<PAGE> 1
- -----------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
10-Q
(Mark One)
/X/ Quarterly Report Pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 28, 1996
OR
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _________ to _________.
Commission File 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 6, 1996, there were 22,126,787 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 --
September 28, 1996 and December 30, 1995........ 3
Consolidated Statements of Operations --
Three and Nine Months Ended September 28, 1996
and September 30, 1995 (Unaudited).............. 4-5
Consolidated Statements of Cash Flows --
Nine Months Ended September 28, 1996 and
September 30, 1995 (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...................................... 10-17
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..................... 18-20
<PAGE> 3
PART I Item 1. Financial Statements
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS September 28, December 30,
1996 1995
--------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................. $ 60,129 $ 40,137
Short-term investments.................... 7,000 28,800
Accounts receivable, less allowance
for doubtful accounts and customer
returns and credits of $7,371 and
$6,832, respectively.................... 64,471 56,785
Inventories, net.......................... 56,493 44,169
Deferred income taxes..................... 15,596 17,595
Other current assets...................... 4,206 9,446
-------- --------
Total current assets................. 207,895 196,932
Property and equipment, net.................... 43,474 42,972
Deferred income taxes.......................... 7,976 7,703
Other assets................................... 4,274 2,729
-------- --------
$263,619 $250,336
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................... $ 26,261 $ 21,840
Accrued liabilities....................... 29,375 32,945
Accrued income taxes...................... 2,555 4,104
Current portion of long-term obligations.. 796 900
-------- --------
Total current liabilities............ 58,987 59,789
Long-term obligations.......................... 3,586 4,181
-------- --------
Total liabilities.................... 62,573 63,970
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; 22,128 and 21,827
shares issued and outstanding,
respectively............................ 22 22
Capital in excess of par value............ 63,114 59,102
Treasury stock, at cost, 15 shares
outstanding for both periods............. (9) (9)
Retained earnings......................... 137,919 127,251
-------- --------
Total stockholders' equity........... 201,046 186,366
-------- --------
$263,619 $250,336
======== ========
</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
-----------------------
Sept. 28, Sept. 30,
1996 1995
-------- --------
<S> <C> <C>
Net sales.................................... $92,741 $84,100
Cost of goods sold........................... 66,079 99,772
------- -------
Gross profit (loss).......................... 26,662 (15,672)
Operating expenses:
Selling, general and administrative..... 11,921 14,725
Research and development................ 9,248 10,007
------- -------
Income (loss) from operations................ 5,493 (40,404)
Other income (expense), net.................. 293 (93)
------- -------
Income (loss) before income taxes............ 5,786 (40,497)
Provision (benefit) for income taxes......... 2,083 (15,632)
------- -------
Net income (loss)............................ $3,703 $(24,865)
======= =======
Net income (loss) per share.................. $0.17 $(1.13)
======= =======
Common and common
equivalent shares used in the
calculation of net income (loss)
per share............................... 22,302 22,055
======= =======
</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
----------------------
Sept. 28, Sept. 30,
1996 1995
-------- --------
<S> <C> <C>
Net sales.................................... $277,023 $277,277
Cost of goods sold........................... 199,998 239,945
-------- --------
Gross profit................................. 77,025 37,332
Operating expenses:
Selling, general and administrative..... 34,063 37,336
Research and development................ 27,420 28,101
-------- --------
Income (loss) from operations................ 15,542 (28,105)
Other income, net.......................... 1,126 1,491
-------- --------
Income (loss) before income taxes............ 16,668 (26,614)
Provision (benefit) for income taxes......... 6,000 (10,912)
-------- --------
Net income (loss) ........................... $ 10,668 $(15,702)
======== ========
Net income (loss) per share.................. $ 0.48 $ (0.71)
======== ========
Common and common
equivalent shares used in the
calculation of net income (loss)
per share............................... 22,288 22,038
======== ========
</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
----------------------
Sept. 28, Sept. 30,
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers............ $269,773 $278,311
Cash paid to suppliers and employees.... (265,324) (277,169)
Interest received....................... 2,161 2,540
Interest paid........................... (393) (151)
Income taxes paid....................... (2,609) (6,918)
