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SGI Reports First Quarter Fiscal Year 2008 ResultsSGI Achieves 43 Percent Bookings Growth
SUNNYVALE, Calif., Nov. 6 /PRNewswire-FirstCall/ -- SGI (NASDAQ: SGIC) today announced financial results for the first quarter of its fiscal year 2008, which ended September 28, 2007.
First Quarter FY08 Highlights
Overall in its first quarter, SGI:
-- Grew bookings more than 40% over the fourth quarter of fiscal 2007 with
key wins in target growth areas
-- Continued stability in pro forma results
-- Achieved its goals for revenue, expenses and cash
"The first step in our growth strategy is to increase our bookings, so I'm very pleased with our order rate this quarter," said Bo Ewald, SGI Chief Executive Officer. "We saw very good momentum in our bookings, with an increase of 43% over Q4. I'm particularly encouraged by the composition and mix of the Q1 orders, which came from across our target markets with the largest single order being under $5M. That is a good step in our plan to build our base of customers without having to rely on very large single system orders." "Our pro forma revenue is stable and our expenses were under control, with operating results in line with our goals. A growing portion of our business is focused on the sale of high value-add software and services, resulting in a greater number of our transactions being impacted by software revenue recognition accounting. Our GAAP results reflect this business and financial transition," said Kathy Lanterman, SGI Chief Financial Officer. "We anticipate that the long term result of this transition will be more stable GAAP results." In this press release, the company uses certain pro forma financial measures that are not calculated in accordance with GAAP, or non-GAAP financial measures. These measures may be referred to as "pro forma" in this press release. In addition, the company uses bookings, which reflect authorized orders for SGI product and professional services received in the period, as a measure of its performance. Management believes that these non- GAAP financial measures and bookings are useful to investors because they facilitate period to period comparisons of SGI's performance and because they help investors view the company's results of operations through the eyes of management and the company's lenders. SGI's credit line covenants, management reporting and incentive plans are measured against certain of these non-GAAP financial measures. GAAP Q1 Results GAAP revenue for the first quarter was $91.1 million, compared to $122.3 million in the fourth quarter. The first quarter GAAP operating loss was $27.2 million, compared to $24.8 million in the fourth quarter of fiscal 2007. GAAP operating expenses were $54.7 million for the first quarter of 2008, as compared to $56.9 million for the fourth quarter of fiscal 2007. Backlog at the end of the first quarter of 2008 was $65.0 million compared to $66.5 million at the end of the fourth quarter of fiscal 2007. Pro Forma Q1 Results Pro forma revenue was $120.7 million in the first quarter of fiscal 2008, compared with $141.5 million in the fourth quarter of fiscal 2007. In the fourth quarter SGI had a single large transaction valued at approximately $40 million, and in the first