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Dot Hill Reports Fourth Quarter And Full Year 2012 Results

HILL-F

DOT HILL SYSTEMS CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(INCLUDES RESULTS FROM BOTH DISCONTINUED AND CONTINUING OPERATIONS)
(In thousands, except per share amounts)
 
  Three Months Ended Twelve Months Ended
  December 31, 2011 September 30, 2012 December 31, 2012 December 31, 2011 December 31, 2012
           
Net revenue  $ 47,037  $ 48,249  $ 44,147  $ 197,461  $ 194,908
Cost of goods sold  38,743  36,025  36,270  155,828  148,678
Gross profit  8,294  12,224  7,877  41,633  46,230
Operating expenses:          
Research and development  9,113  9,348  5,973  35,551  34,940
Sales and marketing  3,426  3,558  3,718  13,876  14,189
General and administrative  2,430  2,305  2,819  9,268  10,665
Restructuring charge (recoveries)  13  (130)  95  668  639
Goodwill impairment charge  --   --   --   4,140  -- 
Total operating expenses  14,982  15,081  12,605  63,503  60,433
Operating loss  (6,688)  (2,857)  (4,728)  (21,870)  (14,203)
Other income (expense):          
Interest income (expense), net  45  8  8  16  17
Other income (expense), net  (44)  (12)  (13)  (41)  (15)
Total other income (expense), net  1  (4)  (5)  (25)  2
Loss before income taxes  (6,687)  (2,861)  (4,733)  (21,895)  (14,201)
Income tax expense  (61)  153  287  129  749
Net loss  $ (6,626)  $ (3,014)  $ (5,020)  $ (22,024)  $ (14,950)
           
Net loss per basic and diluted share  $ (0.12)  $ (0.05)  $ (0.09)  $ (0.40)  $ (0.26)
           
Shares used to compute net loss per basic and diluted share  55,357  57,327  57,501  54,908  56,954
 
DOT HILL SYSTEMS CORP.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value data)
 
  December 31, December 31,
  2011 2012
     
Assets    
Current assets:    
Cash and cash equivalents  $ 46,168  $ 40,315
Accounts receivable, net  31,697  25,025
Inventories  5,251  5,037
Prepaid expenses and other assets  7,896  5,810
Total current assets  91,012  76,187
Property and equipment, net  4,972  7,147
Intangible assets, net  2,601  -- 
Other assets  294  603
Total assets  $ 98,879  $ 83,937
     
Liabilities and stockholders' equity    
Current liabilities:    
Accounts payable  $ 31,434  $ 22,659
Accrued compensation  5,049  4,863
Accrued expenses  10,860  8,325
Deferred revenue  883  2,889
Restructuring accrual  1,328  365
Current portion of long-term note payable  71  2,800
Total current liabilities  49,625  41,901
Other long-term liabilities  552  3,261
Total liabilities  50,177  45,162
     
Stockholders' equity:    
Preferred stock  --   -- 
Common stock  58  58
Additional paid-in capital  321,681  326,576
Accumulated other comprehensive loss  (3,662)  (3,533)
Accumulated deficit  (269,375)  (284,326)
Total stockholders' equity  48,702  38,775
Total liabilities and stockholders' equity  $ 98,879  $ 83,937
 
DOT HILL SYSTEMS CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(INCLUDES RESULTS FROM BOTH DISCONTINUED AND CONTINUING OPERATIONS)
(In thousands)
 
  Three Months Ended
  December 31, 2011 September 30, 2012 December 31, 2012
       
Cash Flows From Operating Activities:      
Net loss  $ (6,626)  $ (3,014)  $ (5,020)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:      
Depreciation and amortization 845 869 699
Provision for bad debt expense  --   (13) 13
Stock-based compensation expense 1,390 897 750
Issuance of warrant to customer 1,007  --  --
(Gain) Loss on write-off of fixed assets  -- 68 (68)
Changes in operating assets and liabilities, net of effects of business acquisition:      
Accounts receivable (6,748) (1,230) 3,269
Inventories (57) (751) 369
Prepaid expenses and other assets (2,512) (2,127) 673
Accounts payable 9,824 4,414 (4,266)
Accrued compensation and other expenses 4,370 503 1,107
Deferred revenue (35) (222) 1,637
Restructuring accrual (238) (590) (184)
Other long-term liabilities (109) 607 1,707
Net cash provided by (used in) operating activities 1,111 (589) 686
       
Cash Flows From Investing Activities:      
Purchases of property and equipment (469) (1,489) (1,698)
Proceeds from sale of property and equipment  --   --  74
Net cash used in investing activities (469) (1,489) (1,624)
       
Cash Flows From Financing Activities:      
Principal payment of note and loan payable (193)  -- 0
Cash proceeds from borrowings on credit facility (current period)  --  1,800 1,000
Shares withheld for tax purposes  (78) (10) (45)
Common stock issued under stock plans 28  306  --
Net cash provided by (used in) financing activities (243) 2,096 955
       
Effect of Exchange Rate Changes on Cash and Cash Equivalents 97 25 (244)
Net Increase (Decrease) in Cash and Cash Equivalents 496 43 (227)
Cash and Cash Equivalents, beginning of period 45,672 40,499 40,542
Cash and Cash Equivalents, end of period  $ 46,168  $ 40,542  $ 40,315
       
Supplemental Disclosures of Non-Cash Investing and Financing Activities:      
Capital assets acquired but not paid  $ 1,540  $ 507  $ 477
 
DOT HILL SYSTEMS CORP.
UNAUDITED RECONCILIATION OF CONSOLIDATED NON-GAAP MEASURES
(INCLUDES RESULTS FROM BOTH DISCONTINUED AND CONTINUING OPERATIONS)
(In thousands, except per share amounts)
 
