Adaptec Reports Better Than Anticipated Second Quarter Results - Q2
Revenues: $109.2 million - Q2 Earnings per Share: $0.00 GAAP; $0.03
Pro Forma - Q2 Operating Cash Flow: $23.2 million MILPITAS, Calif.,
Oct. 27 /PRNewswire-FirstCall/ -- Adaptec, Inc. , a global leader
in storage solutions, today reported its second quarter results for
the period ended September 30, 2003. Net revenues for the second
quarter of fiscal 2004 were $109.2 million, compared with $85.7
million for the second quarter of fiscal 2003 and $107.3 for the
first quarter of fiscal 2004. Net income for the second quarter of
fiscal 2004, on a generally accepted accounting principles (GAAP)
basis, was $0.3 million or $0.00 per share, compared with a net
loss of $10.8 million or $0.10 per share for the second quarter of
fiscal 2003 and net income of $40.8 million or $0.33 per share for
the first quarter of fiscal 2004. Fiscal 2004 first quarter results
include an after tax gain of $49.3 million from the May 2003
settlement with the former president of Distributed Processing
Technology Corp. (DPT), a company Adaptec acquired in 1999. The
first and second quarters of fiscal 2004 include the results from
Eurologic Systems, acquired April 2, 2003, and the second quarter
of fiscal 2004 includes a full quarter of the results of ICP vortex
Computersysteme GmbH (ICP vortex) acquired June 5, 2003. Pro forma
net income for the second quarter of fiscal 2004 was $3.7 million
or $0.03 per share, compared with $0.6 million or $0.01 per share
for the second quarter of fiscal 2003 and $3.6 million or $0.03 per
share for the first quarter of fiscal 2004. Reconciliation between
net income/loss on a GAAP basis and pro forma net income is
provided in the attached tables. "We are pleased with our financial
results and improved efficiency for the second quarter," said
Robert N. Stephens, Adaptec's president and chief executive
officer. "We have made solid progress in Serial ATA, Serial
Attached SCSI, IP storage networking and external storage and are
linking these technologies into a comprehensive spectrum of
scalable product offerings for our customers." Net revenues for the
first six months of fiscal 2004 were $216.5 million, compared with
$193.6 million for the first six months of fiscal 2003. Net income
for the first six months of fiscal 2004, on a GAAP basis, was $41.1
million or $0.35 per share, compared with a net loss of $8.3
million or $0.08 per share for the first six months of fiscal 2003.
Pro forma net income for the first six months of fiscal 2004 was
$7.3 million or $0.07 per share, compared with $9.0 million or
$0.08 per share for the first six months of fiscal 2003. Financial
Highlights -- Operating cash flows for the second quarter of fiscal
2004 were $23.2 million, compared with $11.6 million for the second
quarter of fiscal 2003 and $38.2 million for the first quarter of
fiscal 2004. Operating cash flows for the second quarter of fiscal
2004 included an $11.4 million tax refund and operating cash flows
for the first quarter of fiscal 2004 included $31.0 million
associated with claims settled against the former president of DPT.
-- Cash, cash equivalents and investments as of September 30, 2003,
were $683.4 million, compared with $663.6 million at June 30, 2003
and $742.3 million at March 31, 2003. -- Days sales outstanding
(DSO) in accounts receivable as of September 30, 2003 were 48 days,
compared with 49 days at June 30, 2003, and 45 days at March 31,
2003. -- Annualized inventory turns were 7.0 in the second quarter
of fiscal 2004, compared with 9.1 in the first quarter of fiscal
2004, and 5.3 in the second quarter of fiscal 2003. -- Adaptec
completed the acquisitions of Eurologic Systems and ICP vortex on
April 2 and June 5, respectively. Eurologic contributed $12.6
million of revenue in the second quarter and $13.2 million of
revenue in the first quarter of fiscal 2004, respectively. ICP
vortex contributed $4.9 million of revenue in the second quarter
and $0.9 million of revenue in the first quarter of fiscal 2004,
respectively. -- The Company incurred $1.5 million of restructuring
charges during the second quarter primarily related to reductions
in headcount. Business Highlights -- Adaptec demonstrated the first
prototype Serial Attached SCSI chip at 3-gigabit-per-second
protocol transmission speeds in collaboration with HP, Intel,
Seagate and Maxtor. As this chip is architected to run at
6-gigabits per second, it offers customers investment protection as
faster technologies come to market. The Adaptec chip is a prototype
that supports both Serial Attached SCSI and Serial ATA disk drives.
