-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, C45Z0O3TaeBKs+9H/Yd54mHpiqcbV3M8IHiLt3qjD836HlRI5pTHyKT6fxNg0Zhu b8ndX+ZNj0H7LKdluKLALQ== 0000912057-95-003637.txt : 19950517 0000912057-95-003637.hdr.sgml : 19950516 ACCESSION NUMBER: 0000912057-95-003637 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MYLEX CORP CENTRAL INDEX KEY: 0000731619 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 592291597 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13381 FILM NUMBER: 95537744 BUSINESS ADDRESS: STREET 1: 34551 ARDENWOOD BLVD CITY: FREMONT STATE: CA ZIP: 94555 BUSINESS PHONE: 510-796-6100 MAIL ADDRESS: STREET 2: 34551 ARDENWOOD BLVD CITY: FREMONT STATE: CA ZIP: 94555 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 (Mark One) [x] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934. For the Quarterly Period ended MARCH 31, 1995 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 number 0-13381 MYLEX CORPORATION --------------------------------------------------------------- (Exact name of registrant as specified in its charter) FLORIDA 59-2291597 - ------------------------------------- --------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 34551 Ardenwood Blvd., Fremont, California 94555 - --------------------------------------------- -------- (Address of principal executive offices) ZIP Code Registrant's telephone number (including area code): (510) 796-6100 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 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 ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.01 par value 14,727,269 shares - ---------------------------- ----------------- Class Outstanding at March 31,1995 PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS MYLEX CORPORATION BALANCE SHEET (IN $000'S)
MARCH 31, DECEMBER 31, ASSETS 1995 1994 --------- ------------ CURRENT ASSETS: CASH AND EQUIVALENTS $562 $3,866 ACCOUNTS RECEIVABLE 15,519 11,321 ALLOWANCE FOR DOUBTFUL ACCOUNTS (507) (532) --------- ------------ ACCOUNTS RECEIVABLE, NET 15,012 10,789 INVENTORIES 11,926 10,237 PREPAID EXPENSES AND OTHER CURRENT ASSETS 821 775 --------- ------------ TOTAL CURRENT ASSETS $28,321 $25,667 PROPERTY AND EQUIPMENT, NET 1,534 1,579 OTHER ASSETS 112 112 TOTAL ASSETS $29,967 $27,358 --------- ------------ --------- ------------ LIABILITIES AND STOCK HOLDERS EQUITY CURRENT LIABILITIES: ACCOUNTS PAYABLE $4,791 $3,187 ACCRUED LIABILITIES 3,593 3,151 LINE OF CREDIT PAYABLE TO BANK 500 2,350 CURRENT PORTION OF LONG-TERM CAPITAL LEASE OBLIGATIONS 391 417 --------- ------------ TOTAL CURRENT LIABILITIES $9,275 $9,105 LONG-TERM CAPITAL LEASE OBLIGATIONS 416 493 STOCKHOLDERS' EQUITY: COMMON STOCK 147 146 ADDITIONAL PAID-IN CAPITAL 14,001 13,526 RETAINED EARNINGS 6,128 4,088 --------- ------------ TOTAL STOCKHOLDERS' EQUITY $20,276 $17,760 --------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $29,967 $27,358 --------- ------------ --------- ------------
SEE NOTES TO FINANCIAL STATEMENTS 2 MYLEX CORPORATION STATEMENTS OF OPERATIONS, THREE MONTHS ENDED UNAUDITED (IN $000'S, EXCEPT SHARE DATA)
MARCH 31, MARCH 31, 1995 1994 ---------------- -------------- NET SALES $17,085 $13,642 COST OF SALES 10,813 9,655 ---------------- -------------- GROSS PROFIT 6,272 3,987 OPERATING EXPENSES: SELLING AND MARKETING 1,125 774 RESEARCH AND DEVELOPMENT 957 735 GENERAL AND ADMINISTRATIVE 973 875 TOTAL OPERATING EXPENSES $3,055 $2,384 ---------------- -------------- OPERATING PROFIT $3,217 $1,603 INTEREST INCOME 8 7 INTEREST EXPENSE (57) (131) OTHER EXPENSE (29) (27) ---------------- -------------- INCOME BEFORE TAXES 3,139 1,452 INCOME TAX EXPENSE (BENEFIT) 1,099 363 ---------------- -------------- NET INCOME $2,040 $1,089 EARNINGS PER COMMON SHARE: PRIMARY $0.13 $0.07 FULLY DILUTED $0.13 $0.07 AVERAGE COMMON SHARES OUTSTANDING: PRIMARY 15,511,900 14,651,700 FULLY DILUTED 15,512,600 15,249,000
SEE NOTES TO FINANCIAL STATEMENTS 3 MYLEX CORPORATION STATEMENT OF CASH FLOWS, THREE MONTHS ENDED UNAUDITED (IN $000'S)
MARCH 31, MARCH 31, 1995 1994 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME $2,040 $1,089 DEPRECIATION AND AMORTIZATION 212 270 CHANGES IN OPERATING ASSETS & LIABILITIES ACCOUNTS RECEIVABLE, NET (4,223) (5,431) INVENTORIES (1,689) (481) PREPAID EXPENSES AND OTHER CURRENT ASSETS (46) (85) ACCOUNTS PAYABLE 1,604 2,200 ACCRUED LIABILITIES 442 565 --------- --------- NET CASH USED BY OPERATING ACTIVITIES (1,660) (1,873) CASH FLOWS FROM INVESTING ACTIVITIES: CAPITAL EXPENDITURES (167) (137) --------- --------- NET CASH USED BY INVESTING ACTIVITIES (167) (137) CASH FLOWS FROM FINANCING ACTIVITIES: REPAYMENTS AGAINST LINE OF CREDIT (1,850) (206) REPAYMENT OF CAPITAL LEASE OBLIGATIONS (103) (92) ISSUANCE OF CONVERTIBLE SUBORDINATED DEBENTURES -- (50) EXERCISE OF STOCK OPTIONS 476 255 --------- --------- NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (1,477) (93) --------- --------- NET INCREASE (DECREASE) IN CASH (3,304) (2,103) CASH AND CASH EQUIVALENTS: AT BEGINNING OF PERIOD $3,866 $3,253 --------- --------- --------- --------- CASH AND CASH EQUIVALENTS: AT END OF PERIOD $562 $1,150 --------- --------- --------- --------- CASH PAID DURING THE PERIOD: CASH PAID FOR INTEREST $57 $73 CASH PAID FOR INCOME TAXES $300 --