Income tax refund received.............. 4,160 --
Net cash provided (used) by -------- --------
operating activities............. 7,768 (3,387)
-------- --------
Cash flows from investing activities:
Sale of short-term
investments, net...................... 21,800 34,111
Capital expenditures.................... (12,704) (18,351)
Net cash provided by -------- --------
investing activities............. 9,096 15,760
-------- --------
Cash flows from financing activities:
Net proceeds from issuance of
common stock.......................... 3,826 1,253
Principal payments under long-term
obligations........................... (698) (338)
Net cash provided by -------- --------
financing activities............. 3,128 915
-------- --------
Net increase in cash and cash
equivalents............................. 19,992 13,288
Cash and cash equivalents at beginning
of period............................... 40,137 46,233
-------- --------
Cash and cash equivalents at end
of period............................... $ 60,129 $ 59,521
======== ========
</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
----------------------
Sept. 28, Sept. 30,
1996 1995
-------- --------
<S> <C> <C>
Reconciliation of net income (loss) to net cash
provided (used) by operating activities:
Net income (loss)......................... $10,668 $ (15,702)
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating
activities:
Depreciation, amortization
and other............................. 12,200 13,302
Deferred income tax provision (benefit). 1,726 (14,942)
Provision for losses and reserves
on accounts receivable................ 6,867 7,094
Provision for end-of-life inventory
write-downs........................... -- 31,188
Write-down of fixed assets.............. -- 850
Change in assets and liabilities:
Accounts receivable....................... (14,552) (6,298)
Inventories............................... (12,323) (19,719)
Other current assets...................... 5,240 (325)
Other assets.............................. (1,545) (673)
Accounts payable.......................... 4,421 (249)
Accrued liabilities....................... (3,571) 4,976
Accrued income taxes...................... (1,363) (2,889)
------- -------
Net cash provided (used) by
operating activities............... $ 7,768 $(3,387)
======= =======
Supplemental schedule of non-cash
investing and financing activities:
Transfer of inventories to
property and equipment.................. $ -- $ 1,188
Note payable used to finance
software licenses....................... $ -- $ 1,055
Income tax benefit of disqualifying
dispositions of common stock............ $ 186 $ --
</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 September 28, 1996, the consolidated
statements of operations for the three and nine months ended September 28,
1996 and September 30, 1995, as well as the consolidated statements of cash
flows for the nine months ended September 28, 1996 and September 30, 1995,
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 30, 1995
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>
September 28, December 30,
1996 1995
------------- ------------
(In thousands)
<S> <C> <C>
Raw materials and component parts............ $37,339 $24,932
Work-in-process.............................. 2,864 2,033
Finished goods............................... 16,290 17,204
------- -------
$56,493 $44,169
======= =======
</TABLE>
Note 3--ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
September 28, December 30,
1996 1995
------------- ------------
(In thousands)
<S> <C> <C>
Wages and employee benefits.................. $ 7,144 $ 5,603
Warranty and other related costs............. 18,524 20,068
Loss on purchase commitments................. 193 4,212
Other........................................ 3,514 3,062
------- -------
$29,375 $32,945
======= =======
</TABLE>
<PAGE> 9
Note 4--NET INCOME (LOSS) PER SHARE
Net income (loss) 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. In a period in which a loss is realized, only the
weighted average number of common shares is used to compute the loss per
share as the inclusion of common stock equivalents would be antidilutive.
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
This Form 10-Q contains forward-looking statements within the context of
Section 21E of the Securities Exchange Act of 1934, as amended. Each and
every forward-looking statement involves a number of risks and uncertainties,
including those seventeen risk factors specifically delineated and described
in Part 1, Item 1 of the Company's 1995 Form 10-K, filed March 22, 1996
("1995 Form 10-K") and as specifically expanded and modified below. The
actual results that the Company achieves may differ materially from any
forward-looking statements due to such risks and uncertainties. The Company
has identified by *bold-face* various sentences within this Form 10-Q which
contain such forward-looking statements, and words such as "believes",
"anticipates", "expects", "intends", and similar expressions are intended to
identify forward-looking statements, but are not the exclusive means of
identifying such statements. The Company undertakes no obligation to revise
any forward-looking statements in order to reflect events or circumstances
that may arise after the date of this report.
