SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
September 30, 2005
ADAPTEC, INC.
(Exact name of registrant as specified in its charter)
Delaware |
| 0-15071 |
| 94-2748530 |
(State or other jurisdiction |
| (Commission |
| (I.R.S. Employer |
691 S. Milpitas Boulevard
Milpitas, CA
95035
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (408) 945-8600
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
On September 30, 2005, Adaptec, Inc. (“the Company”) entered into an Asset Purchase Agreement with International Business Machines (“IBM”) pursuant to which the Company sold its IBM i/p Series RAID component business (“i/p Series RAID Business”) to IBM for approximately $22.0 million plus $1.3 million for certain fixed assets. In addition, IBM will purchase all related inventory at the Company’s net book value. The Asset Purchase Agreement is filed as Exhibit 2.01 to this Current Report on Form 8-K and incorporated herein by reference.
The information set forth under Item 2.01 of this report is hereby incorporated into Item 1.01 by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets.
On September 30, 2005, the Company completed the sale of its IBM i/p Series RAID Business to IBM for approximately $22.0 million plus $1.3 million for certain fixed assets. In addition, IBM will purchase all related inventory at the Company’s net book value. Under the terms of the agreement, the Company granted IBM a nonexclusive license to certain intellectual property and sold to IBM substantially all of the assets dedicated to the engineering and manufacturing of RAID controllers and connectivity products for IBM’s i/p Series RAID Business. Under the terms of the nonexclusive license, IBM will pay the Company royalties over the next six quarters. Expenses incurred in the transaction primarily include costs of approximately $0.5 million for legal and accounting fees. In addition, the Company accrued $0.3 million for lease obligations.
Excluding the net revenues earned from the IBM i/p Series RAID Business, sales to IBM represented more than 10% of the Company’s total net revenues for fiscal 2005 and the first quarter of fiscal 2006.
A press release regarding this transaction is included as Exhibit 99.01 and incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits
(b) Pro forma financial information
The unaudited pro forma consolidated financial information of the Company is based on and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended March 31, 2005 and Quarterly Report on Form 10-Q for the three-month period ended June 30, 2005. The accompanying unaudited pro forma consolidated statements of operations for the year ended March 31, 2005 and for the three-month period ended June 30, 2005 are presented as if the disposition of the i/p Series RAID Business discussed in Item 2.01 had been completed as of the date of inception, which was June 29, 2004. The accompanying unaudited pro forma consolidated balance sheet is presented as if the disposition had been completed as of June 30, 2005.
The accompanying unaudited pro forma consolidated financial statements include all material adjustments necessary to reflect, on a pro forma basis, the impact of such disposition on the historical financial information of the Company. The adjustments are described in the notes to the unaudited pro forma consolidated financial statements and are set forth in the “Pro Forma Adjustments” column. The accompanying unaudited pro forma consolidated financial statements are not necessarily indicative of the financial condition or results of operations that would have been reported had the sale occurred on the dates specified, nor are they indicative of the Company’s future financial condition or results of operations. The pro forma adjustments are based upon information and assumptions available at the time of the filing of this Form 8-K.
2
ADAPTEC, INC
Unaudited Pro Forma Consolidated Balance Sheet
|
| June 30, 2005 |
| ||||||
|
| Historical |
| Pro Forma |
| Pro Forma |
| ||
|
| (in thousands, except per share amounts) |
| ||||||
|
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|
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Assets: |
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| 77,176 |
| 24,533 |
| (2a) |
| 101,709 |
|
Marketable securities |
| 402,760 |
|
|
|
|
| 402,760 |
|
Restricted cash - current |
| 1,654 |
|
|
|
|
| 1,654 |
|
Accounts receivable, net |
| 74,648 |
|
|
|
|
| 74,648 |
|
Inventories |
| 48,346 |
| (1,245 | ) | (2a) |
| 47,101 |
|
Deferred income taxes |
| — |
|
|
|
|
| — |
|
Prepaid expenses |
| 20,130 |
| (11,329 | ) | (2a),(2b) |
| 8,801 |
|
Other current assets |
| 5,739 |
|
|
|
|
| 5,739 |
|
Total current assets |
| 630,453 |
| 11,959 |
|
|
| 642,412 |
|
Property and equipment, net |
| 55,942 |
| (3,488 | ) | (2a) |
| 52,454 |
|
Restricted marketable securities, less current portion |
| 3,875 |
|
|
|
|
| 3,875 |
|
Goodwill |
| 90,602 |
| (18,749 | ) | (2a) |
| 71,853 |
|
Other intangible assets, net |
| 66,597 |
| (11,847 | ) | (2a) |
| 54,750 |
|
Other long-term assets |
| 37,626 |
| (27,102 | ) | (2a),(2b) |
| 10,524 |
|
Total assets |
| 885,095 |
| (49,227 | ) |
|
| 835,868 |
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Liabilities and Stockholders’ Equity: |
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Current Liabilities: |
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|
|
|
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Accounts payable |
