EX-99.1 2 a04-5071_1ex99d1.htm EX-99.1

Exhibit 99.1

 

Editorial Contact:

 

Investor Contact:

Caroline Yu

 

Marshall Mohr

Adaptec, Inc.

 

Adaptec, Inc.

(408) 957-2324

 

(408) 957-6773

caroline_yu@adaptec.com

 

marshall_mohr@adaptec.com

 

 

 

Katey Stewart

 

 

Horn Group for Adaptec

 

 

(312) 371-9973

 

 

kstewart@horngroup.com

 

 

 

 

ADAPTEC REPORTS STRONG FOURTH QUARTER RESULTS

 

•                  Q4 Revenue:     $121.3 million

•                  Q4 Earnings per Share: $0.22 GAAP; $0.06 Pro Forma

•                  Q4 Operating Cash Flow: $26.8 million

 

•                  FY’04 Revenue:  $452.9 million

•                  FY’04 Earnings per Share:  $0.54 GAAP; $0.17 Pro Forma

•                  FY’04 Operating Cash Flow:  $95.4 million

•                  Expands Tier-One OEM Relationship with External Storage Products

 

 

MILPITAS, Calif., April 29, 2004 – Adaptec, Inc. (NASDAQ:ADPT), a global leader in storage solutions, today reported its results for the quarter ended March 31, 2004.

 

Net revenues for the fourth quarter of fiscal 2004 were $121.3 million, compared with $105.6 million for the fourth quarter of fiscal 2003 and $115.1 million for the third quarter of fiscal 2004.

 

Net income for the fourth quarter of fiscal 2004 on a generally accepted accounting principles (GAAP) basis was $24.9 million, or $0.22 per share, compared with a net loss of $3.7 million, or $0.03 per share, for the fourth quarter of fiscal 2003 and net loss of $3.0 million, or $0.03 per share, for the third quarter of fiscal 2004.

 

Pro forma net income for the fourth quarter of fiscal 2004 was $6.6 million, or $0.06 per share, compared with $5.4 million, or $0.05 per share, for the fourth quarter of fiscal 2003 and $5.0 million, or $0.05 per share, for the third quarter of fiscal 2004.  

 

 

A reconciliation between net income/loss on a GAAP basis and pro forma net income is provided in the attached tables.

 

“To meet the various needs of IT managers, we have repositioned Adaptec to deliver a robust suite of solutions, offering organizations more storage options and opening broader market opportunities for Adaptec,” said Robert N. Stephens, president and chief executive officer. “These market opportunities are starting to pay off as evidenced by our increased OEM business leading to our strong year-end results.”

 

Net revenues for the fiscal year ended March 31, 2004 were $452.9 million, compared with $408.1 million for the fiscal year ended March 31, 2003.

 

Net income for the fiscal year ended March 31, 2004, on a GAAP basis, was $62.9 million, or $0.54 per share, compared with a net loss of $15.4 million, or $0.14 per share for the fiscal year ended March 31, 2003.  Pro forma net income for the fiscal year ended March 31, 2004, was $19.0 million, or $0.17 per share, compared with $17.4 million, or $0.16 per share, for the fiscal year ended March 31, 2003.

 

Financial Highlights

 

•      Adaptec expanded a tier-one OEM relationship with External Storage Products.  Adaptec will invest more than $5.0 million in additional research and development in fiscal year 2005 to support this expanded relationship.

 

•                  Operating cash flows for the fourth quarter of fiscal 2004 were $26.8 million, compared with $19.8 million for the fourth quarter of fiscal 2003 and $11.1 million for the third quarter of fiscal 2004.

 

•                  In February 2004, the Company repurchased $90.6 million of its 3% convertible notes using the remainder of the proceeds from its ¾% convertible notes offering completed in December 2003.  As a result of these activities, the Company lowered its future quarterly interest expense by approximately $1.2 million.

 

•                  Cash, cash equivalents and investments as of March 31, 2004, were $663.9 million, compared with $744.8 million at December 31, 2003, and $742.3 million at March 31, 2003.

 

 

•                  Days sales outstanding (DSO) in accounts receivable as of March 31, 2004, and December 31, 2003, were 41 days, compared with 45 days at March 31, 2003.

