UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the period ended September 27, 2003 | ||
| or | ||
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from to | ||
Commission file number: 1-16447
Maxtor Corporation
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Delaware
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77-0123732 | |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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500 McCarthy Boulevard, Milpitas, CA |
95035 (Zip Code) |
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| (Address of principal executive offices) | ||
Registrant’s telephone number, including area code:
Indicate by checkmark 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 þ No o
Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act. Yes þ No o
As of November 7, 2003, 245,507,337 shares of the registrant’s Common Stock, $.01 par value, were issued and outstanding.
MAXTOR CORPORATION
FORM 10-Q
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| PART I. FINANCIAL INFORMATION | ||||||
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Item 1.
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Condensed Consolidated Financial Statements | 2 | ||||
| Condensed Consolidated Balance Sheets — September 27, 2003, and December 28, 2002 | 2 | |||||
| Condensed Consolidated Statements of Operations — Three and nine months ended September 27, 2003, and September 28, 2002 | 3 | |||||
| Condensed Consolidated Statements of Cash Flows — Nine months ended September 27, 2003, and September 28, 2002 | 4 | |||||
| Notes to Condensed Consolidated Financial Statements | 5 | |||||
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 19 | ||||
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Item 3.
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Quantitative and Qualitative Disclosures about Market Risk | 42 | ||||
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Item 4.
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Controls and Procedures | 42 | ||||
| PART II. OTHER INFORMATION | ||||||
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Item 1.
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Legal Proceedings | 43 | ||||
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Item 2.
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Changes in Securities | 44 | ||||
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Item 3.
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Quantitative and Qualitative Disclosures about Market Risk | 44 | ||||
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Item 4.
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Submission of Matters to a Vote of Security Holders | 44 | ||||
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Item 5.
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Other Information | 44 | ||||
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Item 6.
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Exhibits and Reports on Form 8-K | 44 | ||||
| Signature Page | 45 | |||||
1
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
MAXTOR CORPORATION
| September 27, | December 28, | |||||||||
| 2003 | 2002 | |||||||||
| (Unaudited) | ||||||||||
| ASSETS | ||||||||||
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Current assets:
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Cash and cash equivalents
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$ | 490,766 | $ | 306,444 | ||||||
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Restricted cash
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40,023 | 56,747 | ||||||||
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Marketable securities
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43,567 | 87,507 | ||||||||
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Restricted marketable securities
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41,232 | — | ||||||||
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Accounts receivable, net of allowance of doubtful
accounts of $17,417 at September 27, 2003 and $18,320 at
December 28, 2002
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493,451 | 363,664 | ||||||||
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Inventories
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218,384 | 175,545 | ||||||||
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Prepaid expenses and other
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52,417 | 33,438 | ||||||||
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Total current assets
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1,379,840 | 1,023,345 | ||||||||
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Property, plant and equipment, net
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328,258 | 364,842 | ||||||||
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Goodwill
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813,951 | 813,951 | ||||||||
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Other intangible assets, net
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85,221 | 146,898 | ||||||||
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Other assets
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15,548 | 11,798 | ||||||||
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Total assets
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$ | 2,622,818 | $ | 2,360,834 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
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Current liabilities:
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Short-term borrowings, including current portion
of long-term debt
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$ | 79,487 | $ | 41,042 | ||||||
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Accounts payable
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688,167 | 642,206 | ||||||||
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Accrued and other liabilities
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453,056 | 471,750 | ||||||||
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Liabilities of discontinued operations
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4,242 | 11,646 | ||||||||
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Total current liabilities
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1,224,952 | 1,166,644 | ||||||||
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Deferred taxes
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196,455 | 196,455 | ||||||||
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Long-term debt, net of current portion
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343,201 | 206,343 | ||||||||
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Other liabilities
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189,059 | 199,071 | ||||||||
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Total liabilities
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1,953,667 | 1,768,513 | ||||||||
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Stockholders’ equity:
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Preferred stock, $0.01 par value, 95,000,000
shares authorized; no shares issued or outstanding
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— | — | ||||||||
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Common stock, $0.01 par value, 525,000,000 shares
authorized; 257,317,593 shares issued and 244,071,855 shares
outstanding at September 27, 2003 and 247,507,244 shares
issued and 242,507,244 shares outstanding at December 28,
2002
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2,573 | 2,475 | ||||||||
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Additional paid-in capital
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2,398,167 | 2,349,253 | ||||||||
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Deferred stock-based compensation
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(265 | ) | (1,193 | ) | ||||||
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Accumulated deficit
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(1,677,102 | ) | (1,740,591 | ) | ||||||
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Cumulative other comprehensive income
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10,717 | 2,377 | ||||||||
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Treasury stock at cost of (13,245,738 shares) at
September 27, 2003 and (5,000,000 shares) at
December 28, 2002
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(64,939 | ) | (20,000 | ) | ||||||
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Total stockholders’ equity
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669,151 | 592,321 | ||||||||
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Total liabilities and stockholders’ equity
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$ | 2,622,818 | $ | 2,360,834 | ||||||
See accompanying notes to condensed consolidated financial statements.
