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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
FOR THE FISCAL YEAR ENDED MARCH 31, 2000
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 000-15071
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ADAPTEC, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 94-2748530
(State of incorporation) (I.R.S. Employer Identification No.)
691 S. MILPITAS BLVD.
MILPITAS, CALIFORNIA 95035
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (408) 945-8600
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.001 PAR VALUE
COMMON SHARE PURCHASE RIGHTS
(Title of Class)
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes /X/ No / /
Based on the closing sale price of the Common Stock on the Nasdaq National
Market System on June 26, 2000, the aggregate market value of the voting stock
held by non-affiliates of the Registrant was $1,491,500,735. Shares of Common
Stock held by each officer and director and by each person known by the Company
to own 5% or more of the outstanding Common Stock have been excluded in that
such persons may be deemed to be affiliates. This determination of affiliate
status is not necessarily a conclusive determination for other purposes.
The number of shares outstanding of Registrant's Common Stock, $.001 par
value, was 99,124,506 at June 26, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from the definitive Proxy
Statement for the Annual Meeting of Stockholders to be held on August 24, 2000.
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INTRODUCTORY STATEMENT
References made in this Annual Report on Form 10-K to "Adaptec", the
"Company", the "Registrant", "we", "our", or "us" refer to Adaptec, Inc. and its
wholly-owned subsidiaries. Adaptec, Easy CD Creator, DirectCD, Toast, Adaptec
Jam, GoBack, WinOnCD and the Adaptec logo are trademarks of Adaptec, Inc., which
may be registered in some jurisdictions. All other trademarks used are owned by
their respective owners.
PART I
ITEM 1. BUSINESS
OVERVIEW
Adaptec was incorporated in 1981 and went public on the Nasdaq Stock Market
in 1986. Adaptec is the global leader in innovative storage solutions. Adaptec's
hardware and software solutions for eBusiness and Internet applications move,
manage, and protect critical data and digital content. The Company operates in
three principal segments: Direct Attached Storage ("DAS"), Storage Networking
Solutions ("SNS") and Software. Adaptec's products are found in high-performance
networks, servers, workstations and desktops from the world's leading OEMs, and
are sold through distribution channels to Internet service providers,
enterprises, medium and small businesses and consumers. Adaptec is an S&P 500
and a Nasdaq Stock Market 100 member.
CORPORATE STRATEGY AND BUSINESS SEGMENTS
In the fourth quarter of fiscal 2000, the Company elected to realign its
business segments. Previously, the Company's reportable segments were Host
Input/Output ("I/O"), Redundant Array of Independent Disks ("RAID"), Software,
Peripheral Technology Solutions ("PTS") and Other. The current segments are
organized by technologies and include DAS, SNS, Software, PTS and Other. Current
market trends indicate that Host I/O and RAID technologies are converging, that
is, data protection is becoming standard in the majority of server
configurations. Accordingly, the Company has combined two of its former business
segments--Host I/O and RAID--to form DAS. Additionally, one of the Company's
business lines formerly reported as part of the Host I/O segment--Networking
Products Group ("NPG")--has been reclassified to SNS, a new segment. The
Software, PTS and Other segments remain unchanged.
The DAS segment designs, develops, manufactures and markets I/O management
solutions to the entire range of servers, workstations and high-end desktops.
These systems employ internal disk drives as their primary mass storage
solution, but also require high-performance connectivity to additional
internally and externally connected storage and peripherals. The performance of
the I/O subsystem is an important component of overall system performance. The
need for high-performance I/O server solutions has been increasing due to
greater Internet usage, multitasking operating systems and large multimedia
files.
The Company's I/O solutions include Small Computer System Interface ("SCSI")
technology delivered via adapter cards and controller chips and SCSI-based and
fibre channel-based RAID technology. These solutions combine the most advanced
SCSI performance with manageability and backwards compatibility. SCSI technology
connects a computer's central processing unit ("CPU") to internal and external
peripherals, including storage devices. The Company's RAID products are utilized
in systems ranging from entry-level workstations to enterprise-class servers,
improving data storage speed, integrity, and reliability.
The emerging SNS segment will focus on bringing new levels of functionality
and interoperability with storage area network ("SAN") initiatives, including
fibre channel, ethernet and infiniband. The SNS segment's primary initiative is
developing, manufacturing and marketing fibre channel adapters
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and marketing storage solutions for the SAN marketplace. In addition, the
Company will evaluate new emerging opportunities in areas such as storage
appliances, ethernet-based storage architectures, and external RAID controllers.
Customers' needs for storage are changing in response to the growth of data
brought about by eBusiness and the Internet. In response to demand for lower
cost of data management, increased data availability, higher performance and
simplified storage scalability, multiple storage architectures are emerging,
where storage devices are connected directly into a network-like fabric. The
Company intends to provide a variety of storage solutions to meet customer
demands in the existing corporate marketplace and in the Internet infrastructure
market.
The Software segment designs, develops and markets primarily application
software for personal computers and optical peripherals, including compact disk
recordable ("CD-R"), compact disk rewriteable ("CD-RW") and digital video disks
("DVD") recordable devices. The Company's application software products allow
users to store data, including audio, video and still photos, to virtually all
marketed CD-R and CD-RW drives using industry standard formats. The application
software, along with the peripherals, provide users with a cost effective
alternative to other forms of removable media for general purpose computing
needs, including the ability to transfer downloaded music from the Internet to
compact disks ("CDs") for private use or creating compilations of music from
purchased music CD labels. The Company's CD-R software offerings are available
as stand-alone products, and also ship built-in or "bundled" with most CD-R
drives in the desktop market.
The business lines that comprised the PTS segment were sold in
November 1998 and January 1999 to Texas Instruments, Inc. ("TI") and
STMicroelectronics, Inc. ("ST"), respectively. This segment designed developed,
manufactured and marketed proprietary integrated circuits ("ICs") for use in
mass storage devices and other peripherals.
The Other segment includes unallocated corporate related revenues and
expenses, including patent settlement fees, interest and other income, interest
expense, write-off of acquired in-process technology resulting from
acquisitions, restructuring charges, other charges and the gain on the sale of
PTS. Additionally, the Other segment includes revenues and expenses related to
businesses divested in fiscal 1999, including external storage, satellite
networking and fibre channel. Although these business lines were divested, the
Company continues to hold a minority interest in Chaparral Network
Storage, Inc. ("Chaparral", formerly known as Chaparral Technologies, Inc.),
BroadLogic, Inc. ("BroadLogic") and JNI Corporation ("JNI", formerly known as
Jaycor Networks, Inc.) the companies which acquired these business lines,
respectively.
See "Note 17. Segment, Geographic and Significant Customer Information" in
Notes to Consolidated Financial Statements on page 70, for further information
on the Company's operating segments.
ACQUISITIONS AND STRATEGIC INVESTMENTS
In July 1999, the Company purchased CeQuadrat GmbH ("CeQuadrat"), a
German-based software company, providing CD-R and CD-RW products primarily to
the European markets. CeQuadrat is included in the Company's Software segment.
In consideration for CeQuadrat, the Company paid $24.3 million in cash
(including $0.3 million in professional fees). The Company accounted for the
acquisition of CeQuadrat using the purchase method of accounting.
In December 1999, the Company purchased Distributed Processing Technology,
Corp. ("DPT"), a supplier of high-performance storage solutions, including SCSI,
RAID and fibre channel based controllers and storage subsystems. DPT is included
in the Company's DAS segment. In consideration for DPT, the Company paid
$186.3 million in cash (including $1.1 million in professional fees) and assumed
stock options valued at $51.8 million. The Company accounted for the acquisition
of DPT using the purchase method of accounting.
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In January 2000, the Company entered into a four-year agreement with Agilent
Technologies, Inc. ("Agilent") to co-develop, market and sell fibre channel
adapters in connection with the SNS segment. The alliance is targeted at
providing interoperability and support to drive customer confidence and
accelerate the adoption of fibre channel in the Windows NT market. The Company
will license Agilent's fibre channel adapter and software driver technology and
pay guaranteed royalties to Agilent based on revenue from certain products.
Additionally, the Company issued warrants to Agilent valued at $37.1 million.
Amortization of the value of the warrants is included in the operating results
of the SNS segment beginning in the fourth quarter of fiscal 2000.
In March 2000, the Company purchased Wild File, Inc. ("Wild File"), a
software company providing data protection software that allows desktop users to
undo a multitude of problems arising from system crashes, failed software
installations, and user error. Wild File is included in the Company's Software
segment. In consideration for Wild File, the Company paid $13.6 million in cash
(including $0.4 million in professional fees), issued 392,000 shares of the
Company's common stock valued at $17.1 million and assumed stock options valued
at $0.8 million. Due to certain restrictions placed on the disposal of certain
shares, $2.6 million of the common stock was accounted for as "Deferred stock-
based compensation", a contra equity account on the Consolidated Balance Sheets,
and was not included in the purchase price. The Company accounted for the
acquisition of Wild File using the purchase method of accounting.
PRODUCTS
The Company's products are designed and manufactured using various
technologies and resources. The Company continues to utilize a process called
concurrent engineering, in which manufacturing, marketing, and engineering work
together early in the development cycle to meet the demands of emerging
technologies as well as decrease the "time to volume" of product shipments. The
Company maintains separate engineering functions for each of its operating
segments. The Company maintains an Internet Website to provide its customers
with detailed company and product information.
DAS
The Company's DAS products include bus-based and microprocessor-based RAID
solutions and SCSI host adapter boards and chips, including related firmware and
software. These products are utilized in a wide range of servers from
entry-level workstations to enterprise-class servers, as well as desktops.