 

•                  Annualized inventory turns were 5.7 in the fourth quarter of fiscal 2004, compared with 6.0 in the third quarter of fiscal 2004 and 9.0 in the fourth quarter of fiscal 2003.

 

•                  Adaptec completed the acquisitions of Eurologic Systems and ICP vortex on April 2 and June 5, 2003.  Eurologic contributed $17.5 million of revenue in the fourth quarter and $55.2 million of revenue for the fiscal year ended March 31, 2004.  ICP vortex contributed $6.6 million of revenue in the fourth quarter and $19.9 million of revenue for fiscal year ended March 31, 2004.

 

•                  Adaptec completed the acquisition of Elipsan on February 13, 2004.  Elipsan is expected to begin generating revenue in the third quarter of fiscal 2005.

 

Business Highlights

 

•                  Adaptec shipped two external storage systems that provide IT managers cost-effective network storage for e-mail, database, disaster recovery, consolidation, backup and other storage applications.

 

•                  The Adaptec iSA1500 Storage Array, an iSCSI-to-Serial ATA system leverages standard Ethernet networks, existing network management skill-sets and low-cost Serial ATA storage.

 

•                  The Adaptec FS4500 combines Fibre Channel scalability and performance with Serial ATA disk drives for reference data storage.

 

 

•                  Adaptec introduced the Adaptec ESA1500 File Saver, an application-specific storage array that automatically backs up corporate PC and laptop information unprotected by standard server backups and gives users an easy way to restore lost files. The Adaptec File Saver is an important part of Adaptec’s strategy to provide organizations with external storage solutions for backup, disaster recovery, e-mail, database and consolidation and other storage applications.

 

•                  Adaptec delivered to major OEMs a Serial Attached SCSI controller ASIC that demonstrates superior performance at a cost comparable to today’s SCSI solutions.

 

Conference Call

 

Adaptec’s fiscal 2004 fourth-quarter earnings conference call is scheduled for 1:45 p.m. PST on April 29, 2004.  The dial-in number for the conference call is (706) 679-0658.  Individuals may also participate free via Webcast by visiting www.adaptec.com 15 minutes prior to the call.  A telephone replay will be made accessible through May 6, 2004, at (800) 642-1687 access code 6758482.  A replay will also be available via Adaptec’s Web site.

 

About Adaptec

 

Adaptec, Inc. (NASDAQ: ADPT) provides end-to-end storage solutions that reliably move, manage and protect critical data and digital content.  Adaptec provides software and hardware solutions for storage connectivity and data protection, storage networking and networked storage subsystems to leading OEM and distribution channel partners.  Adaptec solutions are in use by enterprises, ISPs, medium and small businesses and consumers worldwide.  Adaptec is an S&P Small Cap 600 Index member. More information is available at www.adaptec.com.

 

Safe Harbor Statement

 

This news release includes 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 include statements regarding future events or the future performance of Adaptec including, but not limited to, statements regarding our market opportunities, expectations regarding when Elipsan will begin generating revenue and anticipated research and development investment to support our expanded relationship with a tier-one OEM.  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:  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; decline in consumer acceptance of products based on the SCSI standard; the markets’ failure to accept our new products, including our Ultra 320 line of products; the adverse effects of the intense competition we face in our business, our ability to successfully integrate acquired companies; costs associated with

 

 

strategic alliances could adversely affect our operations; and the continued effects of the current economic slowdown in the technology sector.  For a more complete discussion of risks related to our business, reference is made to the section titled “Risk Factors” included in our Quarterly Report on Form 10-Q for the quarter ended December 31, 2003, on file with the Securities and Exchange Commission, and to the reports that we will file with the Securities and Exchange Commission in 2004.  Adaptec assumes no obligation to update this information.

