GlobeNewswire
2010-02-23
Board of Directors Has Approved the Repurchase of Up to $80
Million of Company's Common Shares
SANTA ANA, Calif., Feb. 23, 2010 (GLOBE NEWSWIRE) -- STEC, Inc.
(Nasdaq:STEC) announced today the Company's financial results for the
fourth quarter and full-year ended December 31, 2009.
Revenue for the fourth quarter of 2009 was $106.0 million, an increase
of 86.3% from $56.9 million for the fourth quarter of 2008.
GAAP gross profit margin was 50.9% for the fourth quarter of 2009,
compared to 27.8% for the fourth quarter of 2008. GAAP diluted earnings
per share from continuing operations was $0.47 for the fourth quarter
of 2009, compared to $0.00 for the fourth quarter of 2008.
Non-GAAP gross profit margin was 51.0% for the fourth quarter of 2009,
compared to 32.3% for the fourth quarter of 2008. Non-GAAP diluted
earnings per share from continuing operations was $0.51 for the fourth
quarter of 2009, compared to $0.05 for the fourth quarter of 2008. GAAP
results in the fourth quarter of 2009 included employee stock
compensation, restructuring costs and class action securities and
shareholder derivative litigation expenses.
Revenue for full-year 2009 was $354.2 million, an increase of 55.8%
from $227.4 million for 2008. GAAP gross profit margin was 47.7% for
2009, compared to 31.3% for 2008. GAAP full-year 2009 diluted earnings
per share from continuing operations was $1.41, compared to full-year
2008 diluted earnings per share from continuing operations of $0.08.
Non-GAAP gross profit margin was 48.4% for the full-year 2009. Non-GAAP
diluted earnings per share from continuing operations was $1.61 for the
full-year 2009.
On February 22, 2010, the Company's Board of Directors reaffirmed its
plan to proceed from time to time, depending on market conditions and
other factors, with repurchases of up to $80 million of the Company's
common stock under previously authorized share repurchase programs.
Share repurchases will be made in open market or privately negotiated
transactions in compliance with Rule 10b-18 promulgated under the
Securities Exchange Act of 1934, as amended. There is no guarantee as
to the exact number of shares, if any, that will be repurchased by the
Company and the Company may discontinue purchases at any time that the
Company determines that additional purchases are not warranted.
Business Outlook
"During 2009 we achieved the highest revenue, gross profit margin and
earnings per share in our Company's nearly 20-year history," said
Manouch Moshayedi, STEC's Chairman and Chief Executive Officer.
"Among our accomplishments for 2009 were: successfully transferring our
manufacturing capacity to Malaysia, resulting in lower overhead and a
lower corporate effective tax rate; expanding and advancing the
development of our SSD product portfolio and successfully qualifying
our SSD products at many of the key original equipment manufacturers
(OEM) in the Enterprise-storage markets.
"We believe that the first half of 2010 will be a trough period for our
business due to an inventory carryover by our largest customer.
Although, we believe the marketing programs that we implemented last
quarter have had a positive effect on the sell-through of SSDs, based
on our best estimates we now anticipate this inventory carryover to
continue to negatively impact our sales to this customer during the
first half of 2010, as we do not expect any meaningful production
orders from this customer during that time.
"We have been working diligently to increase SSD sales to other major
customers by introducing new marketing incentive programs for 2010. We
expect to start experiencing the benefits of these efforts during the
second half of this year.
"We firmly believe that we are still in the beginning stages of the
adoption of SSDs by the Enterprise markets. Despite the near-term
challenges, we believe that as the benefits of SSDs become more widely
understood, and the growth curve of SSD adoption accelerates, we will
be in an ideal position to take full advantage and make significant
gains."
"The management and the Board of Directors believe in the long-term
value of our Company, and have approved the repurchase of up to $80
million of the Company's common shares on the open market."
Guidance
"We currently expect first quarter of 2010 revenue to range from $33
million to $35 million with diluted non-GAAP loss per share to range
from $0.11 to $0.13."