The Company's RAID controllers provide performance and functionality,
incorporate 32-bit and 64-bit PCI technology and offer superior software
functionality to make RAID creation and manipulation fast, simple and reliable.
The Company believes it is the only significant RAID vendor to offer the benefit
of proprietary SCSI development in its RAID controllers. In addition, the
Company believes its UDMA-based RAID controllers offer levels of functionality
that exceed the level of RAID currently available from competing companies. In
addition, the Company's Ultra2 SCSI RAID card family supports advanced RAID
features, including bootable arrays, hot-swap drives, extended parity
protection, dynamic sector repairing and round-the-clock fault tolerance for
business and mission critical data.
Adaptec RAID Cards are rigorously tested with hundreds of SCSI systems and
peripherals like hard disk drives, tape drives, Zip, Jaz, CD-R, CD-RW and
scanners to ensure customers are getting compatibility that they can rely upon.
The Company's SCSI products, which incorporate the Company's proprietary
single chip architectures, provide customers with I/O solutions in the markets
it serves. The Company provides bus mastering, SCSI host adapters that manage
all I/O processing activity, thereby freeing the CPU to perform
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other operations. The Company offers these host adapters across all ranges of
bus architectures including peripheral component interconnect ("PCI"), industry
standard architecture ("ISA"), extended industry standard architecture ("EISA"),
and personal computer memory card international association ("PCMCIA") as well
as for previous generations of the SCSI standard. The Company also provides
non-bus mastering host adapters that provide standardized SCSI connectivity
between the CPU and its peripherals. To expand further the market for its
products, the Company continues to develop and market I/O solutions meeting
specific OEM requirements and turnkey kits for the distributor channels. These
kits include a SCSI host adapter and related software that enable end-users to
more readily connect SCSI peripherals to their microcomputers.
The Company has undertaken numerous initiatives to increase the
accessibility, ease of use, and versatility of the SCSI standard. Advanced SCSI
programming interface ("ASPI"), an industry standard developed by the Company,
enables users to integrate high-performance SCSI peripherals with computers
using popular operating systems, such as Windows (including Windows 98 and
Windows NT), NetWare, OS/2, UNIX, Novel, Macintosh and Linux. In addition, the
Company has strategic relationships with leading operating system vendors, such
as IBM Corporation, Microsoft Corporation, and Novell Inc., resulting in joint
development projects to embed the Company's software within their operating
systems.
SNS
Currently, the Company's SNS product offerings include single-port and
multi-port networks interface cards. These products are used in high-performance
network servers that provide critical local and wide area network solutions.
They maximize the performance of PCI servers operating on Fast Ethernet and
Ethernet networks by providing increased bandwidth on the network.
The Company intends to offer fibre channel adapters and other fibre channel
based technology products beginning in fiscal 2001. The Company is licensing the
technology for the adapters through its agreement with Agilent. The fibre
channel adapters will be used to connect fibre channel devices, including disk
drives, to servers. In addition, the Company is developing ethernet-based
storage products to serve the growing market for SANs.
SOFTWARE
Many of the Company's software products focus on providing CD-R and CD-RW
mastering capability as well as providing complementary editing utilities. These
products include Easy CD Creator-TM-, DirectCD-TM-, WinOnCD-TM-, Toast-TM- and
Adaptec Jam-TM-, and are popular for data storage to optical media and provide
users a storage alternative to other removable media. These software offerings
are available in retail packages and also ship built-in or "bundled" with many
industry-leading CD-R and CD-RW drives.
Additionally, the Company's software product offerings include data
protection software, specifically GoBack-TM-. GoBack-TM- is run on the desktop
and allows users to quickly undo any number of problems occurring from system
crashes, failed software installation, and user error.
MARKETING AND CUSTOMERS
DAS
The Company believes it has successfully positioned itself as a leading
supplier of a full range of I/O storage solutions. The Company sells its DAS
products through a direct sales force to substantially all major server and PC
OEMs, as well as most of the major electronic distributors worldwide. The
Company works closely with its OEM customers on the design of current and next
generation products
4
to meet the specific requirements of system integrators and end-users. The
Company provides its OEM customers with extensive applications and system design
support.
The Company maintains training and support for distribution customers such
as value added resellers ("VARs"), system integrators and distributors. Sales
and marketing of DAS products to OEMs are primarily handled by the Company's
direct sales force, marketing and engineering teams. Senior management familiar
with the customer's market and needs may also participate in the marketing
process. Sales to other customers such as VARs, system integrators and
distributors are marketed similarly. The Company also sells board-based products
to end-users through major computer product distributors and provides technical
support to its customers worldwide.
The Company's DAS OEM customers include Asustek Computer, Inc., Celestica,
Inc., Hewlett Packard Co., Dell Computer Corporation, IBM Corporation, Siemens
Nixdorf and Solectron Corporation. The Company's DAS distributor customers
include Computer 2000, Inc., Ingram Micro, Inc., Macrotron Systems, Inc.,
Nichimen Electronics, Softbank Corporation, Synnex and Tech Data Corporation.
Net revenues from the DAS segment were $703.6 million, $532.3 million and
$696.0 million in fiscal 2000, 1999 and 1998, respectively.
The Company emphasizes solution-oriented customer support as a key element
of its marketing strategy and maintains technical applications groups in the
field as well as at the Company's headquarters. Support provided by these groups
includes assisting current and prospective customers in the use of the Company's
products, writing application notes, and conducting seminars for system
designers. The systems-level expertise and software experience of the Company's
engineering staff are also available to customers with particularly difficult
design problems. A high level of customer support is also maintained through
technical support hotlines, electronic bulletin boards, and dial-in-fax
capability.
SNS
The Company's network interface cards are sold primarily to OEMs. Beginning
in the fourth quarter of fiscal 1999, the Company restructured certain areas of
this business and began focusing more on sales and marketing activities. In
turn, this increased sales to existing OEMs. The Company's SNS OEM customers
include Hewlett Packard Co., EMC Corp. and NetScout Systems, Inc. The Company's
SNS distributor customers include Ingram Micro, Inc. and Arrow Electronics, Inc.
The Company is currently developing fibre channel boards through technology
licensed from Agilent. The Company will market the boards to both OEMs and VARs
through a direct sales force and through distributors.
Net revenues from the SNS segment were $25.3 million, $20.0 million and
$19.6 million in fiscal 2000, 1999 and 1998, respectively.
SOFTWARE
The Company has leveraged its strength in developing high-performance
peripheral connectivity software to attain its position as a leading supplier of
CD-R software. The development of new multimedia applications that focus on data
storage, digital photography, music CD creation, the availability of digital
music formats such as MP3, Internet audio, and desktop video drive the need for
optical storage devices. Through its relationship with leading CD-RW and DVD
drive manufacturers and system OEMs, the Company ensures software support and
compatibility for its product offerings. The Company's product emphasis has been
to provide high-performance, high-quality, consumer-friendly software
applications that enable the usage of optical storage.
5
The Company's Software OEM customers include Hewlett Packard Company, Dell
Computer Corporation, Acer Peripherals, Inc., Gateway 2000, Inc., and Yamaha
Corporation of America. The Company's software distributor customers include
Ingram Micro, Inc., Tech Data Corporation, and Computer 2000, Inc. The Company's
retail customers include Digital River Systems and Rush Order. Net revenues from
the Software segment were $78.2 million, $47.1 million and $38.2 million in
fiscal 2000, 1999 and 1998, respectively.
COMPETITION
The markets for all of the Company's products within the DAS, SNS and
Software segments are highly competitive and are characterized by rapid
technological advances, frequent new product introductions, evolving industry
standards, and competitive price pressures. The Company's competitors continue
to introduce products with improved performance characteristics, and its
customers continue to develop new applications. As the Company has continued to
broaden its storage solution product offerings into the server, workstation and
desktop environments, it has experienced, and expects to experience in the
future, significantly increased competition both from existing competitors and
from additional companies that may enter its markets. Some of these companies
have greater technical, marketing, manufacturing, and financial resources than
the Company. The Company will have to continue to develop and market appropriate
products to remain competitive. The Company believes one of the factors in its
competitive success is its continued commitment of resources to research and
development in the future.
DAS
In the DAS segment, the Company competes with LSI Logic Corporation,
American Megatrends, Inc., QLogic, Corp., Mylex Corporation (a subsidiary of IBM
Corporation), and a number of other smaller manufacturers. The markets for the
Company's DAS products have been highly competitive and are likely to remain
competitive. The Company's competitive strategy is to continue to leverage its
technical leadership and concentrate on the most technology-intensive solutions.
To address the competitive nature of the business, the Company designs advanced
features into its products, with particular emphasis on data transfer rates,
software-defined features, and compatibility with major operating systems and
most peripherals. The Company believes the principal competitive factors in this
market are performance, a comprehensive array of solutions ranging from
connectivity products for the personal computing market to high-performance
products for the enterprise-wide computing and networked environments, product
features, brand awareness, financial resources, and technical and administrative
support. The Company believes that it presently competes favorably with respect
to each of these factors.
SNS
In the SNS segment, the Company's network interface cards compete with Intel
Corp. and 3Com Corp. The Company's competitive strategy is to continue to focus
on its sales and marketing efforts and leverage the technology to design other
competitive networking solutions. The Company's fibre channel products will
compete with QLogic Corp. in the Windows NT market. The Company believes that
the principal competitive factors in the fibre channel market are performance,
brand awareness and technical and administrative support.
