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UNITED STATES
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) January 15, 1999.
ADAPTEC, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-15071 94-2748530
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(State of Incorporation) (Commission File (I.R.S. Employer
Number) Identification No.)
691 S. MILPITAS BLVD., MILPITAS, CALIFORNIA 95035
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 945-8600
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N/A
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(Former name, former address and former fiscal year,
if changed since last report)
This document consists of 8 pages, excluding exhibits, of which this is page 1.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 6, 1998, Adaptec, Inc. ("Adaptec" or the "Company")
entered into an agreement with Texas Instruments, Incorporated ("TI"),
a Delaware Corporation, under which certain assets of the Company's
high-end Peripheral Technology Solutions ("PTS") business were
transferred to TI for approximately $8.5 million in cash, including
sales tax reimbursement of $0.2 million. The Company received cash
proceeds of approximately $4.5 million upon consummation of the asset
purchase agreement. The outstanding balance of $4.0 million is due and
payable in two equal installments scheduled for February and May of
1999.
On January 15, 1999, STMicroelectronics, Inc. ("ST"), a Delaware
corporation, acquired certain assets and obtained certain intellectual
property rights of the Company's mainstream PTS business for a purchase
price of approximately $72.1 million in cash, including sales tax
reimbursement of $0.4 million.
The substance of the two transactions was the disposal of substantially
all the assets, rights and business of the PTS business, excluding
accounts receivable.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired: Not applicable
(b) Pro forma financial information:
INTRODUCTION TO PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The following unaudited Pro Forma Condensed Consolidated Balance Sheet reflects
the historical condensed consolidated balance sheet of Adaptec at December 31,
1998, adjusted to give effect to the PTS disposition as if it had occurred as of
that date.
The unaudited Pro Forma Condensed Consolidated Balance Sheet should be read in
conjunction with the historical consolidated financial statements and notes
thereto and the narrative sections included elsewhere herein. Because the sale
of assets to ST occurred subsequent to January 1, 1999, actual adjustments and
balances will vary from those presented in the Pro Forma Condensed Consolidated
Balance Sheet. However, management believes that any differences between actual
adjustments and pro forma adjustments will not have a material effect on the pro
forma financial statements.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
The following unaudited Pro Forma Condensed Consolidated Statements of
Operations for the year ended March 31, 1998 and the nine months ended December
31, 1998 are based upon the historical condensed consolidated statements of
operations of the Company for the respective periods after giving effect to pro
forma adjustments described in the notes thereto as if the PTS disposition had
been consummated on April 1, 1997 and April 1, 1998, respectively.
The unaudited Pro Forma Condensed Consolidated Statements of Operations should
be read in conjunction with the historical consolidated financial statements and
notes thereto of the Company as previously filed in the Company's annual report
on Form 10-K and the narrative sections included elsewhere herein. The Pro Forma
Condensed Consolidated Statements of Operations are not necessarily indicative
of what actual results of operations would have been for the periods had the
transaction occurred on April 1, 1997 and April 1, 1998, respectively, and do
not purport to indicate the results of future operations.
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ADAPTEC, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
December 31, 1998
(UNAUDITED)
Pro Forma
Adjustments
Reflecting
PTS
Historical Disposition As Adjusted
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ASSETS
Current assets
Cash and marketable securities $ 655,554 $76,079 (A) $ 731,633
Accounts receivable, net 80,357 -- 80,357
Inventories 48,600 (2,501) (B) 46,099
Prepaid expenses and other 108,674 (4,543) (B) 104,131
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Total current assets 893,185 69,035 962,220
Property and equipment, net 185,551 (5,699) (B) 179,852
Other assets 38,439 (4,836) (B) 33,603
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1,117,175 58,500 1,175,675
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ -- $ -- $ --
Note payable -- -- --
Accounts payable 36,945 -- 36,945
Accrued liabilities 78,778 13,037 (C) 112,273
20,458 (D)
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Total current liabilities 115,723 33,495 149,218
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Convertible subordinated notes 230,000 -- 230,000
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Stockholders' equity:
Common stock 108 -- 108
Additional paid-in capital 236,847 -- 236,847
Retained earnings 534,497 25,005 (E) 559,502
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Total stockholders' equity 771,452 25,005 796,457
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1,117,175 58,500 1,175,675
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The accompanying notes are in integral part of these unaudited pro forma
condensed consolidated financial statements.
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ADAPTEC, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
The PTS disposition pro forma adjustments have been made to reflect the
following:
(A) Consideration of $76.1 million still to be received related to the
disposition of PTS. Approximately $4.5 million relating to the sale to
TI was received in November 1998. The remaining $4.0 million which is
due in two equal installments of $2.0 million was classified in the
December 31, 1998 balance sheet as part of prepaid expenses and other.
This amount was reclassified to cash in the pro forma adjustments.
(B) Elimination of assets associated with PTS. These assets include
goodwill of $4.8 million associated with the Analog Devices, Inc.
acquisition. The goodwill was eliminated as the technology and other
intangible assets associated with this acquisition was sold to ST.