quarter the company had a single large transaction with pro forma revenue of approximately $20 million. Excluding these two large transactions, SGI's pro forma revenue results for the two quarters were comparable. "We were again pleased with the growth in our Altix server revenue this quarter, across all server product lines," added Lanterman. Pro forma revenue excludes the impact of fresh-start accounting and the deferral of the company's recognition of revenues for certain of the company's transactions where software is more than incidental to the overall solution pursuant to AICPA Statement of Position SOP 97-2, Software Revenue Recognition ("SOP 97-2"). Pro forma gross margin for the first quarter, which is adjusted for similar items, was 34.3% compared with 35.2% in the fourth quarter of fiscal 2007, with the decrease being driven primarily by product mix. Pro forma operating expenses, which exclude restructuring and bankruptcy-related expenses, stock-based compensation expense and amortization of intangibles, were $51.5 million in the first quarter of fiscal 2008 compared with $53.2 million in the fourth quarter of fiscal 2007. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter of fiscal 2008, as defined in the company's debt agreements, were a loss of $3.8 million, compared with a $2.8 million gain for the fourth quarter of fiscal 2007. "We continue to build the foundation for growth. We're in it for the long term, and we're pleased with our start of fiscal 2008. We are attacking the market with confidence and optimism," added Ewald. A reconciliation of the non-GAAP financial measures used in this press release to the company's GAAP results of operations, including an illustration of the impact of the company's fresh start accounting and the impact of the implementation of SOP 97-2, is attached to this press release and is also available at http://www.sgi.com/company_info/investors. Conference Call SGI will conduct a conference call today at 2 p.m. PT to provide additional details. The webcast is available at http://www.sgi.com/company_info/investors/webcast.html. The conference call can be accessed by dialing(877) 495-0297 or (706) 643-9931 for participants outside of North America, conference ID: 22598535. An audio replay of this call will be available after 5 p.m. PT today at (800) 642-1687 (passcode: 22598535) or (706) 645-9291 (passcode: 22598535) and will be available until November 13, 2007 midnight PT. After November 13, 2007, the call will be available as an archived webcast. All links to the archived webcast and audio replay are available through SGI's web site at http://www.sgi.com/company_info/investors/. SGI - Innovation for Results(TM) SGI (NASDAQ: SGIC) is a leader in high-performance computing. SGI delivers a complete range of high-performance server and storage solutions along with industry-leading professional services and support that enable its customers to overcome the challenges of complex data-intensive workflows and accelerate breakthrough discoveries, innovation and information transformation. SGI helps customers solve significant challenges, whether it's enhancing the quality of life through drug research, designing and manufacturing safer and more efficient cars and airplanes, studying global climate