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Dot Hill Reports Second Quarter 2012 Results

HILL-F

DOT HILL SYSTEMS CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
           
  Three Months Ended Six Months Ended
  June 30, 2011 March 31, 2012 June 30, 2012 June 30, 2011 June 30, 2012
           
Net revenue  $ 53,179  $ 54,744  $ 47,768  $ 102,353  $ 102,512
Cost of goods sold  39,984  39,570  36,813  77,056  76,383
Gross profit  13,195  15,174  10,955  25,297  26,129
Operating expenses:        
Research and development  8,946  9,942  9,677  16,932  19,619
Sales and marketing  3,649  3,533  3,380  6,682  6,913
General and administrative  2,437  3,068  2,473  4,778  5,541
Restructuring charge (recoveries)  37  601  73  (4)  674
Total operating expenses  15,069  17,144  15,603  28,388  32,747
Operating loss  (1,874)  (1,970)  (4,648)  (3,091)  (6,618)
Other income (expense):        
Interest income (expense), net  (5)  8  (7)  (11)  -- 
Other income (expense), net  (1)  3  7  1  11
Total other income (expense), net  (6)  11  --   (10)  11
Loss before income taxes  (1,880)  (1,959)  (4,648)  (3,101)  (6,607)
Income tax expense  65  (91)  400  115  309
Net loss  $ (1,945)  $ (1,868)  (5,048)  $ (3,216)  $ (6,916)
           
Net loss per basic and diluted share  $ (0.04)  $ (0.03)  (0.09)  $ (0.06)  $ (0.12)
       
Shares used to compute net loss per basic and diluted share  54,737  56,030  56,934  54,536  56,484
 
 
DOT HILL SYSTEMS CORP.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value data)
     
  December 31, June 30,
  2011 2012
     
Assets    
Current assets:  
Cash and cash equivalents  $ 46,168  $ 40,499
Accounts receivable, net  31,697  27,085
Inventories  5,251  4,656
Prepaid expenses and other assets  7,896  4,681
Total current assets  91,012  76,921
Property and equipment, net  4,972  5,696
Intangible assets, net  2,601  245
Other assets  294  308
Total assets  $ 98,879  $ 83,170
     
Liabilities and stockholders' equity  
Current liabilities:  
Accounts payable  $ 31,434  $ 23,045
Accrued compensation  5,049  4,840
Accrued expenses  10,860  7,889
Deferred revenue  883  1,480
Restructuring accrual  1,328  1,139
Current portion of long-term note payable  71  -- 
Total current liabilities  49,625  38,393
Other long-term liabilities  552  961
Total liabilities  50,177  39,354
     
Commitments and Contingencies  
Stockholders' equity:  
Preferred stock  --   -- 
Common stock  58  58
Additional paid-in capital  321,681  323,672
Accumulated other comprehensive loss  (3,662)  (3,623)
Accumulated deficit  (269,375)  (276,291)
Total stockholders' equity  48,702  43,816
Total liabilities and stockholders' equity  $ 98,879  $ 83,170
 
 
DOT HILL SYSTEMS CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
       
  Three Months Ended
  June 30, 2011 March 31, 2012 June 30, 2012
       
Cash Flows From Operating Activities:  
Net loss  $ (1,945)  $ (1,868)  $ (5,048)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:  
Depreciation and amortization 1,115 1,085 874
Provision for Bad Debt Expense  --   --  25
Stock-based compensation expense 1,734 1,142 934
Loss on write-off of fixed assets  --  123 121
Loss on write-off of intangible assets  --   --  1,647
Issuance of warrant to customer  
Changes in operating assets and liabilities, net of effects of business acquisition:
Accounts receivable (3,705) (3,469) 8,051
Inventories (140) 496 99
Prepaid expenses and other assets (804) (5,250) 8,444
Accounts payable 3,184 4,543 (13,705)
Accrued compensation and other expenses 2,276 (1,286) (1,866)
Deferred revenue (197) (96) 698
Restructuring accrual (238) 411 (600)
Other long-term liabilities (111) (118) 530
Net cash provided by (used in) operating activities 1,169 (4,287) 204
       
Cash Flows From Investing Activities:  
Purchases of property and equipment (974) (327) (1,098)
Net cash used in investing activities (974) (327) (1,098)
       