SEE NOTES TO FINANCIAL STATEMENTS 4 MYLEX CORPORATION NOTES TO FINANCIAL STATEMENTS UNAUDITED NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION In the opinion of the Company, the accompanying financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to fairly present the Company's financial position and its results of operations and cash flows as of the dates and for the periods indicated. Certain information and footnote disclosures normally contained in financial statements prepared in accordance with generally accepted accounting principles have been omitted. These condensed financial statements should be read in conjunction with the financial statements contained within the Company's Form 10-K for the year ended December 31, 1994. The results of operations for the three months ended March 31, 1995, are not necessarily indicative of the operating results for the full year. PER SHARE DATA Primary earnings per share is based on the weighted average common and, when dilutive, common equivalent shares outstanding each period. Common equivalent shares consist of dilutive shares issuable upon the exercise of stock options and warrants. In determining fully diluted earnings per share, convertible subordinated debentures are considered converted upon issuance and the related interest expense, net of taxes, is added back to net income. NOTE B. INVENTORIES (in $000's)
March 31, December 31, 1995 1994 --------- ------------ Raw materials 7,457 6,924 Work-in-process 3,288 2,263 Finished goods 1,180 1,050 --------- ------------ Total Inventories 11,925 10,237
5 NOTE C. ACCOUNTS RECEIVABLE Northgate Computer Systems, Inc. ("Northgate") declared bankruptcy in the fourth quarter of 1994. The Company to date received net proceeds of $113,167 through the liquidation of Northgate's inventory and continues its efforts, as an unsecured creditor through the credit committee, to collect on the outstanding account receivables due from Northgate. NOTE D. CONTINGENCIES The Company is party to an arbitration proceeding that alleges breach of contract and other claims relating to a royalty agreement entered into by the Company with American Megatrends Inc. ("AMI"). The amount of damages sought by AMI is unspecified. The Company has certain defenses and counterclaims and intends to continue to defend this action vigorously. It should be noted, however, that legal proceedings can be unpredictable, and an unfavorable outcome could have a material adverse effect on the Company's business and results of operations. (see Part II, item 1.) The former Chief Executive Officer of the Company, Dr. M. A. Chowdry, filed a complaint against the Company and its outside directors on October 13, 1994, seeking $5 million in damages and claiming breach of an employment agreement that he entered into with the Company approximately three months prior to his termination as the Company's Chief Executive Officer. Dr. Chowdry voluntarily filed an amendment to his complaint on February 23, 1995. On March 17, 1995 the Company and the individual defendants filed a response (demurrer) to the amended complaint. A hearing on the demurrer filed by the Company and the individual defendants was held on April 27, 1995 and a decision on the demurrer is still under submission. The Company believes it has meritorious defenses and will vigorously defend this lawsuit. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATION Mylex Corporation (the "Company") was incorporated under the laws of the State of Florida in May 1983. In September 1987, the Company moved its headquarters and manufacturing facility from Florida to Fremont, California. In May 1991, the Company again moved to a larger facility in Fremont, California. Mylex Corporation is a technology-based company engaged in the design, development, production and marketing of high performance disk array controllers, network interface cards, personal computer system boards and SCSI host adaptors as well as supporting proprietary software and firmware. The products currently being produced by the Company provide enhanced 6 performance for a wide range of personal computers, workstations and servers. All of the Company's products are sold in the high-technology electronic products segment. The Company's customers are original equipment manufacturers (OEMs), system integrators, value-added resellers (VARs), and computer distributors and dealers. As of May 5, 1995, the Company had approximately 144 employees. The employees are not represented at the Company by any labor union nor employed by the Company under any collective bargaining agreement. LIQUIDITY AND CAPITAL RESOURCES During the first quarter of 1995 the Company financed its operations primarily from existing cash balances and cash generated from operations. As of March 31, 1995, the Company's working capital had increased to $19.1 million from $16.6 million at December 31, 1994. This increase in working capital was due primarily to a $4.2 million growth in accounts receivable and a $1.7 million rise in inventories. This was offset by a decrease