<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
Commission File Number: 0-22071
OVERLAND DATA, INC.
(Exact name of registrant as specified in its charter)
California 95-3535285
(State or other jurisdiction of incorporation) (IRS Employer Identification No.)
8975 Balboa Avenue, San Diego, California 92123-1599
(Address of principal executive offices, including zip code)
(619) 571-5555
(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 90 days.
Yes X No
--- ---
As of MaY 11, 1998 there were 10,564,682 shares of the registrant's common
stock, no par value, issued and outstanding.
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OVERLAND DATA, INC.
FORM 10-Q
For the quarterly period ended March 31, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated condensed statement of operations --
Three months and nine months ended
March 31, 1998 and 1997........................................ 3
Consolidated condensed balance sheet --
March 31, 1998 and June 30, 1997.............................. 4
Consolidated condensed statement of cash flows --
Nine months ended March 31, 1998 and 1997...................... 5
Notes to consolidated condensed financial statements.............. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ........................................ 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ................................................ 14
Item 4. Submission of Matters to a Vote of Security Holders .............. 15
Item 6. Exhibits and Reports on Form 8-K ................................. 15
Signatures ....................................................... 16
</TABLE>
2
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OVERLAND DATA, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------ -----------------
1998 1997 1998 1997
--------- --------- -------- -------
<S> <C> <C> <C> <C>
Net sales...................................... $ 18,659 $ 15,404 $ 50,728 $42,637
Cost of goods sold............................. 13,190 10,167 34,895 27,588
--------- --------- -------- -------
Gross profit................................... 5,469 5,237 15,833 15,049
--------- --------- -------- -------
Operating expenses:
Sales and marketing........................... 2,241 1,738 6,544 5,296
Research and development...................... 1,060 993 2,963 3,088
General and administrative.................... 1,653 1,189 4,721 2,938
--------- --------- -------- -------
Total operating expenses...................... 4,954 3,920 14,228 11,322
--------- --------- -------- -------
Income from operations......................... 515 1,317 1,605 3,727
Other income (expense):
Other income (expense), net................... 46 (52) 50 (46)
Interest, net................................. 247 64 711 (71)
--------- --------- -------- -------
Income before income taxes..................... 808 1,329 2,366 3,610
Provision for income taxes..................... 307 532 899 1,445
--------- --------- -------- -------
Net income..................................... $ 501 $ 797 $ 1,467 $ 2,165
--------- --------- -------- -------
--------- --------- -------- -------
Earnings per share:
Basic......................................... $ 0.05 $ 0.11 $ 0.14 $ 0.37
--------- --------- -------- -------
--------- --------- -------- -------
Diluted....................................... $ 0.05 $ 0.09 $ 0.13 $ 0.25
--------- --------- -------- -------
--------- --------- -------- -------
Number of shares used in computing earnings per share:
Basic........................................ 10,542 7,457 10,512 5,927
--------- --------- -------- -------
--------- --------- -------- -------
Diluted...................................... 10,990 9,359 10,987 8,615
--------- --------- -------- -------
--------- --------- -------- -------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
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OVERLAND DATA, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
--------- --------
(unaudited)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents................................................ $15,056 $18,926
Accounts receivable, less allowance for doubtful accounts
and returns of $931 and $774, respectively ............................. 13,312 11,151
Inventories.............................................................. 13,257 12,101
Deferred income taxes ................................................... 1,743 1,743
Other current assets .................................................... 899 607
------- -------
Total current assets................................................... 44,267 44,528
Property and equipment, net............................................... 4,230 3,499
Deferred income taxes..................................................... 77 77
Intangible and other assets............................................... 67 156
------- -------
$48,641 $48,260
------- -------
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable ........................................................ $ 3,803 $ 5,372
Accrued liabilities...................................................... 1,592 1,377
Accrued payroll and employee compensation................................ 1,086 1,046
------- -------
Total current liabilities.............................................. 6,481 7,795
Other liabilities......................................................... 187 148
------- -------
