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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended January 31, 2002         
|- | --------------------------------------------------------------------------------------------------------------------------------------------------
|  | or                                                                                                                                                
|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from __________ to __________

Commission file number 0-21103



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ADVANCED DIGITAL INFORMATION CORPORATION

|                                                       |  |                                              
|------------------------------------------------------ |  | ---------------------------------------------
|Incorporated under the laws
of the State of Washington |  | I.R.S. Employer Identification
No. 91-1618616

11431 Willows Road N.E.
P.O. Box 97057
Redmond, Washington 98073-9757
 
(425) 881-8004

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 o

The total shares of common stock without par value outstanding at the end
of the quarter reported is 62,264,264.



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TABLE OF CONTENTS



|                             |                                                                                               |                                                            |  |  |  |  |  | 
|---------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------- |  |  |  |  |  | 
|PART IFINANCIAL INFORMATION
|                             | Item 1. Financial Statements                                                                 
|                             |                                                                                               | Consolidated Balance Sheets                               
|                             |                                                                                               | Consolidated Statements of Operations                     
|                             |                                                                                               | Consolidated Statements of Cash Flows                     
|                             |                                                                                               | Consolidated Statements of Changes in Shareholders Equity
|                             |                                                                                               | Notes to Interim Consolidated Financial Statements        
|                             | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                             | Item 3. Quantitative and Qualitative Disclosures About Market Risk Management                
|PART II  OTHER INFORMATION 
|                             | Item 1. Legal Proceedings                                                                    
|                             | Item 2. Changes in Securities                                                                
|                             | Item 3. Defaults Upon Senior Securities                                                      
|                             | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                             | Item 5. Other Information                                                                    
|                             | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                  



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##### Table of Contents






PART IFINANCIAL INFORMATION




Item 1. Financial Statements




Advanced Digital Information Corporation
 Consolidated Balance Sheets
 (In thousands, except for share data)

