EX-99.1 2 a04-12258_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

 

ADAPTEC REPORTS SECOND QUARTER FY 2005 RESULTS

 

•                  Q2 Revenue:  $121.3 million

 

•                  Q2 Earnings per Share:  ($0.08) GAAP; $0.03 Non-GAAP

 

MILPITAS, Calif., October 28, 2004 – Adaptec, Inc. (NASDAQ: ADPT), a global leader in storage solutions, today reported its financial results for the quarter ended September 30, 2004.

 

Net revenue for the second quarter of fiscal 2005 was $121.3 million, compared with $109.2 million for the second quarter of fiscal 2004 and $115.5 million for the first quarter of fiscal 2005.

 

The second quarter of fiscal 2005 net loss on a generally accepted accounting principles (GAAP) basis was ($8.5 million), or ($0.08) per share, compared with net income of $0.3 million, or $0.00 per share, for the second quarter of fiscal 2004 and net income of $0.01 million, or $0.00 per share, for the first quarter of fiscal 2005.

 

Non-GAAP net income for the second quarter of fiscal 2005 was $3.5 million, or $0.03 per share, compared with $3.7 million, or $0.03 per share, for the second quarter of fiscal 2004 and $6.4 million, or $0.06 per share, for the first quarter of fiscal 2005. A reconciliation between GAAP net loss and non-GAAP net income is provided in the attached tables.

 

The current quarter includes a full quarter of IBM iSeries and pSeries activity as Adaptec completed the acquisition of this business on June 29, 2004. The quarter also includes the results of Snap Appliance, Inc. from July 23, 2004, which was the date of that acquisition. Net revenues for these combined businesses totaled $7.9 million, which

 


 

is lower than expected future run rates due to purchase accounting and integration activities.

 

“We attribute our better-than-expected earnings to successful expense controls, acquisition synergies and steady OEM demand,” said Robert N. Stephens, president and chief executive officer for Adaptec. “In addition, we are securing design wins with top-tier OEM customers, delivering critical external storage products that meet diverse business needs.”

 

Business Highlights

 

•                  IBM, with its new TotalStorage DS300 and DS400, became the first major vendor to ship storage solutions based on the Adaptec Flexible Storage Architecture (FSA), a modular platform based on industry-standard, pre-developed and interoperable components, systems and software.

 

•                  Adaptec announced the availability of the Adaptec FSA, which enables original equipment manufacturers (OEMs) and channel partners to mix and match Adaptec components, systems and software to deliver a full range of unique storage solutions from simple arrays to highly available enterprise systems.

 

•                  Adaptec launched the Snap Server 18000, its fastest Snap Server ever. This midrange solution provides a unified block-and-file platform for consolidating multiple types of data across a broad range of applications and scales up to 30 terabytes at a cost of less than $5.00 per gigabyte.

 

•                  At the Intel Developer Forum (IDF), Adaptec demonstrated the industry’s first Serial Attached SCSI (SAS) subsystem powered by the highest performance SAS ASIC with integrated RAID data protection.

 

•                  Adaptec announced the availability of Snap Enterprise Data Replicator (Snap EDR), a high-performance, network-optimized data replication and management software suite that allows customers to easily and cost-effectively move, protect and report on their data throughout a distributed enterprise.

 


 

Conference Call

 

Adaptec’s FY 2005 second-quarter earnings conference call is scheduled for 1:45 p.m. PDT on October 28, 2004. The dial-in number for the conference call is (706) 679-0658. Individuals may also participate free via Web cast by visiting www.adaptec.com 15 minutes prior to the call. A telephone replay will be made accessible through November 11, 2004, at (706) 645-9291, access code 271437. 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 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 ability to secure design wins and deliver external storage products that meet diverse business needs. 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, including our SAS, SATA and iSCSI lines of products; decline in consumer acceptance of our current products; the adverse effects of the intense competition we face in our business, 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 June 30, 2004, 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 Non-GAAP Operating Results (*)
(unaudited)

 

 

 

Three-Month Period Ended

 

 

 

September 30, 2004

 

September 30, 2003

 

 

 

GAAP

 

Adjustments

 

Non-GAAP

 

GAAP

 