| 49,360 |
|
|
|
|
| 49,360 |
|
Accrued liabilities |
| 106,320 |
| (8,550 | ) | (2b) |
| 98,495 |
|
|
|
|
| 725 |
| (2a) |
|
|
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Total current liabilities |
| 155,680 |
| (7,825 | ) |
|
| 147,855 |
|
3/4% Convertible Senior Subordinated Notes |
| 225,000 |
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|
| 225,000 |
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3% Convertible Subordinated Notes |
| 15,368 |
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|
| 15,368 |
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Other long-term liabilities |
| 14,686 |
| (11,250 | ) | (2b) |
| 3,607 |
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|
| 171 |
| (2a) |
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Commitment & contingencies |
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Stockholders’ Equity |
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Preferred stock; $0.001 par value |
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Authorized shares, 1,000; Series A shares, 250 designated; outstanding shares, none |
| — |
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|
| — |
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Common stock; $0.001 par value |
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Authorized shares, 400,000; outstanding shares, 112,339 |
| 112 |
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|
| 112 |
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Additional paid-in capital |
| 165,438 |
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|
| 165,438 |
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Deferred stock based compensation |
| (1,752 | ) |
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|
|
| (1,752 | ) |
Accumulated other comprehensive income, net of taxes |
| 322 |
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|
| 322 |
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Retained earnings |
| 310,241 |
| (30,323 | ) | (2a) |
| 279,918 |
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Total stockholders’ equity |
| 474,361 |
| (30,323 | ) |
|
| 444,038 |
|
Total liabilities and stockholders’ equity |
| 885,095 |
| (49,227 | ) |
|
| 835,868 |
|
See accompanying notes to unaudited pro forma consolidated financial statements.
3
Adaptec, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
|
| Three-Month Period Ended |
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| Historical |
| Pro Forma |
| Pro Forma |
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| (in thousands, except per share amounts) |
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Net revenues |
| $ | 98,398 |
| $ | (4,452 | ) | (2c) |
| $ | 93,946 |
|
Cost of revenues |
| 77,947 |
| (7,148 | ) | (2c) |
| 70,799 |
| |||
Gross profit |
| 20,451 |
| 2,696 |
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|
| 23,147 |
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Operating expenses: |
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Research and development |
| 25,779 |
| (5,980 | ) | (2c) |
| 19,799 |
| |||
Selling, marketing and administrative |
| 19,234 |
| (156 | ) | (2c) |
| 19,078 |
| |||
Amortization of acquisition-related intangible assets |
| 4,892 |
| (1,515 | ) | (2c) |
| (3,377 | ) | |||
Write-off of acquired in- process technology |
| — |
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|
| — |
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Restructuring charges |
| 40 |
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| 40 |
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Other charges |
| 8,010 |
| (8,010 | ) | (2c) |
| — |
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Total operating expenses |
| 57,955 |
| (15,661 | ) |
|
| 42,294 |
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Loss from operations |
| (37,504 | ) | 18,357 |
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|
| (19,147 | ) | |||
Interest and other income |
| 3,608 |
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| 3,608 |
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Interest expense |
| (972 | ) |
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|
| (972 | ) | |||
Loss before income taxes |
| (34,868 | ) | 18,357 |
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|
| (16,511 | ) | |||
Provision for income taxes |
| 1,105 |
| (191 | ) | (2c) |
| 914 |
| |||
Loss from continuing operations |
| $ | (35,973 | ) | $ | 18,548 |
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|
| $ | (17,425 | ) |
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Loss from continuing operations per common share: |
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Basic |
| $ | (0.32 | ) |
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|
| $ | (0.15 | ) | |
Diluted |
| $ | (0.32 | ) |
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| $ | (0.15 | ) | |
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Shares used in computing loss from continuing operations per share: |
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Basic |
| 112,445 |
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|
| 112,445 |
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Diluted |
| 112,445 |
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|
| 112,445 |
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See accompanying notes to unaudited pro forma consolidated financial statements.