The 1995 Form 10-K Risk Factors are hereby restated, modified and expanded
in accordance with the following section references that correlate to the
corresponding 1995 Form 10-K Risk Factors sections:
Product Performance (new): The Company's products are designed and marketed
principally for applications involving the storage and backup of computer
data. Any failure of the Company's products to perform in accordance with
applicable specifications could result in the loss of critical user data and
the assertion by such users of claims against the Company for damages arising
from such data loss. In addition, the Company may incur costs associated
with a product recall or other corrective action to address product defects,
including latent or epidemic defects. The Company's results of operations
could be materially adversely affected by the costs related to such
corrective action or the defense of claims and the payment of any judgment or
settlement in excess of any insurance coverage. While the Company has in the
past incurred certain costs related to product defects, no such costs, to
date, have resulted in material adverse impact to the Company's results of
operations.
Product Development; Mammoth (amended in relevant portions): The Company
began commercial shipment of the Mammoth product in the first quarter of
1996. The Mammoth product incorporates a mechanical deck manufactured by
the Company. The Company's manufacturing experience in the past has been
largely limited to the assembly and testing of purchased components, and the
Company has had limited experience in other phases of manufacturing. In
particular, the Company has had only limited experience in the manufacture
of mechanical decks and certain critical components of the deck assembly,
including the head scanner assemblies, and there can be no assurance that the
Company will be able to manufacture the Mammoth product in commercial
quantities at commercially acceptable cost. Any inability of the Company to
manufacture the Mammoth product and components in the required volumes would
have a material adverse effect on the Company's competitive position and on
its results of operations. For these and other factors relating to the
introduction, manufacture and sale of the Mammoth product, which factors
could have a material adverse effect on the Company's results of operations,
see the "1995 Form 10-K--Risk Factors--Product Development--Mammoth."
<PAGE> 11
The Company's ability to successfully introduce the Mammoth product and to
sustain growth in this product line is also dependent upon the availability
of advanced tape media which meets the Company's specifications. The
advanced tape media is currently solely sourced from Sony, a competitor to
the Company. See "Dependence on Key Vendors/Competitors: Sony and
Hitachi". The Company's ability in the future to procure an adequate supply
of advanced tape media which meets the Company's specifications may be
affected by any constraint in Sony's media production capability, by the
divergence of Sony's limited media supply to third parties, by any change in
Sony's media specifications which no longer meet the Company's requirements,
or otherwise as a result of Sony's competitive position.
Dependence on Key Vendors/Competitors: Sony and Hitachi (restated): The
Company's ability to maintain cost-effective manufacturing volume depends
upon uninterrupted access to high quality components in required volumes and
at competitive prices.
The Company's 8mm mechanical tape decks are currently procured from single
sources, Sony and Hitachi Corporation ("Hitachi"), for the EXB-8505XL and the
EXB-8700 products, respectively. While the Company has contracts with Sony
and Hitachi for the supply of their respective 8mm decks, there can be no
assurance either that the supply of decks will continue or that prices will
remain at their current levels. In addition, the Company expects that Sony
initially will be the sole supplier of advanced media for the Company's
announced Mammoth product. See the "1995 Form 10-K--Business--
Manufacturing." Sony announced during the second quarter of 1996 and
Hitachi announced during the third quarter of 1996 the introduction of
competitive 8mm product offerings. Sony's and Hitachi's competitive position
may adversely affect the Company's ability to procure 8mm mechanical decks
and tape media at required volumes and at competitive prices. See the "1995
Form 10-K--Business--Manufacturing--Sony Tape Deck Agreements." While there
are other manufacturers of 8mm decks, the customization effort required to
make these decks suitable for the Company's products would require many
months of effort. There can be no assurance that such effort would be
successful or, even if successful, that it would not result in a significant
delay in the ability of the Company to ship its products.
