SANTA ANA, Calif., March 1, 2006 (PRIMEZONE) -- SimpleTech, Inc. (Nasdaq:STEC), a designer, developer, manufacturer and marketer of custom and open-standard memory solutions based on Flash memory and DRAM technologies and external storage solutions, today announced its financial results for the fourth quarter and full-year ended December 31, 2005.
Revenue for the fourth quarter of 2005 was $63.3 million, a decrease of 6% from $67.2 million for the third quarter of 2005 and a decrease of 18% from $77.6 million for the fourth quarter of 2004. Gross profit margin was 18.1% for the fourth quarter of 2005, compared to 20.7% for the third quarter of 2005 and 17.9% for the fourth quarter of 2004. Diluted earnings per share was $0.02 for the fourth quarter of 2005, compared to diluted earnings per share of $0.04 for the third quarter of 2005 and $0.06 for the fourth quarter of 2004. Diluted earnings per share for the fourth quarter of 2005 included a $374,000 pre-tax, non-cash charge resulting from the company's decision to accelerate the vesting of all its outstanding unvested stock options as of December 19, 2005 previously awarded to employees, consultants, officers and directors. The company recorded a $461,000 tax benefit in the fourth quarter of 2005 and its effective income tax rate was 24% for full-year 2005. The reduced effective income tax rate compared to full-year 2004 resulted primarily from the generation of increased research and development income tax credits and a lower pre-tax income level in full-year 2005. Order backlog was $12.8 million at December 31, 2005, compared to $12.1 million at September 30, 2005, and $8.1 million at December 31, 2004.
Full-year 2005 revenues were $262.0 million, a decrease of 5% from $275.4 million for 2004. Revenues for 2005 decreased from the prior year due primarily to a $41.2 million decrease in sales of standard and stacked DRAM products, partially offset by a $20.1 million increase in sales of external storage products and a $7.7 million increase in sales of Flash memory products. Full-year 2005 diluted earnings per share was $0.12, compared to full-year 2004 diluted earnings per share from continuing operations of $0.17.
Business Segments
OEM Division
Revenue from OEM Division customers comprised 48% of total revenue for the fourth quarter of 2005, compared to 49% for the third quarter of 2005 and 53% for the fourth quarter of 2004. OEM Division revenue was $30.5 million for the fourth quarter of 2005, a decrease of 7% from $32.8 million for the third quarter of 2005 and a decrease of 26% from $41.0 million for the fourth quarter of 2004. The company continues to expand its custom design capabilities of Flash products for OEM applications and invest significantly in industrial-grade controller technology. In January 2006, the company acquired substantially all of the assets of a division of Integrated Circuit Solution Inc. (ICSI), a Taiwanese company, including intellectual property and an assembled workforce of 18 engineers specializing in Flash controller design. The company believes that its continued investment in industrial Flash technology will allow it to maintain its leadership position in this value-add market sector.
Consumer Division
Revenue from Consumer Division customers comprised 52% of total revenue for the fourth quarter of 2005, compared to 51% for the third quarter of 2005 and 47% for the fourth quarter of 2004. Consumer Division revenue was $32.8 million for the fourth of 2005, a decrease of 5% from $34.4 million for the third quarter of 2005 and a decrease of 10% from $36.6 million for the fourth quarter of 2004. Our external storage business grew 75% from $7.9 million in the third quarter of 2005 to $13.8 million in the fourth quarter of 2005. This growth was driven primarily by the launch of our external storage solutions into three major U.S. retailers during the quarter.
Business Outlook
"I am pleased with the expansion of our external storage business primarily through product launches at new major retailers," said Manouch Moshayedi, chairman and CEO of SimpleTech, Inc. "Further, we anticipate launching into several more major retailers in the first half of 2006.
"In January 2006, we completed the acquisition of certain assets from ICSI that included an assembled work force of 18 Flash controller engineers and intellectual property. The engineers will be based in our research and development facility in Taiwan. The acquisition reaffirms our commitment to maintaining our leadership position in the OEM customized Flash market. We are very pleased with the progress of our OEM Flash revenues, which grew 66% from $22.6 million in 2004 to $37.6 million in 2005. OEM Flash product qualifications and bookings are gaining momentum as we target markets, such as military, communications, automotive, robotics, gaming, medical instrumentation and others as Flash becomes the optimal storage solution for rugged operating environments.
"We currently expect our revenue for the first quarter of 2006, our seasonally weakest quarter, to range from $55 million to $60 million and our diluted earnings per share to be approximately breakeven."
Conference Call
SimpleTech, Inc. will hold an open conference call to discuss results for the fourth quarter and full-year 2005. 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 1-800-781-3662 (United States and Canada) and 1-706-643-7710 (International).
Webcast
This call is being webcast. The webcast can be accessed by clicking on "Investors" at the bottom of the home page at www.simpletech.com. The webcast will be archived and available for replay beginning approximately two hours after the live call concludes.
About SimpleTech, Inc. (Nasdaq:STEC)
SimpleTech, Inc. designs, develops, manufactures and markets custom and open-standard memory solutions based on Flash memory and DRAM technologies and external storage solutions. Headquartered in Santa Ana, California, the company specializes in developing high-density DRAM memory modules and high-speed, high-capacity solid-state Flash drives and memory cards used in sensitive and highly-volatile environments. For information about SimpleTech, Inc., and to subscribe to the company's "Email Alert" service, please visit our web site at www.simpletech.com, click "Investor" and then Email Alert.