|                                     |                                                                                                                   |                                   |                      |                            |        |             |         |             |        |         |         | 
|------------------------------------ | ----------------------------------------------------------------------------------------------------------------- | --------------------------------- | -------------------- | -------------------------- | ------ | ----------- | ------- | ----------- | ------ | ------- | ------- | 
|                                     |                                                                                                                   |                                   |                      |                            |        | October 31, |         | January 31,
|                                     |                                                                                                                   |                                   |                      |                            |        | 2001        |         | 2002       
|                                     |                                                                                                                   |                                   |                      |                            |        |             |         |            
|Assets                               |                                                                                                                   |                                   |                      |                            |        |             |         |            
|Current assets:                      |                                                                                                                   |                                   |                      |                            |        |             |         |            
|                                     | Cash and cash equivalents                                                                                         |                                   | $                    | 155,274                    |        |             | $       | 170,026     |       
|                                     | Accounts receivable, net of allowances of $1,752 in 2001
and $1,930 in 2002                                       |                                   |                      | 82,451                     |        |             |         | 86,771      |       
|                                     | Inventories, net                                                                                                  |                                   |                      | 42,430                     |        |             |         | 36,678      |       
|                                     | Marketable equity securities                                                                                      |                                   |                      | 23,352                     |        |             |         | 15,020      |       
|                                     | Prepaid expenses and other                                                                                        |                                   |                      | 1,789                      |        |             |         | 1,311       |       
|                                     | Income taxes receivable                                                                                           |                                   |                      | 9,546                      |        |             |         | 5,237       |       
|                                     | Deferred income taxes                                                                                             |                                   |                      | 10,297                     |        |             |         | 10,117      |       
|                                     |                                                                                                                   |                                   |                      |                            |        |             |         |            
|                                     |                                                                                                                   |                                   | Total current assets |                            |        | 325,139     |         |             |        | 325,160 |        
|Property, plant and equipment, net   |                                                                                                                   |                                   | 32,017               |                            |        |             | 36,463  |            
|Service parts for maintenance, net   |                                                                                                                   |                                   | 17,149               |                            |        |             | 17,952  |            
|Deferred income taxes                |                                                                                                                   |                                   | 7,766                |                            |        |             | 8,061   |            
|Investments                          |                                                                                                                   |                                   | 11,503               |                            |        |             | 10,353  |            
|Intangible and other assets          |                                                                                                                   |                                   | 5,796                |                            |        |             | 5,468   |            
|                                     |                                                                                                                   |                                   |                      |                            |        |             |         |            
|                                     |                                                                                                                   | $                                 | 399,370              |                            |        | $           | 403,457 |            
|                                     |                                                                                                                   |                                   |                      |                            |        |             |         |            
|Liabilities and Shareholders Equity |                                                                                                                   |                                   |                      |                            |        |             |         |            
|Current liabilities:                 |                                                                                                                   |                                   |                      |                            |        |             |         |            
|                                     | Accounts payable                                                                                                  |                                   | $                    | 38,380                     |        |             | $       | 41,176      |       
|                                     | Accrued liabilities                                                                                               |                                   |                      | 12,573                     |        |             |         | 10,874      |       
|                                     | Deferred revenue                                                                                                  |                                   |                      | 12,772                     |        |             |         | 11,890      |       
|                                     | Bank line of credit and current portion of long-term debt                                                         |                                   |                      | 3,999                      |        |             |         | 2,780       |       
|                                     |                                                                                                                   |                                   |                      |                            |        |             |         |            
|                                     |                                                                                                                   |                                   |                      | Total current liabilities  |        |             | 67,724  |             |        |         | 66,720  | 
|Long-term debt                       |                                                                                                                   |                                   | 1,170                |                            |        |             | 1,185   |            
|Commitments                          |                                                                                                                   |                                   |                     |                            |        |             |        |            
|Shareholders equity:                |                                                                                                                   |                                   |                      |                            |        |             |         |            
|                                     | Preferred stock, no par value; 4,000,000 shares
authorized; none issued and outstanding                           |                                   |                      |                           |        |             |         |            |       
|                                     | Common stock, no par value; 160,000,000 shares authorized,
62,264,264 issued and outstanding (61,934,277 in 2001) |                                   |                      | 221,399                    |        |             |         | 224,217     |       
|                                     | Retained earnings                                                                                                 |                                   |                      | 106,599                    |        |             |         | 108,981     |       
|                                     | Accumulated other comprehensive income (loss):                                                                    |                                   |                      |                            |        |             |         |             |       
|                                     |                                                                                                                   | Cumulative translation adjustment |                      |                            | (2,302 | )           |         |             | (2,527 | )      
|                                     |                                                                                                                   | Unrealized investment gains       |                      |                            | 4,780  |             |         |             | 4,881  |        
|                                     |                                                                                                                   |                                   |                      |                            |        |             |         |            
|                                     |                                                                                                                   |                                   |                      | Total shareholders equity |        |             | 330,476 |             |        |         | 335,552 | 
|                                     |                                                                                                                   |                                   |                      |                            |        |             |         |            
|                                     |                                                                                                                   | $                                 | 399,370              |                            |        | $           | 403,457 |            
|                                     |                                                                                                                   |                                   |                      |                            |        |             |         |            

See the accompanying notes to these consolidated financial statements.



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Advanced Digital Information Corporation
 Consolidated Statements of Operations
 (In thousands, except for per share data)

|                                         |                                                    |   |                    |        |      |   |        |        |  
|---------------------------------------- | -------------------------------------------------- | - | ------------------ | ------ | ---- | - | ------ | ------ | -
|                                         |                                                    |   | Three months ended
|                                         |                                                    |   | January 31,       
|                                         |                                                    |   |                   
|                                         |                                                    |   | 2001               |        | 2002
|                                         |                                                    |   |                    |        |     
|Net sales                                |                                                    | $ | 92,426             |        |      | $ | 96,723 |       
|Cost of sales                            |                                                    |   | 64,820             |        |      |   | 72,921 |       
|                                         |                                                    |   |                    |        |      |   |        |       
|                                         | Gross profit                                       |   |                    | 27,606 |      |   |        | 23,802 |  
|                                         |                                                    |   |                    |        |      |   |        |       
|Operating expenses:                      |                                                    |   |                    |        |      |   |        |       
|                                         | Selling and administrative                         |   |                    | 14,154 |      |   |        | 16,338 |  
|                                         | Research and development                           |   |                    | 6,202  |      |   |        | 6,801  |  
|                                         |                                                    |   |                    |        |      |   |        |       
|                                         |                                                    |   | 20,356             |        |      |   | 23,139 |       
|                                         |                                                    |   |                    |        |      |   |        |       
|Operating profit                         |                                                    |   | 7,250              |        |      |   | 663    |       
|                                         |                                                    |   |                    |        |      |   |        |       
|Other income (expense):                  |                                                    |   |                    |        |      |   |        |       
|                                         | Interest income                                    |   |                    | 2,817  |      |   |        | 1,046  |  
|                                         | Interest expense                                   |   |                    | (81    | )    |   |        | (60    | )
|                                         | Gain (loss) on equity securities transactions, net |   |                    | (53    | )    |   |        | 2,244  |  
|                                         | Foreign currency transaction losses, net           |   |                    | (237   | )    |   |        | (279   | )
|                                         | Other                                              |   |                    | 5      |      |   |        | (8     | )
|                                         |                                                    |   |                    |        |      |   |        |       
|                                         |                                                    |   | 2,451              |        |      |   | 2,943  |       
|                                         |                                                    |   |                    |        |      |   |        |       
|Income before provision for income taxes |                                                    |   | 9,701              |        |      |   | 3,606  |       
|Provision for income taxes               |                                                    |   | 3,192              |        |      |   | 1,224  |       
|                                         |                                                    |   |                    |        |      |   |        |       
|Net income                               |                                                    | $ | 6,509              |        |      | $ | 2,382  |       
|                                         |                                                    |   |                    |        |      |   |        |       
|Basic net income per share               |                                                    | $ | 0.11               |        |      | $ | 0.04   |       
|                                         |                                                    |   |                    |        |      |   |        |       
|Diluted net income per share             |                                                    | $ | 0.10               |        |      | $ | 0.04   |       
|                                         |                                                    |   |                    |        |      |   |        |       

