HAMILTON, BERMUDA — (Marketwire) — 01/14/13 — Stratus Technologies Bermuda Holdings Ltd. (together with its consolidated subsidiaries, “Stratus” or the “Company”), a global provider of uptime assurance, today announced the results for its third quarter and fiscal year-to-date period ended November 25, 2012.
For the third quarter ended November 25, 2012, total revenue was $49.0 million, a decrease of $2.7 million or 5.2% as compared to the $51.7 million in the third quarter ended November 27, 2011. Profit from operations was $8.7 million compared to $8.2 million for the same period last year. Net income was $1.1 million compared to a net loss of $4.6 million for the same period last year. Net income for the quarter-to-date period ended November 25, 2012 includes a net gain on change in fair value of embedded derivatives of $5.5 million. Net loss for the quarter-to-date period ended November 27, 2011 includes a net loss on change in fair value of embedded derivatives of $0.7 million. The Company reported Adjusted EBITDA, a non-GAAP financial measure, of $11.4 million compared to $10.8 million for the same period last year. Please refer to the reconciliation of Adjusted EBITDA to Generally Accepted Accounting Principles (“GAAP”) financial measures in the attached, unaudited “Consolidated Statements of Operations.”
For the year-to-date period ended November 25, 2012, total revenue was $154.2 million, an increase of $2.2 million or 1.4% as compared to the $152.0 million in the year-to-date period ended November 27, 2011. Profit from operations was $29.9 million compared to $24.0 million for the same period last year. Profit from operations for the year-to-date period ended November 25, 2012 and November 27, 2011 includes a net loss on extinguishment of debt of $0.9 million and $1.2 million, respectively. Profit from operations for the year-to-date period ended November 25, 2012 and November 27, 2011 also includes a net gain on change in fair value of embedded derivatives of $4.7 million and a net loss on change in fair value of embedded derivatives $2.4 million, respectively. The net loss was $6.4 million compared to $16.8 million for the same period last year. The Company reported Adjusted EBITDA, a non-GAAP financial measure, of $37.9 million compared to $32.2 million for the same period last year. Please refer to the reconciliation of Adjusted EBITDA to GAAP financial measures in the attached, unaudited “Consolidated Statements of Operations.”
A conference call to review third quarter financial results will be held today, January 14, 2013 at 1:30 p.m. Eastern Time and may be accessed by calling 1-877-941-8609 (U.S. only) or 1-480-629-9692 with a conference ID of 4589483. A recording of this conference call will be available at 1-800-406-7325 (U.S. only) or 1-303-590-3030 with a conference ID of 4589483 for 30 days.
Stratus delivers uptime assurance for the applications its customers depend on most for their success. With its resilient software and hardware technologies, together with proactive availability monitoring and management, Stratus products help to save lives and to protect the business and reputations of companies, institutions, and governments the world over. To learn more about worry-free computing, visit .
Forward-Looking Statements: This press release may contain forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). You are cautioned that such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could cause actual results to differ materially from those described in such forward-looking statements. Such risks and uncertainties include, but are not limited to: the continued acceptance of the Company-s products by the market; the Company-s ability to enter into new service agreements and to retain customers under existing service contracts; the Company-s ability to source quality components and key technologies without interruption and at acceptable prices; the Company-s ability to comply with certain covenants in the governing documents for the Company-s credit facilities and other debt instruments; the Company-s ability to refinance indebtedness when required; the Company-s reliance on sole source manufacturers and suppliers; the presence of existing competitors and the emergence of new competitors; the Company-s financial condition and liquidity and the Company-s leverage and debt service obligations; economic conditions globally and in the Company-s most important markets; developments in the fault-tolerant and high-availability server markets; claims by third parties that the Company infringes upon their intellectual property rights; the Company-s success in adequately protecting its intellectual property rights; the Company-s success in maintaining efficient manufacturing and logistics operations; the Company-s ability to recruit, retain and develop appropriately skilled employees; exposure for systems and service failures; fluctuations in foreign currency exchange rates; fluctuations in interest rates; current risks of terrorist activity and acts of war; the impact of changing tax laws; the impact of changes in policies, laws, regulations or practices of foreign governments on the Company-s international operations; and the impact of natural or man-made disasters. Any forward-looking statements in this press release are made as of the date hereof, and the Company undertakes no duty to further update such forward-looking statements.
© 2013 Stratus Technologies Bermuda Ltd. All rights reserved.
Stratus® is a trademark or registered trademark of ours. All other trade names, service marks and trademarks appearing in this annual report are the property of their respective holders. Our use or display of other parties- trade names, service marks or trademarks is not intended to and does not imply a relationship with, or endorsement or sponsorship of us by, the trade name, service mark or trademark owners.