 

###

 

 

Adaptec, Inc.
GAAP Condensed Consolidated Statements of Operations and
Reconciliation of GAAP to Pro forma Operating Results (*)
(unaudited)

 

 

 

Three-Month Period Ended

 

 

 

March 31, 2004

 

March 31, 2003

 

 

 

GAAP

 

Adjustments

 

Pro forma

 

GAAP

 

Adjustments

 

Pro forma

 

 

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

121,280

 

$

—

 

$

121,280

 

$

105,594

 

$

—

 

$

105,594

 

Cost of revenues

 

71,351

 

—

 

71,351

 

55,331

 

—

 

55,331

 

Gross profit

 

49,929

 

—

 

49,929

 

50,263

 

—

 

50,263

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

26,288

 

(1,049

)(a)

25,239

 

28,723

 

(2,185

)(b)

26,538

 

Selling, marketing and administrative

 

18,801

 

(58

)(a)

18,743

 

20,497

 

(775

)(b)

19,722

 

Amortization of acquisition-related intangible assets

 

2,614

 

(2,614

)(c)

—

 

3,742

 

(3,742

)(c)

—

 

Write-off of acquired in- process technology

 

4,000

 

(4,000

)

—

 

—

 

—

 

—

 

Restructuring and other charges

 

7,586

 

(7,586

)(d)

—

 

8,150

 

(8,150

)(e)

—

 

Total operating expenses

 

59,289

 

(15,307

)

43,982

 

61,112

 

(14,852

)

46,260

 

Income (loss) from operations

 

(9,360

)

15,307

 

5,947

 

(10,849

)

14,852

 

4,003

 

Interest and other income

 

1,938

 

2,732

(f)

4,670

 

7,113

 

—

 

7,113

 

Interest expense

 

(1,414

)

—

 

(1,414

)

(3,584

)

—

 

(3,584

)

Income (loss) before provision for (benefit from) income taxes

 

(8,836

)

18,039

 

9,203

 

(7,320

)

14,852

 

7,532

 

Provision for (benefit from) income taxes

 

(33,693

)

36,270

(g)

2,577

 

(3,615

)

5,724

(h)

2,109

 

Net income (loss)

 

$

24,857

 

$

(18,231

)

$

6,626

 

$

(3,705

)

$

9,128

 

$

5,423

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.23

 

 

 

$

0.06

 

$

(0.03

)

 

 

$

0.05

 

Diluted

 

$

0.22

 

 

 

$

0.06

 

$

(0.03

)

 

 

$

0.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

109,400

 

—

 

109,400

 

107,498

 

—

 

107,498

 

Diluted

 

116,270

 

(4,703

)(o)

111,567

 

107,498

 

1,817

(i)

109,315

 

 

 

Adaptec, Inc.
GAAP Condensed Consolidated Statements of Operations and
Reconciliation of GAAP to Pro forma Operating Results (*)
(unaudited)

 

 

 

Twelve-Month Period Ended

 

 

 

March 31, 2004

 

March 31, 2003

 

 

 

GAAP

 

Adjustments

 

Pro forma

 

GAAP

 

Adjustments

 

Pro forma

 

 

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

452,908

 

$

—

 

$

452,908

 

$

408,113

 

$

—

 

$

408,113

 

Cost of revenues

 

264,200

 

(375

)(j)

263,825

 

203,203

 

—

 

203,203

 

Gross profit

 

188,708

 

375

 

189,083

 

204,910

 

—

 

204,910

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

102,775

 

(4,273

)(a)

98,502

 

118,429

 

(10,395

)(b)

108,034

 

Selling, marketing and administrative

 

78,384

 

(273

)(a)

78,111

 

90,823

 

(4,042

)(b)

86,781

 

Amortization of acquisition-related intangible assets

 

16,681

 

(16,681

)(c)

—

 

14,971

 

(14,971

)(c)

—

 

Write-off of acquired in- process technology

 

7,649

 

(7,649

)

—

 

—

 

—

 

—

 

Restructuring and other charges

 

10,290

 

(10,290

)(k)

—

 

15,817

 

(15,817

)(l)

—

 

Total operating expenses

 

215,779

 

(39,166

)

176,613

 

240,040

 

(45,225

)

194,815

 

Income (loss) from operations

 

(27,071

)

39,541

 

12,470

 

(35,130

)

45,225

 

10,095

 

Interest and other income

 

66,429

 

(43,114

)(m)

23,315

 

33,858

 

(3,297

)(n)

30,561

 

Interest expense

 

(9,424

)

—

 

(9,424

)

(16,422

)

—

 

(16,422

)

Income (loss) before provision for (benefit from) income taxes

 

29,934

 

(3,573

)

26,361

 

(17,694

)

41,928

 

24,234

 

Provision for (benefit from) income taxes

 