SOFTWARE
The rapidly growing CD-RW and data protection markets have attracted a
number of software competitors ranging from small operations to large consumer
software companies. The Company believes its competitive strength is its
technical expertise in providing quality connectivity support coupled with its
strong retail presence. Its competitive strategy is to continue to focus on
providing its
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OEM customers with high-quality software solutions at competitive prices, while
leveraging its OEM presence to drive consumers to upgrade to its full-featured
retail applications.
The Company believes the primary competitive factors in the OEM market are
performance, pricing, and support, while at retail the factors relate more to
the compelling nature of its products and consumer awareness.
BACKLOG
At March 31, 2000, the Company's backlog was approximately $43 million
compared with $56 million at March 31, 1999. Backlog levels may vary with
product availability, delivery lead times and customer order delays, changes or
cancellations. Accordingly, the Company's backlog as of any particular date may
not necessarily be an indicator of future operating results.
MANUFACTURING
The Company's Singapore manufacturing facility produces and tests most DAS,
SNS and Software products. Additionally, the Company acquired a manufacturing
facility in Florida in connection with the purchase of DPT. The Florida facility
continues to manufacture DPT products for the DAS segment. The Company
continuously strives to lower costs, shorten manufacturing cycle times, and
improve service to customers. The Company's products make extensive use of
standard logic, printed circuit boards, and random access memory from several
outside suppliers in addition to the Company's custom designed integrated
circuits.
All semiconductor wafers used in manufacturing the Company's products are
processed to its specifications by outside suppliers and internally tested by
the Company. The Company has secured capacity through agreements with Taiwan
Semiconductor Manufacturing Co., Ltd. ("TSMC") that ensure availability of a
portion of the Company's wafer needs for both current and future technologies
for which the Company has made advance payments.
PATENTS AND LICENSES
The Company maintains a patent award program which encourages its engineers
to document patentable inventions and has applied for and continues to apply for
patents both in the United States and in foreign countries when it deems
advantageous to do so. There can be no assurance that patents will be issued or
that any patent issued will provide significant protection or could be
successfully defended.
As is the case with many companies in the high technology industry, it may
be desirable in the future for the Company to obtain technology licenses from
other companies. The Company has occasionally received notices of claimed
infringement of intellectual property rights and may receive additional such
claims in the future. The Company evaluates all such claims and, if necessary,
will seek to obtain appropriate licenses. There can be no assurance that any
such licenses, if required, will be available on acceptable terms.
In May 2000, the Company entered into a patent cross-license agreement with
a third party and will pay a settlement fee in return for a release from past
infringement claims prior to January 1, 2000. In addition, the Company will pay
a license fee for the use of certain of the third party's patents through
June 30, 2004. The aggregate fee to be paid by the Company under the proposed
cross-license agreement will range from $11.0 million to $25.0 million depending
on the outcome of an evaluation of certain patents by an independent party. The
Company's best estimate of the aggregate fee that will be payable under the
proposed cross-license agreement is $18.0 million. Of the estimated amount,
$9.6 million was attributed to the settlement of past infringement claims.
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RESEARCH AND DEVELOPMENT
The Company believes research and development are fundamental to its
success, especially in IC design, software development, and I/O solutions that
encompass emerging technologies. The development of proprietary ICs that support
multiple architectures and peripheral devices requires a combination of
engineering disciplines. In addition, extensive knowledge of computer and
subsystem architectures, expertise in the design of high-speed digital ICs, and
knowledge of operating system software are essential. The Company's research and
development efforts continue to focus on the development of complete solutions
that include proprietary ICs, firmware, and software that support multiple
architectures and peripheral devices. These I/O solutions facilitate high-speed
data transfer rates for eBusiness and Internet applications, which are essential
to the enhanced performance of client/server networking environments,
applications requiring high-performance I/O, and the adoption of various
peripheral devices.
The Company intends to continue to leverage its technical expertise and
product innovation capabilities to address I/O solutions across a broad range of
users and platforms. The Company continues to invest resources in all business
segments to develop its core products as well as next generation hardware and
software solutions.
Approximately 25% of the Company's employees are engaged in research and
development. In fiscal 2000, 1999 and 1998, the Company spent approximately
$103.1 million (12.7% of net revenues), $146.2 million (21.1% of net revenues)
and $169.0 million (16.8% of net revenues), respectively, for research and
development. During fiscal 1999, the Company restructured its business to reduce
costs, improve operating efficiencies and divest itself of unprofitable business
lines, although the cost benefits of these actions were not fully realized until
fiscal 2000. As a result of the restructuring actions, the Company's operating
expenses, specifically research and development expenses, declined in dollars
and as a percentage of net revenues.
EMPLOYEES
At March 31, 2000, the Company had 2,512 employees. The Company's continued
success will depend in large measure on its ability to attract and retain highly
skilled employees who are in great demand.
EXECUTIVE OFFICERS
The following sets forth certain information with regard to executive
officers of Adaptec as of June 27, 2000, except that ages are as of March 31,
2000:
Mr. Robert N. Stephens (age 54) has served as Chief Executive Officer since
April 1999 and President since October 1998. Prior to his promotion,
Mr. Stephens had served as Chief Operating Officer since November 1995. From
1993 to 1995, he founded and served as Chairman for Power I/O Corporation, a
provider of high performance I/O solutions.
Mr. Robert L. Schultz, Jr. (age 42) has served as Chief Operating Officer
since July 1999. From 1991 to 1999, Mr. Schultz was with Compaq Computer
Corporation as Vice President and Director of the Server Storage Business
(1998 - 1999) and in various marketing roles within Compaq (1991 - 1998).
Mr. Andrew J. Brown (age 40) has served as Vice President of Finance and
Chief Financial Officer since August 1998. From November 1996 to February 1999,
he served as Vice President, and from May 1994 to February 1999, he served as
Corporate Controller and principal accounting officer. From July 1988 to
April 1994, he served in various financial roles within the Company.
Mr. Kenneth B. Arola (age 44) has served as Vice President since June 1998,
and as Corporate Controller and principal accounting officer since
February 1999. From July 1995 to June 1998 he served
8
as Director of Corporate Finance. From December 1990 to July 1995, he served in
various financial roles within the Company.
Mr. J. Peter Campagna (age 47) has served as Vice President and Treasurer
since August 1998. Prior to that, Mr. Campagna served as Director of Tax of the
Company from October 1994 to July 1998.
Mr. Kok Yong Lim (age 52) has served as Vice President of Manufacturing
Operations since December 1999. Prior to that, Mr. Lim served as Managing
Director and Vice President of Adaptec Manufacturing Singapore from August 1993
to December 1999.
Mr. Douglas G. MacKenzie (age 50) has served as Vice President of
Engineering since April 1999. Prior to his promotion, Mr. MacKenzie served as
Director and Vice President of Software Engineering from July 1996. From 1978 to
1996, Mr. MacKenzie served in various engineering management roles at Digital
Equipment Corp.
Mr. Thomas J. Shea (age 35) has served as Vice President and General Manager
of the Software Products Group since April 1999 and from March 1996 through
February 1998. From February 1998 to April 1999, he served as Vice President and
General Manager of the OEM Solutions Group. Prior to that, Mr. Shea served in
various engineering roles within the Company.
Mr. Laurence B. Boucher (age 57) has served as Chairman since April 1999
(and also from May 1981 through May 1990). From August 1998 to April 1999,
Mr. Boucher served as interim CEO. Since December 1987, Mr. Boucher has held the
office of President and Chief Executive Officer of Auspex Systems, Inc., a
manufacturer of network file servers, and Alacritech, Inc, a manufacturer of
high speed network interface devices. Mr. Boucher is a founder of the Company
and was Chief Executive Officer from May 1981 to December 1986 and President
from May 1981 to May 1985.
Mr. Henry P. Massey, Jr. (age 60) has served as Secretary since
November 1989. For more than the last five years, Mr. Massey has been a
practicing lawyer and a member of Wilson, Sonsini, Goodrich & Rosati,
Professional Corporation, a law firm and general outside counsel to the Company.
FOREIGN AND DOMESTIC OPERATIONS
See "Note 17. Segment, Geographic, and Significant Customer Information" in
Notes to Consolidated Financial Statements on page 70.
CERTAIN FACTORS BEARING ON FUTURE RESULTS
This report contains forward-looking statements that involve risks and
uncertainties, specifically in the sections labeled "Corporate Strategy and
Business Segments", "Products", "Competition" and "Research and Development".
The statements contained in this document that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including
without limitation statements regarding the Company's expectations, beliefs,
intentions or strategies regarding the future. All forward-looking statements
included in this document are based on information available to the Company on
the date hereof, and the Company assumes no obligation to update any such
forward-looking statements. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth in the following risk factors and
elsewhere in this document. In evaluating the Company's business, prospective
investors should consider carefully the following factors in addition to the
other information set forth in this document.
9
OUR FUTURE OPERATING RESULTS ARE SUBJECT TO FLUCTUATION, WHICH COULD REDUCE
OUR STOCK PRICE. Our operating results may fluctuate as a result of a wide
variety of factors, including, but not limited to, the following:
- cancellations or postponements of orders
- shifts in the mix of our products and sales channels
- changes in pricing policies by our suppliers
- shortages of components or wafer fabrication capacity affecting us, our
customers or our suppliers
- the market acceptance of new and enhanced versions of our products
- product obsolescence
- shortages of skilled labor
- general worldwide economic and computer industry fluctuations
- future accounting pronouncements
- changes in accounting policies
- the timing of acquisitions of other business products and technologies and
any associated charges or earnings
- restructuring actions or other involuntary terminations
Fiscal 2000 operating results were materially impacted by unusual charges,
including the following:
- write-offs of acquired in-process technology
- write-off of estimated license fees attributable to a patent settlement
agreement
Fiscal 1999 operating results were materially impacted by unusual charges,
including the following:
- write-offs of acquired in-process technology
- costs related to the termination of the Symbios, Inc. acquisition
- restructuring charges
- impairment of assets
- terminations of senior executives
In addition to the unusual charges described above, our fiscal 1999
operating results were adversely affected by the following:
- shifts in corporate and retail buying patterns
- increased competition
- emerging technologies
- economic instability in Asia
- turbulence in the computer disk drive industry.