1) EBITDA represents income (loss) before interest, taxes, depreciation and amortization. We present EBITDA because we consider it an important supplemental measure of our performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. In addition to other applications, EBITDA is used by us and others in our industry to evaluate and price potential acquisition candidates.
Adjusted EBITDA represents EBITDA with certain additional adjustments, as calculated pursuant to the requirements of the interest maintenance covenant under our Revolving Credit Facility. We present Adjusted EBITDA because we believe that it allows investors to assess our ability to meet the interest maintenance covenant under our Revolving Credit Facility.
Our management also uses Adjusted EBITDA internally as a basis upon which to assess our operating performance, and Adjusted EBITDA is also a factor in the evaluation of the performance of our management in determining compensation. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under Generally Accepted Accounting Principles (“GAAP-). Some of these limitations are:
EBITDA and Adjusted EBITDA do not reflect our cash expenditures, or future requirements for capital expenditures, or contractual commitments;
EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debts;
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;
EBITDA and Adjusted EBITDA do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; and
other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA only supplementally, as described above.
a) In order to better align expenses with anticipated revenues, we implemented restructuring programs in prior years. These programs were designed to streamline our business model and centralize certain functions. The expense for the quarter-to-date fiscal period ended November 25, 2012 reflects changes to prior estimates of these liabilities as well as restructuring charges of $0.1 million related to severance and fringe benefits.
As a result of a change of approach in the utilization of marketing and customer service resources, on November 21, 2011, we implemented a restructuring program in order to align its resources to meet its objectives. The restructuring program consisted of a reduction of workforce of 3 marketing professionals and one customer service professional. We recorded a charge of $0.2 million related to severance and fringe benefits.
See Note 4 of these unaudited interim financial statements.
b) In the quarter-to-date and year-to-date fiscal periods ended November 25, 2012 and November 27, 2011, we recorded non-cash stock-based compensation expense charges related to share-based awards to employees.
c) On April 30, 2010 we entered into a four year advisory and strategic planning agreement with an investment banking firm. The yearly fee is $0.5 million.
On October 1, 2005, we entered into an Agreement for Management, Advisory, Strategic Planning and Consulting Services with Investcorp International, Inc., an affiliate of the Investcorp Group, and MidOcean US Advisor, LP, an affiliate of MidOcean, for an aggregate yearly fee of $0.7 million which renews on an annual basis. The payment of the yearly fee is restricted in the Senior Secured Notes and in the Second Lien Credit Facility until these credit facilities are paid in full.
The long-term accrued liability related to this yearly fee totaled $3.6 million and $3.1 million at November 25, 2012 and February 26, 2012, respectively.
d) In the quarter-to-date and year-to-date fiscal periods ended November 25, 2012 and November 27, 2011, we recorded non-cash inventory write-downs.
e) In the year-to-date fiscal periods ended November 25, 2012 and November 27, 2011 we recorded a loss on extinguishment of debt related to the Excess Cash Flow (“ECF”) payment in the fiscal second quarter 2013 and 2012, related to the Senior Secured Notes. The loss in each period is due to a premium, the write-off of a pro rata portion of deferred financing fees along with debt discount and related fees offset by the reduction in the value ascribed to the ECF embedded derivative liability. See Note 6 of these unaudited consolidated financial statements.
f) In the quarter-to-date and year-to-date fiscal periods ended November 25, 2012, we recorded a gain due to the change in fair value of the embedded derivatives related to the Senior Secured Notes. In the quarter-to-date and year-to-date fiscal periods ended November 27, 2011, we recorded a loss due to the change in fair value of the embedded derivatives related to the Senior Secured Notes.
g) In the quarter-to-date fiscal period ended November 25, 2012, we recorded other expense, net of $0.2 million, primarily consisting of $0.1 million of bank fees and $0.1 million of miscellaneous and non-recurring charges.
In the year-to-date fiscal period ended November 25, 2012, we recorded other expense, net of $1.5 million, primarily consisting of $1.1 million of miscellaneous and non-recurring charges and $0.4 of million bank fees.
In the quarter-to-date fiscal period ended November 27, 2011, we recorded other income, net of $0.5 million, primarily consisting of $0.6 million of net foreign currency gains partially offset by $0.1 million of bank fees.
In the year-to-date fiscal period ended November 27, 2011 we recorded other expense, net of $0.4 million, primarily consisting of $0.2 million of miscellaneous and non-recurring charges, $0.3 million of public filing registration costs and $0.4 million of bank fees partially offset by $0.5 million of net foreign currency gains.
Robert C. Laufer
Senior Vice President, CFO
Stratus Technologies
978-461-7343
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