Total liabilities...................................................... 6,668 7,943
------- -------
Shareholders' equity:
Common stock, no par value, 25,000,000 shares
authorized; 10,552,062 and 10,434,593 shares
issued and outstanding, respectively.................................... 33,405 33,246
Cumulative translation adjustment........................................ 39 9
Retained earnings........................................................ 8,529 7,062
------- -------
Total shareholders' equity............................................. 41,973 40,317
------- -------
$48,641 $48,260
------- -------
------- -------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
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OVERLAND DATA, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
1998 1997
------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income............................................................... $1,467 $2,165
Adjustments to reconcile net income to cash
used in operating activities:
Depreciation and amortization............................................ 1,102 768
Changes in operating assets and liabilities:
Account receivables.................................................... (2,161) (1,615)
Inventories............................................................ (1,156) (2,421)
Other assets........................................................... (292) (316)
Accounts payable and accrued liabilities............................... (1,315) 69
Accrued payroll and employee compensation.............................. 40 3
------- -------
Net cash used in operating activities.................................. (2,315) (1,347)
------- -------
INVESTING ACTIVITIES:
Capital expenditures.................................................... (1,744) (1,669)
------- -------
Net cash used in investing activities.................................. (1,744) (1,669)
------- -------
FINANCING ACTIVITIES:
Net proceeds (repayments) under bank line of credit..................... 0 (962)
Proceeds from exercise of stock options................................. 87 114
Stock repurchases....................................................... (312) 0
Net proceeds from issuance of common stock.............................. 384 25,751
------- -------
Net cash provided by financing activities.............................. 159 24,903
------- -------
Effect of exchange rate changes on cash.................................. 30 20
------- -------
Net (decrease) increase in cash and cash equivalents..................... (3,870) 21,907
------- -------
Cash and cash equivalents at the beginning of the period................. 18,926 19
------- -------
Cash and cash equivalents at the end of the period....................... $15,056 $21,926
------- -------
------- -------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
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OVERLAND DATA, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Overland Data,
Inc. and its subsidiaries (the "Company") have been prepared by the Company
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission for Form 10-Q. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of management, these
statements reflect all normal recurring adjustments necessary for a fair
presentation of the financial position, results of operations and cash flows
for all periods presented. The results of operations for such periods are
not necessarily indicative of the results expected for the full fiscal year.
The Company's fiscal quarter ends on the Sunday closest to March 31. For ease
of presentation, the Company's quarter end is deemed to be March 31. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Form 10-K for the fiscal year ended
June 30, 1997 on file with the Securities and Exchange Commission.
NOTE 2 -- INITIAL PUBLIC OFFERING
On February 21, 1997, the Company completed its initial public offering of
3,450,000 shares of common stock at a price to the public of $10.00 per share,
including 450,000 shares granted to the Company's underwriters in the form of
an over-allotment purchase option which was exercised on the same day. Of the
3,450,000 shares sold in the offering, 613,636 shares were sold by certain
shareholders of the Company and 2,836,364 shares were sold by the Company. Net
proceeds to the Company from the offering after deduction of the underwriting
discount and all expenses amounted to $25,659,000. As a result of the
offering, all of the Company's then outstanding shares of convertible
redeemable preferred stock were automatically converted into shares of common
stock on a one-for-one basis.
NOTE 3 -- NET INCOME PER SHARE
The Company retroactively adopted Statement of Financial Accounting Standard
(SFAS) No. 128, "Earnings Per Share," in the quarter ended December 31, 1997.
Basic earnings per share is computed based on the weighted average number of
shares of common stock outstanding during the period. Prior year periods
presented in the income statement also exclude preferred stock that was
converted into common stock upon the Company's initial public offering.
Diluted earnings per share is computed based on the weighted average number of
shares of both common and
6
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preferred stock outstanding during the period, plus the effect of dilutive
stock options and common shares issuable under the Company's Employee Stock
Purchase Plan using the treasury stock method.
