Company Moves Towards Profitability; Earnings per Share From Continuing Operations GAAP ($0.00) and $0.04 Non-GAAP
Adaptec, Inc. (NASDAQ: ADPT), a global leader
in storage solutions, today reported its financial results for the first
quarter of fiscal 2009, which ended on June 30, 2008.
Net revenues from continuing operations for the Company's first quarter of
fiscal 2009 were $31.5 million, compared with $36.1 million for the first
quarter of fiscal 2008. Gross margins from continuing operations were 47%
for the first quarter of fiscal 2009, compared with 32% for the first
quarter of fiscal 2008.
The Company's loss from continuing operations, net of taxes, computed on a
generally accepted accounting principles (GAAP) basis, for the first
quarter of fiscal 2009 was less than ($0.1) million, or ($0.00) per share,
compared with a loss from continuing operations, net of taxes, of ($3.1)
million, or ($0.03) per share, for the first quarter of fiscal 2008. GAAP
net income for the first quarter of fiscal 2009 was $5.0 million, or $0.04
per share, compared with a net loss of ($3.6) million, or ($0.03) per
share, for the first quarter of fiscal 2008. GAAP net income for the first
quarter of fiscal 2009 included $5.8 million from the disposal of
discontinued operations, net of taxes.
"As our results show, we are making steady progress on streamlining our
operating model," said S. "Sundi" Sundaresh, President and CEO of Adaptec.
"We continue to execute and successfully launched our Series 2 RAID
controllers in the quarter. I am pleased with our product pipeline and we
expect to maintain a strong pace of innovation in the future."
Adaptec implemented a restructuring plan, primarily related to a reduction
in workforce, to reduce its operating expenses due to a declining revenue
base, streamline its operations and better align its resources with its
strategic business objectives. The Company began these headcount
reductions in the first quarter of fiscal 2009 and anticipates the
remaining actions to take place in the second quarter of fiscal 2009. The
Company expects to record a total restructuring charge of $3.8 million
associated with this plan, of which $1.8 million, related to severance and
related benefits, was recorded in the first quarter of fiscal 2009.
Non-GAAP income from continuing operations, net of taxes, for the first
quarter of fiscal 2009 was $4.8 million, or $0.04 per share, compared with
a non-GAAP loss from continuing operations, net of taxes, of ($5.6)
million, or ($0.05) per share, for the first quarter of fiscal 2008.
Non-GAAP net income for the first quarter of fiscal 2009 was $4.3 million,
or $0.04 per share, compared with a non-GAAP net loss of ($5.9) million, or
($0.05) per share, for the first quarter of fiscal 2008. The non-GAAP
results for all the periods presented, including, but not limited to, the
first quarters of fiscal 2009 and 2008, as defined below in the section
"Use of Non-GAAP Financial Measures," differ from results measured under
GAAP as they exclude stock-based compensation expense, amortization of
acquisition-related intangible assets, restructuring costs, other charges
or gains, and tax differences due to GAAP versus non-GAAP measurements. A
complete reconciliation between GAAP and non-GAAP information referred to
in this release is provided in the attached tables at the end of this press
release.
Conference Call
The Adaptec first quarter fiscal 2009 earnings conference call is scheduled
for 1:45 p.m. Pacific Time on July 31, 2008. Individuals may participate
via webcast by visiting www.adaptec.com/investor 15 minutes prior to the
call. A telephone replay of the teleconference will be available through
August 14, 2008 by calling (888) 203-1112 in the U.S. or (719) 457-0820
internationally and referencing reservation number 4308350.
About Adaptec
Adaptec, Inc. (NASDAQ: ADPT) provides trusted storage solutions that
reliably move, manage, and protect critical data and digital content.
Adaptec's software and hardware-based solutions are delivered through
leading original equipment manufacturers (OEMs) and channel partners to
provide storage connectivity, data protection, and networked storage to
enterprises, government organizations, medium and small businesses
worldwide. More information is available at www.adaptec.com.