-- Adaptec announced availability of a new network accelerator card
with enhanced software to increase the performance of servers used
in high-performance computing applications. The Adaptec network
accelerator offloads all TCP/IP processing from the host to make
more CPU processing power available for networked applications and
reduce latency. -- Adaptec certified its iSCSI host bus adapters as
"ca smart" with Computer Associates International, Inc.'s
Brightstor ARCserve Backup, enabling storage area network-based
backup solutions built on low-cost, simple-to-deploy IP storage
networks. -- Adaptec showcased interoperable end-to-end storage
solutions -- from ASICs for direct-attached storage connectivity
and data protection to plug-and-play solutions for storage area
networks -- at the Intel Developer Forum. -- Adaptec and Network
Appliance announced the availability of an IP storage area network
(SAN) solution that enables small and midsize businesses to deploy
cost-effective, easy-to-manage SANs for enterprise-level
applications such as online transaction processing, email and
enterprise resource planning. Conference Call Adaptec's fiscal 2004
second-quarter earnings conference call is scheduled for 1:45 p.m.
PST on October 27, 2003. The dial-in number for the conference call
is 212-346-6401. Individuals may also participate free via Webcast
by visiting http://www.adaptec.com/ 15 minutes prior to the call. A
telephone replay will be made accessible through November 3, 2003,
at 800-633-8284, access code 21096605. A Webcast replay will also
be available via Adaptec's web site. About Adaptec Adaptec Inc.
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 OEMs and distribution channel partners. Adaptec is an
S&P Small Cap 600 Index member. More information is available
at http://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 progress with respect to
product development and operating expense reductions, the growth of
our product portfolio, customer acceptance of our products,
improved customer relationships, establishing new partnerships,
stability in the market for our products, continued success with
product design and performance levels, timely introduction of new
technologies, successful business acquisitions and the successful
integration of Eurologic Systems. 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, 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 Form 10-K
for the year ended March 31, 2003, on file with the Securities and
Exchange Commission. Adaptec assumes no obligation to update this
information or the Risk Factors included in its Form 10-K for the
year ended March 31, 2003. Editorial Contact: Investor Contact:
Caroline Yu Marshall Mohr Adaptec, Inc. Adaptec, Inc. 408-957-2324
408-957-6773 Adaptec, Inc. GAAP Condensed Consolidated Statements
of Operations and Reconciliation of GAAP to Pro forma Operating
Results (*) (unaudited) Three-Month Period Ended September 30, 2003
September 30, 2002 Pro Pro GAAP Adjustments forma GAAP Adjustments
forma (in thousands, except per share amounts) Net revenues
$109,192 $-- $109,192 $85,709 $-- $85,709 Cost of revenues 62,746
-- 62,746 39,519 -- 39,519 Gross profit 46,446 -- 46,446 46,190 --
46,190 Operating expenses: Research and development 24,975
(1,116)(a) 23,859 29,403 (2,736)(a) 26,667 Selling, marketing and
administrative 19,223 (36)(a) 19,187 23,238 (1,088)(a) 22,150
