ADIC Posts Fiscal 2002 Profit of Two Cents Per Share; Quarterly Loss Shrinks as Sales Grow 10.8% Sequentially

Business Wire, Dec 12, 2002

Business Editors

REDMOND, Wash.--(BUSINESS WIRE)--Dec. 12, 2002

- Cash Generated from Operations is $16 Million

and $40 Million for Quarter, Year -

ADVANCED DIGITAL INFORMATION CORPORATION (Nasdaq:ADIC) today announced sales for its fourth fiscal quarter ended October 31 were $84.2 million, a decline from $91.2 million in the same quarter last year and up 10.8 percent from $76.0 million in the immediately preceding quarter.

Sales were $338 million for the full fiscal year 2002, a decline of 7.4 percent from fiscal 2001.

The Company reported a net loss for the quarter of $1.2 million, or two cents per fully diluted share, versus pro forma earnings of $2.3 million, or four cents per fully diluted share, reported in the fourth quarter of 2001 and a loss of $2.1 million, or three cents per share, in the preceding quarter. Fiscal 2002 earnings were $1.6 million, or two cents per fully diluted share, compared to pro forma earnings of $18.3 million, or 29 cents per fully diluted share, reported for 2001. Inclusion of acquisition costs and other one-time items resulted in reported net losses for the 2001 fourth quarter and fiscal year of $5.4 million and $10.8 million, respectively.

"Annual operating expenses have increased by over $12 million, or 13.4 percent, during a year when sales declined 7.4 percent, despite significant cost cutting and headcount reductions in certain areas," according to Chairman and Chief Executive Officer Peter van Oppen. "We believe fervently that our software and hardware technologies will be increasingly important in the storage solutions marketplace. Growing acceptance of ADIC products by both end users and OEM partners reinforces that belief and justifies our continued investment in building long-term value in a defensible business," he said.

In December of 2001, the Company confirmed it would maintain heavy investments in product development, sales and service channels as well as infrastructure at the expense of optimizing short-term profits. "Our success in following that strategy is visible through recent quarterly trends in gross margin and sales of Intelligent Storage Solution(TM) products," van Oppen said today.

The Company generated cash from operations of $16.3 million and $40.0 million in the fourth quarter and fiscal year 2002, respectively. Total cash and marketable securities, net of all debt, was $179.6 million, or approximately $2.89 per fully diluted share, at the end of the period, up from $175.0 million at the end of fiscal 2001. As of October 31, marketable securities primarily represented investment grade financial instruments of varying maturities consistent with the Company's investment policy.

As part of an ongoing share repurchase program, a total of 1,294,400 shares of common stock were repurchased during the fiscal year at an aggregate cost of $7.9 million, or approximately $6.07 per share. In addition, 55,282 shares were cancelled as a result of the settlement of escrow claims associated with the fiscal 2001 acquisition of Pathlight Technology, Inc. Cash investment in infrastructure during 2002 included $26.9 million in additional property, plant and equipment for a net increase in fixed assets of $16.7 million.

OEM shipments for the fourth quarter and fiscal year 2002 were 42 percent and 44 percent of total sales compared to 43 percent and 42 percent for the previous fourth quarter and fiscal year. In early December, the Company announced that it had entered into an OEM sales agreement with Sun Microsystems and, in November, it was announced that Cray, Inc. had selected ADIC's StorNext(R) File System for its new generation Cray X1(TM) supercomputer. Each of Dell, Fujitsu-Siemens, Hewlett-Packard, IBM and Sun has extended the product range provided to it by ADIC during the past 12 months. During fiscal 2002, sales to Dell Computer were $63.5 million and sales to IBM Corporation were $86.2 million.

Gross margin as a percentage of sales increased to 29.4 percent for the fourth quarter, up from 29.2 percent in the third quarter and 27.2 percent for the same period last year. Fiscal year 2002 gross margin was 27.2 percent of sales, down from pro forma gross margin of 29.0 percent in fiscal 2001. Intelligent Storage Solutions(TM) (ISS), which include elements of ADIC software and connectivity technology and are sold through both branded and OEM sales channels, represented 36 percent of sales in both the fourth quarter and the immediately preceding third quarter, an increase from 27 percent in fourth quarter 2001. ISS revenue for fiscal 2002 was 30 percent of total sales versus 17 percent of total sales in fiscal 2001.

Subsequent to the end of the fiscal year, the Company's interest in a private company was converted into cash and marketable public equity securities with a combined total current value of approximately $8.8 million. This investment is reflected on the October 31, 2002 balance sheet as a non-current investment valued at $7.7 million.

Assuming no significant change in the general economic environment, results for the first quarter of 2003 are expected to show sales between $80-90 million with an operating loss comparable to the quarter just completed.