The SimpleTech logo is available at: http://www.primezone.com/newsroom/prs/?pkgid=1079
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
This press release contains forward-looking statements that involve risks and uncertainties, including, but not limited to, statements concerning our continued expansion of our custom design capabilities of Flash products and significant investment in industrial-grade controller technology, belief that continued investment in industrial Flash technology will allow us to maintain our leadership position, anticipated launch of our external storage business in several more retailers in the first half of 2006, momentum gain in our OEM Flash product qualifications and bookings, Flash becoming the optimal storage solution for rugged operating environments and revenue and earnings guidance for the first quarter of 2006. 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. Important factors which could cause actual results to differ materially from those expressed or implied in the forward-looking statements are detailed under "Risk Factors" in filings with the Securities and Exchange Commission made from time to time by SimpleTech, including its Annual Report on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 8-K. Other factors that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements include the following risks: integration issues, costs and unanticipated expenditures related to our recent acquisition of Memtech SSD, Corp. and the assets from ICSI, the cost of raw materials may fluctuate widely in the future, unexpected delays in the qualification process of our products with customers, our growth initiatives may not be successfully implemented, slower than expected expansion of our international business, the impact of the implementation in 2006 of new accounting rules related to the expensing of stock options, excess availability of DRAM or Flash memory could reduce component pricing resulting in lower average selling prices and gross profit, DRAM or Flash memory supply may tighten requiring suppliers to place their customers, including us, on limited component allocation, effects of seasonality, interruptions or delays at the semiconductor manufacturing facilities that supply components to us, higher than expected operating expenses, new and changing technologies limiting the applications of our products, our inability to become more competitive in new and existing markets, our backlog may not result in future revenues, our inability to maintain and increase market share, difficulty competing in sectors characterized by aggressive pricing and low margins, higher than anticipated product returns, inventory write-downs, price protection and rebate charges, and new customer and supplier relationships may not be implemented successfully. The information contained in this press release is a statement of SimpleTech's present intention, belief or expectation. SimpleTech may change its intention, belief or expectation, at any time and without notice, based upon any changes in such factors, in SimpleTech's assumptions or otherwise. SimpleTech 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.
SimpleTech, Inc.
Consolidated Balance Sheets
(in thousands)
(unaudited)
December 31,
2005 2004
-------- --------
ASSETS:
Current Assets:
Cash, cash equivalents and
marketable securities $ 60,006 $ 83,318
Accounts receivable, net of
allowances of $878 at December 31,
2005 and $993 at December 31, 2004 38,630 37,047
Inventory, net 37,108 19,002
Deferred income taxes 1,410 1,515
Other current assets 5,139 2,663
-------- --------
Total current assets 142,293 143,545
Furniture, fixtures and equipment, net 8,231 6,146
Intangible assets 1,036 373
Goodwill 733 --
Other long-term assets 333 --
Deferred income taxes 2,515 3,345
-------- --------
Total assets $155,141 $153,409
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable $ 20,565 $ 16,553
Accrued and other liabilities 7,195 5,428
-------- --------
Total liabilities 27,760 21,981
Shareholders' Equity:
Common stock 45 47
Additional paid-in capital 111,576 121,193
Retained earnings 15,760 10,188
-------- --------
Total shareholders' equity 127,381 131,428
-------- --------
Total liabilities and
shareholders' equity $155,141 $153,409
======== ========
SimpleTech, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Year
Ended December 31, Ended December 31,
2005 2004 2005 2004
-------- -------- -------- --------
Net revenues $ 63,251 $ 77,617 $261,988 $275,432
Cost of revenues 51,833 63,690 212,887 228,269
------------------- -------------------
Gross profit 11,418 13,927 49,101 47,163
------------------- -------------------
Operating expenses:
Sales and marketing 6,429 5,701 24,179 19,875
General and
administrative 3,245 2,569 12,705 10,106
Research and development 1,851 1,290 6,560 4,295
------------------- -------------------
Total operating expenses 11,525 9,560 43,444 34,276
------------------- -------------------
Operating (loss) income (107) 4,367 5,657 12,887
Interest income 409 360 1,629 1,052
------------------- -------------------
Income from continuing
operations before
provision for income
taxes 302 4,727 7,286 13,939
Provision for income taxes (461) 1,545 1,713 5,158
------------------- -------------------
Income from continuing
operations $ 763 $ 3,182 $ 5,573 $ 8,781
Loss from discontinued
operations before
benefit for income
taxes -- -- -- (7,115)
Benefit for income
taxes -- (10) -- (3,023)
------------------- -------------------
Income (loss) from
discontinued operations -- $ 10 -- $ (4,092)
------------------- -------------------
Net income $ 763 $ 3,192 $ 5,573 $ 4,689
=================== ===================
Net income (loss) per
share:
Basic:
Continuing operations $ 0.02 0.07 $ 0.12 0.18
Discontinued operations -- -- -- (0.08)
------------------- -------------------
Total $ 0.02 $ 0.07 $ 0.12 $ 0.10
=================== ===================
Diluted:
Continuing operations $ 0.02 $ 0.06 $ 0.12 $ 0.17
Discontinued operations -- -- -- $ (0.08)
------------------- -------------------
Total $ 0.02 $ 0.06 $ 0.12 $ 0.09
=================== ===================
Shares used in computation
of net income (loss) per
share:
Basic 44,998 47,386 45,243 47,707
=================== ===================
Diluted 46,239 49,438 46,625 49,563
=================== ===================