in cash of $3.3 million for a net increase in working capital of $2.5 million. Accounts receivable increased over year end 1994 balance due to a high percentage of the quarter's sales occuring in March. Cash balances decreased by $3.3 million from $3.9 million at December 31, 1994, to $562 thousand at March 31, 1995. This decline in the cash balance is due primarily to a reduction in the amount drawn on the line of credit of $1,850,000 and reduced collections in the quarter resulting from the high percentage of sales occurring in March. The Company has a revolving line of credit with Imperial Bank (the "Bank"), secured by the Company's unencumbered assets, which expires on May 15, 1995. The line of credit bears interest at the Bank's prime rate plus 0.75%. Borrowings are limited to 80% of eligible accounts receivable, and are subject to an overall limit of $6,000,000. The Company is required to maintain a compensating deposit balance with the Bank of at least $500,000 and to comply with certain covenants with respect to dividends, stock repurchases, borrowings, and maintenance of specific financial ratios. The Company was not in compliance with ratios pertaining to accounts receivable and inventory. The Bank recognized this noncompliance and waived its rights with respect to such non-compliance in this specific instance. The Company paid a net of $1,850,000 against the line of credit during the first quarter of 1995 reducing the outstanding balance of $2,350,000 at December 31, 1994, to $500,000 at March 31, 1995. The Company concluded negotiations on the renewal of its line of credit after the end of the quarter. As a result of the negotiations, the Bank increased the line to $8 million and extended it to May 15, 1996. In addition, the financial ratios with respect to accounts receivable and inventory have been removed. 7 The Company presently expects to finance near-term and long-term operations and capital requirements through cash provided by continuing operations, existing cash balances, and borrowings under the revolving bank line of credit. However, there can be no assurance that the Company will not require outside financing, or, if required, that such financing will be available on terms favorable to the Company. Accounts payable increased to $4.8 million at March 31, 1995, compared to $3.2 million at December 31, 1994, an increase of $1.6 million or 50%. This increase was due to the high percentage of inventory purchases made during the final month of the quarter. Net accounts receivable increased to $15.0 million at March 31, 1995, compared to $10.8 million at December 31, 1994, an increase of $4.2 million or 39%. This increase was attributable to a large percentage of the quarter's sales occurring in March. The accounts receivable attributable to those sales are anticipated by the Company to be collected in the second quarter. When compared to last quarter, March's sales contribution was a higher percentage than December's sales contribution in its quarter. This difference between quarters resulted in the prior quarter's accounts receivable being collected earlier and its ending balance being lower. RESULTS OF OPERATIONS SALES AND GROSS PROFITS. The Company's net sales for the three months ended March 31, 1995, totaled $17.1 million, compared to $13.6 million for the corresponding period of fiscal year 1994, an increase of approximately 25%. Sales increased primarily due to increased shipments of the Company's disk array and Pentium system board products, which more than offset the decline in sales of the Company's 486 based system boards and other peripheral products during the first quarter of 1995, as compared to the first quarter of 1994. Sales have not been significantly impacted by inflation over the last three fiscal years. Gross profit for the three months ended March 31, 1995, was $6.3 million or 37% of net sales, compared to $4.0 million or 29% of net sales for the same period in 1994. The increase in gross margins was attributable to increased sales of the Company's higher margin disk array controller products during the three months ended March 31, 1995, which more than offset the declining margins of the Company's 486 system boards. The Company expects price competition for its system board products to continue and expects to encounter price competition for its disk array controller products which will create pressure on the Company's gross margin. However, the Company is taking steps to introduce feature and performance improved disk array products and to further reduce production and material costs in its effort to offer competitive prices for its products without significantly affecting its gross margin. 