Safe Harbor Statement
This news release may include forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities and Exchange Act of 1934, as amended. Forward-looking
statements are statements regarding future events or the future performance
of Adaptec, and include statements regarding Adaptec's expectation that it
will complete the remaining actions relating to its restructuring plan
during the second quarter of fiscal 2009 and the total anticipated charge
it expects to incur related to this restructuring plan, Adaptec's progress
with respect to streamlining its operating model and its expectation
regarding maintaining a strong pace of innovation in the future. These
forward-looking statements are based on current expectations, forecasts and
assumptions and involve a number of risks and uncertainties that could
cause actual results to differ materially from those anticipated by these
forward-looking statements. These risks include: if we do not meet our
restructuring objectives, we may have to continue to implement additional
plans in order to reduce our operating costs; achieving necessary support
from the contract manufacturers to which we have outsourced manufacturing,
assembly and packaging of our products; retaining key management; Adaptec's
ability to launch new software products; difficulty in forecasting the
volume and timing of customer orders; reduced demand in the server, network
storage and desktop computer markets; our target markets' failure to
accept, or delay in accepting, network storage and other advanced storage
solutions, including our SAS, SATA and iSCSI lines of products; decline in
consumer acceptance of our current products; the timing and volume of
orders by OEM customers for storage products; our ability to control and
manage costs associated with the delivery of new products; and the adverse
effects of the intense competition we face in our business. For a more
complete discussion of risks related to our business, reference is made to
the section titled "Risk Factors" included in our Annual Report on Form
10-K/A for the year ended March 31, 2008 on file with the Securities and
Exchange Commission. Adaptec assumes no obligation to update any
forward-looking information that is included in this release.
Adaptec is a registered trademark in the United States and other countries.
Other product and company names are trademarks or registered trademarks of
their respective owners.
Adaptec, Inc.
GAAP Condensed Consolidated Statements of Operations
(unaudited)
Three-Month Period Ended
----------------------------------
June 30, March 31, June 30,
2008 2008 2007
---------- ---------- ----------
(in thousands, except per
share amounts)
Net revenues $ 31,503 $ 35,588 $ 36,102
Cost of revenues 16,821 19,106 24,593
---------- ---------- ----------
Gross profit 14,682 16,482 11,509
---------- ---------- ----------
Operating expenses:
Research and development 5,903 6,824 10,416
Selling, marketing
and administrative 9,497 11,682 13,460
Amortization of acquisition-
related intangible assets -- 631 643
Restructuring charges 1,837 613 1,526
Other charges (gains) -- 2,205 (5,914)
---------- ---------- ----------
Total operating expenses 17,237 21,955 20,131
---------- ---------- ----------
Loss from continuing operations (2,555) (5,473) (8,622)
Interest and other income 5,262 7,979 6,721
Interest expense (841) (872) (1,014)
---------- ---------- ----------
Income (loss) from continuing
operations before income taxes 1,866 1,634 (2,915)
Provision for income taxes 1,913 315 214
---------- ---------- ----------
Income (loss) from continuing
operations, net of taxes (47) 1,319 (3,129)
Discontinued operations, net of taxes
Loss from discontinued
operations, net of taxes (734) (1,398) (506)
Income from disposal of
discontinued operations,
net of taxes 5,794 623 --
---------- ---------- ----------
Income (loss) from discontinued
operations, net of taxes 5,060 (775) (506)
---------- ---------- ----------
Net income (loss) $ 5,013 $ 544 $ (3,635)
========== ========== ==========
Income (loss) per common share:
Basic
Continuing operations $ (0.00) $ 0.01 $ (0.03)
Discontinued operations $ 0.04 $ (0.01) $ (0.00)
Net income (loss) $ 0.04 $ 0.00 $ (0.03)
Diluted
Continuing operations $ (0.00) $ 0.01 $ (0.03)
Discontinued operations $ 0.04 $ (0.01) $ (0.00)
Net income (loss) $ 0.04 $ 0.00 $ (0.03)
Shares used in computing
income (loss) per share:
Basic 119,192 119,163 117,897
Diluted 119,192 119,887 117,897
To supplement its condensed consolidated financial statements in accordance
with generally accepted accounting principles (GAAP), the Company's
earnings release contains non-GAAP financial measures that exclude certain
expenses, gains and losses. The Company believes that the use of non-GAAP
financial measures provides useful information to investors to gain an
overall understanding of its current financial performance and its
prospects for the future. Specifically, the Company believes the non-GAAP
results provide useful information to both management and investors by
excluding certain expenses, gains and losses that the Company believes are
not indicative of its core operating results. In addition, non-GAAP
financial measures are used by management for budgeting and forecasting as
well as subsequently measuring the Company's performance, and the Company
believes that it is providing investors with financial measures that most
closely align to its internal measurement processes. The Company also
believes, based on feedback provided to the Company during its earnings
calls' Q&A sessions and discussions with the investment community, that the
non-GAAP financial measures it provides enhance the ability of the
investment community to review the Company's results and projections.