  Three Months Ended Twelve Months Ended
  December 31, 2011 September 30, 2012 December 31, 2012 December 31, 2011 December 31, 2012
           
Net revenue, as reported  $ 47,037  $ 48,249  $ 44,147  $ 197,461  $ 194,908
Effect of ITC revenue  (16)  (26)  (128)  (1,634)  (360)
Effect of long term contract SW revenue  --   --   2,141  --   2,141
Effect of issuance of warrant to customer  1,007  --   --   1,007  -- 
Non-GAAP net revenue  $ 48,028  $ 48,223  $ 46,160  $ 196,834  $ 196,689
           
Gross profit, as reported  $ 8,294  $ 12,224  $ 7,877  $ 41,633  $ 46,230
Effect of stock-based compensation  158  144  135  828  618
Effect of severance costs  --   60  4  13  71
Effect of issuance of warrant to customer  1,007  --   --   1,007  -- 
Effect of gain from insurance recovery  --   --   --   (555)  -- 
Effect of power supply component failures  1,970  --   --   4,270  -- 
Effect of ITC revenue  (16)  (26)  (128)  (1,634)  (360)
Effect of ITC expenses  293  70  128  1,418  673
Effect of long term contract SW revenue  --   --   2,141  --   2,141
Effect of long term contract SW cost  --   --   2,885  --   2,885
Effect of intangible asset impairment  --   --   --   2,928  1,647
Effect of intangible asset amortization   493  245  --   2,054  952
Non-GAAP gross profit  $ 12,199  $ 12,717  $ 13,042  $ 51,962  $ 54,857
           
Operating expenses, as reported  $ 14,982  $ 15,081  $ 12,605  $ 63,503  $ 60,433
Effect of currency gain (loss)  (147)  133  (341)  254  (555)
Effect of stock-based compensation  (1,232)  (753)  (615)  (4,557)  (3,105)
Effect of contingent consideration adjustment  (21)  --   --   (21)  5
Effect of ITC expenses  (1,233)  (301)  (147)  (5,429)  (1,585)
Effect of goodwill impairment  --   --   --   (4,140)  -- 
Effect of long term contract SW deferred cost  --   --   3,562  --   3,562
Effect of restructuring (charge) recoveries  (13)  130  (95)  (668)  (639)
Effect of legal fees related to power supply component failure  --   (40)  (9)  --   (49)
Effect of severance costs  --   (11)  (237)  (113)  (257)
Non-GAAP operating expenses  $ 12,336  $ 14,239  $ 14,723  $ 48,829  $ 57,810
           
Net loss, as reported  $ (6,626)  $ (3,014)  $ (5,020)  $ (22,024)  $ (14,950)
Effect of currency (gain) loss  147  (133)  341  (254)  555
Effect of stock-based compensation  1,390  897  750  5,385  3,724
Effect of issuance of warrant to customer  1,007  --   --   1,007  -- 
Effect of contingent consideration adjustment  21  --   --   21  (5)
Effect of restructuring charge (recoveries)  13  (130)  95  668  639
Effect of intangible asset amortization   493  245  --   2,054  952
Effect of gain from insurance recovery  --   --   --   (555)  -- 
Effect of power supply component failures  1,970  40  9  4,270  49
Effect of ITC expenses  1,526  370  275  6,847  2,258
Effect of ITC revenue  (16)  (26)  (128)  (1,634)  (360)
Effect of long term contract SW revenue  --   --   2,141  --   2,141
Effect of long term contract SW cost  --   --   2,885  --   2,885
Effect of long term contract SW deferred cost  --   --   (3,562)  --   (3,562)
Effect of intangible impairment  --   --   --   2,928  1,647
Effect of goodwill impairment  --   --   --   4,140  -- 
Effect of severance costs  --   71  241  126  327
Non-GAAP net income (loss)  $ (75)  $ (1,680)  $ (1,973)  $ 2,979  $ (3,700)
           
Non-GAAP net income (loss) per share          
Basic and diluted  $ (0.00)  $ (0.03)  $ (0.03)  $ 0.05  $ (0.06)
Weighted average shares used to calculate net income (loss) per share:          
Basic  55,357  57,327  57,501  54,908  56,954
Diluted  55,357  57,327  57,501  55,488  56,954
           
Non-GAAP net income (loss)  $ (75)  $ (1,680)  $ (1,973)  $ 2,979  $ (3,700)
Interest expense less ITC  8 12 12  43 38
Income tax expense  (61) 153 287  129 749
Depreciation less ITC  219 626 697  2,205 2500
Non-GAAP EBITDA  $ 91  $ (889)  $ (977)  $ 5,356  $ (413)
 
DOT HILL SYSTEMS CORP.
NON-GAAP REVENUE DETAIL BY MARKET
(In thousands)
 
  Three Months Ended Twelve Months Ended
   December 31, 2011  September 30, 2012 December 31, 2012 December 31, 2011 December 31, 2012
           
HP  $ 32,446  $ 32,860  $ 29,869  $ 145,757  $ 130,253
Other Server OEMs  4,214  3,666  3,831  10,022  11,193
Total Server OEMs $ 36,660  $ 36,526  $ 33,700  $ 155,779  $ 141,446
Vertical Markets  10,194  10,261  11,056  34,909  48,352
Service  1,173  1,436  1,404  6,146  6,891
Total Non-GAAP Revenue  $ 48,027  $ 48,223  $ 46,160  $ 196,834  $ 196,689
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
         
         Becky Herrick & Kirsten Chapman
         LHA Investor Relations
         Tel: 415-433-3777
         Email: dothill@lhai.com

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