8 Maintenance of current gross margins or improvement of future gross margins are dependent upon continued manufacturing cost reductions and the successful development and market acceptance of the Company's future disk array controller products. There can be no assurance that the Company will be able to develop and introduce such products in a timely manner or that such products will gain or sustain market acceptance. The Company anticipates increased competition in the market for its disk array products during 1995. The impact of such competition on the Company's sales and gross profits is uncertain. The Company anticipates that additional competition could result in a decline in the selling prices for these products that would impact both gross margins and operating results. Sales of disk array products accounted for 84% of net sales during the quarter ended March 31, 1995, as compared to 78.5% of net sales during the corresponding period in 1994. Sales of the Company's system board products in the first quarter of 1995 was 13% of total sales. This compares with sales of $2.3 million or 17% of total sales in the first quarter of 1994. The Company's largest customer during the first quarter of 1995 was Digital Equipment Corporation ("DEC"), which accounted for $4.1 million or 24% of the Company's sales during that period. The Company second largest customer during the three month ending March 31 was IBM. Sales to IBM were $3.8 million or 22% of the total sales. While there are OEM agreements in place that define the terms of the sales and support services with some of the Company's largest customers, these agreements do not include specific quantity commitments. The Company sells products to its customers on a purchase order basis. As a result, historical sales cannot be relied upon as an accurate indicator of future sales. The Company's backlog as of March 31, 1995 totaled $10.3 million. This ending backlog represents a $2.4 million decline from the corresponding period of 1994. The Company attributes the reduction in the backlog to the decline in orders for EISA bus based disk array products as the industry transitions to PCI bus based products. Due to industry practice with respect to customer changes in delivery schedules and cancellation of orders, the Company believes that backlog as of any particular date may not be indicative of actual net revenues for any succeeding period. Substantially all orders outstanding at March 31, 1995, which were not subsequently changed or canceled would have been scheduled for delivery within the three months ended June 30, 1995. The Company continued to release new RAID (Redundant Array of Independent Disk) products in the latter part of 1994 and the first quarter of 1995. These new product releases are a result of the commitment to development of new products as well as enhancement of existing products. The 9 Company believes its future profitability is dependent to a large extent upon the continued market acceptance of its PCI and SCSI-to-SCSI disk array product families as well as market acceptance of its feature and performance improved disk array products. However, there can be no assurance that new products will be successfully developed or, if developed, that such products or the Company's current products will achieve and sustain market acceptance. The Mylex disk array controller products are designed for integration into the client server, networked PC, and scientific workstation environments. Because of the Company's transition to primarily disk array controller products, marketing these products entailed development of new distribution channels and marketing methods. The Company continued to market its disk array products to several OEM's during the three months ending March 31, 1995. Sales to major OEM's accounted for 67% of the Company's total revenue for the first quarter of 1995. Additionally, the Company was able to market these products to leading distributors, system integrators and value added resellers during the period through its alternate channel sales division. This course of seeking additional new markets is motivated by the Company's commitment to technological innovation and by the Company's desire to diversify its product line. The Company expects that sales of its current generation of disk array controller boards will continue to generate a significant part of the Company's revenue during 1995. A major reduction in sales of such products without a corresponding increase in the sales of the Company's new disk array products would have a material adverse effect on the Company. The Company's ability to compete successfully in either the personal computer market or the market for its more sophisticated products depends upon its ability to develop products which obtain market acceptance, which can be sold at competitive prices while maintaining adequate gross margin levels and which are proven to be reliable. Although the Company believes that certain of its products have certain competitive advantages, there can be no assurance that the Company will be able to compete successfully in the future or that other companies may not develop products with greater performance or at more favorable prices and thus reduce the demand for the Company's products. The Company depends heavily on its suppliers to provide materials on timely basis, at a reasonable price, and with suitable credit terms. Although many of the components for the Company's products are available from numerous sources at competitive prices, some of the most critically needed components are sole-sourced. At