EX-99.1 2 a06-11751_1ex99d1.htm EX-99

Exhibit 99.1

 

FOR IMMEDIATE RELEASE

 

Editorial Contact:

Investor Contact:

Debbie Clima

Mary Camarata

Adaptec, Inc.

Adaptec, Inc.

408-957-1762

408-957-1630

debbie_clima@adaptec.com

mary_camarata@adaptec.com

 

ADAPTEC REPORTS FOURTH QUARTER AND FISCAL 2006 RESULTS

 

•                  Q4 Net Revenue from Continuing Operations: $73.4 million

 

•                  Fiscal Year 2006 Revenue from Continuing Operations: $310.1 million

 

MILPITAS, Calif. – May 11, 2006 – Adaptec, Inc. (NASDAQ: ADPT), a global leader in storage solutions, today reported financial results for the fourth quarter of its fiscal year  2006, which ended on March 31, 2006.

 

Net revenue for the Company’s continuing operations for the fourth quarter of fiscal 2006 was $73.4 million, compared with $79.0 million for the fourth quarter of 2005.

 

The loss from continuing operations, computed on a generally accepted accounting principles (GAAP) basis, for the fourth quarter of fiscal 2006 was ($4.2) million or ($0.04) per share compared with ($153.4) million or ($1.37) per share for the fourth quarter of fiscal 2005.

 

The non-GAAP income from continuing operations for the fourth quarter of fiscal 2006 was $5.6 million or $0.04 per share, compared with a non-GAAP loss from continuing operations of ($5.9) million or ($0.05) per share for the fourth quarter of fiscal 2005.

 

The GAAP net loss for the fourth quarter of fiscal 2006 was ($3.4) million or ($0.03) per share compared with a net loss of ($159.5) million or ($1.43) per share for the fourth quarter of fiscal 2005. The non-GAAP net income for the fourth quarter of fiscal 2006 was $3.3 million or $0.03 per share compared with a non-GAAP net loss of ($4.5) million or ($0.04) per share for the fourth quarter of fiscal 2005.

 

Net revenues from continuing operations for the fiscal year ended March 31, 2006 were $310.1 million, compared with $371.3 million, for the fiscal year ended March 31, 2005. Net loss for the fiscal year

 


 

ended March 31, 2006, on a GAAP basis, was ($148.4) million, or ($1.31) per share, compared with net loss of ($145.1) million, or ($1.31) per share, for the fiscal year ended March 31, 2005.

 

Non-GAAP loss from continuing operations for the fiscal year ended March 31, 2006, was ($3.9) million, or (0.03) per share, compared with non-GAAP income from continuing operations of $5.6 million, or $0.05 per share, for the fiscal year ended March 31, 2005. Non-GAAP net loss for the fiscal year ended March 31, 2006, was ($11.3) million, or ($0.10) per share, compared with non-GAAP net income of $2.0 million, or $0.02 per share, for the fiscal year ended March 31, 2005.

 

A complete reconciliation between GAAP and non-GAAP information referred to in this release is provided in the attached tables.

 

The Company indicated that its improved performance during the fourth fiscal quarter is primarily attributed to the company’s ongoing focus on growing its leadership position in the serial technology marketplace, driving positive changes in its business and operating models, and improving company execution on all fronts.

 

“Fiscal 2006 was a year of recovery for Adaptec and now we are at a turning point in our strategy,” said S. “Sundi” Sundaresh, president and CEO of Adaptec. “As we move into fiscal year 2007, we are well positioned with a strengthened management team, dedicated employee base, and renewed focus on our RAID data protection and serial controller technologies.”

 

Conference Call

 

The Adaptec fourth quarter and fiscal 2006 earnings conference call is scheduled for 1:45 p.m. Pacific Time on May 11, 2006. 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 June 11, 2006 by calling (888) 203-1112 in the U.S. or (719) 457-0820 internationally and referencing reservation number 1644870.

