EX-99.1 2 a04-12174_1ex99d1.htm EX-99.1

Exhibit 99.1

 

FOR IMMEDIATE RELEASE

 

Contact:

 

 

Preston Romm

 

Kirsten Garvin

Chief Financial Officer

 

Director of Investor Relations

Tel: 760-931-5500

 

Tel: 760-476-3811

Email: investors@dothill.com

 

Email: kirsten.garvin@dothill.com

 

Dot Hill Reports Third Quarter 2004 Results

Results In Line with Guidance, Gross Profit Percentage Improves

 

CARLSBAD, Calif. – October 27, 2004 – Dot Hill Systems Corp. (NASDAQ:HILL) today announced financial results for the third quarter ended September 30, 2004. Net revenue was $57.0 million for the third quarter of 2004, compared to $51.0 million for the third quarter of 2003, and $69.6 million for the second quarter of 2004. This revenue figure was within the guidance range the company released in July 2004.

 

Net income for the third quarter of 2004 was $3.6 million, or $0.08 per share on a fully diluted basis. This compares to third quarter 2003 net income of $4.3 million or $0.11 per share on a fully diluted basis, and second quarter 2004 net income of $6.0 million or $0.13 per share on a fully diluted basis. On a pro forma basis, net income for the third quarter of 2004 was $4.4 million or $0.10 per share on a fully diluted basis compared to second quarter 2004 net income of $6.7 million or $0.15 per share on a fully diluted basis. These figures also are within the guidance range that the company set in July 2004. A table reconciling generally accepted accounting principles and pro forma net income, gross profit percentage and fully diluted earnings per share is provided below.

 

Gross profit for the third quarter of 2004 increased to 27.3 percent as compared to third quarter 2003 gross profit of 24.0 percent, and second quarter 2004 gross profit of 24.6 percent. This represents an improvement of 330 basis points year over year, and 270 basis points quarter over quarter. On a pro forma basis, gross profit for the three months ended September 30, 2004 improved 220 basis points to 28.3 percent as compared to the second quarter of 2004.

 

“Dot Hill’s third quarter revenue figures were affected by lower than anticipated sales of our new Serial ATA product,” said James Lambert, Dot Hill’s chief executive officer. “However, we were able to improve our gross profit nearly 270 basis points through product mix and cost reductions. We also posted our eighth consecutive quarter of year-over-year revenue growth. This is particularly encouraging as Dot Hill has been able to sustain a path of positive revenue growth through economically challenging times and technology sector declines.

 

“Dot Hill’s acquisition of Chaparral, which took place in February, has furthered the company’s technological capabilities. The integration and upgrade of the Chaparral controller into Dot Hill’s SANnet systems is on schedule and continuing smoothly. We expect to release the integrated system to our customers in 2005.”

 


 

“Based on our current visibility and taking into account the challenges that many technology companies currently face, we are setting guidance for the fourth quarter of 2004 for net revenue targeted in the range of $60 to $64 million and net income per share targeted in the range of $0.09 to $0.11 on a fully diluted basis and a range of $0.10 to $0.12 on a pro forma basis,” said Preston Romm, Dot Hill’s chief financial officer. “At the end of the quarter, cash, cash equivalents and short-term investments were $114.6 million, a decrease of $10.7 million from the end of the second quarter of 2004. This decrease was due to the repayment of a $7.2 million note and related interest that was assumed in connection with the acquisition of Chaparral, and an increase in payment terms from our largest customer.”

 

Dot Hill’s third quarter 2004 financial results conference call is scheduled to take place today at 12:00 p.m. ET. Please join us for a live audio Webcast at www.dothill.com in the Investor Relations section. If you prefer to join via telephone, please dial 800-295-3991 (U.S.) or 617-614-3924 (International) at least five minutes prior to the start of the call and enter passcode 43120369. A replay of the Webcast will be available on the Dot Hill Web site following the conference call. For a telephone replay, dial 888-286-8010 (U.S.) or 617-801-6888 (International) and enter passcode 20852894.

 

Dot Hill Systems Corp. is a leader in the innovative design and delivery of storage networking solutions to channel partners worldwide. Its products include the SANnet® II family of storage systems, RIO Xtreme™ storage solutions, SANscape® storage management software, SANpath® storage networking software and professional training, support and service. For more information, visit Dot Hill on the web at www.dothill.com.