the current time, the Company is dealing with world wide shortages of DRAM simm memory modules and surface mount capacitors. DRAM simm modules are in heavy demand throughout the personal 10 computer industry and surface mount capacitor supplies are in high demand for use in the manufacturing of cellular phones. The Company is developing different design strategies to cope with these shortages. In the event that essential components, alternative designs or additional manufacturing capacity cannot be obtained as required, the Company could be unable to meet demand for its products, thus adversely affecting results from operations. In addition, scarcity of such components could result in cost increases, which could adversely affect the Company's gross margins. SALES AND MARKETING EXPENSES Sales and marketing expenses for the three months ended March 31, 1995, totaled $1.1 million, an increase of $351 thousand or 45% from the corresponding period in 1994. Sales and marketing expenses represented 6.6% of net sales for the three months ended March 31, 1995, compared to 5.7% incurred during the three months ended March 31, 1994. Increases in sales and marketing expenditures resulted from increased head count, higher compensation and commission expenses as well as increased advertising, promotional and travel expenses. The Company expects that sales and marketing expenses will increase during 1995 as the infrastructure is expanded to support growing market opportunities through both domestic and international channels. RESEARCH AND DEVELOPMENT EXPENSES Research and development expenses for the three months ended March 31, 1995, totaled $957 thousand, an increase of 30% from the $735 thousand incurred during the corresponding period in 1994. Research and development expenses represented 5.6% of net sales for the three months ended March 31, 1995 as compared to 5.4% in 1994. Research and development expenses increased during the first three months of 1995 due to increased staffing expense resulting from higher salaries and increased head count. The Company expects to increase its investment in research and development activities during 1995 in an effort to achieve market acceptance of future products and to continue its strategy of maintaining technology leadership in the RAID market. GENERAL AND ADMINISTRATIVE General and administrative expenses for the three months ended March 31, 1995, totaled $973 thousand, an increase of $98 thousand or 11% from the corresponding period of 1994. General and administrative expenses totaled 5.7% of net sales for the three months ended March 31, 1995, compared to 6.4% incurred during the three months ended March 31, 1994. General and administrative expenses increased during the quarter due to higher compensation and benefit expenses as a result of the addition of employees in this area. Legal expenses also increased over those incurred during the first 11 quarter of 1994. The Company anticipates that general and administrative expenses will continue to increase during 1995. These expenses may vary as a percentage of net sales in future periods as expenses related to litigation matters are incurred. INCOME TAXES The Company's effective tax rate during the quarter ended March 31, 1995, was 35% as compared to 25% in the corresponding period of the prior year. The tax rate for the first quarter of 1995 reflects the impact in the reduction of available tax benefits. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company and American Megatrends, Inc. ("AMI") entered into an agreement on February 15, 1987, pursuant to which, inter alia, AMI licensed to the Company the rights to use a basic input/output system ("BIOS") and certain other technical information in consideration for the payment of royalties. On May 5, 1992, AMI initiated arbitration proceedings before the American Arbitration Association in Miami, Florida, asserting a right under the agreement to audit the Company's books and records for the purpose of calculating royalties. The Company counterclaimed against AMI for breach of contract, failure to pay a written account, failure to pay for goods sold and delivered, and failure to provide required information. On March 16, 1993, AMI amended its demand for arbitration, seeking specific performance of AMI's audit rights under the February 15, 1987, agreement, and in particular, seeking to include in the audit additional records sought by AMI. AMI has also asserted claims for any monies that the audit may indicate are due to AMI, for recovery of all fees and costs associated with the arbitration, and for recovery of additional costs allegedly incurred with respect to the audit. On September 3, 1993, while arbitration was still pending, AMI also filed suit against the Company in the United States District Court in Atlanta, Georgia, alleging claims similar to those presented in the arbitration. The complaint alleged claims for breach of contract, fraud, breach of fiduciary duty, tortious interference with contractual rights and prospective business relations, and unfair competition. The relief sought included injunctive relief, accounting damages in