IF DEMAND FOR OUR CUSTOMERS' PRODUCTS DECLINE OR OUR CUSTOMERS DO NOT
CONTROL THEIR INVENTORIES EFFECTIVELY, OUR REVENUES MAY BE ADVERSELY
AFFECTED. The volume and timing of orders received during a quarter are
difficult to forecast. Our customers from time to time encounter uncertain and
changing demand for their products. Customers generally order based on their
forecasts. If demand falls below
10
such forecasts or if customers do not control inventories effectively, they may
cancel or reschedule shipments previously ordered from us. We have historically
operated with a relatively small backlog and have set our operating budget based
in part on expectations of future revenues. Because much of our operating budget
is relatively fixed in the short-term, if revenues do not meet our expectations,
then our operating income and net income will be disproportionately affected.
Also, operating results in any particular quarter which do not meet the
expectations of securities analysts are likely to cause volatility in the price
of our common stock.
IF DEMAND FOR SERVERS, WORKSTATIONS OR HIGH-PERFORMANCE DESKTOPS DECLINE,
OUR REVENUES FROM OUR DAS SEGMENT MAY DECLINE. Our DAS products are used
primarily in enterprise-class servers, workstations and high-end desktop
computer systems. Our DAS products include host bus adapters, or HBA's, RAID
controllers, boards and chips that allow computers to transfer information to
and from peripherals, such as hard-disk drives, scanners, CD-ROMs, CD-Rs,
CD-RWs, DVD-ROMs, and Zip and Jaz drives among many other devices. Historically,
our growth has been supported by increasing demand for systems that support:
- client/server applications
- computer-aided engineering
- Internet/intranet applications
- data storage and digital content
- multimedia
- video
In the second half of fiscal 1998, the demand for such systems slowed as
more businesses chose to use relatively inexpensive PC's for desktop
applications, and information technology managers shifted resources toward
resolving Year 2000 problems and investing in network infrastructure. Our
business or operating results could be materially adversely affected by a
similar decline in demand for our products. In addition, other technologies may
replace our existing technologies and the acceptance of our technologies in the
market may not be widespread, which could materially adversely affect our
revenues.
IF THE DEMAND FOR DESKTOP COMPUTER SYSTEMS AND CD-R AND CD-RW DRIVES
DECLINES, OUR REVENUES FROM OUR SOFTWARE SEGMENT MAY DECLINE. Our software
products are used primarily in desktop computer systems to enable CD-R and CD-RW
capabilities. We sell our software products primarily to major OEMs and
distributors. Our business depends on general economic and business conditions
and the growth of the CD-R and desktop computer markets. If demand for our
products slows or the CD-R market does not develop as quickly as we expect, our
business or operating results may decline materially due to the resulting
decline in demand for our products.
IF WE ARE UNABLE TO PROVIDE ADEQUATE CUSTOMER SERVICE DURING OUR CUSTOMERS'
DESIGN AND DEVELOPMENT STAGE OR WE ARE UNABLE TO PROVIDE SUCH SERVICE IN A
TIMELY MANNER, REVENUES MAY BE LOST TO OUR COMPETITION. Certain of our products
are designed to meet our customers specifications and, to the extent we are not
able to meet these expectations at all or in timely manner, our customers may
choose to buy their products from another company. As a result, our financial
results could be materially adversely impacted.
WE MAY BE UNABLE TO GENERATE ENOUGH REVENUES FROM PRODUCTS INCORPORATING
TECHNOLOGY LICENSED FROM AGILENT TO OFFSET THE GUARANTEED PAYMENTS TO AGILENT,
WHICH COULD MATERIALLY ADVERSELY IMPACT OUR RESULTS OF OPERATIONS. In
January 2000, we entered into a four-year agreement with Agilent to co-develop,
market and sell fibre channel host adapters. As part of the agreement, we agreed
to license Agilent's fibre channel host adapter and software driver technology
and pay guaranteed minimum royalty payments of
11
$60.00 million over the term of the agreement as follows: $6.0 million in the
first year, $12.0 million in the second year, $18.0 million in the third year
and $24.0 million in the fourth year. If we are unable to generate sufficient
revenues to offset our commitment per the agreement, our results of operations
could be materially adversely impacted.
IF THERE IS A SHORTAGE OF COMPUTER COMPONENTS IN THE MARKET, OUR SALES MAY
DECLINE, WHICH COULD MATERIALLY ADVERSELY IMPACT OUR RESULTS OF OPERATIONS. If
our customers are unable to purchase certain components which are embedded into
their products, then their demand for our components may decline. Beginning in
the fourth quarter of fiscal 2000, we began to experience the impact of other
companys' chip supply shortages, which reduced the demand for some of our DAS
products. This shortage, as well as other shortages, could materially adversely
impact our sales and thereby our results of operations.
OUR RELIANCE ON INDUSTRY STANDARDS AND TECHNOLOGICAL CHANGE IN THE
MARKETPLACE MAY CAUSE OUR REVENUES TO FLUCTUATE OR DECLINE. Various standards
and protocols that evolve with time characterize the computer industry. We
design our products to conform to certain industry standards and protocols such
as the following:
TECHNOLOGIES:
- SCSI
- PCI and PCIX
- RAID
- Ultra-DMA (or UDMA)
- Etherstorage
- Infiniband
- Fibre channel
OPERATING SYSTEMS:
- Windows (including Windows 98 and Windows NT)
- OS/2
- Netware
- UNIX
- Novel
- Macintosh
- Linux
In particular, a majority of our revenues are currently derived from
products based on the SCSI standard. If consumer acceptance of these standards
declines, or if new standards emerge, and if we did not anticipate these changes
and develop new products, these changes could materially adversely affect our
business or operating results. For example, we believe that changes in
consumers' perceptions of the relative merits of SCSI based products and
products incorporating a competing standard, Ultra-DMA, have materially
adversely affected the sales of our products beginning in fiscal 1998 and may
materially adversely affect our future sales.
12
IF OUR PRODUCTS DO NOT INTEROPERATE EFFECTIVELY, THIS COULD NEGATIVELY
IMPACT OUR REVENUES AND REDUCE THE PRICE OF OUR STOCK. We must design our
products to interoperate effectively with a variety of hardware and software
products supplied by other manufacturers, including the following:
- microprocessors
- peripherals
- operating system software
We depend on significant cooperation with these manufacturers to achieve our
design objectives and produce products that interoperate successfully. We
believe that generally we have good relationships with leading system,
peripheral, and microprocessor suppliers; however, we cannot assure that these
suppliers will not from time to time make it more difficult for us to design our
products for successful interoperability. These suppliers also may decide to
compete with us.
OUR DEPENDENCE ON NEW PRODUCTS MAY CAUSE OUR REVENUES TO FLUCTUATE OR
DECLINE. Our future success is highly dependent upon our completing and
introducing new products at competitive price/performance levels in a timely
manner. The success of new product introductions depends on several factors,
including the following:
- defining products to meet customer needs
- product costs
- timely completion and introduction of new product designs relative to
customers' needs and competitor introductions
- quality of new products
- differentiation of new products from those of our competitors
- market acceptance of our products, as well as our competitors'
As a result, we believe that continued significant expenditures for research
and development will be required in the future. We cannot assure that we will
successfully identify new product opportunities and develop and bring new
products to market in a timely manner. Also we cannot assure that products or
technologies developed by others will not render our products or technologies
obsolete or noncompetitive, or that our targeted customers will select our
products for their design or integration into the products. The failure of any
of our new product development efforts could have a material adverse effect on
our business or operating results.
IF WE ARE UNABLE TO COMPETE EFFECTIVELY OUR REVENUES AND OUR STOCK PRICE MAY
DECLINE. The markets for all of our products are intensely competitive and are
characterized by the following:
- rapid technological advances
- frequent new product introductions
- evolving industry standards
- price erosion
In the DAS and SNS segments, we compete with LSI Logic Corporation QLogic,
Corp., American Megatrends, Inc., Mylex Corporation (a subsidiary of IBM), and
other captive manufacturers and suppliers. Our principal competitors in the
Software segment range from small operations to large consumer software
companies. As we have continued to broaden our bandwidth management product
offerings into the server, and workstation and desktop environments, we have
experienced, and expect to experience in the future, significantly increased
competition both from existing competitors and from additional companies that
may enter our markets. Some of these companies have greater technical,
13
marketing, manufacturing, and financial resources than we do. We cannot assure
that we will have sufficient resources to accomplish any of the following:
- meet growing product demand
- make timely introduction of new leading-edge solutions in response to
competitive threats
- compete successfully in the future against existing or potential
competitors
- provide OEMs with timely design specifications
- prevent price competition from eroding margins
IF WE ARE UNABLE TO INTEGRATE ACQUIRED COMPANIES AND TECHNOLOGIES AND THE
COSTS RELATED WITH THESE ACQUISITIONS, OUR FINANCIAL CONDITION OR OPERATING
RESULTS MAY DECLINE. In July 1999, we acquired CeQuadrat, in December 1999, we
acquired DPT, and in March 2000, we acquired Wild File. Each of the acquisitions
was accounted for using the purchase method of accounting. In January 2000, we
entered into an agreement with Agilent to co-develop, market and sell fibre
channel host bus adapters. As part of our overall strategy, we may continue to
acquire or invest in complementary companies, products, or technologies and
enter into joint ventures and strategic alliances with other companies. Risks
commonly encountered in such transactions include the following:
- the difficulty of assimilating the operations and personnel of the
combined companies
- the potential disruption of our ongoing business
- the inability to retain key technical and managerial personnel
- the difficulty of integrating the acquired company into Adaptec's
strategic and financial plans.