2
MAXTOR CORPORATION
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| September 27, | September 28, | September 27, | September 28, | |||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||||
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Net revenues
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$ | 1,065,531 | $ | 819,716 | $ | 2,915,323 | $ | 2,741,166 | ||||||||||
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Cost of revenues
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883,106 | 762,187 | 2,411,805 | 2,510,481 | ||||||||||||||
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Gross profit
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182,425 | 57,529 | 503,518 | 230,685 | ||||||||||||||
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Operating expenses:
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Research and development
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88,172 | 94,095 | 259,051 | 301,205 | ||||||||||||||
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Selling, general and administrative
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33,875 | 34,754 | 96,774 | 111,424 | ||||||||||||||
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Amortization of intangible assets
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20,562 | 20,562 | 61,686 | 61,686 | ||||||||||||||
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Restructuring charge
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— | 9,495 | — | 9,495 | ||||||||||||||
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Total operating expenses
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142,609 | 158,906 | 417,511 | 483,810 | ||||||||||||||
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Income (loss) from operations
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39,816 | (101,377 | ) | 86,007 | (253,125 | ) | ||||||||||||
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Interest expense
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(8,966 | ) | (7,133 | ) | (22,713 | ) | (20,241 | ) | ||||||||||
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Interest and other income
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1,197 | 2,944 | 3,983 | 8,349 | ||||||||||||||
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Other gain (loss)
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(951 | ) | 623 | (863 | ) | 2,200 | ||||||||||||
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Income (loss) from continuing operations
before income taxes
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31,096 | (104,943 | ) | 66,414 | (262,817 | ) | ||||||||||||
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Provision for income taxes
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1,209 | 527 | 2,923 | 1,333 | ||||||||||||||
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Income (loss) from continuing operations
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29,887 | (105,470 | ) | 63,491 | (264,150 | ) | ||||||||||||
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Loss from discontinued operations
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— | (58,141 | ) | — | (73,501 | ) | ||||||||||||
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Net income (loss)
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$ | 29,887 | $ | (163,611 | ) | $ | 63,491 | $ | (337,651 | ) | ||||||||
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Net income (loss) per share — basic
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Continuing operations
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$ | 0.12 | $ | (0.44 | ) | $ | 0.26 | $ | (1.11 | ) | ||||||||
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Discontinued operations
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$ | — | $ | (0.24 | ) | $ | — | $ | (0.31 | ) | ||||||||
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Total
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$ | 0.12 | $ | (0.68 | ) | $ | 0.26 | $ | (1.42 | ) | ||||||||
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Net income (loss) per share —
diluted
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Continuing operations
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$ | 0.12 | $ | (0.44 | ) | $ | 0.26 | $ | (1.11 | ) | ||||||||
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Discontinued operations
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$ | — | $ | (0.24 | ) | $ | — | $ | (0.31 | ) | ||||||||
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Total
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$ | 0.12 | $ | (0.68 | ) | $ | 0.26 | $ | (1.42 | ) | ||||||||
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Shares used in per share calculation
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— basic
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241,618,230 | 240,177,574 | 242,135,752 | 238,413,709 | ||||||||||||||
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— diluted
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252,343,682 | 240,177,574 | 248,358,269 | 238,413,709 | ||||||||||||||
See accompanying notes to condensed consolidated financial statements.