Amortization of acquisition -related intangible assets 4,713
(4,713)(b) -- 3,743 (3,743)(b) -- Restructuring and other charges
1,478 (1,478)(c) -- 7,667 (7,667)(d) -- Total operating ' expenses
50,389 (7,343) 43,046 64,051 (15,234) 48,817 Income (loss) from
operations (3,943) 7,343 3,400 (17,861) 15,234 (2,627) Interest and
other income 4,252 -- 4,252 9,633 (2,197)(e) 7,436 Interest expense
(2,490) -- (2,490) (4,011) -- (4,011) Income from operations before
provision for (benefit from) income taxes (2,181) 7,343 5,162
(12,239) 13,037 798 Provision for (benefit from) income taxes
(2,442) 3,887(f) 1,445 (1,419) 1,642(f) 223 Net income (loss) $261
$3,456 $3,717 $(10,820)$11,395 $575 Net income (loss) per share:
Basic $0.00 $0.03 $(0.10) $0.01 Diluted $0.00 $0.03 $(0.10) $0.01
Shares used in computing net income (loss) per share: Basic 108,411
-- 108,411 106,550 -- 106,550 Diluted 110,219 -- 110,219 106,550
1,596(g) 108,146 Adaptec, Inc. GAAP Condensed Consolidated
Statements of Operations and Reconciliation of GAAP to Pro forma
Operating Results (*) (unaudited) Six-Month Period Ended September
30, 2003 September 30, 2002 Pro Pro GAAP Adjustments forma GAAP
Adjustments forma (in thousands, except per share amounts) Net
revenues $216,485 $-- 216,485 $193,555 $-- $193,555 Cost of
revenues 124,177 -- 124,177 86,803 -- 86,803 Gross profit 92,308 --
92,308 106,752 -- 106,752 Operating expenses: Research and
development 50,932 (2,342)(a) 48,590 60,619 (5,522)(a) 55,097
Selling, marketing and administra- tive 39,576 (180)(a) 39,396
47,291 (2,177)(a) 45,114 Amortization of acquisition -related
intangible assets 9,537 (9,537)(b) -- 7,487 (7,487)(b) -- Write-off
of acquired in-process technology 3,649 (3,649)(h) -- -- -- --
Restructuring and other charges 1,826 (1,826)(c) -- 7,667
(7,667)(d) -- Total operating expenses 105,520 (17,534) 87,986
123,064 (22,853) 100,211 Income (loss) from operations (13,212)
17,534 4,322 (16,312) 22,853 6,541 Interest and other income 60,311
(48,790)(i) 11,521 18,468 (3,297)(e) 15,171 Interest expense
(5,688) -- (5,688) (9,185) -- (9,185) Income (loss) from operations
before provision for income taxes 41,411 (31,256) 10,155 (7,029)
19,556 12,527 Provision for income taxes 348 2,495(f) 2,843 1,237
2,270(f) 3,507 Net income (loss) $41,063 $(33,751) $7,312
$(8,266)$17,286 $9,020 Net income (loss) per share: Basic $0.38
$0.07 $(0.08) $0.08 Diluted $0.35 $0.07 $(0.08) $0.08 Shares used
in computing net income (loss) per share: Basic 108,183 -- 108,183
106,264 -- 106,264 Diluted 126,400 (16,328)(j) 110,072 106,264
1,897(g) 108,161 (a) Deferred compensation expense associated with
the Platys acquisition. (b) Amortization of acquisition-related
intangible assets related to the acquisitions of DPT, Platys,
Eurologic and ICP vortex. (c) Restructuring charges. (d)
Restructuring charges of $7.2 million and write-off of a minority
investment of $0.5 million. (e) Gain on early extinguishment of 4
3/4 % Convertible Subordinated Notes. (f) Incremental income taxes
associated with certain pro forma adjustments. (g) Dilutive effect
of employee stock options. (h) Write-off of acquired in-process
technology associated with the Eurologic acquisition. (i) Gain of
$49.3 million related to the settlement with the former president
of DPT, loss of $0.8 million on redemption of 4 3/4% Convertible
Subordinated Notes, and gain distributions of $0.3 million on
investments. (j) Anti-dilutive effect of 3% Convertible