- uncertainty about whether or when the presumed benefits of the
acquisitions will outweigh the costs reported in the financial statements.
- the possibility of inaccurate assessments of the value of a potential
target businesses, products or technologies
- incurring additional expenses associated with amortization of acquired
intangible assets
- dilution of existing equity holders
- unanticipated changes in the market conditions for acquired products or
technologies
- the maintenance of uniform standards, controls, procedures, and policies
- the impairment of relationships with employees and customers as a result
of integration of new personnel
We cannot assure that we will be successful in overcoming these risks or any
other problems encountered in connection with these or other business
combinations, investments, or joint ventures, or that such transactions will not
materially adversely affect our business, financial condition or operating
results.
WE DEPEND ON WAFER SUPPLIERS WHOSE FAILURE TO MEET OUR MANUFACTURING NEEDS
COULD NEGATIVELY AFFECT OUR OPERATIONS. Independent foundries currently
manufacture to our specifications all of the finished silicon wafers used for
our products. We currently purchase most of our wafers through a supply
agreement with Taiwan Semiconductor Manufacturing Corp. ("TSMC"). The
manufacture of semiconductor devices is sensitive to a wide variety of factors,
including the following:
- the availability of raw materials
- the availability of manufacturing capacity
14
- the level of contaminants in the manufacturing environment
- impurities in the materials used
- the performance of personnel and equipment
While we have been satisfied with the quality, yield, and timeliness of
wafer deliveries to date we cannot assure that manufacturing yield problems will
not occur in the future. In addition, although we have various supply agreements
with our suppliers, a shortage of raw materials or production capacity could
lead our wafer suppliers to allocate available capacity to other customers, or
to the suppliers' internal uses. Any prolonged inability to obtain wafers with
competitive performance and cost attributes, adequate yields, or timely
deliveries from our foundries would delay our production and our product
shipments and could have a material adverse impact on our business or operating
results. We expect that our current suppliers will, in the future, seek to
convert its fabrication process arrangements to smaller wafer geometries and to
more advanced process technologies. Such conversions entail inherent
technological risks that can affect yields and delivery times. If for any reason
our current suppliers are unable or unwilling to satisfy our wafer needs, we
will be required to identify and qualify additional foundries. We cannot assure
that any additional wafer foundries would become available, that such foundries
would be successfully qualified, or that such foundries would be able to satisfy
our requirements on a timely basis.
In order to secure wafer capacity, from time to time we have entered into
"take or pay" contracts that have committed us to purchase specified wafer
quantities over extended periods, and we have made prepayments to foundries. In
the future, we may enter into similar transactions, including, without
limitation, the following:
- non-refundable deposits
- loans
- equity investments
- joint ventures
- other partnership relationships
Any such transaction could require us to seek additional equity or debt
financing to fund such activities. We cannot assure that we will be able to
obtain any required financing on terms acceptable to us.
WE DEPEND ON SUBCONTRACTORS WHOSE FAILURE TO MEET OUR MANUFACTURING NEEDS
COULD NEGATIVELY AFFECT OUR OPERATIONS. We rely on subcontractors for the
assembly and packaging of the ICs included in our products. We have no long-term
agreements with our assembly and packaging subcontractors. We also use board
subcontractors to better balance production runs and capacity. We cannot assure
that such subcontractors will continue to be able and willing to meet our
requirements for such components or services. Any significant disruption in
supplies from, or degradation in the quality of components or services supplied
by, such subcontractors could delay shipments and result in the loss of
customers or revenues or otherwise have a material adverse impact on our
business or operating results.
OUR DISTRIBUTORS MAY NOT ADEQUATELY DISTRIBUTE OUR PRODUCTS WHICH COULD
NEGATIVELY AFFECT OUR OPERATIONS. Our distributors generally offer a diverse
array of products from several different manufacturers. Accordingly, we are at a
risk that these distributors may give higher priority to selling products from
other suppliers, thus reducing their efforts to sell our products. A reduction
in sales efforts by our current distributors could materially adversely impact
our business or operating results. Our distributors may on occasion build
inventories in anticipation of substantial growth in sales, and if such growth
does not occur as rapidly as we anticipate, distributors may decrease the amount
of product ordered from us in subsequent quarters. In addition, if we decrease
our price protection or distributor-incentive programs, our distributors may
temporarily decrease the amounts of product purchased from us. This could result
in a change in distributor business habits, and distributors may decide to
decrease the amount of product held and reduce their inventory levels. This
could reduce our revenues in any given quarter and could negatively impact our
operating results. In addition, we may from time to time take actions to reduce
levels of Company products at distributors. These actions could reduce our
revenues in any given quarter and could negatively impact our operating results
or revenues.
Gross revenues from distributors accounted for 54% of our total gross
revenues in fiscal 2000. One distributor accounted for 13% of net revenues in
fiscal 2000 and 19% of gross trade receivables as of March 31, 2000. Another
distributor accounted for 11% of gross trade receivables as of March 31, 2000,
but represented less than 10% of net revenues in fiscal 2000.
15
OUR OPERATIONS DEPEND ON KEY PERSONNEL, THE LOSS OF WHOM COULD AFFECT OUR
BUSINESS AND REDUCE OUR FUTURE REVENUES. Our future success depends in large
part on the continued service of our key technical, marketing, and management
personnel, and on our ability to continue to attract and retain qualified
employees, particularly those highly skilled design, process, and test engineers
who are involved in the design enhancements and manufacture of existing products
and the development of new products and processes. The competition for such
personnel is intense, and the loss of key employees could materially adversely
affect our business, operating results or revenues. Specifically, the expansion
of high technology companies in Silicon Valley, where our corporate offices are
located, has increased demand and competition for qualified personnel. Our
continued growth and future operating results will depend upon our ability to
attract, hire and retain significant numbers of qualified employees.
CERTAIN OF OUR INTERNATIONAL OPERATIONS ARE RISKY, AND MAY NEGATIVELY AFFECT
OUR OPERATIONS OR REVENUES. Our manufacturing facility and various
subcontractors it utilizes from time to time are primarily located in Asia.
Additionally, we have various sales offices and customers throughout Europe,
Japan, and other countries. Our international operations and sales are subject
to political and economic risks, including political instability, currency
controls, exchange rate fluctuations, and changes in import/export regulations,
tariffs, and freight rates. We may use forward exchange contracts to manage any
exposure associated with certain foreign currency-denominated commitments. In
addition, because our primary wafer supplier, TSMC, is located in Taiwan, we may
be subject to certain risks resulting from the political instability in Taiwan,
including conflicts between Taiwan and the People's Republic of China.
WE MAY NOT ALWAYS BE ABLE TO ADEQUATELY PROTECT OR MAINTAIN OUR INTELLECTUAL
PROPERTY RIGHTS. Historically, we have devoted significant resources to
research and development, and we believe that the intellectual property derived
from such research and development is a valuable asset that is important to the
success of our business. Although we actively maintain and defend our
intellectual property rights, we cannot assure that the steps taken by us will
be adequate to protect our proprietary rights. In addition, the laws of certain
territories in which our products are or may be developed, manufactured, or
sold, including Asia and Europe, may not protect our products and intellectual
property rights to the same extent as the laws of the United States.
We have from time to time discovered counterfeit copies of our products
being manufactured or sold by others. Although we maintain an active program to
detect and deter the counterfeiting of our products, significant availability of
counterfeit products could reduce our revenue and damage our reputation and
goodwill with customers.
THIRD PARTIES MAY ASSERT INFRINGEMENT CLAIMS AGAINST US, WHICH MAY RESULT IN
ADDITIONAL COSTS AND COULD MATERIALLY ADVERSELY IMPACT OUR OPERATIONS AND
REVENUES. From time to time, third parties may assert exclusive patent,
copyright, and other intellectual property rights to our key technologies. We
cannot assure you that third parties will not assert infringement claims against
us in the future, that assertions by third parties will not result in costly
litigation, or that we would prevail in such litigation or be able to license
any valid and infringed patents from third parties on commercially reasonable
terms. Litigation, regardless of the outcome, could result in substantial cost
to us and diversion of our resources. Any infringement claim or other litigation
against or by us could materially adversely impact our business, operating
results or revenues.
In May 2000, the Company entered into an agreement with a third party for a
patent cross-license. Under the agreement, the Company will pay the third party
a settlement fee in return for a release from past infringement claims prior to
January 1, 2000 and a fully paid-up license fee for the use of certain of the
third party's patents through June 30, 2004. Additionally, the Company will
grant the third party a license to use all of its patents for the same period.
The aggregate fee to be paid by the Company under the proposed cross-license
agreement will range from $11 million to $25 million, depending on the outcome
of an evaluation of certain patents by an independent party. The Company's
16
best estimate of the aggregate fee that will be payable under the proposed
cross-license agreement is $18.0 million.
WE MAY ENCOUNTER NATURAL DISASTERS, WHICH MAY NEGATIVELY AFFECT OUR
OPERATIONS AND OUR FINANCIAL CONDITION. Our corporate headquarters in
California are located near major earthquake faults. Any damage to our
information systems caused as a result of an earthquake, fire or any other
natural disasters could have a material impact on our business, financial
condition and results of operations. Additionally, our primary wafer supplier is
located in Taiwan, which has experienced significant earthquakes. A severe
earthquake could interrupt our manufacturing process and could materially
adversely impact our business, financial condition or results of operations.