NOTE 4 -- INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
-------- --------
(unaudited)
<S> <C> <C>
Raw materials $ 7,608 $ 8,160
Work-in-process 3,764 2,839
Finished goods 1,885 1,102
-------- --------
$ 13,257 $ 12,101
-------- --------
-------- --------
</TABLE>
NOTE 5 -- LITIGATION
The Company, its directors and certain of its officers have been named as
defendants in a class action lawsuit which alleges that the defendants
violated various federal securities laws through material misrepresentation
and omissions in connection with the Company's initial public offering in
February 1997. The lawsuit seeks rescission of the share purchases of the
class during the period between February 21, 1997 and March 14, 1997 or
rescissory damages if their shares have been sold, as well as attorneys' fees
and other costs and expenses. The defendants have not yet been required to
answer the allegations in the lawsuit, and, on November 24, 1997, filed a
Motion to Dismiss with the Court. The Motion to Dismiss was denied on
February 20, 1998 and discovery is expected to begin shortly. To date, no
discovery has been conducted, and the outcome of the lawsuit cannot be
determined. However, management believes that it has meritorious defenses
and intends to defend against the lawsuit vigorously. The Company maintains
directors' and officers' liability insurance to provide coverage, within
policy limits, against suits of this nature, and other than legal fees
incurred to date, no amounts have been recorded in the financial statements
for any losses which may result from this litigation.
7
<PAGE>
ITEM 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements usually contain the words "estimate,"
"anticipate," "expect" or similar expressions. All forward-looking statements
are inherently uncertain as they are based on various expectations and
assumptions concerning future events and they are subject to numerous known
and unknown risks and uncertainties. The forward-looking statements included
herein are based on current expectations and entail such risks and
uncertainties as those set forth below which could cause the Company's actual
results to differ materially from those projected in the forward-looking
statements. The Company disclaims any obligation to update or publicly
announce revisions to any such statements to reflect future events or
developments.
Advanced technology companies such as Overland Data are subject to numerous
risks and uncertainties generally characterized by rapid technological change
and other highly competitive factors. The Company's future revenue and
operating results are dependent upon gaining further market acceptance for
its LibraryXpress line of automated tape libraries and its ability to
manufacture sufficient product to satisfy demand. The LibraryXpress products
incorporate a line of DLT tape drives supplied by Quantum Corporation, which
is the sole source for the DLT tape technology. In the past, there have been
times when the Company was unable to obtain an adequate supply of such drives
and there can be no assurance that such supply interruptions will not recur.
The Company's future revenue and operating results are also dependent upon
market demand for its TapeXpress line of 36-track products, which could be
adversely affected by newly introduced competitive products and other
factors. Although IBM is the Company's primary customer for this product
line, IBM is not required to purchase minimum quantities pursuant to the
supply arrangement.
The future success of the Company will also depend upon its ability to
develop, manufacture and market new and enhanced products on a timely and
cost effective basis, including products related to the Company's new
Variable Rate Randomizer (VR2) encoding technology which was announced on
December 11, 1997. Although a cross-licensing agreement was announced on
April 1, 1998 with Tandberg Data ASA whereby Tandberg will include VR2
technology in Tandberg's MLR and SLR tape drives, success in this area cannot
be assured because of the inherent uncertainty of development projects for
high technology products, the possible introduction of competing products in
the marketplace, the uncertainty of market acceptance of the products and
other such factors.
The risks and uncertainties noted above, along with others which could
materially and adversely affect the Company's business, are more fully set
forth in the "Risk Factors", "Management's Discussion and Analysis of
Financial Condition and Results of
8
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Operations," and other sections of the Company's Form 10-K for the most
recently completed fiscal year on file with the Securities and Exchange
Commission.