See the accompanying notes to these consolidated financial statements.



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Advanced Digital Information Corporation
 Consolidated Statements of Cash Flows
 (In thousands)

|                                                     |                                                                                             |                                               |         |                    |         |      |         |        |        |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------------- | --------------------------------------------- | ------- | ------------------ | ------- | ---- | ------- | ------ | ------ | -
|                                                     |                                                                                             |                                               |         | Three months ended
|                                                     |                                                                                             |                                               |         | January 31,       
|                                                     |                                                                                             |                                               |         |                   
|                                                     |                                                                                             |                                               |         | 2001               |         | 2002
|                                                     |                                                                                             |                                               |         |                    |         |     
|Cash flows from operating activities:                |                                                                                             |                                               |         |                    |         |      |         |       
|                                                     | Net income                                                                                  |                                               | $       | 6,509              |         |      | $       | 2,382  |       
|                                                     | Adjustments to reconcile net income to net cash
provided by (used in) operating activities: |                                               |         |                    |         |      |         |        |       
|                                                     |                                                                                             | Depreciation and amortization                 |         |                    | 3,037   |      |         |        | 5,475  |  
|                                                     |                                                                                             | Allowance for doubtful accounts receivable    |         |                    | 182     |      |         |        | 494    |  
|                                                     |                                                                                             | Inventory obsolescence                        |         |                    | 642     |      |         |        | 830    |  
|                                                     |                                                                                             | (Gain) loss on equity securities transactions |         |                    | 53      |      |         |        | (2,244 | )
|                                                     |                                                                                             | Deferred income taxes                         |         |                    | (523    | )    |         |        | (180   | )
|                                                     | Change in assets and liabilities:                                                           |                                               |         |                    |         |      |         |        |       
|                                                     |                                                                                             | Accounts receivable                           |         |                    | 2,764   |      |         |        | (4,678 | )
|                                                     |                                                                                             | Inventories                                   |         |                    | (29,974 | )    |         |        | 4,547  |  
|                                                     |                                                                                             | Prepaid expenses and other                    |         |                    | (295    | )    |         |        | 462    |  
|                                                     |                                                                                             | Service parts for maintenance                 |         |                    | (1,324  | )    |         |        | (4,036 | )
|                                                     |                                                                                             | Other assets                                  |         |                    | (4      | )    |         |        |       |  
|                                                     |                                                                                             | Accounts payable                              |         |                    | 17,785  |      |         |        | 2,920  |  
|                                                     |                                                                                             | Accrued liabilities                           |         |                    | (3,965  | )    |         |        | (1,219 | )
|                                                     |                                                                                             | Income taxes payable                          |         |                    | (522    | )    |         |        | 5,225  |  
|                                                     |                                                                                             | Deferred revenue                              |         |                    | 2,137   |      |         |        | (764   | )
|                                                     |                                                                                             |                                               |         |                    |         |      |         |        |       
|Net cash provided by (used in) operating activities  |                                                                                             |                                               | (3,498  | )                  |         |      | 9,214   |       
|                                                     |                                                                                             |                                               |         |                    |         |      |         |        |       
|Cash flows from investing activities:                |                                                                                             |                                               |         |                    |         |      |         |       
|                                                     | Purchase of property, plant and equipment                                                   |                                               |         | (4,361             | )       |      |         | (6,724 | )     
|                                                     | Purchase of other investments                                                               |                                               |         | (500               | )       |      |         | (400   | )     
|                                                     | Proceeds from equity securities transactions                                                |                                               |         | 1,847              |         |      |         | 11,996 |       
|                                                     |                                                                                             |                                               |         |                    |         |      |         |        |       
|Net cash provided by (used in) investing activities  |                                                                                             |                                               | (3,014  | )                  |         |      | 4,872   |       
|                                                     |                                                                                             |                                               |         |                    |         |      |         |        |       
|Cash flows from financing activities:                |                                                                                             |                                               |         |                    |         |      |         |       
|                                                     | Repayment of short-term and long-term debt                                                  |                                               |         | (1,022             | )       |      |         | (1,006 | )     
|                                                     | Proceeds from issuance of common stock for stock options                                    |                                               |         | 721                |         |      |         | 1,851  |       
|                                                     |                                                                                             |                                               |         |                    |         |      |         |        |       
|Net cash provided by (used in) financing activities  |                                                                                             |                                               | (301    | )                  |         |      | 845     |       
|                                                     |                                                                                             |                                               |         |                    |         |      |         |        |       
|Effect of exchange rate changes on cash              |                                                                                             |                                               | 420     |                    |         |      | (179    | )     
|                                                     |                                                                                             |                                               |         |                    |         |      |         |        |       
|Net increase (decrease) in cash and cash equivalents |                                                                                             |                                               | (6,393  | )                  |         |      | 14,752  |       
|Cash and cash equivalents at beginning of period     |                                                                                             |                                               | 194,268 |                    |         |      | 155,274 |       
|                                                     |                                                                                             |                                               |         |                    |         |      |         |        |       
|Cash and cash equivalents at end of period           |                                                                                             | $                                             | 187,875 |                    |         | $    | 170,026 |       
|                                                     |                                                                                             |                                               |         |                    |         |      |         |        |       