The non-GAAP financial information is presented using consistent
methodology from quarter-to-quarter and year-to-year. These measures should
be considered in addition to results prepared in accordance with GAAP, but
should not be considered a substitute for, or superior to, GAAP results.
The non-GAAP financial measures presented by the Company may be different
than the non-GAAP financial measures presented by other companies. In
addition, these non-GAAP financial measures are not based on any
comprehensive set of accounting rules or principles. The Company believes
that non-GAAP financial measures have limitations in that they do not
reflect all of the amounts associated with the Company's results of
operations as determined in accordance with GAAP and that these measures
should only be used to evaluate the Company's results of operations in
conjunction with the corresponding GAAP financial measures.
The Company excludes the following expenses, gains and losses from its
non-GAAP financial measures, when applicable:
Stock-based compensation expense: Stock-based compensation expense consists
of expenses recorded under SFAS 123(R), "Share-Based Payment," in
connection with stock awards such as stock options, restricted stock awards
and restricted stock units granted under the Company's equity incentive
plans and shares issued pursuant to the Company's employee stock purchase
plan. The Company excludes stock-based compensation expense from non-GAAP
financial measures because it is a non-cash measurement that does not
reflect the Company's ongoing business; the Company believes that the
provision of non-GAAP information that excludes stock-based compensation
improves the ability of investors to compare its period-over-period
operating results, as there is significant variability and unpredictability
across companies with respect to this expense.
Amortization of acquisition-related intangible assets: Amortization of
acquisition-related intangible assets primarily relate to core and existing
technologies, and customer relationships that were acquired from prior
acquisitions. The Company excludes the amortization of acquisition-related
intangible assets because it does not reflect the Company's ongoing
business and it does not have a direct correlation to the operation of the
Company's business. In addition, in accordance with GAAP, the Company
generally recognizes expenses for internally-developed intangible assets as
they are incurred, notwithstanding the potential future benefit such assets
may provide. Unlike internally-developed intangible assets, however, and
also in accordance with GAAP, the Company generally capitalizes the cost of
acquired intangible assets and recognizes that cost as an expense over the
useful lives of the assets acquired (other than goodwill, which is not
amortized, and acquired in-process technology, which is expensed
immediately, as required under GAAP). As a result of their GAAP treatment,
there is an inherent lack of comparability between the financial
performance of internally-developed intangible assets and acquired
intangible assets. Accordingly, the Company believes it is useful to
provide, as a supplement to its GAAP operating results, a non-GAAP
financial measure that excludes the amortization of acquired intangible
assets in order to enhance the period-over-period comparison of its
operating results, as there is significant variability and unpredictability
across companies with respect to this expense.
Restructuring charges and other charges (gains): Restructuring charges
primarily relate to activities engaged in by the Company's management to
simplify its infrastructure. Other charges (gains) primarily relate to the
impairment of acquisition-related intangible assets from prior acquisitions
and gain on sale of long-lived assets. Restructuring charges and other
charges (gains) are excluded from non-GAAP financial measures because they
are not considered core operating activities. Although the Company has
engaged in various restructuring activities over the past several years,
each has been a discrete, extraordinary event based on a unique set of
business objectives. The Company does not engage in restructuring
activities in the ordinary course of business. As such, the Company
believes it is appropriate to exclude restructuring charges from its
non-GAAP financial measures, as it enhances the ability of investors to
compare the Company's period-over-period operating results. Other charges
(gains) are also excluded from non-GAAP financial measures because the
occurrence of such costs is infrequent.
Income taxes: Incremental income taxes associated with certain non-GAAP
items and a tax provision from certain discrete tax events that occurred
during the first quarter of fiscal 2009, related to a pre-acquisition
adjustment on a foreign entity.
Adaptec, Inc.