RESULTS OF OPERATIONS
The following table sets forth items in the Company's statement of operations
as a percentage of net sales for the periods presented. The data has been
derived from the Company's unaudited condensed consolidated financial
statements.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------ -------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales.......................................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold................................. 70.7 66.0 68.8 64.7
----- ----- ----- -----
Gross profit....................................... 29.3 34.0 31.2 35.3
----- ----- ----- -----
Operating expenses:
Sales and marketing............................... 12.0 11.3 12.9 12.4
Research and development.......................... 5.7 6.4 5.8 7.3
General and administrative........................ 8.9 7.7 9.3 6.9
----- ----- ----- -----
Total operating expenses.......................... 26.6 25.4 28.0 26.6
----- ----- ----- -----
Income from operations............................. 2.7 8.6 3.2 8.7
Other income (expense):
Other income (expense), net....................... 0.3 0.1 0.1 (0.2)
Interest, net..................................... 1.3 0.0 1.4 0.0
----- ----- ----- -----
Income before income taxes......................... 4.3 8.7 4.7 8.5
Provision for income taxes......................... 1.6 3.5 1.8 3.4
----- ----- ----- -----
Net income......................................... 2.7% 5.2% 2.9% 5.1%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
FOR THE THREE MONTHS ENDED MARCH 31, 1998
NET SALES. Net sales of $18.7 million in the fiscal 1998 third quarter grew
by $3.3 million or 21.4% over sales of $15.4 million in the comparable quarter
of the prior year. The growth was attributable primarily to increased sales of
the LibraryXpress product line, which grew 129% from $4.5 million in the fiscal
1997 third quarter to $10.3 million in the fiscal 1998 third quarter. This
included sales of the new LXL loader express library which began shipping in
February 1998 and the
9
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establishment of a commercial distribution channel. These gains were
partially offset by declines in sales of the Company's more mature 36, 18 and
9-track products. Sales of 36-track products of $4.5 million in the fiscal
1998 third quarter declined by $0.6 million or 11.8% from $5.1 million in
fiscal 1997. Combined sales of 18 and 9-track products of $1.7 million
declined by 48.5% from sales of $3.3 million in the third quarter of the
prior year. The Company expects that its customers will continue to migrate
to newer technologies and that, as a result, sales of 18-track and 9-track
products will comprise a smaller percentage of its sales in future quarters.
A summary of the sales mix by product for the periods presented in the
statement of operations is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------ -------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Company products:
LibraryXpress....................................... 55.4% 29.3% 47.7% 23.1%
36-track............................................ 23.9 32.8 26.3 31.4
18-track............................................ 3.6 6.6 3.5 11.5
9-track............................................. 5.3 14.6 8.6 18.8
Spare parts, controllers, other..................... 6.4 11.5 7.9 9.0
Other products:
DLT distributed product............................. 5.4 5.2 6.0 6.0
HP distributed product.............................. 0.0 0.0 0.0 0.2
----- ----- ----- -----
100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
GROSS PROFIT. The Company's gross profit for the fiscal 1998 third quarter
was $5.5 million, an increase of 5.8% from $5.2 million in the fiscal 1997
third quarter. As a percentage of sales, however, the fiscal 1998 gross
margin declined to 29.3% from 34.0% in fiscal 1997. The margin decline was
due primarily to a shift in customer mix in that a greater portion of sales
were made to OEM customers and to upper level distributors at lower margins
relative to the Company's other sales channels. Additionally, pricing
pressure in the marketplace resulted in lower selling prices of certain of
the Company's products.
SALES AND MARKETING EXPENSE. Sales and marketing expense amounted to $2.2
million or 12.0% of net sales in the fiscal 1998 third quarter compared to
$1.7 million or 11.3% of net sales in the fiscal 1997 third quarter. The
higher level of expenses related to the addition of new marketing personnel,
increased spending for promotions and advertising and an expansion of the
Company's European operations.
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RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense amounted
to $1.1 million or 5.7% of net sales in the fiscal 1998 third quarter
compared to $993,000 or 6.4% of net sales in the fiscal 1997 third quarter.
The increased level of expenses in fiscal 1998 reflects increased development
efforts of new product.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
amounted to $1.7 million or 8.9% of net sales in the fiscal 1998 third
quarter compared to $1.2 million or 7.7% of net sales in the fiscal 1997
third quarter. The increased level of expenses in fiscal 1998 reflects
increased legal fees related to the recently signed cross-license agreement
with Tandberg Data, an increase in support personnel, depreciation on the
Company's new computer system, and a Company-wide management training program.
OTHER INCOME (EXPENSE), NET. Other income (expense) consists primarily of
interest income, interest expense and gain or loss on foreign currency
translation. In fiscal year 1997, prior to the Company's initial public
offering on February 21, 1997, this item consisted entirely of interest
expense incurred on borrowings under the Company's revolving bank line of
credit. Net other income of $294,000 in the fiscal 1998 third
quarter consisted of $247,000 of interest income and $47,000 of foreign
currency gains.