change, providing technologies for homeland security and defense, or helping enterprises manage large data. With offices worldwide, the company is headquartered in Sunnyvale, Calif., and can be found on the Web at sgi.com. (C) 2007 SGI. All rights reserved. SGI, Altix, the SGI cube and the SGI logo are registered trademarks of SGI in the United States and/or other countries worldwide. All other registered trademarks mentioned herein are the property of their respective owners. This press release contains forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth herein, including the risks and uncertainties discussed under the caption "Factors That May Affect Results" and elsewhere in SGI's Form 10-K or Form 10-Q most recently filed with the Securities and Exchange Commission. These forward-looking statements speak only as of the date hereof. SGI disclaims any intent or obligation to update these forward-looking statements.
SGI Pro Forma Income Statement
Predecessor Company Successor Company
(Dollars in GAAP Other Pro Forma GAAP Other Pro Forma
millions) 1Q07 Adjust 1Q07 2Q07 Adjust 2Q07
Product and Other
Revenue 60.6 60.6 63.7 63.7
Prod Rev - Adj
for change
in accounting
to 97-2 3.3 3.3 8.8 8.8
Fresh Start
Valuation
Adjustment - 3.4 3.4
Global Services
Revenue 61.2 61.2 44.0 44.0
Serv Rev - Adj
for change
in accounting
to 97-2 1.8 1.8 1.7 1.7
Fresh Start
Valuation
Adjustment - - 12.5 12.5
Total Revenue 121.8 5.2 127.0 107.7 26.4 134.1
Cost of Product
and Other Revenue 42.7 42.7 59.9 59.9
Prod Cost -
Adj for
change in
accounting to
97-2 2.1 2.1 5.3 5.3
Fresh Start
- Valuation
Adjustment - 1.6 1.6
Fresh Start -
Amortization
of
Intangibles - (2.0) (2.0)
Fresh Start -
Inventory
Valuation
Amortization - (12.6) (12.6)
Fresh Start -
PP&E Depreciation
Adjustment - - 0.1 0.1
Cost of Service
Revenue 32.3 32.3 29.4 29.4
Service Cost
- Adj for
change in
accounting to
97-2 0.7 0.7 1.0 1.0
Service Cost
- Adj for
Fresh Start
Accounting - 0.3 0.3
Fresh Start -
PP&E Depreciation
Adjustment - 0.0 0.0
Stock-Based
Compensation 0.0 0.0 (0.0) (0.0)
Total Cost
of Revenue 75.0 2.8 77.8 89.3 (6.3) 83.0
Gross Profit 46.8 2.4 49.2 18.4 32.7 51.1
Gross Margin 38.4% 45.6% 38.7% 17.1% 123.7% 38.1%
R&D 16.0 - 16.0 15.0 - 15.0
Fresh Start
- In Process
R&D Write-Off - - (0.5) (0.5)
Fresh Start -
PP&E Depreciation
Adjustment - - 0.2 0.2
Stock-Based
Compensation 0.0 0.0 (0.1) (0.1)
16.0 0.0 16.0 15.0 (0.4) 14.6
Selling, General
and Administrative 42.4 - 42.4 41.6 - 41.6
Fresh Start -
Amortization
of Intangibles - (2.1) (2.1)
Fresh Start -
PP&E Depreciation - (0.6) (0.6)
Reorganization - -
Stock-Based
Compensation (0.1) (0.1) (0.1) (0.1)
Total SG&A
Expense 42.4 (0.1) 42.2 41.6 (2.7) 38.9
Total Operating
Expense before
Restructuring 58.4 (0.1) 58.2 56.6 (3.1) 53.5
Operating
Income (Loss)
before
Restructuring (11.5) 2.5 (9.1) (38.2) 35.8 (2.4)
Restructuring 3.9 (3.9) - 1.2 (1.2) -
Bankruptcy
related expenses - - - 1.7 (1.7) -
Total Operating
Expense 62.3 (4.1) 58.2 59.5 (6.0) 53.5
Operating
Income (Loss) (15.5) 6.4 (9.1) (41.1) 38.7 (2.4)
Interest Expense
& Interest Income (7.1) (7.1) (2.2) (0.0) (2.3)
Cost of DIP
Financing 3.7 3.7 - -
Other Income
(Expense), Net
of Interest
Income 10.8 10.8 0.3 0.3
Pre-tax gain
- Sale of portion
of equity
investment (9.8) (9.8) - -
Reorganization