 

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. 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: identifying and retaining key management, identifying potential buyers for the Systems business; market demand for RAID 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 Quarterly Report on Form 10-Q for the quarter ended December 31, 2006, on file with the Securities and Exchange Commission. Adaptec assumes no obligation to update any forward looking information that is included in this release.

 

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.

 


 

Adaptec, Inc.

GAAP Condensed Consolidated Statements of Operations and

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

(unaudited)

 

 

 

Three-Month Period Ended

 

 

 

March 31, 2006

 

March 31, 2005

 

 

 

GAAP

 

Adjustments

 

Non-GAAP

 

GAAP

 

Adjustments

 

Non-GAAP

 

 

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

73,414

 

$

—

 

$

73,414

 

$

78,958

 

$

—

 

$

78,958

 

Cost of revenues

 

45,448

 

—

 

45,448

 

54,543

 

—

 

54,543

 

Gross profit

 

27,966

 

—

 

27,966

 

24,415

 

—

 

24,415

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

13,641

 

—

 

13,641

 

18,242

 

(202

)(b)

18,040

 

Selling, marketing and administrative

 

15,272

 

(39

)(a)

15,233

 

17,076

 

(768

)(b)

16,308

 

Amortization of acquisition-related intangible assets

 

1,689

 

(1,689

)(c)

 

 

2,181

 

(2,181

)(d)

—

 

Restructuring charges

 

7,325

 

(7,325

)(e)

 

 

921

 

(921

)(e)

—

 

Goodwill impairment

 

 

 

—

 

 

 

52,272

 

(52,272

)(f)

—

 

Other charges

 

107

 

(107

)(g)

 

 

2,465

 

(2,465

)(h)

—

 

Total operating expenses

 

38,034

 

(9,160

)

28,874

 

93,157

 

(58,809

)

34,348

 

Loss from continuing operations

 

(10,068

)

9,160

 

(908

)

(68,742

)

58,809

 

(9,933

)

Interest and other income

 

5,011

 

(22

)(i)

4,989

 

(230

)

4,466

(j)

4,236

 

Interest expense

 

(716

)

—

 

(716

)

(1,089

)

—

 

(1,089

)

Income (loss) from continuing operations before income taxes

 

(5,773

)

9,138

 

3,365

 

(70,061

)

63,275

 

(6,786

)

Provision for (benefit from) income taxes

 

(1,598

)

(666

)(k)

(2,264

)

83,357

 

(84,226

)(l)

(869

)

Income (loss) from continuing operations

 

(4,175

)

9,804

 

5,629

 

(153,418

)

147,501

 

(5,917

)

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from discontinued operations, net of taxes

 

(12,501

)

10,169

(m)

(2,332

)

(6,124

)

7,495

(m)

1,371

 

Income from disposal of discontinued operations, net of taxes

 

13,284

 

(13,284

)(m)

 

 

—

 

—

 

—

 

Income (loss) from discontinued operations, net of taxes

 

783

 

(3,115

)

(2,332

)

(6,124

)

7,495

 

1,371

 

Net income (loss)

 

$

(3,392

)

$

6,689

 

$

3,297

 

$

(159,542

)

$

154,996

 

$

(4,546

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.04

)

 

 

$

0.05

 

$

(1.37

)

 

 

$

(0.05

)

Discontinued operations

 

$

0.01

 

 

 

$

(0.02

)

$

(0.05

)

 

 

$

0.01

 

Net income (loss)

 

$

(0.03

)

 

 

$

0.03

 

$

(1.43

)

 

 

$

(0.04

)

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.04

)

 

 

$

0.04

 

$

(1.37

)

 

 

$

(0.05

)

Discontinued operations

 

$

0.01

 

 

 

$

(0.02

)

$

(0.05

)

 

 

$

0.01

 

Net income (loss)

 

$

(0.03

)

 

 

$

0.03

 

$

(1.43

)

 

 

$

(0.04

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

114,678

 

—

 

114,678

 

111,905

 

—

 

111,905

 

Diluted

 

114,678

 

22,215

(u)

136,893

 

111,905

 

—

 

111,905

 

 


 

Adaptec, Inc.