INCOME TAXES. The Company's provision for state and federal income taxes in
fiscal year 1998 was 38% of income before taxes versus 40% in fiscal year
1997. The Company expects this lower rate to continue. The reduced tax rate
in the current year is primarily the result of a greater portion of product
sales being shipped from the Company's operation in the UK, which is subject
to a lower tax rate.
NET INCOME. Diluted net income per share decreased to $.05 in the fiscal
1998 third quarter compared to $.09 in the fiscal 1997 third quarter. Basic
net income per share decreased to $.05 from $.11 in the same time periods.
In addition to the lower level of earnings, the calculation of earnings per
share in the most recent quarter reflects a higher number of shares
outstanding as a result of the Company's initial public offering in February
1997.
FOR THE NINE MONTHS ENDED MARCH 31, 1998
NET SALES. The Company's net sales of $50.7 million in the first nine
months of fiscal 1998 grew by $8.1 million or 19.0% over sales of $42.6
million in the comparable period of the prior year. Similar to the quarterly
results, this growth principally resulted from increased sales of the
LibraryXpress product line, including sales of the new LXL loader express
library which began shipping in February, 1998. LibraryXpress
11
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sales grew 146% from $9.9 million in the first nine months of fiscal 1997 to
$24.3 million in the first nine months of 1998. Sales of the Company's
36-track products of $13.3 million in the first nine months of fiscal 1998
were relatively level with the $13.4 million shipped in the prior period.
Partially offsetting these gains were declines in sales of the Company's
mature 18-track and 9-track products, which fell by a combined 53% from $12.9
million in the first nine months of the prior year to $6.1 million in the
first nine months of the current year. Finally, sales in the first nine
months of fiscal 1998 of controllers, spare parts, software and other
products amounted to $4.0 million, an increase of 5% over fiscal 1997 sales
of $3.8 million.
GROSS PROFIT. The Company's gross profit for the first nine months of
fiscal 1998 was $15.8 million, up 4.6% from $15.1 million reported in the
first nine months of fiscal 1997. The gross margin percentage declined from
35.3% in 1997 to 31.2% in 1998, reflecting greater sales through the
Company's OEM and volume channels in the current year, lower margins on
LibraryXpress sales as that product line matures, as well as pricing
pressures in the marketplace.
SALES AND MARKETING EXPENSE. Sales and marketing expense amounted to $6.6
million or 12.9% of net sales in the first nine months of fiscal 1998
compared to $5.3 million or 12.4% of net sales in the first nine months of
fiscal 1997. The higher level of expense includes the
addition of new marketing personnel, an expanded advertising and promotion
program and an expansion of the Company's European operations.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense amounted
to $3.0 million or 5.8% of net sales in the first nine months of fiscal 1998
compared to $3.1 million or 7.2% of net sales in the first nine months of
fiscal 1997. The reduced spending was due primarily to a reimbursement of non-
recurring engineering expenses from a major OEM customer related to the
development of a new product which began in the first quarter of fiscal 1998.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
amounted to $4.7 million or 9.3% of net sales in the first nine months of
fiscal 1998 compared to $2.9 million or 6.9% of net sales in the first nine
months of fiscal 1997. The increased level of expenses reflects a one-time
facilities-related rebate in the prior year, costs incurred to
recruit and attract several top level personnel, legal fees related to the
class-action lawsuit filed against the Company and to the Tandberg Data cross-
license agreement, depreciation on the Company's new computer system, a Company-
wide management training program and other costs incident to being a public
company.
OTHER INCOME (EXPENSE), NET. In the first nine months of fiscal 1997, net
other expense of $117,000 consisted of $71,000 of interest expense and
$46,000 of foreign exchange loss related to the Company's European
operations. The net other income of $763,000 in the first nine months of
fiscal 1998 consisted of
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$711,000 of interest income generated on invested IPO proceeds and $52,000 of
foreign currency gains.
INCOME TAXES. The Company's provision for state and federal income taxes in
fiscal year 1998 was 38% of income before taxes versus 40% in fiscal year 1997.
The company expects this lower rate to continue. The reduced tax rate in the
current year is primarily the result of a greater portion of product sales
being shipped from the Company's operation in the UK, which is subject to a
lower tax rate.