WE MAY EXPERIENCE VOLATILE FLUCTUATIONS IN OUR STOCK PRICE. The stock
market in general, and the market for shares of technology companies in
particular, has from time to time experienced extreme price fluctuations. Often,
these changes have been unrelated to the operating performance of the affected
companies. In addition, factors such as technological innovations or new product
introductions by us, by our competitors, or by our customers may have a
significant impact positively or negatively, on the market price of our common
stock. Furthermore, quarter-to-quarter fluctuations in our results of operations
caused by changes in customer demand, changes in the microcomputer and
peripherals markets, or other factors, may have a significant impact on the
market price of our common stock. In addition, general market conditions and
international macroeconomic factors unrelated to our performance may affect our
stock price. These conditions and other conditions and factors that generally
affect the market for stocks of technology companies could cause the price of
our common stock to fluctuate substantially over short periods.
WE ARE EXPOSED TO CERTAIN EQUITY PRICE RISKS OR INVESTMENT RISKS WHICH COULD
AFFECT OUR QUARTERLY OR ANNUAL PROFITS AND OUR STOCK PRICE. We are exposed to
equity price risk with our investment in JNI common stock included in
"Marketable securities" in our Condensed Consolidated Balance Sheet as of
March 31, 2000. Since JNI's initial public offering in October 1999 through the
date of this report, the market price of JNI common stock has ranged from $20.19
to $93.88 and is likely to continue to fluctuate. An adverse change in the price
of JNI common stock and limitations on the sale of that stock could materially
adversely affect our financial position and, if we were to sell our investment
at a loss, could materially adversely affect our financial results.
WE ENGAGE IN TRANSACTIONS INVOLVING DERIVATIVES WHICH COULD ADVERSELY AFFECT
OUR FINANCIAL POSITION. We engage in transactions involving derivative
securities to execute repurchases of our common stock under stock repurchase
programs authorized by our board of directors. Some of these transactions may
obligate us to buy back shares of our common stock at prices greater than fair
market value at the time of purchase. In June 2000, the Company repurchased
shares of its common stock at prices greater than the fair market value of our
stock at the date of repurchase in accordance with two derivative contracts.
Although the impact of the June 2000 repurchases did not materially adversely
impact of financial position, in the future our obligation could be in excess of
the amounts recognized in our financial statements and could materially
adversely affect our financial position.
WE MAY BE ENGAGED IN LEGAL PROCEEDINGS THAT COULD NEGATIVELY AFFECT OUR
FINANCIAL CONDITION OR BUSINESS OPERATIONS. From time to time we are subject to
litigation or claims that could negatively affect our financial condition or
business operations. For instance, a class action lawsuit is pending in the
United States District Court for the Northern District of California against us
and certain of our officers and directors. This lawsuit alleges that we made
false and misleading statements at various times during the period between
April 1997 and January 1998 and that these statements violated federal
securities laws. The complaint does not specify damages. The Company's motion to
dismiss the complaint was granted in April 2000. The plaintiffs were given leave
to file an amended complaint, and they have stated that they intend to do so. We
believe this lawsuit is without merit and we intend to defend ourselves
vigorously. However, any dispute, including this lawsuit, could cause us to
incur unforeseen expenses,
17
could occupy an inordinate amount of our management's time and attention and
could negatively affect our financial condition or business operations.
WE MAY BE SUBJECT TO A HIGHER EFFECTIVE TAX RATE THAT COULD NEGATIVELY
IMPACT OUR RESULTS OF OPERATIONS AND FINANCIAL POSITION. Currently, we are
subject to a significantly lower effective tax rate as compared to the U.S.
Federal statutory tax rate due to income earned in Singapore, resulting from a
tax holiday relating to certain of our products. The terms of the tax holiday
provide that profits derived from certain products will be exempt from tax
through fiscal 2005, subject to certain conditions. If we do not continue to
meet the conditions and requirements of the tax holiday in Singapore, our
effective tax rate will increase, which could materially adversely impact our
results of operations and financial position.
WE MAY BE REQUIRED TO PAY ADDITIONAL TAXES TO THE INTERNAL REVENUE SERVICE
WHICH COULD NEGATIVELY IMPACT OUR RESULTS OF OPERATIONS AND FINANCIAL
POSITION. The Internal Revenue Service is currently auditing the Company's
income tax returns for fiscal years 1994 through 1999. Although no proposed
adjustments have been received from these audits as of the date of this report,
the outcome of these audits could materially adversely impact the Company's
financial position and results of operations.
ITEM 2. PROPERTIES
The Company owns seven buildings (approximately 479,000 square feet) in
California, which are primarily used by the Company for corporate offices,
research, manufacturing, marketing, and sales, one building (approximately
16,000 square feet) in Florida primarily used for engineering and one building
(approximately 200,000 square feet) in Colorado, used for research, technical
support, marketing, sales, and administrative support. As of March 31, 1999, the
Company was actively pursuing the sale of the Colorado land and building and
these assets were therefore classified in assets held for sale (currents assets)
in the March 31, 1999 balance sheet. During the third quarter of fiscal 2000,
the Company took the land and building held for sale in Colorado off the market
in order to make improvements to the property. At which time the improvements
are completed, the Company will determine its future requirements for the
property. Accordingly, the land and building held for sale in Colorado have been
reclassified to "Property and equipment" in the Consolidated Balance Sheet as of
March 31, 2000.
The Company leases seven buildings (approximately 166,000 square feet) in
California, of which two are used as outside warehouses, four are sublet or
available for sublease and one is occupied by the Company. The Company leases
six buildings (approximately 56,000 square feet) in Florida, which are used for
warehousing, manufacturing, technical support, marketing, sales, and
administrative support. Other facilities include Redmond, Washington (2,000
square feet); Plymouth Minnesota (7,000 square feet); Hudson, Wisconsin (9,000
square feet); and Nashua, New Hampshire (23,000 square feet) to support
technical design efforts and sales.
Adaptec Manufacturing Singapore is located in one owned facility
(approximately 172,000 square feet) and is used by the Company for research,
manufacturing, sales and warehousing. The Company also leases four sales offices
in the United States, and one sales office each in Brussels, Belgium; Munich,
Germany; Aachen, Germany; Bretonneux, France; London, England; Lindfield,
Australia; Singapore; Seoul, Korea; Taipei, Taiwan; Hong Kong; and Tokyo, Japan.
The Aachen, Brussels and Tokyo offices also provide technical design efforts and
technical support. The Company believes its existing facilities and equipment
are well maintained and in good operating condition and believes its
manufacturing facilities, together with the use of independent manufacturers
where required or desirable, will be sufficient to meet its anticipated
manufacturing needs through fiscal 2001.
The Company also acquired a parcel of land in Fremont, California, for
$12.9 million in fiscal 1996. In January 2000, the Company entered into a
contract to sell the remaining land in Fremont, California and expects to
consummate the sale by mid-fiscal 2001.
18
The Company's future facilities requirements will depend upon the Company's
business, and the Company believes additional space, if required, may be
obtained on reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
A class action lawsuit is pending in the United States District Court for
the Northern District of California against the Company and certain of its
officers and directors. The class action lawsuit alleges that the Company made
false and misleading statements at various times during the period between
April 1997 and January 1998 in violation of federal securities laws. The
Company's motion to dismiss the complaint was granted in April 2000. The
plaintiffs were given leave to file an amended complaint, and they have stated
that they intend to do so. The Company believes the class action lawsuit is
without merit and intends to defend itself vigorously.
In addition, a derivative action was filed in the Superior Court of the
State of California against the Company and certain of its officers and
directors, alleging that the individual defendants improperly profited from
transactions in the Company's stock during the same time period referenced by
the class action lawsuit. In July 1999, the Company entered into an agreement to
settle the derivative action. Under the terms of the agreement, the Company
reimbursed the fees and costs incurred by the plaintiff's attorney in the amount
of $600,000. The settlement does not affect the class action lawsuit still
pending. The court approved the settlement on December 21, 1999, and as a
result, the derivative action has been dismissed. The amount of the settlement
was paid in full in the fourth quarter of fiscal 2000.
The Company is a party to other litigation matters and claims which are
normal in the course of its operations, and while the results of such
litigations and claims cannot be predicted with certainty, the Company believes
that the final outcome of such matters will not have a materially adverse impact
on the Company's consolidated financial position or results of operations.
The IRS is auditing the Company's income tax returns for fiscal 1994 through
1996. In addition, in March 2000 the IRS began its audit on the Company's income
tax returns for fiscal 1997 through 1999. No proposed adjustments have been
received for these audits. The Company believes sufficient taxes have been
provided and that the ultimate outcome of the IRS audits will not have a
material adverse impact on the Company's financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
19
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Incorporated by reference from the information under the caption: "Selected
Financial Data" on page 77 of the Company's Annual Report to Stockholders for
the fiscal year ended March 31, 2000.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference from the information under the caption: "Selected
Financial Data" on page 77 of the Company's Annual Report to Stockholders for
the fiscal year ended March 31, 2000.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Incorporated by reference from the information under the caption:
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on page 79 through 92 of the Company's Annual Report to Stockholders
for the fiscal year ended March 31, 2000.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Incorporated by reference from the information under the caption: "Market
Risk Disclosure" on page 91 of the Company's Annual Report to Stockholders for
the fiscal year ended March 31, 2000.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidate financial statements of Adaptec, Inc. at March 31, 2000 and 1999
and for each of the three years in the period ended March 31, 2000 and the
independent accountants' report thereon are incorporated by reference from pages
36 through 74 of the Annual Report to Stockholders for the year ended March 31,
2000.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
20
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to directors of Adaptec is incorporated by
reference from the information under the captions: "Election of
Directors--Nominees" and "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Company's definitive Proxy Statement for the Annual Meeting
of Stockholders to be held, August 24, 2000 (the "Proxy Statement"). Information
with respect to the executive officers of Adaptec is included in Part I of this
Form 10-K under the heading "Executive Officers".