(32,973

)

40,354

(g)

7,381

 

(2,268

)

9,053

(h)

6,785

 

Net income (loss)

 

$

62,907

 

$

(43,927

)

$

18,980

 

$

(15,426

)

$

32,875

 

$

17,449

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.58

 

 

 

$

0.17

 

$

(0.14

)

 

 

$

0.16

 

Diluted

 

$

0.54

 

 

 

$

0.17

 

$

(0.14

)

 

 

$

0.16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

108,656

 

—

 

108,656

 

106,772

 

—

 

106,772

 

Diluted

 

124,001

 

(13,309

)(o)

110,692

 

106,772

 

1,836

(i)

108,608

 

 

 

(a)          Deferred compensation expense associated with the Platys acquisition and cash hire-on payments associated with the Elipsan acquisition.

 

(b)         Deferred compensation expense associated with the Platys acquisition.

 

(c)          Amortization of acquisition-related intangible assets related to the acquisitions of DPT, Platys, Eurologic, ICP vortex and Elipsan.

 

(d)         Impairment of held-for-sale long-lived assets of $5.0 million, restructuring charges of $1.6 million and write-off of a minority investment of $1.0 million.

 

(e)          Restructuring charges of $7.2 million and write-off of a minority investment of $1.0 million.

 

(f)            Loss on repurchase of 3% convertible notes.

 

(g)         Reversal of deferred tax asset valuation allowance of $21.6 million, reversal of certain liabilities for tax contingencies of $6.3 million and incremental income taxes associated with certain pro forma adjustments.

 

(h)         Incremental income taxes associated with certain pro forma adjustments.

 

(i)             Dilutive effect of employee stock options.

 

(j)             Warranty costs related to product support claims assumed in connection with our acquisition of DPT.

 

(k)          Impairment of held-for-sale long-lived assets of $5.0 million, restructuring charges of $4.3 million and write-off of a minority investment of $1.0 million.

 

(l)             Restructuring charges of $14.3 million and write-off of minority investments of $1.5 million.

 

(m)       Gain of $49.3 million related to the settlement with the former president of DPT, loss of $5.7 million on repurchase of 3% convertible notes, loss of $0.8 million on redemption of 4 ¾% convertible notes, and realized gains of $0.3 million on investments.

 

(n)         Gain on repurchase of 4 ¾% convertible notes.

 

(o)         Anti-dilutive effect of 3% convertible notes.

 

(*)         To supplement our consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), we use pro forma measures of operating results, net income/(loss) and earnings per share, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses.  These pro forma measures are provided to enhance the user’s overall understanding of our current financial performance and our prospects for the future.  Specifically, we believe the pro forma results provide useful information to both management and investors by excluding certain expenses, gains and losses that we believe are not indicative of our core operating results.  In addition, since we have historically reported pro forma results to the investment community, we believe the inclusion of pro forma numbers provides consistency in our financial reporting. Further, these pro forma results are one of the primary indicators management uses for planning and forecasting of future periods. The pro forma 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.

 

 

Adaptec, Inc.
Summary Balance Sheet and Cash Flow Data
(unaudited)

 

 

 

As of

 

Balance Sheet Data

 

March 31, 2004

 

March 31, 2003

 

 

 

(in thousands)

 

 

 

 

 

 

 

Cash, cash equivalents and marketable securities

 

$

663,854

 

$

742,302

 

Accounts receivable, net

 

51,562

 

50,137

 

Inventories

 

48,888

 

23,496

 

Goodwill and other intangible assets

 

117,394

 

101,249

 

Other assets

 

169,406

 

185,795

 

Total assets

 

$

1,051,104

 

$

1,102,979

 

 

 

 

 

 

 

Current liabilities

 

142,361

 

247,606

 

Convertible notes and other long-term obligations

 

263,852

 

252,596

 

Stockholders’ equity

 

644,891

 

602,777

 

Total liabilities and stockholders’ equity

 

$

1,051,104

 

$

1,102,979

 

 

 

 

Three-Month Period Ended

 

Year-ended

 

Cash Flow Data

 

March 31, 2004

 

December 31, 2003

 

March 31, 2003

 

March 31, 2004

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

24,857

 

$

(3,013

)

$

(3,705

)

$

62,907

 

