EX-99.1 2 a05-13713_1ex99d1.htm EX-99.1

 

Exhibit 99.1

 

FOR IMMEDIATE RELEASE

 

SGI REPORTS FOURTH QUARTER AND FISCAL YEAR 2005 RESULTS

 

MOUNTAIN VIEW, Calif. (July 28, 2005)-Silicon Graphics (NYSE: SGI) today announced results for its fourth fiscal quarter and fiscal year ended June 24, 2005.

 

Revenue for the fourth quarter was $172 million, in line with the preliminary results announced July 7, 2005. Gross margin was 36.7% compared with 34.5% in the third quarter. SGI’s fourth-quarter operating loss was $16 million, compared with an operating loss of $45 million in the third quarter. Net income, including the net gain from the sale of a portion of the Company’s interest in SGI Japan, was $8 million or $0.02 per share on a fully diluted basis, compared with a net loss of $45 million or $0.17 per share in the third quarter.

 

Revenue for fiscal 2005 was $730 million.  The net loss was $76 million or $0.29 per share for the fiscal year.

 

“Our fourth quarter showed sequential revenue and bookings growth, and the lowest operating expenses for the fiscal year,” said Chairman and CEO Bob Bishop. “Nevertheless, we need to accelerate the turnaround and strengthen our financial position going forward.”

 

SGI has retained the turnaround firm of Alix Partners LLC to advise it in further reducing expenses, increasing revenue and improving liquidity.  SGI expects to announce significant restructuring actions later this quarter, and is actively pursuing financing alternatives, including amending or replacing its asset-based credit facility to increase borrowing availability.  As previously disclosed, SGI did not meet its EBITDA covenant for the fourth quarter under its asset-based credit agreement. Covenant waivers have been obtained on several prior occasions.

 

As of June 24, 2005, unrestricted cash, cash equivalents and marketable investments were $64 million compared with $84 million at March 25, 2005.

 

SGI will conduct a conference call today at 2 p.m. PT to provide additional details. The webcast is available at http://www.sgi.com/company info/investors/events.html. The dial-in number is (800) 817-2743 or (913) 981-4915 for participants outside North America.  An audio replay of this call will be available after 5 p.m. PT today at (888) 203-1112 (passcode: 7788439) or (719) 457-0820 (passcode: 7788439) and will be available for seven days. All links to the archived Webcast and audio replay are available through SGI’s Web site at www.sgi.com/company info/investors/.

 

Forward-Looking Statements
This news release contains certain forward-looking statements, including statements relating to our financial and operating results for the quarter ended June 24, 2005. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actual results may vary materially from the expected results described in this release. Factors that could cause actual results to differ materially from those described in this release include the process of calculating, reviewing and analyzing, and completing the audit with respect to, the final financial results for the quarter and the fiscal year; the failure to achieve expected revenue and gross margin levels; failure to manage costs and generate improved operating results; failure to maintain adequate cash resources for the operation of the business; the failure to receive waivers under the Company’s asset-based financing arrangements or to

 


 

secure additional financing, and the other risks and uncertainties detailed from time to time in the Company’s SEC reports, including the report on Form 10-Q for the quarter ended March 25, 2005. Silicon Graphics is under no obligation to, and expressly disclaims any obligation to, further update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

 

SILICON GRAPHICS | The Source of Innovation and Discovery(tm)
SGI, also known as Silicon Graphics, Inc., is the world’s leader in high-performance computing, visualization and storage. SGI’s vision is to provide technology that enables the most significant scientific and creative breakthroughs of the 21st century. Whether it’s sharing images to aid in brain surgery, finding oil more efficiently, studying global climate or enabling the transition from analog to digital broadcasting, SGI is dedicated to addressing the next class of challenges for scientific, engineering and creative users.  With offices worldwide, the company is headquartered in Mountain View, Calif., and can be found on the Web at www.sgi.com.

 

Silicon Graphics, SGI, the SGI cube and the SGI logo are registered trademarks and The Source of Innovation and Discovery is a trademark of Silicon Graphics, Inc., in the United States and/or other countries worldwide. All other trademarks mentioned herein are the property of their respective owners.