See the accompanying notes to these consolidated financial statements.



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Advanced Digital Information Corporation
 Consolidated Statements of Changes in Shareholders Equity
 Three months ended January 31, 2002
 (In thousands)

|                                                         |                                                             |                            |                                                                              |   |              |   |          |   |               |   |               |       |       |   |       |      |             |        |         |   |       |   | 
|-------------------------------------------------------- | ----------------------------------------------------------- | -------------------------- | ---------------------------------------------------------------------------- | - | ------------ | - | -------- | - | ------------- | - | ------------- | ----- | ----- | - | ----- | ---- | ----------- | ------ | ------- | - | ----- | - | 
|                                                         |                                                             |                            |                                                                              |   |              |   |          |   |               |   |               |       |       |   |       |      | Accumulated |        |         |   |      
|                                                         |                                                             |                            |                                                                              |   | Common Stock |   |          |   |               |   | Other         |       |       |   |      
|                                                         |                                                             |                            |                                                                              |   |              |   | Retained |   | Comprehensive |   |               |       |      
|                                                         |                                                             |                            |                                                                              |   | Shares       |   | Amount   |   | Earnings      |   | Income (Loss) |       | Total
|                                                         |                                                             |                            |                                                                              |   |              |   |          |   |               |   |               |       |      
|Balance at October 31, 2001                              |                                                             |                            | 61,934                                                                       |   |              | $ | 221,399  |   |               | $ | 106,599       |       |       | $ | 2,478 |      |             | $      | 330,476 |  
|Exercise of stock options,
including tax benefit of $967 |                                                             |                            | 270                                                                          |   |              |   | 2,725    |   |               |   |              |       |       |   |      |      |             |        | 2,725   |  
|Exercise of warrants                                     |                                                             |                            | 60                                                                           |   |              |   | 93       |   |               |   |              |       |       |   |      |      |             |        | 93      |  
|Comprehensive income:                                    |                                                             |                            |                                                                              |   |              |   |          |   |               |   |               |       |       |   |       |      |             |        |         |  
|                                                         | Net income                                                  |                            |                                                                              |  |              |   |          |  |               |   |               | 2,382 |       |   |       |     |             |        |         |  |      
|                                                         | Unrealized investment gains:                                |                            |                                                                              |   |              |   |          |   |               |   |               |       |       |   |       |      |             |        |         |   |      
|                                                         |                                                             |                            | Unrealized investment
gains, net of tax of $639                              |   |              |  |          |   |               |  |               |       |       |  |       |      |             | 1,188  |         |   |       |  | 
|                                                         |                                                             |                            | Reclassification
adjustment: gain included
in net income, net of tax
of $585 |   |              |  |          |   |               |  |               |       |       |  |       |      |             | (1,087 | )       |   |       |  | 
|                                                         | Foreign currency translation
adjustment, net of tax of $121 |                            |                                                                              |  |              |   |          |  |               |   |               |      |       |   |       | (225 | )           |        |         |  |      
|                                                         |                                                             | Total comprehensive income |                                                                              |   |             |   |          |   |              |   |               |       |      |   |       |      |            |        |         |   | 2,258 |  
|                                                         |                                                             |                            |                                                                              |   |              |   |          |   |               |   |               |       |       |   |       |      |             |        |         |  
|Balance at January 31, 2002                              |                                                             |                            | 62,264                                                                       |   |              | $ | 224,217  |   |               | $ | 108,981       |       |       | $ | 2,354 |      |             | $      | 335,552 |  
|                                                         |                                                             |                            |                                                                              |   |              |   |          |   |               |   |               |       |       |   |       |      |             |        |         |  