In addition to its dependence on Sony and Hitachi, the Company has engaged
other third parties, including competitors and potential competitors, in the
joint development of products or components. These relationships subject the
Company to other supply or technology dependencies. The Company further
relies upon other sole source vendors for certain critical components,
including but not limited to, printed circuit boards, semiconductor circuits
and read/write heads. The Company has not executed master purchase
agreements with many of its sole source vendors and conducts business with
such vendors on a purchase order basis. The Company's reliance on these and
other sole source vendors involves several risks, including the possiblity of
a shortage of certain key components and reduced control over delivery
schedules, manufacturing yields, quality and costs. The Company has, on
occasion, experienced problems with the quality of and interruptions in the
supply of sole source components although, to date, no such quality problems
or interruptions have had a material effect on the company's results of
operations. In the event of yield, quality, delivery or supply problems with
any of these vendors, the Company could be forced to delay shipments of its
products, which would have a material adverse effect on the Company's results
of operations. See the "1995 Form 10-K--Business--Manufacturing."
<PAGE> 12
The Company's quarter-inch cartridge drive subsystems incorporate cartridge
media developed and produced by Imation Enterprises Corporation. Imation
Enterprises Corporation, owner of the DC-2000 and Travan(TM) technology,
devotes substantial resources to the development of further enhancements to
the technology. The Company's ability to successfully compete in the quarter-
inch business depends, in part, upon its continued access to and its ability
to adapt to change in such quarter-inch technology. See "1995 Form 10-K--
Business--Research and Development."
Competition (amended in relevant portions): The Company faces direct
competition in the market from companies offering 8mm tape subsystems. Sony
announced in the second quarter of 1996 a competitive 8mm offering and
Hitachi Corporation announced in the third quarter of 1996 a competitive 8mm
offering which has the capability to read data written on the media by the
Company's products. For a further description of competitive factors, which
factors could have a material adverse effect on the Company's results of
operations, see the "1995 Form 10 K--Risk Factors--Competition."
RESULTS OF OPERATIONS
The following table sets forth unaudited operating results for the three
and nine month periods ended September 28, 1996 and September 30, 1995 as a
percentage of sales in each of these periods. This data has been derived
from the unaudited consolidated financial statements.
<TABLE>
<CAPTION>
Three Months Ended
----------------------
Sept. 28, Sept. 30,
1996 1995
-------- --------
<S> <C> <C>
Net sales.................................... 100.0% 100.0%
Cost of goods sold........................... 71.3 118.7
------ ------
Gross profit (loss).......................... 28.7 (18.7)
Operating expenses:
Selling, general and administrative........ 12.8 17.5
Research and development................... 10.0 11.9
------ ------
Income (loss) from operations................ 5.9 (48.1)
Other income (expense), net.................. 0.3 (0.1)
------ ------
Income (loss) before income taxes............ 6.2 (48.2)
Provision (benefit) for income taxes......... 2.2 (18.6)
------ ------
Net income (loss)............................ 4.0% (29.6)%
====== ======
</TABLE>
<PAGE> 13
<TABLE>
<CAPTION>
Nine Months Ended
----------------------
Sept. 28, Sept. 30,
1996 1995
-------- --------
<S> <C> <C>
Net sales.................................... 100.0% 100.0%
Cost of goods sold........................... 72.2 86.5
------ ------
Gross profit................................. 27.8 13.5
Operating expenses:
Selling, general and administrative........ 12.3 13.5
Research and development................... 9.9 10.1
------ ------
Income (loss) from operations................ 5.6 (10.1)
Other income, net............................ 0.4 0.5
------ ------
Income (loss) before income taxes............ 6.0 (9.6)
Provision (benefit) for income taxes......... 2.1 (3.9)
------ ------
Net income (loss)............................ 3.9% (5.7)%
====== ======
</TABLE>
NET SALES
Net sales for the three and nine month periods ended September 28, 1996 were
$92.7 million and $277.0 million, respectively. For the quarter, revenues
increased by 10.3% over the corresponding period in 1995. This increase is
due to increased sales of 1/4" drives and 8mm half-high drive and library
products. Consumable sales also grew. For the year-to-date, revenues
remained level with the prior year's level of $277.3 million.