Adjustments to reconcile net income (loss) to net cash provided by operations:

 

 

 

 

 

 

 

 

 

Non-cash P&L items:

 

 

 

 

 

 

 

 

 

Non-cash restructuring charges

 

—

 

39

 

2,091

 

105

 

Impairment of long-lived assets held for sale

 

4,977

 

—

 

—

 

4,977

 

Write-off of minority investment

 

1,000

 

—

 

1,000

 

1,000

 

Write-off of acquired in-process technology

 

4,000

 

—

 

—

 

7,649

 

Stock-based compensation related to Platys

 

819

 

907

 

2,257

 

4,078

 

Loss on repurchase of 3% convertible notes

 

2,732

 

2,944

 

—

 

6,466

 

Non-cash portion of DPT settlement gain

 

—

 

—

 

—

 

(18,256

)

Depreciation and amortization

 

12,025

 

13,894

 

11,519

 

52,768

 

Deferred income taxes

 

(18,707

)

(360

)

2,998

 

(24,602

)

Other items

 

547

 

(6

)

1,802

 

786

 

Changes in assets and liabilities

 

(5,482

)

(3,352

)

1,846

 

(2,476

)

Net cash provided by operating activities

 

$

26,768

 

$

11,053

 

$

19,808

 

$

95,402

 

 

 

 

 

 

 

 

 

 

 

Other significant cash flow activities:

 

 

 

 

 

 

 

 

 

Payments for business acquisitions, net of cash acquired

 

(16,841

)

—

 

—

 

(46,725

)

Payments of general holdback in connection with acquisition of Platys

 

(3,394

)

(32

)

(80

)

(3,589

)

Proceeds from issuance of ¾% convertible notes, net of issuance costs

 

—

 

218,250

 

—

 

218,250

 

Repurchase of 3% convertible notes

 

(91,311

)

(124,233

)

—

 

(215,544

)

Redemption of 4 ¾% convertible notes

 

—

 

—

 

—

 

(83,010

)

Purchase of convertible bond hedge

 

—

 

(64,140

)

—

 

(64,140

)

Proceeds from issuance of warrants

 

—

 

30,390

 

—

 

30,390

 

 

 

Adaptec, Inc.
GAAP Condensed Consolidated Statements of Operations and
Reconciliation of GAAP to Pro forma Operating Results (*)
(unaudited)

 

 

 

Three-Month Period Ended
December 31, 2003

 

 

 

GAAP

 

Adjustments

 

Pro forma

 

 

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

Net revenues

 

$

115,143

 

$

—

 

$

115,143

 

Cost of revenues

 

68,575

 

(375

)(j)

68,200

 

Gross profit

 

46,568

 

375

 

46,943

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

25,103

 

(882

)(b)

24,221

 

Selling, marketing and administrative

 

19,745

 

(35

)(b)

19,710

 

Amortization of acquisition-related intangible assets

 

4,530

 

(4,530

)(c)

—

 

Restructuring charges

 

878

 

(878

)

—

 

Total operating expenses

 

50,256

 

(6,325

)

43,931

 

Income (loss) from operations

 

(3,688

)

6,700

 

3,012

 

Interest and other income

 

3,369

 

2,944

(f)

6,313

 

Interest expense

 

(2,322

)

—

 

(2,322

)

Income (loss) before provision for (benefit from) income taxes

 

(2,641

)

9,644

 

7,003

 

Provision for (benefit from) income taxes

 

372

 

1,589

(h)

1,961

 

Net income (loss)

 

$

(3,013

)

$

8,055

 

$

5,042

 

 

 

 

 

 

 

 

 

Net income (loss) per common share:

 

 

 

 

 

 

 

Basic

 

$

(0.03

)

 

 

$

0.05

 

Diluted

 

$

(0.03

)

 

 

$

0.05

 

 

 

 

 

 

 

 

 

Shares used in computing net income (loss) per share:

 

 

 

 

 

 

 

Basic

 

108,858

 

—

 

108,858

 

Diluted

 

108,858

 

2,197

(i)

111,055

 

 

Please see the footnotes accompanying the Condensed Consolidated Statement of Operations for the three- and twelve- month periods ended March 31, 2004 and 2003 for an explanation of the footnotes referred to in the table above.