Items 340.4 (340.4) 0.0 - -
Income (Loss)
Before Income
Taxes 328.6 (340.1) (11.5) (43.0) 38.7 (4.4)
Provision for
(Benefit From)
Income Taxes 2.4 2.4 0.7 0.7
Tax on sale of
equity investment
noted above (1.9) (1.9) - -
Net Loss 326.3 (338.2) (12.0) (43.7) 38.7 (5.0)
Depreciation for
EBITDA $10.2 $(3.7) $6.5 $11.0 $(4.5) $6.6
Adjusted EBITDA
(Operating Inc/
(Loss) less
Depreciation) $(2.6) $4.2
Successor Company Successor Company
(Dollars in GAAP Other Pro Forma GAAP Other Pro Forma
millions) 3Q07 Adjust 3Q07 4Q07 Adjust 4Q07
Product and
Other Revenue 58.6 58.6 74.3 74.3
Prod Rev -
Adj for change
in accounting
to 97-2 8.2 8.2 11.7 11.7
Fresh Start
Valuation
Adjustment 1.1 1.1 0.6 0.6
Service Revenue 52.5 52.5 48.0 48.0
Serv Rev -
Adj for change
in accounting
to 97-2 2.2 2.2 2.0 2.0
Fresh Start
Valuation
Adjustment 7.2 7.2 4.8 4.8
Total Revenue 111.0 18.7 129.8 122.3 19.2 141.5
Cost of Product
and Other Revenue 41.3 41.3 61.1 61.1
Prod Cost
- Adj for change
in accounting
to 97-2 2.5 2.5 8.0 8.0
Fresh Start
- Valuation
Adjustment 0.6 0.6 0.1 0.1
Fresh Start
- Amortization
of Intangibles (1.7) (1.7) (1.7) (1.7)
Fresh Start -
Inventory
Valuation
Amortization (4.3) (4.3) (5.2) (5.2)
Fresh Start -
PP&E
Depreciation
Adjustment 0.1 0.1 0.1 0.1
Cost of Service
Revenue 33.0 33.0 29.0 29.0
Service Cost
- Adj for change
in accounting
to 97-2 1.1 1.1 0.2 0.2
Service Cost
- Adj for
Fresh Start
Accounting 0.6 0.6 0.2 0.2
Fresh Start
- PP&E
Depreciation
Adjustment 0.0 0.0 (0.0) (0.0)
Stock-Based Compensation (0.0) (0.0) (0.1) (0.1)
Total Cost of
Revenue 74.4 (1.2) 73.2 90.1 1.5 91.7
Gross Profit 36.7 19.9 56.6 32.1 17.7 49.8
Gross Margin 33.0% 106.3% 43.6% 26.3% 92.1% 35.2%
R&D 14.2 14.2 14.9 - 14.9
Fresh Start
- In Process
R&D Write-Off - - -
Fresh Start
- PP&E
Depreciation
Adjustment 0.1 0.1 0.1 0.1
Stock-Based
Compensation (0.2) (0.2) (0.3) (0.3)
14.2 (0.1) 14.0 14.9 (0.2) 14.7
Selling, General
and Administrative 42.0 - 42.0 41.7 - 41.7
Fresh Start
- Amortization
of Intangibles (2.1) (2.1) (2.1) (2.1)
Fresh Start
- PP&E
Depreciation (0.5) (0.5) (0.5) (0.5)
Stock-Based
Compensation (0.9) (0.9) (0.6) (0.6)
Total SG&A
Expense 42.0 (3.5) 38.5 41.7 (3.2) 38.5
Total Operating
Expense before
Restructuring 56.2 (3.7) 52.5 56.6 (3.4) 53.2
Operating Income
(Loss) before
Restructuring (19.5) 23.6 4.1 (24.4) 21.0 (3.4)
Restructuring 0.2 (0.2) - 0.2 (0.2) -
Bankruptcy related
expenses 0.2 (0.2) - 0.2 (0.2) -
Total Operating
Expense 56.6 (4.0) 52.5 56.9 (3.7) 53.2
Operating Income
(Loss) (19.9) 23.9 4.1 (24.8) 21.4 (3.4)
Interest Expense
& Interest Income (2.3) (2.3) (2.3) (2.3)
Cost of DIP
Financing - - -
Other Income
(Expense), Net
of Interest
Income (0.4) (0.0) (0.4) (2.3) (2.3)
Pre-tax gain
- Sale of
portion of
equity investment - - -
Reorganization Items - - -
Income (Loss) Before
Income Taxes (22.5) 23.9 1.4 (29.4) 21.4 (8.0)
Provision for
(Benefit From)
Income Taxes 0.5 0.1 0.5 7.5 (4.7) 2.8
Tax on sale of
equity
investment
noted above - - -
Net Loss (23.0) 23.9 0.9 (36.9) 26.1 (10.8)
Depreciation for
EBITDA $10.4 $(4.3) $6.1 $10.5 $(4.4) $6.2
Adjusted EBITDA
(Operating Inc/
(Loss) less
Depreciation) $10.2 $2.8
Successor Company
GAAP Other Pro Forma
(Dollars in millions) 1Q08 Adjust 1Q08
Product and Other Revenue 45.6 45.6
Prod Rev - Adj for change in