During the first nine months of 1996, sales of the Company's half-high drive
and library products, including the Mammoth drive, represented 79.2% of
revenue. This is an increase from 71.6% for the same period in 1995. Sales
of quarter-inch products increased to 5.1% of revenue from 2.0% for the same
period in the previous year. Sales of the Company's full-high drives and
libraries decreased to 1.0% of revenue from 7.3% for the same period in the
previous year. Additionally, media and service revenues continued to grow in
both absolute dollars and as a percentage of total revenue from 1995 to
1996. The Company discontinued shipment of its 4mm drive product during the
first quarter of 1996.
The remainder of sales during the first nine months of 1996 and 1995, along
with a recap of the products described above are listed in the following
table.
<PAGE> 14
PRODUCT MIX TABLE
(As a Percentage of Net Sales)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------
Sept. 28, Sept. 30,
1996 1995
-------- --------
<S> <C> <C>
8mm half-high drives:
EXB-8205, 8505, 8700 and Mammoth........... 65.2% 58.6%
8mm full-high drives:
EXB-8200 and 8500.......................... 0.9 5.1
8mm half-high libraries:
EXB-10h, 210, 440 and 480.................. 14.0 13.0
8mm full-high libraries:
EXB-10, 10i, 10e, 60 and 120............... 0.1 2.2
4mm products:
EXB-4200................................... 0.9 6.0
Quarter-inch products:
TR3, EXB-1500 and 2501..................... 5.1 2.0
Consumables.................................. 11.1 9.7
Service, spares and other.................... 5.8 5.7
Sales allowances............................. (3.1) (2.3)
------ ------
100.0% 100.0%
====== ======
</TABLE>
The Company classifies its customer base into the following categories:
original equipment manufacturers ("OEM's"), non-system OEM's ("NSO's"),
solution providers, distributors and end-users.
The customer mix during the third quarter of 1996 shifted to distributors
from OEM's, NSO's and solution providers when compared to the same period in
1995. For the first nine months of 1996, sales shifted to distributors from
NSO's, solution providers and end-users over the same period in the prior
year. This shift is due in part to increased sales of quarter-inch products,
which are predominantly sold through the distribution channel. The following
table shows the customer mix for the third quarter and first nine months of
1996 and 1995.
<PAGE> 15
CUSTOMER MIX TABLE
(As a Percentage of Net Sales)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------- -------------------
Sept. 28, Sept. 30, Sept. 28, Sept. 30,
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Customer Type:
- --------------
OEM.............................. 38.8% 44.3% 44.5% 44.3%
Distributor...................... 48.2 39.5 43.1 37.5
NSO.............................. 6.6 9.0 6.8 10.1
Solution provider................ 2.4 3.2 2.2 4.1
End-user......................... 4.0 4.0 3.4 4.0
------ ------ ------ ------
100.0% 100.0% 100.0% 100.0%
====== ====== ====== ======
During the third quarter and first nine months of 1996, one OEM customer
accounted for 15% and 16% of sales, respectively, compared to 13% and 15%,
respectively, for the comparable periods in 1995. Another OEM customer
accounted for 9% and 11% of sales, respectively, during the third quarter
and first nine months of 1996 compared to 14% and 11% in the comparable
periods in 1995. No other customers accounted for 10% or more of sales in
any of these periods.
*Since these and other major customers also sell competing products and
continually review new technologies, there can be no assurance that sales
to these or any other customers will continue to represent the same portion
of the Company's future revenue.*
GROSS MARGIN
Gross margin percentages for the third quarter and first nine months of 1996
increased to 28.7% and 27.8%, respectively, compared to -18.7% and 13.5%,
respectively, for the comparable periods in 1995. The 1995 margins include
special non-recurring third quarter charges in other cost of sales of $34.2
million which reduced them to the figures shown from 22.0% and 25.8%,
respectively, for the third quarter and first nine months of 1995. Gross
margins in 1996 were affected by a number of factors during the quarter and
year-to-date. An increase in the value of the dollar versus the yen during
the year resulted in reduced costs of certain Japanese components.
