ADIC Advanced Digital Information (MM)

Advanced Digital Information Corporation (NASDAQ:ADIC) today announced earnings for the third quarter ended July 31, 2005 of $7.4 million, or 11 cents per share, on sales of $111 million versus a loss of $1.4 million, or two cents per share, on sales of $110 million during the same quarter last year. The Company earned $733,000, or one cent per share, on sales of $106 million during the immediately preceding second quarter. Gross profit as a percentage of sales was 30.0 percent during the third quarter, up from 26.9 percent on similar sales during the same quarter last year and down slightly from 30.8 percent reported in the immediately preceding quarter. Operating profit of $1.1 million was up $4.4 million from an operating loss of $3.3 million reported in third quarter 2004 and up more than $1 million from operating profit of $41,000 reported for second quarter 2005. "We are delighted to report improving results amid further confirmation that our strategy is working," said Chair and Chief Executive Officer Peter van Oppen. "We saw excellent growth of our branded products with an increase of 19 percent over third quarter 2004 and sequential growth of seven percent. Sales of enterprise-class products were particularly strong during the period and had a positive effect on gross margin. Margins were up more than 300 basis points over third quarter last year and we believe the small sequential decline in margin percentage will not disrupt this longer-term trend," he said. "Our OEM business was, as expected, down about $10 million from last year, but was relatively flat sequentially and we are pleased to note excellent progress on new OEM programs which should begin to generate growth toward the end of this calendar year," according to van Oppen. "Despite normal competitive challenges and pricing declines on maturing OEM products, we continue to enjoy excellent and growing relationships with our major resellers and partners," he said. The Company noted branded sales represented approximately 62 percent of revenue during the third quarter, while OEM sales equaled about 38 percent of total revenue. Service revenues, which are included in branded sales, were up nearly 23 percent over the same period last year and approximately flat sequentially. Operating expenses were down $748,000 from the same quarter last year and down $533,000 from the preceding second quarter. Lower operating expenses were attributed to a reduction in sales and marketing costs partially offset by increases in R&D and administrative costs. The Company expects sales and marketing costs to begin growing again during the current quarter. Other income of $2.8 million for the quarter includes a previously announced gain of $2.5 million related to the sale of a facility in Germany. The Company also reported a tax benefit of $3.5 million during the quarter, reflecting recent successful conclusion of Federal tax audits for the years 2000-2002. Net cash provided by operating activities for the nine months ended July 31 was $37 million. Subtracting reported cash flow from operations through April 30 indicates third quarter cash flow from operations was approximately $15 million. Total cash and marketable securities were $241 million, approximately equal to the balance at the end of the second quarter and up from $226 million reported at the end of third quarter 2004. Under existing and continuing share repurchase authorizations, the Company repurchased approximately 1.9 million shares during the third quarter at an average price of $7.63 per share, for a total cost of $14.3 million. Over the past six months, the Company has repurchased approximately 2.9 million shares at an average cost of $7.88 per share, for a total cost of $22.8 million. About ADIC Advanced Digital Information Corporation (NASDAQ:ADIC) is a leading provider of Intelligent Storage(TM) solutions to the open systems marketplace. ADIC is the world's largest supplier of automated tape systems using the drive technologies most often employed for backing up open system, client-server networks.(1) The Company's data management software, storage networking appliances, and disk-based backup and restore 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, OEMs and partnerships, including Apple, Cray, Dell, EMC, Fujitsu-Siemens, HP, IBM and Sun. Further information about ADIC is available at www.adic.com. (1) Market Share: Gartner Dataquest, Tape Automation Systems Market Shares, 2004, F. Yale, August 2005. ADIC is a registered trademark 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 relating to 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, acceptance of new products, success of new sales channels, technical competition or obsolescence, supply constraints, changes in market pricing, production problems and the Company's ability to complete announced restructurings on schedule. Reference is made to the Company's Annual Report on Form 10-K for the year