Adjustments

 

Non-GAAP

 

 

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

121,270

 

$

—

 

$

121,270

 

$

109,192

 

$

—

 

$

109,192

 

Cost of revenues

 

68,274

 

(129

)(a)

68,145

 

62,795

 

—

 

62,795

 

Gross profit

 

52,996

 

129

 

53,125

 

46,397

 

—

 

46,397

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

32,016

 

(1,987

)(a)

30,029

 

25,203

 

(1,116

)(b)

24,087

 

Selling, marketing and administrative

 

23,129

 

(2,317

)(a)

20,812

 

19,355

 

(36

)(b)

19,319

 

Amortization of acquisition-related intangible assets

 

5,181

 

(5,181

)(c)

—

 

4,713

 

(4,713

)(f)

—

 

Write-off of acquired in-process technology

 

2,200

 

(2,200

)(d)

—

 

—

 

—

 

—

 

Restructuring charges

 

1,928

 

(1,928

)(e)

—

 

1,478

 

(1,478

)(e)

—

 

Total operating expenses

 

64,454

 

(13,613

)

50,841

 

50,749

 

(7,343

)

43,406

 

Income (loss) from operations

 

(11,458

)

13,742

 

2,284

 

(4,352

)

7,343

 

2,991

 

Interest and other income

 

3,659

 

—

 

3,659

 

4,661

 

—

 

4,661

 

Interest expense

 

(1,145

)

—

 

(1,145

)

(2,490

)

—

 

(2,490

)

Income (loss) before income taxes

 

(8,944

)

13,742

 

4,798

 

(2,181

)

7,343

 

5,162

 

Provision for (benefit from) income taxes

 

(474

)

1,817

(g)

1,343

 

(2,442

)

3,887

(n)

1,445

 

Net income (loss)

 

$

(8,470

)

$

11,925

 

$

3,455

 

$

261

 

$

3,456

 

$

3,717

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.08

)

 

 

$

0.03

 

$

0.00

 

 

 

$

0.03

 

Diluted

 

$

(0.08

)

 

 

$

0.03

 

$

0.00

 

 

 

$

0.03

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

110,312

 

—

 

110,312

 

108,411

 

—

 

108,411

 

Diluted

 

110,312

 

2,306

(h)

112,618

 

110,219

 

 

 

110,219

 

 


 

Adaptec, Inc.

GAAP Condensed Consolidated Statements of Operations and

Reconciliation of GAAP to Non-GAAP Operating Results (*)

(unaudited)

 

 

 

Six-Month Period Ended

 

 

 

September 30, 2004

 

September 30, 2003

 

 

 

GAAP

 

Adjustments

 

Non-GAAP

 

GAAP

 

Adjustments

 

Non-GAAP

 

 

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

236,772

 

$

—

 

$

236,772

 

$

216,485

 

$

—

 

$

216,485

 

Cost of revenues

 

133,408

 

(129

)(i)

133,279

 

124,274

 

—

 

124,274

 

Gross profit

 

103,364

 

129

 

103,493

 

92,211

 

—

 

92,211

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

57,404

 

(2,756

)(i)

54,648

 

51,384

 

(2,342

)(b)

49,042

 

Selling, marketing and administrative

 

42,065

 

(2,353

)(i)

39,712

 

39,838

 

(180

)(b)

39,658

 

Amortization of acquisition-related intangible assets

 

8,110

 

(8,110

)(c)

—

 

9,537

 

(9,537

)(f)

—

 

Write-off of acquired in-process technology

 

5,200

 

(5,200

)(d)

—

 

3,649

 

(3,649

)(d)

—

 

Restructuring charges

 

2,747

 

(2,747

)(e)

—

 

1,826

 

(1,826

)(e)

—

 

Total operating expenses

 

115,526

 

(21,166

)

94,360

 

106,234

 

(17,534

)

88,700

 

Income (loss) from operations

 

(12,162

)

21,295

 

9,133

 

(14,023

)

17,534

 

3,511

 

Interest and other income

 

5,502

 

1,250

(j)

6,752

 

61,122

 

(48,790

)(k)

12,332

 

Interest expense

 

(2,267

)

—

 

(2,267

)

(5,688

)