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the information under the caption: "Executive
Compensation and Other Matters" and "Election of Directors--Certain
Transactions" in the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the information under the caption: "Election
of Directors--Security Ownership of Management; Principal Stockholders" in the
Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the information under the caption: "Election
of Directors--Certain Transactions" in the Company's Proxy Statement.
21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following Consolidated Financial Statements of Adaptec, Inc. and the
Report of Independent Accountants, as listed under (a)(1) below, are
incorporated by reference to the Registrant's Annual report to Stockholders for
the year ended March 31, 2000.
(a)(1) FINANCIAL STATEMENTS:
PAGE
--------
Consolidated Statements of Operations--Fiscal Years ended
March 31, 2000, 1999, and 1998............................ 36
Consolidated Balance Sheets at March 31, 2000 and 1999...... 37
Consolidated Statements of Cash Flows--Fiscal Years ended
March 31, 2000, 1999, and 1998............................ 38
Consolidated Statements of Stockholders' Equity--Fiscal
Years ended March 31, 2000, 1999, and 1998................ 39
Notes to Consolidated Financial Statements.................. 40 to 72
Report of Management........................................ 73
Report of Independent Accountants........................... 74
(2) FINANCIAL STATEMENT SCHEDULE:
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Adaptec, Inc.
Our audits of the consolidated financial statements referred to in our
report dated April 26, 2000, appearing in the Fiscal 2000 Annual Report to
Stockholders of Adaptec, Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the financial statement schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule
represents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
San Jose, California
April 26, 2000
22
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED MARCH 31, 2000, 1999 AND 1998
(IN THOUSANDS)
BALANCE AT BALANCE AT
BEGINNING END
OF PERIOD ADDITIONS DEDUCTIONS OF PERIOD
---------- --------- ---------- ----------
Year ended March 31, 2000
Allowance for doubtful accounts.................... $ 1,895 $ 1,128 $ 1,741 $ 1,282
Allowance for excess and obsolete inventory........ 19,314 4,729 12,791 11,252
Sales returns...................................... 8,799 33,000 32,076 9,723
Allowances......................................... 3,760 9,280 10,122 2,918
Year ended March 31, 1999
Allowance for doubtful accounts.................... $ 4,185 $ 1,258 $ 3,548 $ 1,895
Allowance for excess and obsolete inventory........ 22,585 11,123 14,394 19,314
Sales returns...................................... 20,057 39,616 50,874 8,799
Allowances......................................... 3,199 24,455 23,894 3,760
Year ended March 31, 1998
Allowance for doubtful accounts.................... $ 5,098 $ 4,000 $ 4,913 $ 4,185
Allowance for excess and obsolete inventory........ 18,365 14,054 9,834 22,585
Sales returns...................................... 8,028 45,823 33,794 20,057
Allowances......................................... 4,892 29,186 30,879 3,199
23
(3) EXHIBITS INCLUDED HEREIN (NUMBERED IN ACCORDANCE WITH ITEM 601 OF
REGULATION S-K):
EXHIBIT
NUMBER DESCRIPTION NOTES
- --------------------- ----------- --------
2.1 Asset Acquisition Agreement by and among Adaptec, Inc. and
Analog Devices, Inc. dated March 24, 1998. 10
2.2 Agreement and Plan of Reorganization by and among Adaptec,
Inc., Ridge Technologies and RDS Acquisition dated as of May
21, 1998. 10
2.3 Agreement and Plan of Merger dated February 23, 1998 between
Registrant and Adaptec, Inc., a California corporation. 10
2.4 Asset Purchase Agreement between Texas Instruments,
Incorporated and Adaptec, Inc. dated November 6, 1998. 12
2.5 Asset Acquisition Agreement among Adaptec, Inc., Adaptec
Mfg. (s) Pte. Ltd. And STMicroelectronics, Inc. dated
January 15, 1999. 12
2.6 Amendment No. 1 to Asset Acquisition Agreement among
Adaptec, Inc., Adaptec Mfg. (s) Pte. Ltd. and
STMicroelectronics, Inc. dated January 15, 1999. 12
2.7 Agreement and Plan of Reorganization, dated as of December
3, 1999, by and among Adaptec, Inc., Adaptec Mfg. (S) Pte.
Ltd., Adaptec Acquisition Corp., Distributed processing
Technology Corp., and Stephen H. Goldman. 15
2.8 Development and Marketing Agreement by and between Adaptec,
Inc., Adaptec CI, Ltd. and Agilent Technologies, Inc. dated
January 17, 2000
3.1 Certificate of Incorporation of Registrant filed with
Delaware Secretary of State on November 19, 1997. 10
3.2 Bylaws of Registrant, as amended on June 29, 1999. 13
4.1 Second Amended and Restated Rights Agreement dated December
5, 1996 between Registrant and Chase Mellon Shareholder
Services, Inc. as Rights Agents 9
4.2 Indenture dated as of February 3, 1997 between Registrant
and State Street bank and Trust Company 11
4.3 First Amendment dated March 12, 1998 to Second Amended and
Restated Rights Agreement. 10
4.4 First Supplemental indenture dated as of March 12, 1998
between Registrant and State Street Bank and Trust Company. 10
10.1+ Registrant's 1986 Employee Stock Purchase Plan. 4
10.2+ Registrant's Savings and Retirement Plan. 1
10.3+ 1990 Stock Plan, as amended. 6
10.4+ Forms of Stock Option Agreement, Tandem Stock Option/SAR
Agreement, Restricted Stock Purchase Agreement, Stock
Appreciation Rights Agreement, and Incentive Stock Rights
Agreement for use in connection with the 1990 Stock Plan, as
amended. 3
10.5+ 1990 Directors' Option Plan and forms of Stock Option
Agreement, as amended. 4
10.6 Option Agreement I Between Adaptec Manufacturing (S) Pte.
Ltd. and Taiwan Semiconductor Manufacturing Co., Ltd. dated
October 23, 1995. 7
10.7* Option Agreement II Between Adaptec Manufacturing (S) Pte.
Ltd. and Taiwan Semiconductor Manufacturing Co., Ltd. dated
October 23, 1995. 7
10.8 Form of Indemnification Agreement entered into with
directors and officers of Adaptec, Inc., a California
corporation, prior to Registrant's reincorporation into
Delaware. 2
24
EXHIBIT
NUMBER DESCRIPTION NOTES
- --------------------- ----------- --------
10.9 Form of Indemnification Agreement entered into between
Registrant and its officers and directors. 10
10.10 Industrial Lease Agreement between the Registrant, as
Lessee, and Jurong Town Corporation, as Lessor. 5
10.11** Amendment to Option Agreements I & II between Taiwan
Semiconductor Manufacturing Co., Ltd. and Adaptec,
Manufacturing (s) Pte. Ltd. 13
10.12 Modification to Amendment to Option Agreement I & II between
Taiwan Semiconductor Manufacturing Co., Ltd. and Adaptec,
Manufacturing (s) Pte. Ltd. 13
10.13+ 1999 Stock Plan. 14
10.14 License Agreement between International Business Machines
Corporation and Adaptec, Inc.
10.15** Amendment No. 3 to Option Agreement II between Adaptec
Manufacturing (S) Pte. Ltd. and Taiwan Semiconductor
Manufacturing Co., Ltd.
13.1 Those portions of Registrant's Annual Report to Stockholders
incorporated by reference herein.
21.1 Subsidiaries of Registrant.
23.1 Consent of Independent Accountants, PricewaterhouseCoopers
LLP.
24.1 Power of Attorney. (See Page 28)
27.1 Financial Data Schedule for the year ended March 31, 2000.
- ------------------------
(1) Incorporated by reference to exhibits filed with Registrant's Annual Report
on Form 10-K for the year ended March 31, 1987.
(2) Incorporated by reference to exhibits filed with Registrant's Annual Report
on Form 10-K for the year ended March 31, 1992.
(3) Incorporated by reference to exhibits filed with Registrant's Annual Report
on Form 10-K for the year ended March 31, 1993.
(4) Incorporated by reference to exhibits filed with Registrant's Annual Report
on Form 10-K for the year ended March 31, 1994.
(5) Incorporated by reference to exhibits filed with Registrant's Annual Report
on Form 10-K for the year ended March 31, 1995.
(6) Incorporated by reference to Exhibit 4.2 filed with the Registrant's
Registration Statement on Form S-8 (file No. 333-00779) filed on
February 7, 1996.
(7) Incorporated by reference to Exhibit 10.1and 10.2 to Form 10-Q as filed
February 9, 1996.
(8) Incorporated by reference to Exhibit 1 filed with Amendment No. 4 to
Registrant's Registration Statement on Form 8-A (No. 0-15071) as filed on
January 4, 1997.
(9) Incorporated by reference to Exhibit 4.2 filed with the Registrant's
Registration Statement on Form S-1 and Amendment No. 1 thereto (file
No. 333-24557), which became effective on July 24, 1997.
(10) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the year ended March 31, 1998.