See the accompanying notes to these consolidated financial statements.



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Advanced Digital Information Corporation
 Notes to Interim Consolidated Financial Statements
 January 31, 2002

Note 1. Basis of presentation

The accompanying condensed consolidated financial statements are unaudited
and include the accounts of the Company and its subsidiaries. All significant
intercompany transactions, balances and profits have been eliminated in
consolidation.

On May 11, 2001 we acquired Pathlight Technology, Inc. (Pathlight) in a
business combination accounted for as a pooling-of-interests. The condensed
consolidated financial statements have been restated to retroactively combine
Pathlight as a wholly owned subsidiary of ADIC since inception. Certain prior
period balances have been adjusted or reclassified to conform our accounting
policies and current period presentation.

The accompanying condensed consolidated financial statements are unaudited
and should be read in conjunction with the financial statements included in our
Annual Report on Form 10-K for the year ended October 31, 2001. The year-end
condensed balance sheet data was derived from audited financial statements, but
does not include all disclosures required by generally accepted accounting
principles. In our opinion all normal recurring adjustments which are
necessary for the fair presentation of the results for the interim periods are
reflected herein. Operating results for the three-month period ended January
31, 2002, are not necessarily indicative of results to be expected for a full
year.

Note 2. Earnings per share

The following table sets forth the computation of basic and diluted net
income per share for the three months ended January 31, 2001 and 2002:

|                             |                                                                                                        |   |                                           |        |      |   |      |        | 
|---------------------------- | ------------------------------------------------------------------------------------------------------ | - | ----------------------------------------- | ------ | ---- | - | ---- | ------ | 
|                             |                                                                                                        |   | Three months ended                       
|                             |                                                                                                        |   | January 31,                              
|                             |                                                                                                        |   |                                          
|                             |                                                                                                        |   | 2001                                      |        | 2002
|                             |                                                                                                        |   |                                           |        |     
|                             |                                                                                                        |   | (In thousands, except for per share data)
|Numerator:                   |                                                                                                        |   |                                           |        |      |   |      |       
|                             | Net income                                                                                             |   | $                                         | 6,509  |      |   | $    | 2,382  | 
|                             |                                                                                                        |   |                                           |        |      |   |      |        | 
|Denominator:                 |                                                                                                        |   |                                           |        |      |   |      |       
|                             | Denominator for basic net income per share
weighted average shares                                    |   |                                           | 59,200 |      |   |      | 62,079 | 
|                             | Dilutive potential common shares from Team
Member (employee) stock options                             |   |                                           | 4,517  |      |   |      | 2,020  | 
|                             |                                                                                                        |   |                                           |        |      |   |      |        | 
|                             | Denominator for diluted net income per share
adjusted weighted average shares and assumed
conversions |   |                                           | 63,717 |      |   |      | 64,099 | 
|                             |                                                                                                        |   |                                           |        |      |   |      |        | 
|Basic net income per share   |                                                                                                        | $ | 0.11                                      |        |      | $ | 0.04 |       
|                             |                                                                                                        |   |                                           |        |      |   |      |        | 
|Diluted net income per share |                                                                                                        | $ | 0.10                                      |        |      | $ | 0.04 |       
|                             |                                                                                                        |   |                                           |        |      |   |      |        | 



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Advanced Digital Information Corporation
 Notes to Interim Consolidated Financial Statements (Continued)
 January 31, 2002