GAAP Condensed Consolidated Statements of Operations and

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

(unaudited)

 

 

 

Twelve-Month Period Ended

 

 

 

March 31, 2006

 

March 31, 2005

 

 

 

GAAP

 

Adjustments

 

Non-GAAP

 

GAAP

 

Adjustments

 

Non-GAAP

 

 

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

310,145

 

$

—

 

$

310,145

 

$

371,257

 

$

—

 

$

371,257

 

Cost of revenues

 

201,890

 

(15

)(n)

201,875

 

219,455

 

—

 

219,455

 

Gross profit

 

108,255

 

15

 

108,270

 

151,802

 

—

 

151,802

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

60,895

 

(89

)(n)

60,806

 

86,479

 

(1,879

)(o)

84,600

 

Selling, marketing and administrative

 

64,989

 

(1,088

)(n)

63,901

 

72,120

 

(3,267

)(o)

68,853

 

Amortization of acquisition-related intangible assets

 

7,155

 

(7,155

)(c)

 

 

9,251

 

(9,251

)(d)

—

 

Restructuring charges

 

10,430

 

(10,430

)(e)

 

 

5,896

 

(5,896

)(e)

—

 

Goodwill impairment

 

90,602

 

(90,602

)(p)

 

 

52,272

 

(52,272

)(f)

—

 

Other charges

 

1,579

 

(1,579

)(g)

 

 

(290

)

290

(q)

—

 

Total operating expenses

 

235,650

 

(110,943

)

124,707

 

225,728

 

(72,275

)

153,453

 

Income (loss) from continuing operations

 

(127,395

)

110,958

 

(16,437

)

(73,926

)

72,275

 

(1,651

)

Interest and other income

 

17,621

 

79

(r)

17,700

 

8,369

 

6,158

(s)

14,527

 

Interest expense

 

(3,314

)

—

 

(3,314

)

(4,439

)

—

 

(4,439

)

Income (loss) from continuing operations before income taxes

 

(113,088

)

111,037

 

(2,051

)

(69,996

)

78,433

 

8,437

 

Provision for (benefit from) income taxes

 

1,608

 

201

(k)

1,809

 

51,894

 

(49,017

)(t)

2,877

 

Income (loss) from continuing operations

 

(114,696

)

110,836

 

(3,860

)

(121,890

)

127,450

 

5,560

 

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations, net of taxes

 

(43,546

)

36,144

(m)

(7,402

)

(23,216

)

19,690

(m)

(3,526

)

Income from disposal of discontinued operations, net of taxes

 

9,810

 

(9,810

)(m)

 

 

—

 

—

 

—

 

Loss from discontinued operations, net of taxes

 

(33,736

)

26,334

 

(7,402

)

(23,216

)

19,690

 

(3,526

)

Net income (loss)

 

$

(148,432

)

$

137,170

 

$

(11,262

)

$

(145,106

)

$

147,140

 

$

2,034

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(1.01

)

 

 

$

(0.03

)

$

(1.10

)

 

 

$

0.05

 

Discontinued operations

 

$

(0.30

)

 

 

$

(0.07

)

$

(0.21

)

 

 

$

(0.03

)

Net income (loss)

 

$

(1.31

)

 

 

$

(0.10

)

$

(1.31

)

 

 

$

0.02

 

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(1.01

)

 

 

$

(0.03

)

$

(1.10

)

 

 

$

0.05

 

Discontinued operations

 

$

(0.30

)

 

 

$

(0.07

)

$

(0.21

)

 

 

$

(0.03

)

Net income (loss)

 

$

(1.31

)

 

 

$

(0.10

)

$

(1.31

)

 

 

$

0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

113,405

 

—

 

113,405

 

110,798

 

—

 

110,798

 

Diluted

 

113,405

 

—

 

113,405

 

110,798

 

1,638

(v)

112,436

 

 


 

(*) 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 $0.03 million associated with the Snap Appliance acquisition (acquired in July 2004) and deferred compensation expense related to assumed stock options associated with the Snap Appliance acquisition. These assumed options were negotiated as part of the acquisition and represent compensation over and above the amounts that we provide to these acquired employees.