Conference Call
STEC will hold an open conference call to discuss results for the
fourth quarter and full-year 2009. The call will take place today at
1:30 p.m., Pacific/ 4:30 p.m., Eastern. The call-in numbers for the
conference are (877) 645-6380 (United States and Canada) and (914)
495-8562 (International).
Webcast
This call will be webcast. The webcast can be accessed by clicking on
the gray "Nasdaq:STEC" tab at the top of the home page at
www.stec-inc.com. The webcast will be archived and available for replay
beginning approximately two hours after the live call concludes.
About STEC, Inc. (Nasdaq:STEC)
STEC, Inc. is a leading global provider of solid-state drive
technologies and solutions tailored to meet the high-performance,
high-reliability needs of original equipment manufacturers (OEMs). With
headquarters in Santa Ana, California and locations worldwide, STEC
leverages almost two decades of solid-state drive knowledge and
experience to deliver the industry's most comprehensive line of
solid-state drives to the storage industry.
For information about STEC and to subscribe to the Company's "Email
Alerts" service, please visit our web site at www.stec-inc.com, click
the "Nasdaq:STEC" tab at the top of the page and then click "Email
Alerts."
The STEC, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=1079
Use of Non-GAAP Financial Information
To supplement the consolidated financial results prepared in accordance
with Generally Accepted Accounting Principles ("GAAP"), we use non-GAAP
financial measures (non-GAAP gross profit, non-GAAP operating expenses,
non-GAAP operating income, non-GAAP income from continuing operations
before provision for income taxes, non-GAAP income from continuing
operations and non-GAAP diluted earnings per share from continuing
operations) that exclude start-up costs related to the Company's
Malaysia facility, employee stock compensation, employee severance, a
warranty claim, global tax restructuring expenses, IP litigation costs,
hiring and recruiting fees incurred for key research and development
employees, special charges for restructuring, class action securities
and derivative action litigation costs, Malaysian government incentive
grant income and the short-term impact of the global tax restructuring
on the Company's effective tax rate. Management excludes these items
because it believes that the non-GAAP measures enhance an investor's
overall understanding of the Company's financial performance and future
prospects by being more reflective of the Company's core, recurring
operational activities and to be more comparable with the results of
the Company over various periods. Management uses non-GAAP financial
measures internally for strategic decision making, forecasting future
results and evaluating current performance. Guidance is provided only
on a non-GAAP basis due to the inherent difficulty of forecasting the
timing or amount of such items. Difficulties in forecasting the
non-GAAP items include the timing of customer audit approvals for the
Malaysia facility which would impact the ramp up of production,
registration costs for new entities related to our global tax
restructuring and unexpected delays in shipping new products developed
by our foreign subsidiaries in lower tax jurisdictions than the United
States. These items could be materially significant in our GAAP results
in any period. By disclosing non-GAAP financial measures, management
intends to provide investors with a more meaningful, consistent
comparison of the Company's core operating results and trends for the
periods presented. Non-GAAP financial measures are not prepared in
accordance with GAAP; therefore, the information is not necessarily
comparable to other companies' financial information and should be
considered as a supplement to, not a substitute for, or superior to,
the corresponding measures calculated in accordance with GAAP. A
complete reconciliation between GAAP and non-GAAP information referred
to in this release is provided in tables included in this release.
Certain amounts reported in prior releases may have been reclassified
to conform to the current quarter's non-GAAP presentation.