—

 

(5,688

)

Income (loss) before income taxes

 

(8,927

)

22,545

 

13,618

 

41,411

 

(31,256

)

10,155

 

Provision for (benefit from) income taxes

 

(467

)

4,280

(g)

3,813

 

348

 

2,495

(n)

2,843

 

Net income (loss)

 

$

(8,460

)

$

18,265

 

$

9,805

 

$

41,063

 

$

(33,751

)

$

7,312

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.08

)

 

 

$

0.09

 

$

0.38

 

 

 

$

0.07

 

Diluted

 

$

(0.08

)

 

 

$

0.09

 

$

0.35

 

 

 

$

0.07

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

110,076

 

—

 

110,076

 

108,183

 

—

 

108,183

 

Diluted

 

110,076

 

2,001

(h)

112,077

 

126,400

 

(16,328

)(l)

110,072

 

 


 

(*) To supplement our consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), we use non-GAAP 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 non-GAAP 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 non-GAAP 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 non-GAAP results to the investment community, we believe the inclusion of non-GAAP numbers provides consistency in our financial reporting. Further, these non-GAAP results are one of the primary indicators management uses for assessing our performance, allocating resources and planning and forecasting future periods. The non-GAAP 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.

 

(a) Management incentive program of $2.9 million associated with the Snap Appliance acquisition (acquired in July 2004), deferred compensation expense related to assumed stock options of $0.9 million associated with the Platys (acquired in August 2001) and Snap Appliance acquisitions and cash hire-on payments of $0.6 million associated with the IBM i/p Series RAID business acquisition (acquired in June 2004).  These assumed options and special bonus arrangements were negotiated as part of the acquisitions and represent compensation over and above the amounts that we provide to these acquired employees.

 

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

 

(c) Amortization of acquisition-related intangible assets, primarily core and existing technologies, patents, trade name and supply agreement intangibles, related to the acquisitions of Platys, Eurologic (acquired in April 2003), ICP vortex (acquired in June 2003), Elipsan (acquired in February 2004), the IBM i/p Series RAID business and Snap Appliance.

 

(d) In-process write-off of research and development costs associated with the Snap Appliance acquisition of $2.2 million, the IBM i/p Series RAID business acquisition of $3.0 million and the Eurologic acquisition of $3.6 million.

 

(e) Restructuring expense primarily related to activities under (i) first and second quarter of fiscal 2005 restructuring plans to reduce headcount, consolidate facilities and other actions related to the Snap Appliance acquisition and (ii) the second quarter of fiscal 2004 restructuring plan related to actions to reduce headcount and consolidate facilities related to the DSG segment.

 

(f) Amortization of acquisition-related intangible assets, primarily core technology and patent intangibles, related to the acquisitions of DPT (acquired in December 1999), Platys, Eurologic and ICP vortex.

 

(g) Incremental income taxes associated with certain non-GAAP adjustments and a tax benefit from certain discrete tax events during the second quarter of fiscal 2005 related to the method and amount of settled tax controversies.

 

(h) Dilutive effect of employee stock options.

 

(i) Management incentive program of $2.9 million associated with the Snap Appliance acquisition, deferred compensation expense of $1.7 million associated with the Platys and Snap Appliance acquisitions and cash hire-on payments of $0.6 million associated with the IBM i/p Series RAID business acquisition.

 

(j) Expense related to a license and release agreement to settle claims that some of our products infringed certain patents.

 

(k) Gain of $49.3 million related to the settlement with the former president of DPT over claims that representations and warranties made by DPT stockholders as part of the initial acquisition were incomplete or inaccurate, loss of $0.8 million on redemption of 4 ¾% Convertible Subordinated Notes, and realized gains of $0.3 million on investments.

 

(l) Anti-dilutive effect of 3% Convertible Subordinated Notes.

 

(m) Amortization of acquisition-related intangible assets, primarily core technology and patent intangibles, related to the acquisitions of Platys, Eurologic, ICP vortex and Elipsan.

 

(n) Incremental income taxes associated with certain non-GAAP adjustments.

 


 

Adaptec, Inc.