an unspecified amount, exemplary damages and attorneys' fees and costs. On October 29, 1993, the Company filed an answer and counterclaim denying the allegations of the complaint, setting forth various affirmative defenses, and presenting counterclaims for breach of contract, unjust enrichment and unfair 12 competition. The relief sought included injunctive relief, accounting damages an unspecified amount, exemplary damages and attorney's fees and costs. On October 29th, 1993, the Company filed an answer and counterclaimed denying the allegations of the complaint, setting forth various affirmative defenses, and presenting counterclaims for breach of contracts, unjust enrichment and unfair competition. On April 1, 1994, both AMI and the Company filed amended pleadings in the arbitration to include all claims and counterclaims previously asserted in the federal court action. Pursuant to a stipulation of the parties, the federal court lawsuit was dismissed without prejudice in February 1995. Preliminary conferences with the arbitrators were held on March 19, 1993, on November 2, 1993, on July 29, 1994 and on November 22, 1994. The matter is in the discovery stage. The evidentiary hearings are scheduled for a two-week period beginning June 19, 1995. While the Company believes it has numerous defenses to AMI's claims and intends to continue to vigorously defend the arbitration, there can be no assurance that the Company will ultimately prevail. An unfavorable outcome could have a material adverse effect on the Company's business and results of operations. The former Chief Executive Officer of the Company, Dr. M. A. Chowdry, filed a complaint against the Company and its outside directors seeking $5 million in damages on October 13, 1994, claiming breach of an employment agreement that he entered into with the Company approximately three months prior to his termination as the Company's Chief Executive Officer. Dr. Chowdry voluntarily filed an amendment to his complaint on February 23, 1995. On March 17, 1995 the Company and the individual defendants filed a response (demurrer) to the amended complaint. A hearing on the demurrer filed by the Company and the individual defendants was held on April 27, 1995 and a decision on the demurrer is still under submission. The Company believes it has meritorious defenses and will vigorously defend this lawsuit. In addition to matters discussed herein, the Company is a party to routine suits and claims arising in the ordinary course of its business which the Company does not believe will have a material adverse effect on its business or financial condition. 13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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, in Fremont, California, on the 12th day of May 1995. MYLEX CORPORATION By /s/ Colleen Meyers -------------------------------- Colleen Meyers Vice President of Finance and Chief Financial Officer 14 INDEX TO EXHIBITS Mylex Corporation Quarterly Report on Form 10-Q Sequentially Exhibit No. Description Numbered Page - ----------- ----------- ------------- 11.1 Statement re Computation of Per Share Earnings 16-17 15 EXHIBIT 11.1 MYLEX CORPORATION EARNINGS PER SHARE COMPUTATION THREE MONTHS ENDED MARCH 31, 1995 AND 1994 The basis for computing net income per common share is described in Note A to the financial statements, beginning on page 5 of the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 1995. The computation of primary and fully diluted earnings per share is as follows:
Three Months Ended PRIMARY EARNINGS March 31, March 31, PER SHARE 1995 1994 Net earnings $2,040,200 $1,089,200 Weighted average number on common shares outstanding during this period 14,648,300 13,053,800 Number of common share equivalents resulting from stock options and warrants, computed using the treasury stock method 863,600 1,597,900 ----------------------------- Number of common and common share 15,511,900 14,651,700 equivalents used in computation Primary earnings per share $0.13 $0.07
16
Three Months Ended FULLY DILUTED EARNINGS March 31, March 31, PER SHARE 1995 1994 Net earnings $2,040,200 $1,089,200 Interest on converted convertible debentures (net of taxes) 0 43,250 ----------------------------- $2,040,200 $1,132,450 Weighted average number on common shares outstanding during this period 14,648,300 13,053,800 Number of common share equivalents resulting from stock options and warrants, computed using the treasury stock method 864,300 1,597,900 Weignted average shares isssuable from assumed conversion of convertible subordinated debentures since issuance 0 597,300 ----------------------------- Weighted average common and dilutive common shares outstanding 15,512,600 15,249,000 Fully diluted earnings per share $0.13 $0.07
17 EX-27 2 EXHIBIT 27
5 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 562,179 0 15,926,729 (506,574) 11,325,448 22,320,633 6,317,334 (4,782,943) 29,967,207 8,274,445 416,516 147,272 0 0 20,128,974 25,967,207 17,085,032 17,085,032 10,813,098 10,813,098 3,076,026 0 57,196 3,138,713 1,098,350 2,040,163 0 0 0 2,040,163 0.13 0.13
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