<PAGE> 12
GROSS MARGIN
The Company's gross margin percentage decreased to 30.9% for the first quarter
of 1995 compared to 31.5% for the first quarter of 1994. The Company
currently expects continued price erosion in all of its ongoing products due
to the competitive nature of the storage peripherals business. Future gross
margins will also be adversely impacted by price erosion and costs associated
with end-of-life programs related to the production of the Company's full-high
drive and full-high library products. Also future gross margins may be
impacted by the Company's decision to cancel development of the EXB-2502 or the
impact of the introduction of competing quarter-inch products. The Company
also expects product costs to be impacted by the result of weakness of the U.S.
dollar relative to component parts purchased in Japanese yen. The Company
currently expects these adverse trends to be partially offset by the effect of
continued cost control efforts combined with an improvement in the product mix
towards the higher margin half-high drives.
OPERATING EXPENSES
Selling, general and administrative expenses increased slightly as a
percentage of sales to 11.1% for the first quarter of 1995 compared to 10.8%
for the same period in 1994. The principal components of these sales-related
costs include salaries and benefits, sales commissions, advertising and
promotions expenses.
Research and development expenditures increased to 9.2% of sales for the first
quarter of 1995 compared to 8.8% for the same period in 1994. This increase is
due to emphasis on improvements of current products and commitment to the
development of new products including Mammoth. The consolidation of the 4mm
and quarter-inch research and development organizations is not expected to
result in a material impact on total 1995 research and development expenses.
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 three months of 1995 remained
at 36.0% of income before taxes and was consistent with the comparable period
of 1994.
NET INCOME
Net income per share increased slightly to $0.34 in the first quarter of 1995
compared to $0.32 in the first quarter of 1994. This increase was primarily
the result of increased other income.
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
During the first three months of 1995, the Company generated $5.2 million of
cash from operating activities, generated $169,000 in proceeds from the sale of
common stock and expended $6.0 million for capital equipment. Together, these
activities resulted in a net decrease in the combined balance of cash and
short-term investments of $638,000 to a quarter-ending balance of $79.7
million. The Company's working capital increased to $161.8 million on April
1, 1995 from $158.0 million on December 31, 1994.
The Company has a $7.5 million bank line of credit which expires April 30,
1996, with borrowings under the line limited to 80% of eligible accounts
receivable plus 25% of eligible inventory (limited to $3,000,000). On May 1,
1995 the amount available under the line was $7.5 million and no borrowings
were outstanding. Borrowings under the line of credit bear interest at the
lower of the bank's prime rate or LIBOR + 2%. 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> 14
PART II.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index
Exhibit
Number Description
------- -----------
27.0 Financial Data Schedule
(b) Reports on Form 8-K: There were no reports on Form 8-K for the
three month period ended April 1, 1995.
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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 May 15, 1995 By William L. Marriner
----------------------- ------------------------
Executive Vice President and Chief
Financial Officer
(Principal Financial and Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET AS OF APRIL 1, 1995 AND THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED APRIL 1,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> APR-1-1995
<CASH> 77,621
<SECURITIES> 2,084
<RECEIVABLES> 65,922
<ALLOWANCES> 4,431
<INVENTORY> 67,454
<CURRENT-ASSETS> 219,424
<PP&E> 73,595
<DEPRECIATION> 40,503
<TOTAL-ASSETS> 262,380
<CURRENT-LIABILITIES> 57,645
<BONDS> 0
<COMMON> 22
0
0
<OTHER-SE> 204,528
<TOTAL-LIABILITY-AND-EQUITY> 262,380
<SALES> 96,193
<TOTAL-REVENUES> 96,193
<CGS> 66,444
<TOTAL-COSTS> 66,444
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 730
<INTEREST-EXPENSE> 38
<INCOME-PRETAX> 11,676
<INCOME-TAX> 4,203
<INCOME-CONTINUING> 7,473
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,473
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
</TABLE>