Note 3. Inventories

Inventories are comprised of the following:

|                                     |  |                |        |             |  |   |        |  
|------------------------------------ |  | -------------- | ------ | ----------- |  | - | ------ | -
|                                     |  | October 31,    |        | January 31,
|                                     |  | 2001           |        | 2002       
|                                     |  |                |        |            
|                                     |  | (In thousands)
|Finished goods                       |  | $              | 23,055 |             |  | $ | 21,992 |  
|Work-in-process                      |  |                | 939    |             |  |   | 923    |  
|Raw materials                        |  |                | 25,824 |             |  |   | 22,153 |  
|                                     |  |                |        |             |  |   |        |  
|                                     |  |                | 49,818 |             |  |   | 45,068 |  
|Allowance for inventory obsolescence |  |                | (7,388 | )           |  |   | (8,390 | )
|                                     |  |                |        |             |  |   |        |  
|                                     |  | $              | 42,430 |             |  | $ | 36,678 |  
|                                     |  |                |        |             |  |   |        |  

Note 4. Investments in marketable equity securities and other investments

At January 31, 2002, the cost basis of marketable equity securities
included as a current asset was $7,511,000 and the fair value was $15,020,000.
The difference between the cost basis and fair value of $7,509,000, net of
taxes of $2,628,000 is recorded as an unrealized investment gain. During the
three month period ended January 31, 2002, we sold a portion of these
marketable equity securities and realized a gain of $1,672,000.

During the three month period ended January 31, 2002 we received cash of
$287,000 related to the sale of calls, a derivative financial instrument that
permits the purchaser of the call to buy a specified marketable equity security
at a specified price. In accordance with our internal policies, we only sell
calls on marketable securities we already own. We have recorded a liability of
$3,988,000 at January 31, 2002, which represents the current fair market value
of the calls at that time. At January 31, 2002, we have also recorded $572,000
as a component of our net gain on equity securities related to call
transactions. This reflects the change in the fair market value of the related
liability during the quarter plus the cash received on current period sales of
calls. We will continue to record the derivative liability at fair market
value until their maturity. The majority of the derivatives mature in the
first half of fiscal 2002. At that time, the liability will be eliminated and
the gain will be recorded as a gain on equity securities transactions.






|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The following discussion and analysis should be read in conjunction with
our financial statements included in our Annual Report on Form 10-K for the
year ended October 31, 2001. This discussion contains certain forward-looking
statements that involve risks and uncertainties, such as statements of our
plans, objectives, expectations and intentions. Such risks are detailed in our
Annual Report on Form 10-K for the year ended October 31, 2001 and are
incorporated herein by reference.



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Our actual results could differ materially from those discussed here. We
undertake no obligation to publicly release any revisions to these
forward-looking statements that may be required to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

General

We provide hardware and software-based data storage solutions to the open
systems marketplace. Our storage solutions integrate into a wide range of
rapidly evolving network computing environments and are designed to enable
organizations to organize, protect and retrieve complex mission-critical data.
We design, manufacture, sell and support specialized data storage hardware and
software products and provide related services. Currently, we derive
substantially all of our revenue from the sale of storage libraries,
connectivity and management products and related service and support. We
distribute our products primarily through value-added resellers (VARs),
distributors and original equipment manufacturers (OEMs), and also sell
directly to large end users.

The following discussion and analysis has been prepared utilizing the
restated combined financial statements as if Pathlight was a wholly owned
subsidiary of ADIC since inception. The condensed combined information is not
necessarily indicative of the actual results of operations had the acquisition
occurred at the beginning of the periods, nor should it be used to project the
Companys results of operations for any future date or period.

Results of Operations

Net Sales.Net sales increased during the first quarter of fiscal 2002 to
$96.7 million, an increase of 5% from $92.4 million in the comparable quarter
of fiscal 2001. The $4.3 million increase in net sales is primarily due to
growth in sales to our OEM customers. For the three months ended January 31,
2002 and 2001, OEM sales comprised 50% and 46% of net sales, respectively. The
increase in OEM sales from the comparable period in fiscal 2001 is primarily
due to strong sales growth of Scalar® products to OEM customers. Branded
business declined just under 5% for the same period.

Gross Profit.Gross profit was $23.8 million or 25% of net sales for the
three months ended January 31, 2002 compared to $27.6 million or 30% of net
sales for the same period in fiscal 2001. The reduction in gross profit is
primarily a result of OEM sales representing a larger percentage of our
total sales. OEM sales generally have lower margins. In addition, we
have increased our fixed costs as they relate to
infrastructure. We expect margins to improve as the branded business resumes
growth.