NET INCOME. Diluted net income per share decreased to $.13 in the first
nine months of fiscal 1998 compared to $.25 in the first nine months of the
prior year. Basic net income per share decreased to $.14 from $.37 in the same
time period. In addition to the lower level of earnings, the calculation of
earnings per share in the most recent nine month period reflects a higher
number of shares outstanding as a result of the Company's initial public
offering in February 1997.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of fiscal 1998, the Company used $3.9 million of
cash primarily to fund increased working capital and capital expenditures.
Earnings before depreciation and amortization generated $2.6 million.
Offsetting this was the funding of $2.2 million in increased accounts
receivable and $1.2 million in increased inventories to support the higher
sales levels, as well as a net decrease of $1.3 million in payables/accruals.
An additional $1.7 million was spent on capital equipment during the period,
primarily equipment and software related to the Company's new computer
system. A total of $159,000 was generated during the period from the sale of
stock to employees participating in the Company's Employee Stock Purchase
Plan and those exercising stock options, offset by funds required to
repurchase 60,000 shares of the Company's stock, pursuant to the Company's
stock repurchase plan. On an aggregate basis, these activities reduced the
company's cash reserves to $15.1 million at March 31, 1998. At that date,
the Company's working capital amounted to $37.8 million, with no outstanding
funded debt, and had an unused bank line of credit of $5 million. The
Company believes that these resources will be sufficient to fund its
operations and to provide for its growth for the foreseeable future.
13
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company, its directors and certain of its officers have been named as
defendants in two putative class action lawsuits filed on April 21, 1997 and
May 2, 1997 in the U.S. District Court for the Southern District of California.
In both cases, the plaintiffs purport to represent a class of all persons who
purchased the Company's Common Stock between February 21, 1997 and March 14,
1997. The complaints allege that the defendants violated various federal
securities laws through material misrepresentation and omissions in connection
with the Company's initial public offering and its registration statement on
Form S-1, which was declared effective by the Securities and Exchange
Commission on February 21, 1997. The lawsuits seek rescission of their share
purchases or rescissory damages if their shares have been sold, as well as
attorneys' fees and other costs and expenses.
On September 16, 1997, the Court entered an Order permitting the voluntary
dismissal of the first-filed lawsuit without prejudice. The plaintiff in the
second lawsuit now has been appointed as the Lead Plaintiff in this
litigation, but the defendants have not yet been required to answer the
allegations in the complaint. On November 24, 1997, the defendants filed a
Motion to Dismiss with the Court, which was denied on February 20, 1998;
discovery is expected to begin shortly. To date, no discovery has been
conducted, and the outcome of the remaining lawsuit cannot be determined.
However, management believes that it has meritorious defenses and intends to
defend against the lawsuit vigorously. The Company maintains directors' and
officers' liability insurance to provide coverage, within policy limits,
against suits of this nature, and other than legal fees incurred to date, no
amounts have been recorded in the financial statements for any losses which
may result from this litigation.
14
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during Q3 of Fiscal
1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11.0 Computation of Earnings Per Common Share
27.0 Financial Data Schedule
(b) Reports on Form 8-K
None
15
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OVERLAND DATA, INC.
Date: May 13, 1998 By: /s/ Vernon A. LoForti
----------------------
Vernon A. LoForti
Vice President and
Chief Financial Officer
16
<PAGE>
EXHIBIT 11
OVERLAND DATA, INC.