accounting to 97-2 24.7 24.7
Fresh Start Valuation
Adjustment 0.0 0.0
Service Revenue 45.5 45.5
Serv Rev - Adj for change in
accounting to 97-2 1.1 1.1
Fresh Start Valuation
Adjustment 3.8 3.8
Total Revenue 91.1 29.6 120.7
Cost of Product and Other
Revenue 37.7 37.7
Prod Cost - Adj for change
in accounting to 97-2 18.1 18.1
Fresh Start - Valuation
Adjustment - -
Fresh Start - Amortization
of Intangibles (1.2) (1.2)
Fresh Start - Inventory
Valuation Amortization (1.6) (1.6)
Fresh Start - PP&E
Depreciation Adjustment 0.0 0.0
Cost of Service Revenue 25.9 25.9
Service Cost - Adj for change
in accounting to 97-2 0.5 0.5
Service Cost - Adj for Fresh
Start Accounting -
Fresh Start - PP&E Depreciation
Adjustment (0.0) (0.0)
Stock-Based Compensation (0.1) (0.1)
Total Cost of Revenue 63.6 15.7 79.3
Gross Profit 27.5 13.9 41.4
Gross Margin 30.2% 47.0% 34.3%
R&D 13.3 13.3
Fresh Start - In Process
R&D Write-Off - -
Fresh Start - PP&E Depreciation
Adjustment 0.0 0.0
Stock-Based Compensation (0.3) (0.3)
13.3 (0.3) 13.0
Selling, General and
Administrative 41.5 41.5
Fresh Start - Amortization
of Intangibles (1.9) (1.9)
Fresh Start - PP&E
Depreciation (0.5) (0.5)
Stock-Based Compensation (0.7) (0.7)
Total SG&A Expense 41.5 (3.1) 38.4
Total Operating Expense
before Restructuring 54.8 (3.4) 51.5
Operating Income (Loss)
before Restructuring (27.3) 17.3 (10.0)
Restructuring 0.2 (0.2) -
Bankruptcy related expenses (0.3) 0.3 -
Total Operating Expense 54.7 (3.2) 51.5
Operating Income (Loss) (27.2) 17.1 (10.0)
Interest Expense & Interest
Income (2.5) (2.5)
Cost of DIP Financing -
Other Income (Expense), Net of
Interest Income (0.8) (0.8)
Pre-tax gain - Sale of portion
of equity investment -
Reorganization Items -
Income (Loss) Before Income
Taxes (30.5) 17.1 (13.4)
Provision for (Benefit From)
Income Taxes 5.7 (4.4) 1.3
Tax on sale of equity
investment noted above -
Net Loss (36.2) 21.6 (14.6)
Depreciation for EBITDA $9.9 $(3.7) $6.2
Adjusted EBITDA (Operating Inc/
(Loss) less Depreciation) $(3.8)
REVENUE BY SEGMENT (Pro GAAP GAAP Adjust Adjust
Forma) FY06 FY07 FY06 FY07 FY06 1Q07
Core Systems:
Server products $124.0 $156.5 $8.8 $19.8 $132.8 $37.2
Storage products 49.9 50.2 7.0 14.1 56.9 14.3
Total Core Systems 173.9 206.7 15.8 33.9 189.7 51.6
Legacy Systems:
Server products 73.8 47.2 13.6 2.6 87.4 11.8
Storage products 4.5 3.2 0.8 0.6 5.3 0.5
Total Legacy Systems 78.3 50.4 14.4 3.2 92.7 12.4
Total Products
Revenue 252.3 257.1 30.1 37.1 282.4 63.9
48.6% 55.5% 51.3% 50.3%
Global Services:
Support Services 214.1 160.3 0.9 24.8 215.0 48.5
Professional services and
solutions 52.5 45.4 1.1 7.6 53.6 14.5
Total Global Services
Revenue 266.6 205.8 2.0 32.4 268.5 63.0
51.4% 44.5% 48.7% 49.7%
Total Revenue $518.8 $462.9 $32.1 $69.5 $550.9 $127.0
REVENUE BY SEGMENT (Pro GAAP
Forma) 2Q07 3Q07 4Q07 FY07 B/(W) 1Q08
Core Systems:
Server products $46.1 $38.6 $54.3 $176.3 $43.6 $31.6
Storage products 15.1 14.7 20.2 64.3 7.4 8.2
Total Core Systems 61.2 53.4 74.5 240.6 51.0 39.9
Legacy Systems:
Server products 13.3 13.2 11.4 49.8 (37.6) 4.9
Storage products 1.4 1.2 0.7 3.8 (1.5) 0.8
Total Legacy Systems 14.7 14.5 12.1 53.6 (39.1) 5.7
Total Products
Revenue 75.9 67.9 86.6 294.3 11.9 45.6
56.6% 52.3% 61.2% 55.3% 50.1%
Global Services:
Support Services 47.5 44.2 44.8 185.1 (29.9) 38.2