 

Dot Hill, the Dot Hill logo, SANnet, SANpath, SANscape, RIVA and RIO Xtreme are trademarks of Dot Hill Systems Corp. All other products and names mentioned herein are trademarks or registered trademarks of their respective owners.

 

Statements contained in this press release regarding matters that are not historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Such statements include statements regarding: Dot Hill’s targeted financial results for the fourth quarter of 2004; future gross profit; the successful integration and upgrade of Chaparral’s technology into Dot Hill’s products; Dot Hill’s technological capabilities; and the launch dates of new products. The risks that contribute to the uncertain nature of the forward-looking statements include, among other things: the risk that one or more of Dot Hill’s OEM or other customers may cancel or reduce orders, not order as forecasted or terminate their agreements with Dot Hill; the risk that Dot Hill’s new products may not prove to be popular; the risk that one or more of Dot Hill’s suppliers or subcontractors may fail to perform or may terminate their agreements with Dot Hill; unforeseen technological, intellectual property, personnel or engineering issues; and the additional risks set forth in the forms 8-K, 10-K and 10-Q most recently filed by Dot Hill. All forward-looking statements contained in this press release speak only as of the date on which they were made. Dot Hill undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made.

 


 

DOT HILL SYSTEMS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE OPERATIONS

(Unaudited - in thousands, except per share information)

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2003

 

2004

 

2003

 

2004

 

Net Revenue

 

$

50,979

 

$

56,966

 

$

129,928

 

$

175,351

 

Cost of Goods Sold

 

38,766

 

41,439

 

102,166

 

129,204

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

12,213

 

15,527

 

27,762

 

46,147

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

Sales and marketing

 

3,454

 

4,571

 

10,266

 

13,809

 

Research and development

 

2,795

 

4,983

 

7,692

 

14,088

 

General and administrative

 

1,851

 

2,709

 

4,921

 

7,327

 

Restructuring expenses

 

—

 

7

 

—

 

(384

)

In-process research and development

 

 

 

 

 

 

 

4,700

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

8,100

 

12,270

 

22,879

 

39,540

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

4,113

 

3,257

 

4,883

 

6,607

 

 

 

 

 

 

 

 

 

 

 

Other Income (Expense):

 

 

 

 

 

 

 

 

 

Interest income

 

133

 

421

 

256

 

1,427

 

Interest expense

 

(16

)

(69

)

(86

)

(355

)

Gain on foreign currency transactions, net

 

6

 

98

 

309

 

252

 

Other income, net

 

70

 

72

 

50

 

52

 

Total other income, net

 

193

 

522

 

529

 

1,376

 

Income Before Income Taxes

 

4,306

 

3,779

 

5,412

 

7,983

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

(37

)

(151

)

(48

)

(243

)

Net Income

 

$

4,269

 

$

3,628

 

$

5,364

 

$

7,740

 

 

 

 

 

 

 

 

 

 

 

Net Income Attributable to Common Stockholders:

 

 

 

 

 

 

 

 

 

Net income

 

$

4,269

 

$

3,628

 

$

5,364

 

$

7,740

 

Dividends on preferred stock

 

—

 

—

 

(141

)

—

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common stockholders

 

$

4,269

 

$

3,628

 

$

5,223

 

$

7,740

 

 

 

 

 

 

 

 

 

 

 

Net Income Per Share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.13

 

$

0.08

 

$

0.17

 

$

0.18

 

Diluted

 

$

0.11

 

$

0.08

 

$

0.15

 

$

0.17

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Used to Calculate Net Income Per Share:

 

 

 

 

 

 

 

 

 

Basic

 

33,723

 

43,511

 

30,692

 

43,403

 

Diluted

 

37,891

 

46,188

 

35,081

 

46,489

 

 

 

 

 

 

 

 

 

 

 

Comprehensive Operations:

 

 

 

 

 

 

 

 

 

Net income

 

$

4,269

 

$

3,628

 

$

5,364

 

$

7,740

 

Foreign currency translation adjustments

 

233

 

17

 

56

 

18

 

Net unrealized gain (loss) on short-term investments

 

(44

)

94

 

(60

)

(284

)

Comprehensive income

 

$

4,458

 

$

3,739

 

$

5,360

 

$

7,474

 

 


 

DOT HILL SYSTEMS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited - in thousands, except per share information)

 

 

 

December 31, 2003

 

September 30, 2004

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash, cash equivalents and short-term investments

 

$

191,545

 

$

114,647

 

Accounts receivable, net of allowance of $467 and $569

 

14,558

 

37,809

 

Inventories

 