ended October 31, 2004 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 after the date of this release or to reflect the occurrence of unanticipated events. Conference Call There will be a conference call to discuss third quarter results as well as estimates for the fourth quarter of fiscal 2005 at 1:30 p.m. PT (4:30 p.m. ET) on August 18, 2005. The call can be accessed live on our website at www.adic.com/ir. -0- *T ADVANCED DIGITAL INFORMATION CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except for per share amounts) (Unaudited) Three Months Ended Nine Months Ended July 31, July 31, 2005 2004 2005 2004 -------- -------- -------- -------- Revenue: Product $ 97,024 $ 98,648 $286,701 $306,410 Service 13,991 11,386 41,305 32,996 -------- -------- -------- -------- Total revenue 111,015 110,034 328,006 339,406 Cost of revenue: Product 67,775 71,338 199,578 217,791 Service 9,983 9,049 29,642 26,324 -------- -------- -------- -------- Total cost of revenue 77,758 80,387 229,220 244,115 Gross profit 33,257 29,647 98,786 95,291 Sales and marketing 16,149 17,522 49,058 48,939 General and administrative 6,321 5,823 19,012 18,107 Research and development 9,692 9,565 30,999 28,265 -------- -------- -------- -------- Operating profit (loss) 1,095 (3,263) (283) (20) Other income, net 2,797 526 4,691 1,956 -------- -------- -------- -------- Income (loss) before benefit for income taxes 3,892 (2,737) 4,408 1,936 Benefit for income taxes (3,488) (1,331) (3,435) (106) -------- -------- -------- -------- Net income (loss) $ 7,380 $ (1,406) $ 7,843 $ 2,042 ======== ======== ======== ======== Basic net income (loss) per share $ 0.11 $ (0.02) $ 0.12 $ 0.03 ======== ======== ======== ======== Diluted net income (loss) per share $ 0.11 $ (0.02) $ 0.12 $ 0.03 ======== ======== ======== ======== Shares used in computing basic net income (loss) per share 62,468 64,235 63,189 64,135 ======== ======== ======== ======== Shares used in computing diluted net income (loss) per share 62,626 64,235 63,466 65,040 ======== ======== ======== ======== ADVANCED DIGITAL INFORMATION CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) July 31, October 31, 2005 2004 --------- --------- ASSETS Current assets Cash and cash equivalents $ 51,368 $ 94,695 Accounts receivable, net 94,476 93,025 Inventories, net 25,719 38,728 Marketable securities 189,220 138,238 Other current assets 13,976 13,602 -------- -------- Total current assets 374,759 378,288 Property, plant and equipment, net 44,634 45,913 Service parts for maintenance, net 28,364 29,993 Investments 3,416 2,769 Other non-current assets 23,329 18,067 -------- -------- $474,502 $475,030 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Deferred revenue - current $ 35,481 $ 31,727 Other current liabilities 72,233 65,200 -------- -------- Total current liabilities 107,714 96,927 Deferred revenue - long-term 15,703 13,605 Other long-term liabilities 400 600 Shareholders' equity 350,685 363,898 -------- -------- $474,502 $475,030 ======== ======== ADVANCED DIGITAL INFORMATION CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Nine Months Ended July 31, -------------------- 2005 2004 --------- --------- Cash flows from operating activities: Net income $ 7,843 $ 2,042 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 19,670 18,235 Bad debt expense 643 46 Inventory obsolescence 1,538 2,442 (Gain) loss on securities and investment transactions 22 (446) Gain on assets held for sale (2,485) -- Deferred income taxes (4,770) (36) Tax benefit from exercise of stock options 198 1,777 Other 32 49 Change in assets and liabilities: Accounts receivable (1,064) 13,135 Inventories 11,305 (15,020) Other current assets (1,563) (571) Service parts for maintenance (6,789) (7,959) Current liabilities 6,158 1,885 Deferred revenue 6,487 8,571 --------- --------- Net cash provided by operating activities 37,225 24,150 --------- --------- Cash flows from investing activities: Purchase of property, plant and equipment (11,602) (12,755) Proceeds from assets held for sale 4,498 16,740 Purchase of marketable securities (222,156) (100,494) Proceeds from securities transactions 171,176 73,080 Purchase of other investments (669) (504) Purchase of intangible assets -- (200) Return of investment on other investments -- 71 --------- --------- Net cash used in investing activities (58,753) (24,062) --------- --------- Cash flows from financing activities: Repayment of short-term and long-term debt -- (1,221) Repurchase of common stock (22,794) (9,510) Proceeds from issuance of common stock for stock options and Stock Purchase Plan 2,004 6,551 --------- --------- Net cash used in financing activities (20,790) (4,180) --------- --------- Effect of exchange rate changes on cash (1,009) 285 --------- --------- Net decrease in cash and cash equivalents (43,327) (3,807) Cash and cash equivalents at beginning of period 94,695 91,451 --------- --------- Cash and cash equivalents at end of period $ 51,368 $ 87,644 ========= ========= *T