Cash Flows From Financing Activities:  
Principal payment of note and loan payable (68) (71)  -- 
Shares withheld for tax purposes  (152) (401) (132)
Common stock issued under stock plans 206 448  -- 
Net cash provided by (used in) financing activities (14) (24) (132)
       
 Effect of Exchange Rate Changes on Cash and Cash Equivalents 18 (83) 78
 Net Increase (Decrease) in Cash and Cash Equivalents 199 (4,721) (948)
 Cash and Cash Equivalents, beginning of period 46,309 46,168 41,447
 Cash and Cash Equivalents, end of period  $ 46,508  $ 41,447  $ 40,499
 
Supplemental Disclosures of Non-Cash Investing and Financing Activities:    
Capital assets acquired but not paid  $ 164  $ 855  $ 811
           
           
DOT HILL SYSTEMS CORP.
UNAUDITED RECONCILIATION OF CONSOLIDATED NON-GAAP MEASURES
(In thousands, except per share amounts)
           
   Three Months Ended   Six Months Ended 
   June 30, 2011   March 31, 2012   June 30, 2012   June 30, 2011   June 30, 2012 
           
Net revenue, as reported  53,179  54,744  47,768  102,353  102,512
Effect of ITC revenue  (721)  (147)  (59)  (1,352)  (206)
Non-GAAP net revenue  52,458  54,597  47,709  101,001  102,306
           
Gross profit, as reported  13,195  15,174  10,955  25,297  26,129
Effect of stock-based compensation  285  172  167  418  339
Effect of severance costs  3  6  --   3  6
Effect of ITC revenue  (721)  (147)  (59)  (1,352)  (206)
Effect of ITC expenses  405  356  119  627  475
Effect of intangible asset impairment  --   --   1,647  --   1,647
Effect of intangible asset amortization   519  441  266  1,039  707
Non-GAAP gross profit  13,686  16,002  13,095  26,032  29,097
           
Operating expenses, as reported  15,069  17,144  15,603  28,388  32,747
Effect of currency gain (loss)  (26)  (376)  29  (84)  (347)
Effect of stock-based compensation  (1,449)  (970)  (767)  (2,119)  (1,737)
Effect of contingent consideration adjustment  --   --   5  --   5
Effect of ITC expenses  (1,540)  (956)  (182)  (2,818)  (1,139)
Effect of restructuring (charge) recoveries  (37)  (601)  (73)  4  (674)
Effect of severance costs  (46)  (9)  --   (46)  (9)
Non-GAAP operating expenses  11,971  14,232  14,615  23,325  28,846
           
Net loss, as reported  (1,945)  (1,868)  (5,048)  (3,216)  (6,916)
Effect of currency (gain) loss  26  376  (29)  84  347
Effect of stock-based compensation  1,734  1,142  935  2,537  2,077
Effect of contingent consideration adjustment  --   --   (5)  --   (5)
Effect of restructuring charge (recoveries)  37  601  73  (4)  674
Effect of intangible asset amortization   519  441  266  1,039  707
Effect of ITC expenses  1,945  1,312  301  3,445  1,613
Effect of ITC revenue  (721)  (147)  (59)  (1,352)  (206)
Effect of intangible asset impairment  --   --   1,647  --   1,647
Effect of severance costs  49  15  --   49  15
Non-GAAP net income (loss)  1,644  1,872  (1,919)  2,582  (47)
           
Non-GAAP net income (loss) per share          
Basic and diluted  0.03  0.03  (0.03)  0.05  (0.00)
Weighted average shares used to calculate net income (loss) per share:          
Basic  54,737  56,030  56,934  54,536  56,484
Diluted  56,020  57,094  56,934  55,847  56,484
           
Non-GAAP net income (loss)  1,644  1,872  (1,919)  2,582  (47)
Interest expense less ITC  7  7  7  13  14
Income tax expense  65  (91)  400  115  309
Depreciation less ITC  473  545  632  904  1,177
Non-GAAP EBITDA  2,189  2,333  (880)  3,614  1,453
CONTACT: Hanif Jamal
         Chief Financial Officer
         Tel: 303-845-3377
         Email: investors@dothill.com
         
         Jodi Bochert
         Investor Relations
         Tel: 303-845-3469
         Email:  investors@dothill.com
         
         Peter Seltzberg
         Hayden IR
         Tel: 646-415-8972
         Email: peter@haydenir.com

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