Safe Harbor Statement under the Private Securities Litigation Reform
Act of 1995
This release contains forward-looking statements that involve risks and
uncertainties, including, but not limited to, statements concerning
future Company and SSD growth, customers' acceptance of SSDs, the
impact of customer inventory on STEC in the first and second quarters
of 2010, the effectiveness of sales and marketing initiatives, and
expected first quarter 2010 revenue and earnings per share. Such
forward-looking statements are based on current expectations and
involve inherent risks and uncertainties, including factors that could
delay, divert or change any of them, and could cause actual outcomes
and results to differ materially from current expectations. Although
STEC believes that the forward looking statements contained in this
release are reasonable, it can give no assurance that its expectations
will be fulfilled. Important factors which could cause actual results
to differ materially from those expressed or implied in the
forward-looking statements are detailed in filings with the Securities
and Exchange Commission made from time to time by STEC, including its
Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, and its
Current Reports on Form 8-K. The information contained in this press
release is a statement of STEC's present intention, belief or
expectation. STEC may change its intention, belief, or expectation, at
any time and without notice, based upon any changes in such factors, in
STEC's assumptions or otherwise. STEC undertakes no obligation to
release publicly any revisions to any forward-looking statements to
reflect events or circumstances occurring after the date hereof or to
reflect the occurrence of unanticipated events.
STEC, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
----------- -----------
December December
31, 2009 31, 2008
----------- -----------
ASSETS:
Current Assets:
Cash and cash equivalents $ 135,658 $ 33,379
Short-term investments 10,000 --
Accounts receivable, net of
allowances of $3,557 at
December 31, 2009 and $1,196
at December 31, 2008 78,373 43,516
Inventory 42,739 63,985
Deferred income taxes -- 1,302
Other current assets 2,840 7,872
----------- -----------
Total current assets 269,610 150,054
----------- -----------
Leasehold interest in land 2,543 2,587
Property, plant and equipment 39,911 44,406
Intangible assets 292 573
Goodwill 1,682 1,682
Other long-term assets 5,076 2,720
Deferred income taxes 6,448 4,407
----------- -----------
Total assets $ 325,562 $ 206,429
=========== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Current Liabilities:
Accounts payable $ 29,911 $ 13,097
Accrued and other liabilities $ 14,070 $ 10,339
----------- -----------
Total current liabilities 43,981 23,436
----------- -----------
Long-term income taxes payable 2,986 1,430
Commitments and contingencies -- --
Shareholders' Equity:
Preferred stock, $0.001 par
value, 20,000,000 shares
authorized, no shares
outstanding -- --
Common stock, $0.001 par
value, 100,000,000 shares
authorized, 50,284,438
shares issued and
outstanding as of December
31, 2009 and 48,429,348
shares issued and
outstanding as of December
31, 2008 50 48
Additional paid-in capital 154,087 129,670
Retained earnings 124,458 51,845
----------- -----------
Total shareholders' equity 278,595 181,563
----------- -----------
Total liabilities and
shareholders' equity $ 325,562 $ 206,429
=========== ===========
STEC, INC.
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share amounts)
--------------------- ----------------------
Quarter Ended Year Ended
December 31, December 31,
--------------------- ----------------------
2009 2008 2009 2008
---------- --------- ---------- ----------
Net revenues $ 106,004 $ 56,915 $ 354,183 $ 227,445
Cost of revenues 52,078 41,070 185,236 156,358
---------- --------- ---------- ----------
Gross profit 53,926 15,845 168,947 71,087
Sales and marketing 5,387 4,803 20,352 19,045
General and administrative 8,157 7,499 28,543 25,476
Research and development 9,969 6,190 27,481 21,081
Special charges (125) -- 3,408 --
---------- --------- ---------- ----------
Total operating expenses 23,388 18,492 79,784 65,602
Operating income (loss) 30,538 (2,647) 89,163 5,485
Other income (expense) (15) 66 601 1,380
---------- --------- ---------- ----------
Income (loss) from
continuing operations
before provision for
income taxes 30,523 (2,581) 89,764 6,865
Provision (benefit) for
income taxes 6,015 (2,407) 18,221 2,714
---------- --------- ---------- ----------
Income (loss) from
continuing operations 24,508 (174) 71,543 4,151
Discontinued operations:
Income from operations of
Consumer Division 2,194 9 1,838 238
Provision for income taxes 909 6 768 97
Income from discontinued
operations 1,285 3 1,070 141
---------- --------- ---------- ----------
Net income (loss) $ 25,793 $ (171) $ 72,613 $ 4,292
========== ========= ========== ==========
Net income per share:
Basic:
Continuing operations $ 0.49 $ -- $ 1.45 $ 0.09
Discontinued operations 0.02 -- 0.02 --
---------- --------- ---------- ----------
Total $ 0.51 $ -- $ 1.47 $ 0.09