 

(b) Management incentive program of $0.6 million associated with the Snap Appliance acquisition and deferred compensation expense related to assumed stock options of $0.4 million associated with the Platys (acquired in August 2001) and Snap Appliance acquisitions.

 

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

 

(d) Amortization of acquisition-related intangible assets, primarily core and existing technologies, patents and customer relationships intangible assets, related to the acquisitions of Platys, Eurologic, ICP vortex and Elipsan.

 

(e) Restructuring expense primarily related to (i) activities under the third and fourth quarters of fiscal 2006 restructuring plan to simplify our infrastructure by reducing headcount and consolidating facilities as well as adjustments made to previous restructuring plans and (ii) to activities under the first, second, third and fourth quarters of fiscal 2005 restructuring plans to reduce headcount, consolidate facilities and other actions related to the Snap Appliance acquisition, plans to reduce headcount related to the Vitesse and ServerEngines strategic alliances and adjustments made to previous restructuring plans.

 

(f) Impairment of goodwill related to the Channel segment of $52.3 million

 

(g) Loss on the sale of our Singapore manufacturing assets, buildings and improvements and inventory.

 

(h) Other charges primarily represents $0.9 million and $1.6 million in severance, benefits, loss on the sale of property and equipment and legal fees associated with the strategic alliances entered into with ServerEngines and Vitesse, respectively.

 

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

 

(j) Loss on liquidation of investments related to the repatriation of cash from Singapore to the United States.

 

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

 

(l) Incremental income taxes associated with certain non-GAAP adjustments, recording of a valuation allowance on net deferred tax assets and taxes incurred on the repatriation of cash from Singapore to the United States.

 

(m) Loss (income) from disposal of the IBM i/p Series RAID business and Systems business, impairment of the IBM i/p Series RAID long-lived assets,  impairment of the Systems long-lived assets, write-off of in-process research and development costs associated with the acquisitions of Snap Appliance and the IBM i/p Series RAID business, amortization of acquisition-related intangible assets related to the acquisitions of Platys, Eurologic, ICP vortex, Snap Appliance and the IBM i/p Series RAID business, management incentive program associated with the Snap Appliance acquisition, deferred compensation expense related to assumed stock options associated with the Snap Appliance acquisition, cash hire-on payments associated with the IBM i/p Series RAID business acquisition, and incremental income taxes associated with certain GAAP and non-GAAP adjustments. Amounts are summarized below:

 


 

(in millions)

 

Three-month ended
March 31, 2006

 

Three-month ended
March 31, 2005

 

Twelve-month ended
March 31, 2006

 

Twelve-month ended
March 31, 2005

 

Three-month ended
December 31, 2005

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairment of the IBM i/p Series RAID Business

 

$

—

 

$

—

 

$

15.5

 

$

---

 

$

—

 

Impairment of Systems long lived assets

 

10.0

 

—

 

10.0

 

—

 

—

 

Write-off of in-process research and development

 

—

 

—

 

—

 

5.2

 

—

 

Acquisition-related intangible assets

 

—

 

2.9

 

5.2

 

9.0

 

—

 

Management incentive program

 

0.5

 

0.7

 

4.0

 

2.8

 

0.8

 

Deferred compensation expense

 

0.1

 

0.2

 

1.4

 

0.7

 

0.2

 

Cash hire-on payments

 

—

 

—

 

—

 

0.6

 

—

 

Loss (gain) from disposal of IBM i/p Series RAID

 

(2.1

)

—

 

1.4

 

—

 

(3.5

)

Gain from disposal of Systems Business

 

(12.1

)

—

 

(12.1

)

—

 

—

 

Income taxes

 

0.5

 

3.7

 

0.9

 

1.4

 

1.1

 

Total

 

$

(3.1

)

$

7.5

 

$

26.3

 

$

19.7

 

$

(1.4

)

 

(n) Management incentive program of $1.0 million associated with the Snap Appliance acquisition and deferred compensation expense related to assumed stock options of $0.2 million associated with the Platys and Snap Appliance acquisitions.