(11) Incorporated by reference to Exhibit 10.1 to Form 10-Q as filed
August 13, 1998.
25
(12) Incorporated by reference to Exhibits 2.1, 2.2, and/or 2.3, respectively,
to Form 8-K as filed February 1, 1999.
(13) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the year ended March 31, 1999.
(14) Incorporated by reference to Exhibit 10.1 to Form 10-Q as filed
November 8, 1999.
(15) Incorporated by reference to Exhibit 2.1 to Form 8-K as filed January 6,
2000.
+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c) of said form.
* Confidential treatment has been granted for portions of this agreement.
** Confidential treatment has been requested for portions of this agreement.
(b) REPORTS ON FORM 8-K
During the fourth quarter ended March 31, 2000, the Company filed with the
Securities and Exchange Commission a current Report on Form 8-K dated
January 6, 2000 to report under Item 2 thereof the acquisition of Distributed
Processing Technology Corp. Subsequently, the Company filed a current Report on
Form 8-K/A dated March 3, 2000, amending its Report on Form 8-K dated
January 6, 2000.
26
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.
ADAPTEC, INC.
/S/ ROBERT N. STEPHENS
- --------------------------------------------
Robert N. Stephens
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Date: June 27, 2000
27
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Robert N. Stephens and Andrew J. Brown, jointly
and severally, his attorneys-in-fact, each with the power of substitution, for
him in any and all capacities, to sign any amendments to this Report on
Form 10-K, and to file the same, with exhibits thereto and other documents in
connection therewith with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons in the capacities and on
the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President, Chief Executive
/s/ ROBERT N. STEPHENS Officer and Director
------------------------------------------- (principal executive June 27, 2000
(Robert N. Stephens) officer)
Vice President of Finance
/s/ ANDREW J. BROWN and Chief Financial
------------------------------------------- Officer June 27, 2000
(Andrew J. Brown) (principal financial
officer)
Vice President and
/s/ KENNETH B. AROLA Corporate Controller
------------------------------------------- (principal accounting June 27, 2000
(Kenneth B. Arola) officer)
/s/ LAURENCE B. BOUCHER
------------------------------------------- Chairman of the Board and June 27, 2000
(Laurence B. Boucher) Director
------------------------------------------- Director
(John G. Adler)
/s/ CARL J. CONTI
------------------------------------------- Director June 27, 2000
(Carl J. Conti)
/s/ JOHN C. EAST
------------------------------------------- Director June 27, 2000
(John C. East)
/s/ ILENE H. LANG
------------------------------------------- Director June 27, 2000
(Ilene H. Lang)
/s/ ROBERT J. LOARIE
------------------------------------------- Director June 27, 2000
(Robert J. Loarie)
/s/ B. J. MOORE
------------------------------------------- Director June 27, 2000
(B. J. Moore)
28
SIGNATURE TITLE DATE
--------- ----- ----
/s/ W. FERRELL SANDERS
------------------------------------------- Director June 27, 2000
(W. Ferrell Sanders)
/s/ PHILLIP E. WHITE
------------------------------------------- Director June 27, 2000
(Phillip E. White)
29
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION NOTES
- --------------------- ----------- --------
2.1 Asset Acquisition Agreement by and among Adaptec, Inc. and
Analog Devices, Inc. dated March 24, 1998. 10
2.2 Agreement and Plan of Reorganization by and among Adaptec,
Inc., Ridge Technologies and RDS Acquisition dated as of May
21, 1998. 10
2.3 Agreement and Plan of Merger dated February 23, 1998 between
Registrant and Adaptec, Inc., a California corporation. 10
2.4 Asset Purchase Agreement between Texas Instruments,
Incorporated and Adaptec, Inc. dated November 6, 1998. 12
2.5 Asset Acquisition Agreement among Adaptec, Inc., Adaptec
Mfg. (s) Pte. Ltd. And STMicroelectronics, Inc. dated
January 15, 1999. 12
2.6 Amendment No. 1 to Asset Acquisition Agreement among
Adaptec, Inc., Adaptec Mfg. (s) Pte. Ltd. and
STMicroelectronics, Inc. dated January 15, 1999. 12
2.7 Agreement and Plan of Reorganization, dated as of December
3, 1999, by and among Adaptec, Inc., Adaptec Mfg. (S) Pte.
Ltd., Adaptec Acquisition Corp., Distributed processing
Technology Corp., and Stephen H. Goldman. 15
2.8 Development and Marketing Agreement by and between Adaptec,
Inc., Adaptec CI, Ltd. and Agilent Technologies, Inc. dated
January 17, 2000
3.1 Certificate of Incorporation of Registrant filed with
Delaware Secretary of State on November 19, 1997. 10
3.2 Bylaws of Registrant, as amended on June 29, 1999. 13
4.1 Second Amended and Restated Rights Agreement dated December
5, 1996 between Registrant and Chase Mellon Shareholder
Services, Inc. as Rights Agents 9
4.2 Indenture dated as of February 3, 1997 between Registrant
and State Street bank and Trust Company 11
4.3 First Amendment dated March 12, 1998 to Second Amended and
Restated Rights Agreement. 10
4.4 First Supplemental indenture dated as of March 12, 1998
between Registrant and State Street Bank and Trust Company. 10
10.1+ Registrant's 1986 Employee Stock Purchase Plan. 4
10.2+ Registrant's Savings and Retirement Plan. 1
10.3+ 1990 Stock Plan, as amended. 6
10.4+ Forms of Stock Option Agreement, Tandem Stock Option/SAR
Agreement, Restricted Stock Purchase Agreement, Stock
Appreciation Rights Agreement, and Incentive Stock Rights
Agreement for use in connection with the 1990 Stock Plan, as
amended. 3
10.5+ 1990 Directors' Option Plan and forms of Stock Option
Agreement, as amended. 4
10.6 Option Agreement I Between Adaptec Manufacturing (S) Pte.
Ltd. and Taiwan Semiconductor Manufacturing Co., Ltd. dated
October 23, 1995. 7
10.7* Option Agreement II Between Adaptec Manufacturing (S) Pte.
Ltd. and Taiwan Semiconductor Manufacturing Co., Ltd. dated
October 23, 1995. 7
10.8 Form of Indemnification Agreement entered into with
directors and officers of Adaptec, Inc., a California
corporation, prior to Registrant's reincorporation into
Delaware. 2
10.9 Form of Indemnification Agreement entered into between
Registrant and its officers and directors. 10
10.10 Industrial Lease Agreement between the Registrant, as
Lessee, and Jurong Town Corporation, as Lessor. 5
EXHIBIT
NUMBER DESCRIPTION NOTES
- --------------------- ----------- --------
10.11** Amendment to Option Agreements I & II between Taiwan
Semiconductor Manufacturing Co., Ltd. and Adaptec,
Manufacturing (s) Pte. Ltd. 13
10.12 Modification to Amendment to Option Agreement I & II between
Taiwan Semiconductor Manufacturing Co., Ltd. and Adaptec,
Manufacturing (s) Pte. Ltd. 13
10.13+ 1999 Stock Plan. 14
10.14 License Agreement between International Business Machines
Corporation and Adaptec, Inc.
10.15** Amendment No. 3 to Option Agreement II between Adaptec
Manufacturing (S) Pte. Ltd. and Taiwan Semiconductor
Manufacturing Co., Ltd.
13.1 Those portions of Registrant's Annual Report to Stockholders
incorporated by reference herein.
21.1 Subsidiaries of Registrant.
23.1 Consent of Independent Accountants, PricewaterhouseCoopers
LLP.
24.1 Power of Attorney. (See Page 28)
27.1 Financial Data Schedule for the year ended March 31, 2000.
- ------------------------
(1) Incorporated by reference to exhibits filed with Registrant's Annual Report
on Form 10-K for the year ended March 31, 1987.
(2) Incorporated by reference to exhibits filed with Registrant's Annual Report
on Form 10-K for the year ended March 31, 1992.
(3) Incorporated by reference to exhibits filed with Registrant's Annual Report
on Form 10-K for the year ended March 31, 1993.
(4) Incorporated by reference to exhibits filed with Registrant's Annual Report
on Form 10-K for the year ended March 31, 1994.
(5) Incorporated by reference to exhibits filed with Registrant's Annual Report
on Form 10-K for the year ended March 31, 1995.
(6) Incorporated by reference to Exhibit 4.2 filed with the Registrant's
Registration Statement on Form S-8 (file No. 333-00779) filed on
February 7, 1996.
(7) Incorporated by reference to Exhibit 10.1and 10.2 to Form 10-Q as filed
February 9, 1996.
(8) Incorporated by reference to Exhibit 1 filed with Amendment No. 4 to
Registrant's Registration Statement on Form 8-A (No. 0-15071) as filed on
January 4, 1997.
(9) Incorporated by reference to Exhibit 4.2 filed with the Registrant's
Registration Statement on Form S-1 and Amendment No. 1 thereto (file
No. 333-24557), which became effective on July 24, 1997.
(10) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the year ended March 31, 1998.
(11) Incorporated by reference to Exhibit 10.1 to Form 10-Q as filed
August 13, 1998.
(12) Incorporated by reference to Exhibits 2.1, 2.2, and/or 2.3, respectively,
to Form 8-K as filed February 1, 1999.
(13) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the year ended March 31, 1999.
(14) Incorporated by reference to Exhibit 10.1 to Form 10-Q as filed
November 8, 1999.
(15) Incorporated by reference to Exhibit 2.1 to Form 8-K as filed January 6,
2000.
+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c) of said form.
* Confidential treatment has been granted for portions of this agreement.
** Confidential treatment has been requested for portions of this agreement.