3
MAXTOR CORPORATION
| Nine Months Ended | |||||||||||
| September 27, | September 28, | ||||||||||
| 2003 | 2002 | ||||||||||
| (Unaudited) | |||||||||||
| (In thousands) | |||||||||||
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Cash Flows from Operating
Activities:
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Net income (loss) from continuing operations
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$ | 63,491 | $ | (264,150 | ) | ||||||
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Adjustments to reconcile net income
(loss) from continuing operations to net cash provided by
(used in) operating activities:
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Depreciation and amortization
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121,018 | 112,856 | |||||||||
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Amortization of intangible assets
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61,686 | 61,686 | |||||||||
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Amortization of deferred compensation related to
Quantum DSS restricted shares
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— | 4,103 | |||||||||
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Stock-based compensation expense
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736 | 3,450 | |||||||||
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Restructuring charge
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— | 9,495 | |||||||||
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Loss on sale of property, plant and equipment and
other assets
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2,908 | 3,700 | |||||||||
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Loss on retirement of bond
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(111 | ) | (1,307 | ) | |||||||
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Realized loss on investment
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— | (2,400 | ) | ||||||||
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Change in assets and liabilities:
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Accounts receivable
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(129,786 | ) | 67,199 | ||||||||
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Inventories
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(42,839 | ) | (22,641 | ) | |||||||
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Prepaid expenses and other assets
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(5,019 | ) | 3,991 | ||||||||
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Accounts payable
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49,254 | 71,158 | |||||||||
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Accrued and other liabilities
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(28,714 | ) | (115,957 | ) | |||||||
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Net cash provided by (used in) operating
activities from continuing operations
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92,624 | (68,817 | ) | ||||||||
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Net cash flow used in discontinued operations
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(7,404 | ) | (27,615 | ) | |||||||
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Net cash provided by (used in) operating
activities
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85,220 | (96,432 | ) | ||||||||
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Cash Flows from Investing
Activities:
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Proceeds from sale of property, plant and
equipment
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340 | 181 | |||||||||
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Purchase of property, plant and equipment
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(83,602 | ) | (118,732 | ) | |||||||
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Change in restricted cash
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16,724 | 42,167 | |||||||||
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Proceeds from sale of marketable securities
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42,766 | 146,260 | |||||||||
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Purchase of marketable securities
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(41,195 | ) | (50,888 | ) | |||||||
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Net cash provided by (used in) investing
activities
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(64,967 | ) | 18,988 | ||||||||
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Cash Flows from Financing
Activities:
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Proceeds from issuance of debt, including
short-term borrowings
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241,763 | — | |||||||||
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Principal payments of debt including short-term
borrowings
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(107,067 | ) | (24,572 | ) | |||||||
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Principal payments under capital lease obligations
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(22,797 | ) | (17,818 | ) | |||||||
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Purchase of treasury shares at cost
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(44,939 | ) | — | ||||||||
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Net proceeds from receivable-backed borrowing
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47,908 | — | |||||||||
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Repurchase of common stock
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— | (606 | ) | ||||||||
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Proceeds from issuance of common stock from
employee stock purchase plan and stock options exercised
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49,202 | 22,933 | |||||||||
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Net cash provided by (used in) financing
activities
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164,070 | (20,063 | ) | ||||||||
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Net change in cash and cash equivalents
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184,322 | (97,507 | ) | ||||||||
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Cash and cash equivalents at beginning of period
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306,444 | 379,927 | |||||||||
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Cash and cash equivalents at end of period
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$ | 490,766 | $ | 282,420 | |||||||
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Supplemental Disclosures of Cash Flow
Information:
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Cash paid during the period for:
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Interest
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$ | 17,688 | $ | 19,304 | |||||||
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Income taxes
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$ | 2,532 | $ | 5,617 | |||||||
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Schedule of Non-Cash Investing and Financing
Activities:
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