 

(o) Management incentive program of $2.8 million associated with the Snap Appliance acquisition, deferred compensation expense related to assumed stock options of $2.4 million associated with the Platys and Snap Appliance acquisitions.

 

(p) Impairment of goodwill.

 

(q) Other charges primarily represents $0.9 million and $1.6 million in severance, benefits, loss on the sale of property and equipment and legal fees associated with the strategic alliances entered into with ServerEngines and Vitesse, respectively and gain of $2.8 million on sale of long-lived assets.

 

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

 

(s) Loss of $4.5 million on liquidation of investments related to the repatriation of cash from Singapore to the United States and expense of $1.7 million related to a license and release agreement to settle claims that some of our products infringed certain patents.

 

(t)  Incremental income taxes associated with certain non-GAAP adjustments, recording of a valuation allowance on net deferred tax assets, taxes incurred on the repatriation of cash from Singapore to the United States and a tax benefit from certain discrete tax events during the second and third quarter of fiscal 2005 related to the method and amount of settled tax controversies.

 

(u) Anti-dilutive effect of employee options and 3/4% convertible notes.

 

(v) Anti-dilutive effect of employee options.

 


 

Adaptec, Inc.

Summary Balance Sheet and Cash Flow Data

(unaudited)

 

Balance Sheet Data

 

 

 

As of

 

 

 

March 31, 2006

 

December 31, 2005

 

March 31, 2005

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and marketable securities

 

$

556,552

 

$

532,306

 

$

526,556

 

Accounts receivable, net

 

47,876

 

57,086

 

70,159

 

Inventories

 

23,423

 

22,441

 

60,204

 

Goodwill and other intangible assets

 

18,471

 

21,739

 

170,943

 

Other assets

 

71,721

 

61,732

 

135,644

 

Assets held for sale

 

—

 

22,583

 

—

 

Assets from discontinued operations

 

19,356

 

30,481

 

—

 

Total assets

 

$

737,399

 

$

748,368

 

$

963,506

 

 

 

 

 

 

 

 

 

Current liabilities

 

133,749

 

135,043

 

177,644

 

Liabilities from discontinued operations

 

4,856

 

5,336

 

—

 

Convertible notes and other long-term obligations

 

229,349

 

240,648

 

275,539

 

Stockholders’ equity

 

369,445

 

367,341

 

510,323

 

Total liabilities and stockholders’ equity

 

$

737,399

 

$

748,368

 

$

963,506

 

 

Cash Flow Data

 

 

 

Three-Month Period Ended

 

 

 

March 31, 2006

 

December 31, 2005

 

March 31, 2005

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

(4,175

)

$

(2,614

)

$

(153,418

)

Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used for) operations:

 

 

 

 

 

 

 

Non-cash P&L items:

 

 

 

 

 

 

 

Goodwill impairment

 

—

 

—

 

52,272

 

Loss (gain) on sale of long-lived assets

 

107

 

1,472

 

1,372

 

Stock-based compensation

 

18

 

20

 

525

 

Deferred income taxes

 

—

 

—

 

50,779

 

Loss on repurchase of 3% convertible notes

 

(22

)

—

 

—

 

Depreciation and amortization

 

5,113

 

6,340

 

8,875

 

Other items

 

889

 

507

 

(616

)

Changes in assets and liabilities

 

(15,159

)

11,913

 

48,524

 

Net cash provided by operating activities of continuing operations

 

(13,229

)

17,638

 

8,313

 

Net cash provided by (used for) operating activities of discontinued operations

 

(2,303

)

2,109

 

(2,620

)

Net cash provided by (used for) operating activities

 

$

(15,532

)

$

19,747

 

$

5,693

 

 

 

 

 

 

 

 

 

Other significant cash flow activities:

 

 

 

 

 

 

 

Proceeds from the sale of business

 

35,490

 

24,126

 

 

 

Repurchase of 3% convertible notes

 

1,321

 

—

 

—