ADIC Posts Two Cent Per Share Loss on 10% Sales Growth To $111 Million in Second Quarter.Business Editors REDMOND Redmond, city (1990 pop. 35,800), King co., W Wash., a suburb of Seattle, on Lake Sammamish; inc. 1912. Its economy centers around computer software (Microsoft Corp. , Wash.--(BUSINESS WIRE)--May 13, 2004 New Enterprise Product Acceptance Accelerates; Sales and Marketing Costs Up; Share Buyback Buyback The buying back of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies will buyback shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may Expanded Advanced Digital Information Corporation (Nasdaq:ADIC) today announced a second quarter loss of $1.3 million, or two cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. , on sales of $111.1 million for the period ended April 30, 2004, versus a profit of $2.4 million, or four cents per share, on sales of $100.6 million during the same period last year. Sales grew more than 10 percent from the same period last year and declined just over six percent from the record first quarter ended Jan. 31. "We are disappointed at the end of our six quarters of sequential sales growth and the resulting small operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. this period," said Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , Peter van Oppen. "But we remain convinced that our continued investment in new products and channels is the right strategy. ADIC(R) ramped up expenses during the second quarter, especially in sales and marketing, in anticipation of even more rapid sales growth which did not materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. ," he said. "We did, however, continue to make measurable progress in the acceptance of our newest products as well as development of sales channels during the quarter and we do not expect to significantly alter our existing levels of spending." Yesterday, the Company announced a worldwide reseller An organization that sells hardware and software to the general public. Resellers purchase products from software publishers and hardware manufacturers. agreement with HP covering ADIC's StorNext(TM) data management software. The first joint customer is identified as NOB Nob, in the Bible, religious center just N of Jerusalem. Saul had its inhabitants massacred. Cross-Media Facilities, a supplier of digital archiving services for multiple public broadcasters in the Netherlands. In mid-April, ADIC announced StorNext(TM) interoperability The capability of two or more hardware devices or two or more software routines to work harmoniously together. For example, in an Ethernet network, display adapters, hubs, switches and routers from different vendors must conform to the Ethernet standard and interoperate with each other. with Apple Computer's new Xsan(TM) file system. This exclusive compatibility allows end users to add Mac-based server and storage resources to the list of platforms that can transparently share data over a SAN. Also during the quarter, both the i2000 Intelligent Library(TM) and Pathlight VX(TM) disk-to-tape backup appliance A stand-alone hardware device or software environment dedicated to a specific task. See hardware appliance and software appliance. grew at sequential rates that would represent triple-digit growth on an annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. basis. Pathlight VX(TM) users are able to achieve disk performance and RAID reliability using serial ATA See SATA. Serial ATA - Serial Advanced Technology Attachment disk for primary backup and restore while maintaining an integrated path to tape for extended data retention and disaster recovery. The Company believes ADIC's own proven tape emulation (architecture) emulation - When one system performs in exactly the same way as another, though perhaps not at the same speed. A typical example would be emulation of one computer by (a program running on) another. , disk file system, policy based A decision made by any software application that is based on the policy (rules and regulations) of the organization. See policy and COPS. data management tools and tape library technology provide Pathlight VX(TM) unique performance and scalability advantages for customers. "ADIC is in the process of transforming our business from one that has historically been heavily dependent on mid-range tape storage to one that is becoming a leading player in creating innovative, enterprise-class hardware and data management software products incorporating both disk and tape," van Oppen said. "Our customers are drowning drowning /drown·ing/ (droun´ing) suffocation and death resulting from filling of the lungs with water or other substance. drowning, n asphyxiation because of submersion in a liquid. in data and ADIC's products are a big part of the solution. These new products, combined with additional enterprise sales channels, are expected to help gradually improve overall sales growth and result in improved financial results," he said. During the second quarter, gross profit as a percentage of sales dropped to 28.2 percent compared with 32.7 percent in the second quarter last year and 29.0 percent in the immediately preceding quarter. This decline is primarily a result of lower-than-anticipated sales volumes and significant increases in service infrastructure which offset increases in the proportion of higher margin Intelligent Storage Solutions(TM) (ISS ISS See Institutional Shareholder Services (ISS). ) sales and branded versus OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and business. Sales of ISS products, which include elements of ADIC connectivity and software technology and are sold through both branded and OEM sales channels, represented approximately 38 percent of sales in the second quarter, unchanged from a year ago and up from 35 percent in the immediately preceding period. The Company believes that, at constant sales levels, an increasing proportion of ISS sales, whether sold on a branded or OEM basis, will typically increase gross margins as a percentage of sales. A sequential decline in overall sales volume this period obscured the positive margin effects of a sequential improvement in the proportion of ISS sales, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. ADIC. ISS sales were 17, 30 and 37 percent of total sales in fiscal years 2001, 2002 and 2003, respectively. OEM sales to partners, including Dell, Fujitsu-Siemens, HP, IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) and Sun, were approximately 47 percent of total sales versus 45 percent in the second quarter of fiscal 2003 and 50 percent in the first quarter of fiscal 2004. A lower proportion of OEM sales generally results in increasing gross margin as a percentage of sales but the sequential decline this quarter was also obscured by the effect of lower overall sales volumes during the period, according to the Company. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. rose 6.8 percent from the same quarter last year and 10.4 percent sequentially. All of this expense growth is attributable to increases in sales and marketing expenses, including the addition of more than 50 sales and marketing Team Members over the past six months. Other income was a net expense for the quarter as interest income of $519,000 was more than offset by foreign currency losses of $961,000. Total cash and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has , net of all debt, rose to approximately $224.3 million. Separately, ADIC announced that Chuck Stonecipher will become Executive Vice President for Product Development and Strategy, relinquishing re·lin·quish tr.v. re·lin·quished, re·lin·quish·ing, re·lin·quish·es 1. To retire from; give up or abandon. 2. To put aside or desist from (something practiced, professed, or intended). 3. other responsibilities to spend full time on the management of products, technology plans and competitive strategy for which he has long had responsibility. Chief Financial Officer Jon Gacek also becomes an Executive Vice President. Share Repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. Expanded The Company also announced that its Board of Directors has authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: the repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. of up to five million total additional shares under its previously announced stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. program. Approximately 1.4 million shares have been repurchased under the existing program approved in May 2002. ADIC believes any such purchases, which may be made from time to time, represent good value for the Company and its shareholders. About ADIC Advanced Digital Information Corporation (Nasdaq:ADIC) is a leading provider of Intelligent Storage Solutions(TM) to the open systems marketplace. ADIC is the world's largest supplier of automated au·to·mate v. au·to·mat·ed, au·to·mat·ing, au·to·mates v.tr. 1. To convert to automatic operation: automate a factory. 2. tape systems using the drive technologies most often employed for backing up open system, client-server networks.* The Company's data management software, storage networking appliances, and disk-to-tape data protection solutions provide IT managers innovative tools for storing, managing and protecting their most valuable digital assets in a variety of disk and tape environments. ADIC storage products are available through a worldwide sales force and a global network of resellers and OEMs, including Cray (Cray, Inc., Seattle, WA, www.cray.com) A supercomputer manufacturer founded in 1972 as Cray Research, Inc., by Seymour Cray, a leading designer of large-scale computers at Control Data. In 1976, it shipped its first computer to Los Alamos National Laboratory. , Dell, Fujitsu-Siemens, HP, IBM and Sun. Further information about ADIC is available at www.adic.com. *IDC 2001 worldwide revenue and unit market share data for all automated systems using DLT (Digital Linear Tape) A magnetic tape technology originally developed by Digital for its VAX line. The technology was later sold to Quantum, which makes it available to other manufacturers. DLT uses half-inch, single-hub cartridges similar to IBM's 3480/3490/3590 line. , SDLT (Super DLT) See DLT. , LTO (Linear Tape Open) A family of open magnetic tape standards developed by HP, IBM and Quantum (formerly the Certance subsidiary of Seagate) that are licensed to third-party vendors. LTO cartridges contain a memory that stores historical usage data. , 8mm or AIT drives, and Gartner Dataquest, Tape Automation Systems Market Shares, 2003, F. Yale, April 2004. ADIC and Scalar scalar, quantity or number possessing only sign and magnitude, e.g., the real numbers (see number), in contrast to vectors and tensors; scalars obey the rules of elementary algebra. Many physical quantities have scalar values, e.g. are registered trademarks and Intelligent Storage is a trademark of Advanced Digital Information Corporation. All other trade or service marks mentioned in this document should be considered the property of their respective owners. This release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Company's future products and services and future operating results that are subject to risks and uncertainties that could cause actual results to differ materially from those projected. The words "expect", "anticipate", and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Factors that could affect the Company's actual results include general economic trends, purchase deferrals by customers, technical competition or obsolescence ob·so·les·cent adj. 1. Being in the process of passing out of use or usefulness; becoming obsolete. 2. Biology Gradually disappearing; imperfectly or only slightly developed. , supply constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. , changes in market pricing and production problems. Reference is made to the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended Oct. 31, 2003, for a more detailed description of factors that could affect the Company's actual results. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. The Company undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or after the date of this release or to reflect the occurrence of unanticipated events. Conference Call There will be a conference call to discuss second quarter results as well as estimates for the third quarter of fiscal 2004 at 1:30 p.m. PT (4:30 p.m. ET) on May 13, 2004. The call can be accessed live on our website at www.adic.com/ir.