========== ========= ========== ==========
Diluted:
Continuing operations $ 0.47 $ -- $ 1.41 $ 0.08
Discontinued operations 0.03 -- 0.02 --
---------- --------- ---------- ----------
Total $ 0.50 $ -- $ 1.43 $ 0.08
========== ========= ========== ==========
Shares used in per share
computation:
Basic 50,264 50,125 49,350 49,956
========== ========= ========== ==========
Diluted 51,601 50,125 50,896 51,132
========== ========= ========== ==========
The non-GAAP financial measures included in the following tables are
non-GAAP gross profit, non-GAAP operating expenses, non-GAAP operating
income, non-GAAP income from continuing operations before provision for
income taxes, non-GAAP income from continuing operations and non-GAAP
diluted earnings per share from continuing operations, which adjust for
the following items: (a) start-up costs related to the Company's
Malaysia facility, (b) employee stock compensation expense, (c)
employee severance, (d) warranty claim, (e) global tax structuring
costs, (f) IP litigation costs, (g) hiring and recruiting fees incurred
for key research and development employees, (h) special charges related
to restructuring costs, (i) class action securities and derivative
action litigation costs, (j) Malaysia government incentive grant income
and (k) the short-term impact of the global tax restructuring on the
Company's effective tax rate. Management believes these non-GAAP
financial measures enhance an investor's overall understanding of the
Company's financial performance and future prospects by being more
reflective of the Company's core operational activities and to be more
comparable with the results of the Company over various periods.
Management uses non-GAAP financial measures internally for strategic
decision making, forecasting future results and evaluating current
performance. By disclosing non-GAAP financial measures, management
intends to provide investors with a more meaningful, consistent
comparison of the Company's core, recurring operating results and
trends for the periods presented. Non-GAAP financial measures are not
prepared in accordance with GAAP; therefore, the information is not
necessarily comparable to other companies' financial information and
should be considered as a supplement to, not a substitute for, or
superior to, the corresponding measures calculated in accordance with
GAAP.
The items excluded from GAAP financial results in calculating non-GAAP
financial results, are set forth below:
a) The Malaysia facility start-up costs relate primarily to expenses
associated with our manufacturing facility in Penang, Malaysia in which
construction was completed in 2008. During 2008 and the first quarter
of 2009, we used this facility to train production employees, obtain
facility certifications such as ISO certification, install the
necessary accounting and information systems and conduct customer
audits to better prepare for the full-scale transition of our U.S.
operations to Malaysia in 2009. As full-scale production was not
completely transitioned to Malaysia until the second quarter of 2009,
management believes excluding Malaysia start-up costs from our
operations for the reporting periods through the first quarter of 2009
provides investors with a better means of evaluating our current
operations. Starting in the second quarter of 2009, we no longer treat
costs incurred for our Malaysia operations as a non-GAAP item since the
transition of operations and integration of the Malaysia facility was
substantially completed during the second quarter of 2009.
b) Employee stock compensation costs incurred in connection with
Statement of Financial Accounting Standards 123R have been excluded as
management omits these expenses when evaluating its core operating
activities, for strategic decision making, forecasting future results
and evaluating current performance.
c) Employee severance relates to one-time costs incurred related to the
termination of certain U.S.-based employees. The Company provides
compensation to certain employees as an accommodation upon termination
of employment without cause. Management believes that excluding
severance costs from operating results provides investors with a better
means for measuring current Company performance.
d) The warranty claim relates to a customer reimbursement request for
internally generated costs that they contend were incurred to remediate
issues involving a manufacturing defect for compact flash cards
purchased and rectified by the Company in prior years. The Company
previously acknowledged the defect in the controller design on certain
of its compact flash cards and immediately put a coordinated plan in
place in 2006, which was substantially completed prior to 2008, to
replace all suspect cards identified by this customer with the Company
bearing all costs. The Company has assessed the possible outcomes of
the claim and has recorded an estimated liability in the fourth quarter
of 2008. The Company views this customer claim for their internal
service and repair costs incurred in prior periods as non-recurring and
therefore not indicative of current Company performance.