Additionally, improved warranty costs had a positive impact on margins.
*Due to the competitive nature of the storage peripherals business, price
erosion on most products is expected to have an ongoing negative impact on
gross margins.*
<PAGE> 16
OPERATING EXPENSES
Selling, general and administrative expenses decreased as a percentage of
sales to 12.8% and 12.3%, respectively, for the third quarter and first nine
months of 1996 compared to 17.5% and 13.5%, respectively, for the same
periods in 1995. In absolute dollars, these expenses for the third quarter
and first nine months of 1996 decreased $2.8 million and $3.3 million,
respectively, over the same periods in the previous year. Decreases are
primarily the result of special non-recurring third quarter 1995 charges
totaling $2.6 million related to the write-off of goodwill and end-of-life
capitalized equipment. Decreases can also be attributed to ongoing cost
control efforts.
Research and development expenditures decreased to 10.0% and 9.9% of sales,
respectively, for the third quarter and first nine months of 1996 compared
to 11.9% and 10.1%, respectively, for the comparable periods in 1995. In
absolute dollars, these expenses for the third quarter and first nine months
of 1996 decreased by $760k and $680k, respectively, over the same periods in
the previous year.
OTHER INCOME, NET
Other income, net, consists primarily of interest income and expense,
discounts taken by customers, state franchise taxes, foreign currency gains
and losses and other miscellaneous items.
TAXES
The provision for income taxes for the first nine months of 1996 was
36.0% of income before taxes compared to 41.0% of loss before taxes for the
same period in the prior year.
NET INCOME (LOSS)
Net income per share was $0.17 and $0.48, respectively, for the third quarter
and first nine months of 1996. This compares to a net loss per share of
$1.13 and $0.71, respectively, for the same periods in 1995. The large
increases mainly relate to higher margins and lower operating expenses.
Net income for the third quarter and first nine months of 1995 were impacted
by write-downs related to end-of-life products.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1996, the Company generated $7.8 million of
cash from operating activities, generated $3.8 million in proceeds from the
sale of common stock and expended $12.7 million for capital equipment and
$698,000 on repayment of long-term obligations. Together, these activities
resulted in a net decrease in the combined balance of cash and short-term
investments of $1.8 million to a quarter-ending balance of $67.1 million.
The Company's working capital increased to $148.9 million at September 28,
1996 from $137.1 million at December 30, 1995.
<PAGE> 17
The Company has a $7.5 million bank line of credit which expires April 30,
1997, with borrowings under the line limited to 80% of eligible accounts
receivable plus 25% of eligible inventory (limited to $3,000,000). On
October 15, 1996 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. 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 1997.*
<PAGE> 18
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 September 28, 1996
<PAGE> 19
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 November 8, 1996 By /s/William L. Marriner
----------------------- ------------------------
William L. Marriner
Executive Vice President and Chief
Financial Officer
(Principal Financial and Accounting
Officer)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 28, 1996 AND THE
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 28, 1996 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-28-1996
<PERIOD-END> SEP-28-1996
<CASH> 60,129
<SECURITIES> 7,000
<RECEIVABLES> 71,842
<ALLOWANCES> 7,371
<INVENTORY> 56,493
<CURRENT-ASSETS> 207,895
<PP&E> 101,156
<DEPRECIATION> 57,682
<TOTAL-ASSETS> 263,619
<CURRENT-LIABILITIES> 58,987
<BONDS> 0
<COMMON> 22
0
0
<OTHER-SE> 201,024
<TOTAL-LIABILITY-AND-EQUITY> 263,619
<SALES> 277,023
<TOTAL-REVENUES> 277,023
<CGS> 199,998
<TOTAL-COSTS> 199,998
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,938
<INTEREST-EXPENSE> 393
<INCOME-PRETAX> 16,668
<INCOME-TAX> 6,000
<INCOME-CONTINUING> 10,668
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,668
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
</TABLE>