Selling and Administrative Expenses.Selling and administrative expenses
were $16.3 million or 17% of net sales for the three months ended January 31,
2002 compared to $14.2 million or 15% of net sales for the same period in
fiscal 2001. Selling and administrative expenses have increased in both
absolute dollars and as a percentage of net sales due to continued efforts to
expand our sales and service channels and improve our infrastructure. We
expect to increase selling and administrative expenditures in absolute dollars
to support new product offerings, sales and service channels and to continue
improvement of our infrastructure.

Research and Development Expenses.Research and development expenses
increased 10% to $6.8 million for the first quarter of fiscal 2002 compared to
$6.2 million for the first quarter of fiscal 2001. For both periods research
and development spending were 7% of net sales. The increase in absolute
dollars is related to added resources, additional spending related to new
products and maintaining heavy investment in software and hardware product
development. We believe that significant investments in research and
development are required to remain competitive and to solidify



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our market position in intelligent storage solutions. Consequently, we
expect to incur increased research and development expenses in future periods.

Other Income (Expense).Other income was $2.9 million for the first
quarter of fiscal 2002 compared to $2.5 million for the first quarter of fiscal
2001. The decrease in interest income in the three month period ended January
31, 2002, is the result of lower returns on cash balances along with a
reduction of our cash balances from the comparable period in fiscal 2001. This
decrease in interest income from the comparable period in fiscal 2001 was
offset with an increase in other income related to the gain on equity
securities transactions of $2.2 million in first quarter of fiscal 2002. In
2001, we had a loss on equity securities transactions of $53,000. Interest
expense in both periods primarily relates to interest on operating credit lines
through a German bank along with a loan payable to a German bank.

Provision for Income Taxes.For the three months ended January 31, 2002
and 2001, the provision for income taxes was $1.2 million and $3.2 million,
respectively. Our effective income tax rate was 34% for the first quarter of
2002 as compared to 33% in the same period of fiscal 2001. The effective tax
rate includes tax expense for various federal, state and international
jurisdictions.

Liquidity and Capital Resources

Cash flows provided by operating activities were $9.2 million for the
three months ended January 31, 2002. In the comparable period of fiscal 2001,
cash flows used in operating activities were $3.5 million. In fiscal 2002,
operating cash was provided by net income, depreciation and amortization, a
decrease in inventories and income taxes payable and was offset by increases in
accounts receivable and service parts for maintenance. In fiscal 2001,
operating cash was primarily used to fund increases in inventories, and was
offset by net income, depreciation, other allowances and growth in accounts
payable.

Cash flows provided by investing activities were $4.9 million for the
first three months of fiscal 2002. In the comparable period of fiscal 2001,
cash flows used in investing activities were $3.0 million. Cash flows include
proceeds from certain equity securities transactions of $12.0 million and $1.8
million for first quarter 2002 and 2001, respectively. Investments in
property, plant and equipment were $6.7 million and $4.4 million during the
first three months of fiscal 2002 and 2001, respectively. Capital expenditures
during the first quarter of fiscal 2002 were comprised primarily of computer
hardware and software to improve our infrastructure and leasehold improvements
purchased for our new Englewood, Colorado facility. Both periods reflect the
purchase of other investments in non-marketable securities.

Cash flows provided by financing activities during the first three months
of fiscal 2002 were $845,000, compared to $301,000 used in the first quarter of
fiscal 2001. During the first quarter of fiscal 2002 and 2001, we received
proceeds from the exercise of stock options of $1.9 million and $721,000,
respectively. Offsetting the above proceeds in both periods were certain
payments on bank lines of credit and long-term debt, which were $1.0 million in
both first quarter fiscal 2002 and 2001.

At January 31, 2002, our cash and cash equivalents totaled $170.0 million,
a $14.7 million increase from $155.3 million at October 31, 2001. Our working
capital, the difference between current assets and current liabilities, was
$258.4 million and $257.4 million at January 31, 2002 and October 31, 2001,
respectively. The ratio of current assets to current liabilities was 4.9 to 1
and 4.8 to 1 at January 31, 2002 and October 31, 2001, respectively.