e) The global tax structuring costs relate primarily to tax consulting,
legal fees and filing fees associated with establishing various
corporate entities throughout the world, and establishing cost-sharing
and transfer pricing agreements among the worldwide entities. These
costs were included as a non-GAAP item in 2008 as we believed these
expenditures were one-time set-up fees and are therefore not indicative
of our recurring operational results. Beginning in the first quarter of
2009 we no longer treat global tax structuring costs as a non-GAAP item
because the structuring was substantially completed by the end of 2008.
f) Intellectual property litigation costs relate to a patent
infringement suit filed against us by a competitor on April 14, 2008.
We filed our answer to the lawsuit asserting affirmative defenses of
non-infringement, invalidity and counter-claimed for a declaratory
judgment of non-infringement, invalidity, and unenforceability for all
patents in question plus legal fees and costs. In February 2009, the
lawsuit was mutually dismissed by both parties and no further costs
have been incurred by the Company related to this matter after the
first quarter of 2009. Management believes that legal and consulting
fees incurred in conjunction with this lawsuit for the periods
presented should be excluded when evaluating core operations since
management believes these costs are non-recurring.
g) Research and development employee recruitment fees relate to a core
group of engineers hired to begin development of a new product design.
In the fourth quarter of 2008, the Company incurred recruiting fees and
one-time sign-on bonuses for these core employees. Management believes
that the recruiting fees and one-time bonuses incurred for the start-up
of this engineering design group is non-recurring and should be
excluded from its results when evaluating the Company's current
operations.
h) Special charges relate to a restructuring plan that we implemented
during the first quarter of 2009. These charges included expenses
related to a reduction in our workforce and asset impairment charges.
The special charges primarily impacted U.S. based operations and
employees as part of the overall transition of certain operations to
our facility in Penang, Malaysia. The restructuring plan was
substantially completed by the end of 2009. Management believes that
costs incurred in connection with the restructuring plan which were
primarily related to workforce reduction severance costs and
consolidation of facilities expenses are non-recurring in nature and
should be excluded when evaluating core operations.
i) In the fourth quarter of 2009, certain class action securities
complaints and shareholder derivative actions were filed against the
Company and certain officers and directors of the Company. Under our
Directors and Officers insurance policies, we are required to pay a
deductible of $500,000 for the initial attorneys' fees and costs
incurred related to these lawsuits. After the first $500,000 of
attorneys' fees and costs are incurred, and until our policy limits are
exhausted, our insurance carriers, subject to their reservations of
rights to deny or limit coverage, should be responsible for covering a
substantial portion of the attorneys' fees and costs associated with
our defense of these actions. Management believes the insurance policy
deductible is a non-recurring expense and should be excluded when
evaluating core operations for fourth quarter of 2009.
j) Malaysia government grant incentive income relates to proceeds
received from the Ministry of International Trade and Industry ("MITI")
in Malaysia. The grants are provided by MITI as incentive for our local
subsidiary incurring research and development expenses and employee
training costs for its operations in Malaysia. Since the grants
represent reimbursement of expenses which were previously adjusted by
us as a non-GAAP item under Malaysia start-up costs, we have reversed
the related grant reimbursement income from our 2009 non-GAAP results.
k) During 2008, our effective tax rate increased in excess of its base
historical tax rate as the result of the implementation of a global tax
structuring plan. The short-term impact of the global tax structuring
plan resulted in losses being incurred in foreign jurisdictions with
zero tax rates which produced less overall tax benefits for us. For
non-GAAP purposes, we have made an adjustment to reflect the full-year
2008 effective tax rates at historical base rate levels. No adjustments
have been made to 2009 effective tax rates as the global tax
structuring was substantially completed by the end of 2008 and we
expect to achieve ongoing tax benefits. Management believes that
fluctuations in our effective tax rate during the 2008 implementation
of the global tax structuring were temporary and should be excluded
when evaluating core operations for that period.