 

2


 

SILICON GRAPHICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except per share amounts)

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

 

June 24,

 

June 25,

 

June 24,

 

June 25,

 

 

 

2005

 

2004 (1)

 

2005

 

2004 (1)

 

 

 

(unaudited)

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Product and other revenue

 

$

102,943

 

$

109,783

 

$

391,322

 

$

432,718

 

Product revenue from related party (2)

 

4,457

 

14,629

 

44,658

 

66,426

 

Service revenue

 

64,816

 

83,283

 

293,985

 

342,858

 

Total revenue

 

172,216

 

207,695

 

729,965

 

842,002

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Cost of product and other revenue

 

70,871

 

76,360

 

285,428

 

292,628

 

Cost of service revenue

 

38,087

 

47,922

 

179,648

 

200,217

 

Research and development

 

20,234

 

23,283

 

92,705

 

108,763

 

Selling, general and administrative

 

57,956

 

65,656

 

244,568

 

257,742

 

Other operating expense (3)

 

1,424

 

1,959

 

24,083

 

47,825

 

Total costs and expenses

 

188,572

 

215,180

 

826,432

 

907,175

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

(16,356

)

(7,485

)

(96,467

)

(65,173

)

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(3,354

)

(3,331

)

(16,052

)

(19,234

)

Interest and other income (expense), net

 

26,562

(4)

479

 

28,773

(4)

(25,366

)(5)

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

6,852

 

(10,337

)

(83,746

)

(109,773

)

 

 

 

 

 

 

 

 

 

 

Income tax benefit

 

(995

)

(2,778

)

(8,014

)

(9,527

)

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

7,847

 

(7,559

)

(75,732

)

(100,246

)

 

 

 

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

 

 

 

Net income (loss) from discontinued operations, net of tax

 

—

 

676

 

—

 

3,975

 

Gain on disposition of discontinued operations, net of tax

 

—

 

50,501

 

(276

)

50,501

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

7,847

 

$

43,618

 

$

(76,008

)

$

(45,770

)

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share:

 

 

 

 

 

 

 

 

 

Continuing operations:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.03

 

$

(0.03

)

$

(0.29

)

$

(0.44

)

Diluted

 

$

0.02

 

$

(0.03

)

$

(0.29

)

$

(0.44

)

 

 

 

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

—

 

$

0.20

 

$

(0.00

)

$

0.24

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.03

 

$

0.17

 

$

(0.29

)

$

(0.20

)

Diluted

 

$

0.02

 

$

0.17

 

$

(0.29

)

$

(0.20

)

 

 

 

 

 

 

 

 

 

 

Shares used in the calculation of net income (loss) per common share:

 

 

 

 

 

 

 

 

 

Basic

 

265,149

 

261,001

 

263,430

 

227,837

 

Diluted

 

417,845

 

261,001

 

263,430

 

227,837

 

 

(1)

The results of our Alias application software business for periods prior to its sale in June 2004, are reflected as discontinued operations.

 

 

(2)

Represents product sales to SGI Japan, a related party for which we own a 24% equity interest at June 24, 2005 and owned a 40% equity interest at June 25, 2004.

 

 

(3)

Represents charges for estimated restructuring costs and charges associated with the impairment of assets.

 

 

(4)

The three- and twelve-month periods ended June 24, 2005 include a gain of approximately $21 million on the sale of a portion of our equity investment in SGI Japan.

 

 

(5)

The twelve-month period ended June 25, 2004 includes a $31 million non-cash charge resulting from the extinguishment of the exchanged 5.25% Senior Convertible Notes due in 2004.

 

 


 

SILICON GRAPHICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

June 24,

 

June 25,

 

 

 

2005

 

2004

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

64,247

 

$

154,855

 

Short-term marketable investments

 

39

 

2,010

 

Short-term restricted investments

 

39,757

 

23,585

 

Accounts receivable, net

 

93,335

 

113,901

 

Inventories

 

75,662

 

66,938

 

Prepaid expenses and other current assets

 

41,587

 

34,916

 

Total current assets

 

314,627

 

396,205

 

 

 

 

 

 

 

Restricted investments

 

413

 

909

 

 

 

 

 

 

 

Net property and equipment

 

56,257

 

74,595

 

 

 

 

 

 

 

Other assets

 

79,004

 

98,215

 

 

 

 

 

 

 

 

 

$

450,301

 

$

569,924

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

56,231

 

$

65,119

 

Accrued compensation

 

34,062

 

37,053

 

Income taxes payable

 

2,689

 

6,082

 

Other current liabilities

 

72,530

 

98,467

 

Current portion of long-term debt

 

1,820

 

17,775

 

Current portion of deferred revenue

 

98,305

 

96,058

 

Total current liabilities

 

265,637

 

320,554

 

 

 

 

 

 

 

Long-term debt

 

261,992

 

264,212

 

Long-term deferred revenue

 

36,188

 

25,749

 

Other liabilities

 

77,672

 

82,087

 

Total liabilities

 

641,489

 

692,602

 

 

 

 

 

 

 

Total stockholders’ deficit

 

(191,188

)

(122,678

)

 

 

 

 

 

 

 

 

$

450,301

 

$

569,924