Reconciliation of GAAP to Non-GAAP Operating Results
(unaudited)
Three-Month Period Ended
----------------------------------
June 30, March 31, June 30,
2008 2008 2007
---------- ---------- ----------
(in thousands)
GAAP income (loss) from continuing
operations, net of taxes $ (47) $ 1,319 $ (3,129)
Stock-based compensation expense 1,386 1,787 1,444
Amortization of acquisition-
related intangible assets -- 631 643
Restructuring charges 1,837 613 1,526
Other charges (gains) -- 2,205 (5,914)
Income taxes 1,617 90 (160)
---------- ---------- ----------
Non-GAAP income (loss) from continuing
operations, net of taxes $ 4,793 $ 6,645 $ (5,590)
========== ========== ==========
Adjustment for interest expense on 3/4%
Convertible Notes, net of taxes 762 743 --
---------- ---------- ----------
Adjusted Non-GAAP income (loss) from
continuing operations, net of taxes -
used only to calculate diluted earnings
per share $ 5,555 $ 7,388 $ (5,590)
========== ========== ==========
GAAP net income (loss) $ 5,013 $ 544 $ (3,635)
Stock-based compensation expense 1,386 1,787 1,444
Amortization of acquisition-
related intangible assets -- 631 643
Restructuring charges 1,837 613 1,526
Other charges (gains) -- 2,205 (5,914)
Income taxes 1,617 90 (160)
Loss (income) from discontinued
operations, net of taxes (5,563) (131) 203
---------- ---------- ----------
Non-GAAP net income (loss) $ 4,290 $ 5,739 $ (5,893)
========== ========== ==========
Adjustment for interest expense on 3/4%
Convertible Notes, net of taxes 762 743 --
---------- ---------- ----------
Adjusted Non-GAAP net income (loss) -
used only to calculate diluted earnings
per share $ 5,052 $ 6,482 $ (5,893)
========== ========== ==========
Shares used in computing
income (loss) per share:
Basic - GAAP and Non-GAAP 119,192 119,163 117,897
Diluted - GAAP 119,192 119,887 117,897
Employee stock options and other 1,067 -- --
3/4% Convertible Notes 19,224 19,224 --
---------- ---------- ----------
Diluted - Non-GAAP 139,483 139,111 117,897
---------- ---------- ----------
Adaptec, Inc.
Summary Balance Sheet and Cash Flow Data
(unaudited)
As of
----------------------------------
June 30, March 31, June 30,
Balance Sheet Data 2008 2008 2007
------------------ ---------- ---------- ----------
(in thousands)
Cash, cash equivalents and marketable
securities $ 631,604 $ 626,216 $ 591,459
Accounts receivable, net 19,635 23,204 28,337
Inventories 6,147 9,926 24,678
Other intangible assets -- -- 4,837
Other assets 42,437 40,741 57,806
---------- ---------- ----------
Total assets $ 699,823 $ 700,087 $ 707,117
========== ========== ==========
Current liabilities $ 30,082 $ 31,439 $ 56,774
Current portion of convertible notes 225,402 225,321 --
Convertible notes, less current portion
and other long-term obligations 17,894 19,231 232,378
Stockholders' equity 426,445 424,096 417,965
---------- ---------- ----------
Total liabilities and
stockholders' equity $ 699,823 $ 700,087 $ 707,117
========== ========== ==========
Three-Month Period Ended
----------------------------------
June 30, March 31, June 30,
Cash Flow Data 2008 2008 2007
-------------- ---------- ---------- ----------
(in thousands)
Net income (loss) $ 5,013 $ 544 $ (3,635)
Less: Income (loss) from discontinued
operations, net of taxes 5,060 (775) (506)
---------- ---------- ----------
Income (loss) from continuing
operations, net of taxes (47) 1,319 (3,129)
Adjustments to reconcile income (loss)
from continuing operations, net of taxes,
to net cash provided by (used in)
operations:
Non-cash P&L items:
Stock-based compensation 1,386 1,787 1,444
Inventory-related charges 197 411 2,376
Depreciation and amortization 1,316 1,712 3,006
Impairment of long-lived assets -- 2,321 --
Gain on sale of long-lived
assets -- -- (6,735)
Other items 60 368 72
Changes in assets and liabilities 4,644 14,819 (742)
---------- ---------- ----------
Net cash provided by (used in)
operating activities of continuing
operations 7,556 22,737 (3,708)
Net cash provided by (used in)
operating activities of discontinued
operations (151) 2,776 1,665
---------- ---------- ----------
Net cash provided by (used in)
operating activities $ 7,405 $ 25,513 $ (2,043)
========== ========== ==========
Other significant cash flow activities:
Proceeds from issuance of common
stock 3 36 636
Proceeds from sale of long-lived
assets -- -- 19,881