STEC, INC.
Schedule Reconciling GAAP Income From Continuing Operations to Non-GAAP Income
From Continuing Operations
($ in thousands, except per share amounts)
(unaudited)
------------------- ---------
For the
For the Year
Quarters Ended Ended
December December December
31, 31, 31,
--------- -------- ---------
2009 2008 2009
--------- -------- ---------
GAAP income (loss) from continuing operations $ 24,508 $ (174) $ 71,543
========= ======== =========
The non-GAAP amounts have been adjusted to
exclude the following items:
Excluded from cost of sales:
Malaysia facility start-up costs (a) $ -- $ 1,850 $ 2,249
Employee stock compensation (b) 89 21 292
Employee severance (c) -- 211 --
Warranty claim (d) -- 477 --
--------- -------- ---------
89 2,559 2,541
Excluded from operating expenses:
Malaysian facility start-up costs (a) $ -- $ 1,460 $ 1,635
Employee stock compensation (b) 1,824 719 4,805
Employee severance (c) -- 73 --
Global tax structuring costs (e) -- 194 --
IP litigation costs (f) -- 1,484 1,249
Hiring and recruiting fees for key R&D
employees (g) -- 185 --
Special charges - restructuring costs (h) (126) -- 3,408
Securities and derivative action litigation
costs (i) 500 -- 500
--------- -------- ---------
2,198 4,115 11,597
Excluded from other income:
Malaysia government incentive grant income (j) -- -- (560)
--------- -------- ---------
Total non-GAAP adjustments before income tax 2,287 6,674 13,578
Income tax effect on non-GAAP adjustments (464) (2,516) (3,029)
--------- -------- ---------
Net effect of adjustments to GAAP net income 1,823 4,158 10,549
Global tax structuring implementation
short-term income income tax impact (k) -- (1,464) --
--------- -------- ---------
Non-GAAP income from continuing operations $ 26,331 $ 2,520 $ 82,092
========= ======== =========
GAAP diluted earnings per share from continuing
operations $ 0.47 $ -- $ 1.41
Impact of non-GAAP adjustments on diluted
earnings per share $ 0.04 $ 0.05 $ 0.20
--------- -------- ---------
Non-GAAP diluted earnings per share from
continuing operations $ 0.51 $ 0.05 $ 1.61
========= ======== =========
(a) - (k) See corresponding footnotes above.
STEC, INC.
Schedule Reconciling Reported Financial Ratios
(unaudited)
---------------------------------- ----------------------
For the Quarters Ended For the Year Ended,
---------------------------------- ----------------------
December
December 31, 2009 31, 2008 December 31, 2009
---------------------- ---------- ----------------------
GAAP gross profit 50.9% 27.8% 47.7%
Effect of reconciling item
on gross profit 0.1% 4.5% 0.7%
---------------------- ---------- ----------------------
Non-GAAP gross profit 51.0% 32.3% 48.4%
====================== ========== ======================
STEC, INC.
Selected Non-GAAP Financial Information
($ in thousands)
(unaudited)
-------------------- ----------
For the
For the Quarters Year
Ended Ended,
-------------------- ----------
December December December
31, 31, 31,
--------- --------- ----------
2009 2008 2009
--------- --------- ----------
GAAP gross profit $ 53,926 $ 15,845 $ 168,947
Malaysia facility start-up costs (a) -- 1,850 2,249
Employee stock compensation (b) 89 21 292
Employee severance (c) -- 211 --
Warranty claim (d) -- 477 --
--------- --------- ----------
Non-GAAP gross profit $ 54,015 $ 18,404 $ 171,488
========= ========= ==========
(a) - (d) Refer to the corresponding footnotes above.
CONTACT: STEC, Inc.
Mitch Gellman, Vice President of Investor Relations
(949) 260-8328
ir@stec-inc.com