Professional services and
solutions 10.7 17.7 10.1 53.0 (0.6) 7.3
Total Global
Services Revenue 58.3 61.9 54.9 238.1 (30.4) 45.5
43.4% 47.7% 38.8% 44.7% 49.9%
Total Revenue $134.1 $129.8 $141.5 $532.4 $(18.6) $91.1
REVENUE BY SEGMENT (Pro Forma) Adjust 1Q08 1Q08 B/(W)
Core Systems:
Server products $20.9 $52.5 $15.3
Storage products $3.4 11.6 (2.7)
Total Core Systems 24.3 64.1 12.6
Legacy Systems:
Server products 0.5 5.4 (6.4)
Storage products (0.1) 0.8 0.2
Total Legacy Systems 0.4 6.2 (6.2)
Total Products Revenue 24.7 70.3 6.4
58.2%
Global Services:
Support Services 3.9 42.1 (6.4)
Professional services and solutions 1.0 8.3 (6.2)
Total Global Services Revenue 4.9 50.4 (12.6)
41.8%
Total Revenue $29.6 $120.7 $(6.2)
SILICON GRAPHICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
Sept 28, June 29,
2007 2007
ASSETS
Current assets:
Cash and cash equivalents $54,529 $69,887
Short-term marketable investments 41 223
Short-term restricted investments 6,452 6,763
Accounts receivable, net 51,503 47,643
Inventories 55,723 54,354
Prepaid expenses and other current
assets 46,721 55,729
Total current assets 214,969 234,599
Restricted investments 612 302
Net property and equipment 43,055 43,392
Other intangibles 63,794 71,264
Other assets 72,456 59,501
$394,886 $409,058
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $21,408 $14,387
Accrued compensation 32,912 35,382
Income taxes payable 3,351 2,209
Other current liabilities 41,215 45,830
Current portion of long-term debt 53 261
Current portion of deferred
revenue 83,522 84,798
Total current liabilities 182,461 182,867
Long-term debt 85,000 85,000
Long-term deferred revenue 52,420 32,362
Other liabilities 25,627 24,370
Total liabilities 345,508 324,599
Total stockholders' equity 49,378 84,459
$394,886 $409,058
SILICON GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts, unaudited)
Successor Predecessor
Company Company
Three Months Three Months
Ended Ended
Sept 28, Sept 29,
2007 2006
Product and other revenue $40,142 $45,229
Product revenue from related party 5,454 15,377
Global Services Revenue 45,489 61,199
Total revenue 91,085 121,805
Costs and expenses:
Cost of product and other revenue 37,692 42,710
Cost of service revenue 25,889 32,265
Research and development 13,296 16,007
Selling, general and administrative 41,224 42,359
Other operating expense, net 175 3,926
Total costs and expenses 118,276 137,267
Operating loss (27,191) (15,462)
Interest expense (2,952) (7,688)
Interest and other income (expense), net (1) (383) 11,391
Loss before reorganization items and
income taxes (30,526) (11,759)
Reorganization items, net - 340,397
(Loss) income before income taxes (30,526) 328,638
Income tax provision 5,667 2,382
Net (loss) income $(36,193) $326,256
Net (loss) income per common share:
Basic $(3.25) $1.20
Diluted $(3.25) $0.77
Weighted-average shares used to compute net
(loss) income per share:
Basic 11,125 271,563
Diluted 11,125 423,875
(1) The three-month period ended September 29, 2006 includes a pre-tax
gain of approximately $10 million on the sale of a portion of the
Predecessor Company's investment in SGI Japan.
Media contact: Lisa Pistacchio, pistacchio@sgi.com, 650.933.5683; SGI PR Hotline: 650.933.7777 Website: http://www.sgi.com/ |
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