4
|
| Twelve-Month Period Ended |
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| Historical |
| Pro Forma |
| Pro Forma |
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| (in thousands, except per share amounts) |
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Net revenues |
| $ | 474,990 |
| $ | (26,583 | ) | (2c) |
| $ | 448,407 |
|
Cost of revenues |
| 293,746 |
| (12,544 | ) | (2c) |
| 281,202 |
| |||
Gross profit |
| 181,244 |
| (14,039 | ) |
|
| 167,205 |
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Operating expenses: |
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Research and development |
| 113,771 |
| (16,823 | ) | (2c) |
| 96,948 |
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Selling, marketing and administrative |
| 82,445 |
| (399 | ) | (2c) |
| 82,046 |
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Amortization of acquisition-related intangible assets |
| 18,299 |
| (4,545 | ) | (2c) |
| 13,754 |
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Write-off of acquired in- process technology |
| 5,200 |
| (3,000 | ) | (2c) |
| 2,200 |
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Restructuring charges |
| 5,896 |
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|
| 5,896 |
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Goodwill impairment |
| 52,272 |
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|
| 52,272 |
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Other charges |
| (290 | ) |
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|
| (290 | ) | |||
Total operating expenses |
| 277,593 |
| (24,767 | ) |
|
| 252,826 |
| |||
Loss from operations |
| (96,349 | ) | 10,728 |
|
|
| (85,621 | ) | |||
Interest and other income |
| 8,369 |
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|
| 8,369 |
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Interest expense |
| (4,439 | ) |
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|
| (4,439 | ) | |||
Loss before income taxes |
| (92,419 | ) | 10,728 |
|
|
| (81,691 | ) | |||
Provision before income taxes |
| 52,687 |
| (1,110 | ) | (2c) |
| 51,577 |
| |||
Loss from continuing operations |
| $ | (145,106 | ) | $ | 11,838 |
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|
| $ | (133,268 | ) |
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Loss from continuing operations per common share: |
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Basic |
| $ | (1.31 | ) |
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|
| $ | (1.20 | ) | |
Diluted |
| $ | (1.31 | ) |
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| $ | (1.20 | ) | |
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Shares used in computing loss from continuing operations per share: |
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Basic |
| 110,798 |
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|
| 110,798 |
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Diluted |
| 110,798 |
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|
| 110,798 |
| |||
See accompanying notes to unaudited pro forma consolidated financial statements.
5
ADAPTEC, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. On September 30, 2005, Adaptec, Inc. (“the Company”) completed the sale of its International Business Machine (“IBM”) i/p Series RAID component business (“i/p Series RAID Business”) to IBM for approximately $22.0 million plus $1.3 million for certain fixed assets. In addition, IBM will purchase all related inventory at the Company’s net book value. The sale included a nonexclusive license to certain intellectual property and assets dedicated to the engineering and manufacturing of RAID controllers and connectivity products for IBM’s i/p Series RAID Business. Under the terms of the nonexclusive license, IBM will pay the Company royalties over the next six quarters. Expenses primarily include expected costs of $0.5 million for legal and accounting fees and $0.3 million for lease obligations. The estimated net loss on sale is approximately $26 million. The estimated net loss as of September 30, 3005 of $26 million differs from the amount of $30.3 million reflected in the June 30, 2005 Unaudited Pro Forma Consolidated Balance Sheet primarily due to amortization of certain assets.
The Company currently estimates that it will not pay income tax as a result of the sale of i/p Series RAID Business.
2. The following pro forma adjustments to the unaudited consolidated statements of operations and consolidated balance sheet have been prepared to reflect the following:
a. The pro forma consolidated balance sheet reflects the effects of the sale of the i/p Series RAID Business as if it had been consummated on June 30, 2005 and includes the transfer of all related assets, liabilities, transaction costs and related loss on disposition.
b. Under the terms of the Asset Purchase Agreement IBM forgave all outstanding liabilities due under the Distribution Agreement entered into with the Company in December 2004. The pro forma consolidated balance sheet reflects the forgiveness of these liabilities as if the transaction had been consummated on June 30, 2005.
c. The pro forma consolidated statements of operations for the fiscal year ended March 31, 2005 and for the three-month period ended June 30, 2005 assume the sale of the i/p Series RAID Business has been consummated from the date of inception, which was June 29, 2004. The pro forma consolidated statements of operations have been adjusted to eliminate the net revenues and expenses which the Company believes (i) are directly attributable to the i/p Series RAID components products and (ii) will not continue after the completion of the sale of the i/p Series RAID Business.
6
(c) Exhibits
Exhibit No. |
| Description of Exhibits |
|
|
|
2.01 |
| Asset Purchase Agreement, dated September 30, 2005, by and between IBM and the Company. |
|
|
|
99.01 |
| Press release issued by the Company on September 30, 2005. |
7
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ADAPTEC, INC. | |||
| |||
| |||
By: | /s/ Marshall L. Mohr |
| |
Marshall L. Mohr | |||
Vice President and Chief Financial Officer | |||
| |||
| Date: October 6, 2005 | ||
8
EXHIBIT INDEX
Exhibit No. |
| Description of Exhibits |
|
|
|
2.01 |
| Asset Purchase Agreement, dated September 30, 2005, by and between IBM and the Company. |
|
|
|
99.01 |
| Press release issued by the Company on September 30, 2005. |
9