Subordinated Notes. (k) Anti-dilutive effect of 3% and 4 3/4%
Convertible Subordinated 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) (in thousands) Balance Sheet
Data As of Sept. 30, March 31, Sept. 30, 2003 2003 2002 Cash, cash
equivalents and marketable securities $683,425 $742,302 $707,149
Accounts receivable, net 57,369 50,137 47,474 Inventories 40,738
23,496 32,419 Goodwill and other intangible assets 110,540 101,249
110,601 Other assets 157,518 185,795 185,335 Total assets
$1,049,590 $1,102,979 $1,082,978 Current liabilities $142,637
$247,606 $145,828 Convertible subordinated notes and other
long-term obligations 255,888 252,596 335,200 Stockholders' equity
651,065 602,777 601,950 Total liabilities and stockholders' equity
$1,049,590 $1,102,979 $1,082,978 Cash Flow Data Three-Month Period
Ended Sept. 30, June 30, Sept. 30, 2003 2003 2002 Net income (loss)
$261 $40,802 $(10,820) Adjustments to reconcile net income (loss)
to net cash provided by operations: Non-cash P&L items:
Non-cash restructuring charges 66 -- 1,851 Write-off of acquired
in-process technology -- 3,649 -- Stock-based compensation related
to Platys 1,081 1,271 2,775 Loss (gain) on extinguishment of debt
-- 790 (2,197) Non-cash portion of DPT settlement gain -- (18,256)
-- Depreciation and amortization 14,184 12,665 11,645 Deferred
income taxes (3,100) (2,435) (455) Other items 156 89 1,000 Changes
in assets and liabilities 10,516 (408) 7,833 Net cash provided by
operating activities $23,164 $38,167 $11,632 Other significant cash
flow activities: Payments for business acquisitions, net of cash
acquired (61) 29,945 -- Payment of general holdback in connection
with acquisition of Platys 159 -- 10,640 Repurchase of 4 3/4%
convertible notes -- 83,010 70,374 Adaptec, Inc. GAAP Condensed
Consolidated Statements of Operations and Reconciliation of GAAP to
Pro forma Operating Results (*) (unaudited) Three-Month Period
Ended June 30, 2003 GAAP Adjustments Pro forma (in thousands,
except per share amounts) Net revenues $107,293 $-- $107,293 Cost
of revenues 61,431 -- 61,431 Gross profit 45,862 -- 45,862
Operating expenses: Research and development 25,957 (1,226)(a)
24,731 Selling, marketing and administrative 20,353 (144)(a) 20,209
Amortization of acquisition -related intangible assets 4,824
(4,824)(b) -- Write-off of acquired in-process technology 3,649
(3,649)(h) -- Restructuring charges 348 (348) -- Total operating
expenses 55,131 (10,191) 44,940 Income (loss) from operations
(9,269) 10,191 922 Interest and other income 56,059 (48,790)(i)
7,269 Interest expense (3,198) -- (3,198) Income from operations
before provision for income taxes 43,592 (38,599) 4,993 Provision
for income taxes 2,790 (1,392)(e) 1,398 Net income $40,802
$(37,207) $3,595 Net income per share: Basic $0.38 $0.03 Diluted
$0.33 $0.03 Shares used in computing net income per share: Basic
107,956 -- 107,956 Diluted 127,901 (17,975)(k) 109,926 Please see
the footnotes accompanying the Condensed Consolidated Statement of
Operations for the three- and six- month periods ended September
30, 2003 and 2002 for an explanation of the footnotes referred to
in the table above. DATASOURCE: Adaptec, Inc. CONTACT: media,
Caroline Yu, +1-408-957-2324, or , or investors, Marshall Mohr,
+1-408-957-6773, or , both of Adaptec, Inc. Web site:
http://www.adaptec.com/
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