We believe that our existing cash and cash equivalents, available bank
lines of credit, debt capacity and anticipated cash flow from our operating
activities will be sufficient to fund our working capital and capital
expenditure needs for at least the next 12 months. We will continue to
evaluate possible acquisitions of, or investments in businesses, products, or
technologies that we believe are



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strategic, which may require the use of cash. In addition, we have made
and expect to make investments in companies with whom we have identified
potential synergies.






|Item 3. | Quantitative and Qualitative Disclosures About Market Risk Management
|------- | ---------------------------------------------------------------------

We are exposed to various market risks, including changes in foreign
currency rates and interest rates. We may enter into various derivative
transactions to manage certain of these exposures.

The assets and liabilities of our non-U.S. subsidiaries have functional
currencies other than the U.S. dollar and are translated into U.S. dollars at
exchange rates in effect at the balance sheet date. Income and expense items
are translated at the average exchange rates prevailing during the period. A
10% depreciation in the U.S. dollar would result in an approximately $110,000
increase in income before provision for income taxes for the first three months
of fiscal 2002.

At January 31, 2002, we had variable rate debt of approximately $2.6
million provided by German banks, and fixed rate debt of $1.1 million, also
provided by a German bank. The fair value of such debt approximates the
carrying amount on the consolidated balance sheets at January 31, 2002. We have
entered into an interest rate swap agreement on the variable rate debt, which
fixes the interest rate at 4.3% through November 2003. Interest on the fixed
rate debt is 4.4%.



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PART II  OTHER INFORMATION




Item 1. Legal Proceedings

No material pending litigation.




Item 2. Changes in Securities

In connection with ADICs acquisition of Pathlight Technology on May 11,
2001, ADIC assumed all outstanding warrants to purchase shares of common stock
of Pathlight. Accordingly, after applying the applicable conversion ratio to
the outstanding Pathlight warrants, ADIC assumed warrants providing for the
issuance of an aggregate of 308,291 shares of ADIC common stock at prices
ranging from $1.235 to $7.401 per share (the Assumed Warrants). All of the
Assumed Warrants contained provisions permitting net exercise.

The shares of common stock issuable by ADIC upon exercise of the Assumed
Warrants have not been registered under the Securities Act of 1933, as amended,
and have been issued upon exercise of Assumed Warrants in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act, on
the basis that the Assumed Warrants were issued to, and are held by, a limited
number of accredited investors. The following table sets forth information
with respect to unregistered shares of ADIC common stock that were issued upon
exercise of Assumed Warrants during the three months ended January 31, 2002:

|         |  |                      |  |                    |        |           |        |  |        |                  |        | 
|-------- |  | -------------------- |  | ------------------ | ------ | --------- | ------ |  | ------ | ---------------- | ------ | 
|Date of  |  |                      |  |                    |        |           |        |  |        | Number of Shares
|Sale     |  | Purchaser            |  | Consideration Paid |        | Purchased
|         |  |                      |  |                    |        |          
|12/12/01 |  | RAND Capital         |  | $                  | 83,725 |           |        |  | 54,786 |                 
|01/07/02 |  | Edward Wolf          |  |                    | 5,998  |           |        |  | 2,533  |                 
|01/07/02 |  | James Wooden         |  |                    | 3,748  |           |        |  | 1,583  |                 
|01/10/02 |  | Steven Schaeffer (1) |  |                    | 2,998  |           |        |  | 1,099  |                 
|         |  |                      |  |                    |        |           |        |  |        |                  |        | 
|         |  |                      |  |                    |        | $         | 96,469 |  |        |                  | 60,001 | 
|         |  |                      |  |                    |        |           |        |  |        |                  |        | 



---

|(1) |  | Assumed Warrants were exercised using the net exercise provision.
Shares were withheld in payment of the aggregate exercise price. The amount
shown in the consideration paid column is based on the fair value of ADIC
Common Stock on the date of exercise. For Steven Schaeffer, an Assumed Warrant
for 1,266 shares was exercised with 167 shares withheld.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Item 3. Defaults Upon Senior Securities

None.




Item 4. Submission of Matters to a Vote of Security Holders

None.




Item 5. Other Information

None.




Item 6. Exhibits and Reports on Form 8-K

None.



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



|                      | ADVANCED DIGITAL INFORMATION CORPORATION                                                                              
|--------------------- | ----------------------------------------------------------------------------------------------------------------------
|                     
|Dated: March 15, 2002 | /s/ PETER H. VAN OPPEN                                                                                                
|                      | Peter H. van Oppen, Chairman
     and Chief Executive Officer                                                         
|                     
|Dated: March 15, 2002 | /s/ JON W. GACEK                                                                                                      
|                      | Jon W. Gacek, Senior Vice President
     and Chief Financial Officer (Principal
     Financial and Accounting Officer)



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