ADVANCED DIGITAL INFORMATION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share amounts)
(Unaudited)
Three months ended Six months ended
April 30, April 30,
2004 2003 2004 2003
-------- -------- -------- --------
Net sales $111,067 $100,642 $229,372 $197,738
Cost of sales 79,742 67,728 163,728 134,968
-------- -------- -------- --------
Gross profit 31,325 32,914 65,644 62,770
Sales and marketing 17,345 14,516 31,417 27,657
General and administrative 6,080 6,172 12,284 12,147
Research and development 9,320 9,967 18,700 20,271
-------- -------- -------- --------
Operating profit (loss) (1,420) 2,259 3,243 2,695
Other income (expense), net (536) 1,426 1,665 3,605
-------- -------- -------- --------
Income (loss) before provision
(benefit) for income taxes (1,956) 3,685 4,908 6,300
Provision (benefit) for income
taxes (652) 1,266 1,308 2,195
-------- -------- -------- --------
Net income (loss) $ (1,304) $ 2,419 $ 3,600 $ 4,105
======== ======== ======== ========
Basic net income (loss) per
share $ (0.02) $ 0.04 $ 0.06 $ 0.07
======== ======== ======== ========
Diluted net income (loss) per
share $ (0.02) $ 0.04 $ 0.06 $ 0.07
======== ======== ======== ========
Shares used in computing basic
net income (loss) per share 64,360 62,343 64,084 62,105
======== ======== ======== ========
Shares used in computing
diluted net income (loss)
per share 64,360 63,073 65,240 62,878
======== ======== ======== ========
ADVANCED DIGITAL INFORMATION CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
April 30, 2004 Oct. 31, 2003
-------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 219,899 $ 180,401
Accounts receivable, net 93,139 100,391
Inventories, net 39,150 35,736
Marketable securities 5,526 20,788
Assets held for sale -- 12,384
Other current assets 22,512 21,514
-------------- -------------
Total current assets 380,226 371,214
Property, plant and equipment, net 47,348 45,505
Service parts for maintenance, net 29,657 28,427
Investments 4,021 3,728
Other non-current assets 4,043 4,298
------------- -------------
$ 465,295 $ 453,172
============= =============
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities $ 96,374 $ 94,852
Deferred income taxes 2,515 2,507
Long-term debt -- 967
Shareholders' equity 366,406 354,846
------------- -------------
$ 465,295 $ 453,172
============= =============
ADVANCED DIGITAL INFORMATION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six months ended
April 30,
-------------------
2004 2003
-------- --------
Cash flows from operating activities:
Net income $ 3,600 $ 4,105
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 12,108 10,096
Allowance for doubtful accounts receivable 39 494
Inventory obsolescence 1,473 2,962
Gain on securities transactions (871) (1,412)
Deferred income taxes (83) (54)
Tax benefit from exercise of stock options 1,693 587
Other 39 27
Change in assets and liabilities:
Accounts receivable 4,940 (17,013)
Inventories (5,934) (7,425)
Prepaid expenses and other assets (228) (544)
Income taxes receivable (704) 1,268
Service parts for maintenance (5,886) (3,548)
Accounts payable (1,559) 5,245
Accrued liabilities (4,283) 4,183
Deferred revenue 7,158 2,364
-------- --------
Net cash provided by operating activities 11,502 1,335
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment (8,950) (6,442)
Proceeds from assets held for sale 15,117 --
Purchase of marketable securities (4,004) (2,352)
Proceeds from securities transactions 20,089 13,352
Purchase of other investments (364) --
Return of investment on other investments 71 --
-------- --------
Net cash provided by investing activities 21,959 4,558
-------- --------
Cash flows from financing activities:
Repayment of bank lines of credit and long-term
debt (103) (1,510)
Proceeds from short-term borrowings -- 781
Repurchase of common stock -- (697)
Proceeds from issuance of common stock for stock
options and Stock Purchase Plan 5,893 2,861
-------- --------
Net cash provided by financing activities 5,790 1,435
-------- --------
Effect of exchange rate changes on cash 247 1,288
-------- --------
Net increase in cash and cash equivalents 39,498 8,616
Cash and cash equivalents at beginning of period 180,401 150,741
-------- --------
Cash and cash equivalents at end of period $219,899 $159,357
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