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------------- --------------------------
1998 1997 1998 1997
---------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
BASIC EPS COMPUTATION
Net income ...................................... $ 501,000 $ 797,000 $ 1,467,000 $ 2,165,000
---------- ----------- ------------ ------------
---------- ----------- ------------ ------------
Weighted average number of shares of
common stock outstanding......................... 10,542,000 7,457,000 10,512,000 5,927,000
---------- ----------- ------------ ------------
Total............................................ 10,542,000 7,457,000 10,512,000 5,927,000
---------- ----------- ------------ ------------
---------- ----------- ------------ ------------
Basic earnings per share......................... $ 0.05 $ 0.11 $ 0.14 $ 0.37
---------- ----------- ------------ ------------
---------- ----------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------------- --------------------------
1998 1997 1998 1997
---------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
DILUTED EPS COMPUTATION
Net income ..................................... $ 501,000 $ 797,000 $ 1,467,000 $ 2,165,000
---------- ----------- ------------ ------------
---------- ----------- ------------ ------------
Weighted average number of shares of
common stock outstanding........................ 10,542,000 7,457,000 10,512,000 5,927,000
Weighted average number of shares of
preferred stock outstanding..................... - 1,247,000 - 1,972,000
Common stock equivalents from the
issuance of options and the employee
stock purchase plan using
the treasury stock method....................... 448,000 655,000 475,000 616,000
Cheap stock adjustment.......................... - - - 131,000
---------- ----------- ------------ ------------
Total........................................... 10,990,000 9,359,000 10,987,000 8,646,000
---------- ----------- ------------ ------------
---------- ----------- ------------ ------------
Diluted earnings per share...................... $ 0.05 $ 0.09 $ 0.13 $ 0.25
---------- ----------- ------------ ------------
---------- ----------- ------------ ------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
3/31/98, THE CONSOLIDATED CONDENSED BALANCE SHEET AS OF 3/31/98 AND THE
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED 3/31/98
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 15,056
<SECURITIES> 0
<RECEIVABLES> 13,312
<ALLOWANCES> 0
<INVENTORY> 13,257
<CURRENT-ASSETS> 44,267
<PP&E> 4,230
<DEPRECIATION> 0
<TOTAL-ASSETS> 48,641
<CURRENT-LIABILITIES> 6,481
<BONDS> 0
0
0
<COMMON> 33,405
<OTHER-SE> 8,568
<TOTAL-LIABILITY-AND-EQUITY> 48,641
<SALES> 50,728
<TOTAL-REVENUES> 0
<CGS> 34,895
<TOTAL-COSTS> 34,895
<OTHER-EXPENSES> 14,228
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (711)
<INCOME-PRETAX> 2,366
<INCOME-TAX> 899
<INCOME-CONTINUING> 1,467
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,467
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.13
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE 9 MONTHS ENDED 3/31/97,
THE CONSOLIDATED CONDENSED BALANCE SHEET AS OF 3/31/97, AND THE CONSOLIDATED
CONDENSED STATEMENT OF CASH FLOWS FOR THE 9 MONTHS ENDED 3/31/97, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 21,926
<SECURITIES> 0
<RECEIVABLES> 8,841
<ALLOWANCES> 0
<INVENTORY> 10,846
<CURRENT-ASSETS> 43,624
<PP&E> 3,119
<DEPRECIATION> 0
<TOTAL-ASSETS> 46,933
<CURRENT-LIABILITIES> 7,147
<BONDS> 0
0
0
<COMMON> 32,961
<OTHER-SE> 6,148
<TOTAL-LIABILITY-AND-EQUITY> 46,933
<SALES> 42,637
<TOTAL-REVENUES> 0
<CGS> 27,588
<TOTAL-COSTS> 27,588
<OTHER-EXPENSES> 11,322
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,610
<INCOME-TAX> 1,445
<INCOME-CONTINUING> 2,165
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,165
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.25
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE 12 MONTHS ENDED 6/30/97,
THE CONSOLIDATED CONDENSED BALANCE SHEET AS OF 6/30/97, & THE CONSOLIDATED
CONDENSED STATEMENT OF CASH FLOWS FOR THE 12 MONTHS ENDED 6/30/97, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 18,926
<SECURITIES> 0
<RECEIVABLES> 11,151
<ALLOWANCES> 0
<INVENTORY> 12,101
<CURRENT-ASSETS> 44,528
<PP&E> 3,499
<DEPRECIATION> 0
<TOTAL-ASSETS> 48,260
<CURRENT-LIABILITIES> 7,795
<BONDS> 0
0
0
<COMMON> 33,246
<OTHER-SE> 7,071
<TOTAL-LIABILITY-AND-EQUITY> 48,260
<SALES> 59,146
<TOTAL-REVENUES> 0
<CGS> 38,775
<TOTAL-COSTS> 38,775
<OTHER-EXPENSES> 15,635
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (185)
<INCOME-PRETAX> 4,987
<INCOME-TAX> 1,887
<INCOME-CONTINUING> 3,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,100
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.33
</TABLE>