Summary Balance Sheet and Cash Flow Data

(unaudited)

 

Balance Sheet Data

 

 

 

As of

 

 

 

September 30, 2004

 

March 31, 2004

 

September 30, 2003

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and marketable securities

 

$

529,988

 

$

663,854

 

$

683,425

 

Accounts receivable, net

 

76,524

 

51,562

 

57,369

 

Inventories

 

65,115

 

48,888

 

40,738

 

Goodwill and other intangible assets

 

253,788

 

117,394

 

110,540

 

Other assets

 

162,697

 

169,406

 

157,518

 

Total assets

 

$

1,088,112

 

$

1,051,104

 

$

1,049,590

 

 

 

 

 

 

 

 

 

Current liabilities

 

174,176

 

142,361

 

142,637

 

Convertible notes and other long-term obligations

 

273,736

 

263,852

 

255,888

 

Stockholders’ equity

 

640,200

 

644,891

 

651,065

 

Total liabilities and stockholders’ equity

 

$

1,088,112

 

$

1,051,104

 

$

1,049,590

 

 

Cash Flow Data

 

 

 

Three-Month Period Ended

 

 

 

September 30, 2004

 

June 30, 2004

 

September 30, 2003

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(8,470

)

$

10

 

$

261

 

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

 

 

 

 

 

 

 

Non-cash P&L items:

 

 

 

 

 

 

 

Non-cash restructuring charges

 

—

 

109

 

66

 

Write-off of acquired in-process technology

 

2,200

 

3,000

 

—

 

Stock-based compensation related to Platys and Snap Appliance

 

873

 

805

 

1,081

 

Depreciation and amortization

 

12,261

 

10,342

 

14,079

 

Deferred income taxes

 

56

 

(25

)

(3,100

)

Other items

 

(3,964

)

—

 

261

 

Changes in assets and liabilities

 

(11,126

)

(6,060

)

6,766

 

Net cash provided by (used for) operating activities

 

$

(8,170

)

$

8,181

 

$

19,414

 

 

 

 

 

 

 

 

 

Other significant cash flow activities:

 

 

 

 

 

 

 

Payments for business acquisitions, net of cash acquired

 

76,503

 

47,475

 

61

 

Payments of general holdback in connection with acquisition of Platys

 

—

 

—

 

159

 

 


 

Adaptec, Inc.

GAAP Condensed Consolidated Statements of Operations and

Reconciliation of GAAP to Non-GAAP Operating Results (*)

(unaudited)

 

 

 

Three-Month Period Ended
June 30, 2004

 

 

 

GAAP

 

Adjustments

 

Non-GAAP

 

 

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

Net revenues

 

$

115,502

 

$

—

 

$

115,502

 

Cost of revenues

 

65,134

 

—

 

65,134

 

Gross profit

 

50,368

 

—

 

50,368

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

25,388

 

(769

)(b)

24,619

 

Selling, marketing and administrative

 

18,936

 

(36

)(b)

18,900

 

Amortization of acquisition-related intangible assets

 

2,929

 

(2,929

)(m)

—

 

Write-off of acquired in- process technology

 

3,000

 

(3,000

)(d)

—

 

Restructuring charges

 

819

 

(819

)(e)

—

 

Total operating expenses

 

51,072

 

(7,553

)

43,519

 

Income (loss) from operations

 

(704

)

7,553

 

6,849

 

Interest and other income

 

1,843

 

1,250

(j)

3,093

 

Interest expense

 

(1,122

)

—

 

(1,122

)

Income before income taxes

 

17

 

8,803

 

8,820

 

Provision for income taxes

 

7

 

2,463

(n)

2,470

 

Net income

 

$

10

 

$

6,340

 

$

6,350

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

Basic

 

$

0.00

 

 

 

$

0.06

 

Diluted

 

$

0.00

 

 

 

$

0.06

 

 

 

 

 

 

 

 

 

Shares used in computing net income per share:

 

 

 

 

 

 

 

Basic

 

109,840

 

—

 

109,840

 

Diluted

 

111,536

 

—

 

111,536

 

 

Please see the footnotes accompanying the Condensed Consolidated Statement of Operations for the three- and six-month periods ended September 30, 2004 and 2003 for an explanation of the footnotes referred to in the table above.