3,158

 

3,684

 

Prepaid expenses and other

 

1,836

 

2,713

 

Total current assets

 

211,097

 

158,853

 

 

 

 

 

 

 

Property and equipment, net

 

4,791

 

8,514

 

Goodwill

 

—

 

57,111

 

Other intangibles

 

—

 

8,441

 

Other assets

 

2,555

 

1,039

 

 

 

 

 

 

 

Total assets

 

$

218,443

 

$

233,958

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable

 

$

24,533

 

$

31,649

 

Accrued compensation

 

4,459

 

2,758

 

Accrued expenses

 

2,052

 

3,727

 

Deferred revenue

 

1,028

 

856

 

Income taxes payable

 

1,005

 

927

 

Current portion of restructuring accrual

 

370

 

143

 

Total current liabilities

 

33,447

 

40,060

 

 

 

 

 

 

 

Restructuring accrual, net of current portion

 

554

 

107

 

Borrowings under lines of credit

 

247

 

193

 

Other long-term liabilities

 

62

 

883

 

 

 

 

 

 

 

Total liabilities

 

34,310

 

41,243

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

Preferred stock, $0.001 par value, 10,000 shares authorized, 0 shares issued and outstanding

 

—

 

—

 

Common stock, $0.001 par value, 100,000 shares authorized, 43,307 and 43,597 shares issued and outstanding at December 31, 2003 and September 30, 2004, respectively

 

43

 

44

 

Additional paid-in capital

 

275,827

 

276,919

 

Deferred compensation

 

(28

)

(13

)

Accumulated other comprehensive loss

 

(263

)

(529

)

Accumulated deficit

 

(91,446

)

(83,706

)

Total stockholders’ equity

 

184,133

 

192,715

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

218,443

 

$

233,958

 

 


 

Reconciliation of Differences Between GAAP and Pro Forma Financial Measures

 

We may from time to time discuss this quarter’s performance using the pro forma financial measures presented below. The following table provides a reconciliation of the differences between the pro forma financial measures presented below and the most directly comparable financial measures calculated and presented in accordance with GAAP.

 

 

 

Three Months Ended

 

 

 

9/30/03

 

9/30/04

 

6/30/04

 

 

 

 

 

 

 

 

 

GAAP Net Income

 

$

4,269

 

$

3,628

 

$

5,995

 

Add back:

 

 

 

 

 

 

 

Amortization of intangible assets

 

—

 

730

 

738

 

Write-off of discontinued inventory

 

—

 

—

 

376

 

Reversal of restructuring accrual

 

—

 

—

 

(383

)

 

 

 

 

 

 

 

 

Net income, adjusted for the items above

 

$

4,269

 

$

4,358

 

$

6,726

 

 

 

 

 

 

 

Three Months Ended

 

 

 

9/30/03

 

9/30/04

 

6/30/04

 

 

 

 

 

 

 

 

 

GAAP Gross Profit Percentage

 

24.0

%

27.3

%

24.6

%

Add back:

 

 

 

 

 

 

 

Amortization of intangible assets

 

—

 

1.0

%

1.0

%

Write-off of discontinued inventory

 

—

 

—

 

0.5

%

 

 

 

 

 

 

 

 

Gross Profit Percentage, adjusted for the items above

 

24.0

%

28.3

%

26.1

%

 

 

 

 

 

 

Three Months Ended

 

 

 

9/30/03

 

9/30/04

 

6/30/04

 

 

 

 

 

 

 

 

 

GAAP Diluted earnings per share

 

$

0.11

 

$

0.08

 

$

0.13

 

Add back:

 

 

 

 

 

 

 

Amortization of intangible assets

 

—

 

0.02

 

0.02

 

Write-off of discontinued inventory

 

—

 

—

 

0.01

 

Reversal of restructuring accrual

 

—

 

—

 

(0.01

)

 

 

 

 

 

 

 

 

Diluted earnings per share, adjusted for the items above

 

$

0.11

 

$

0.10

 

$

0.15

 

 

The pro forma measures provided above, which remove the related expense resulting from the amortization of intangible assets with finite lives (acquired in connection with the acquisition Chaparral), the write-off of discontinued NAS inventory and the impact of reversing of a portion of our restructuring accrual related to our former New York office from the most directly comparable GAAP measures, are included as an additional clarifying item to aid readers of the financial statements in further understanding our quarterly performance and the impact that certain items and events had on the financial results. The pro forma financial measures provided above should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.

###