The balance of the assets eliminated relate to inventory, equipment
and other immaterial assets sold in conjunction with the sale of the
PTS business.
(C) Transaction costs associated with the PTS disposition. Transaction
costs include legal, accounting and consulting costs associated with
the sale of the PTS business as well as termination costs of employees
associated with the PTS business.
(D) Income taxes payable associated with taxing the anticipated gain at
45%. The tax rate of 45% is higher than statutory rates due to book
write-offs which were offset against sale proceeds and are not
deductible for tax purposes.
(E) Anticipated gain on PTS disposition, net of related taxes.
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ADAPTEC, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine months ended December 31, 1998
(UNAUDITED)
Pro Forma
Adjustments
Reflecting
PTS
Historical Disposition As Adjusted
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Net revenues $ 508,424 $84,791 (A) $ 423,633
Cost of revenues 217,544 59,300 (B) 158,244
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Gross profit 290,880 25,491 265,389
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Operating expenses:
Research and development 119,970 29,165 (C) 90,805
Sales, marketing and administrative 134,661 8,058 (D) 126,603
Write-off of acquired in-process technology 65,762 26,380 (E) 39,382
Restructuring and other charges 62,187 -- 62,187
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Total operating expenses 382,580 63,603 318,977
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Loss from operations (91,700) (38,112) (53,588)
Interest income 24,961 -- 24,961
Interest expense (9,106) -- (9,106)
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Loss from operations before benefit
for income taxes (75,845) (38,112) (37,733)
Benefit for income taxes (974) (3,037) (G) 2,063
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Net loss $ (74,871) $(35,075) $ (39,796)
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Net loss per common share:
Basic $ (0.67) $ (0.36)
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Diluted $ (0.67) $ (0.36)
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Shares used in computing net loss per
common share:
Basic 111,274 111,274
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Diluted 111,274 111,274
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The accompanying notes are in integral part of these unaudited pro forma
condensed consolidated financial statements.
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ADAPTEC, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year ended March 31, 1998
(UNAUDITED)
Pro Forma
Adjustments
Reflecting
PTS
Historical Disposition As Adjusted
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Net revenues $1,007,293 $249,786 (A) $ 757,507
Cost of revenues 391,100 135,101 (B) 255,999
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Gross profit 616,193 114,685 501,508
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Operating expenses:
Research and development 169,022 45,929 (C) 123,093
Sales, marketing and administrative 215,624 13,318 (D) 202,306
Write-off of acquired in-process technology -- -- (E) --
Restructuring and other charges 6,715 3,215 (F) 3,500
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Total operating expenses 391,361 62,462 328,899
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Income from operations 224,832 52,223 172,609
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Interest income 32,899 -- 32,899
Interest expense (12,402) -- (12,402)
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20,497 -- 20,497
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Income before income taxes and cumulative
effect of a change in accounting principle 245,329 52,223 193,106
Provision for income taxes 63,452 13,758 49,694
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Income before cumulative effect of a change
in accounting principle 181,877 38,465 143,412
Cumulative effect of a change in accounting principle (9,000) -- (9,000)
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Net income $ 172,877 $ 38,465 $ 134,412
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Net income per common share:
Basic
Income before cumulative effect of a change
in accounting principle $ 1.61 $ 1.27
Cumulative effect of a change in accounting principle (0.08) (0.08)
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Net income $ 1.53 $ 1.19
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Diluted
Income before cumulative effect of a change
in accounting principle $ 1.54 $ 1.21
Cumulative effect of a change in accounting principle (0.08) (0.08)
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Net income $ 1.46 $ 1.13
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Shares used in computing net income per common share:
Basic 113,172 113,172
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Diluted 118,432 118,432
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The accompanying notes are in integral part of these unaudited pro forma
condensed consolidated financial statements.
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ADAPTEC, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
The PTS disposition pro forma adjustments have been made to reflect the
following:
(A) Reduction in revenues due to PTS disposition.
(B) Reduction in cost of revenues due to PTS disposition.
(C) Reduction in research and development for costs associated with PTS
operations.
(D) Reduction in sales, marketing and administrative for costs associated
with PTS operations.
(E) Reduction in write-off of in-process technology related to the Analog
Devices, Inc. acquisition as this business was included in the PTS
operations.
(F) Reduction in restructuring and other charges for costs attributable to
the PTS operations.
(G) The tax effect of pro forma adjustments are at the Company's effective
tax rates in effect during those periods, net of book write-offs for
which no tax benefit is derived.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS (CONT.)
(c) Exhibits:
EXHIBIT
NUMBER DESCRIPTION
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2.1 Asset Purchase Agreement between Texas Instruments, Incorporated
and Adaptec, Inc. dated November 6, 1998.
2.2 Asset Acquisition Agreement among Adaptec, Inc., Adaptec Mfg.(s)
Pte. Ltd. and ST Microelectronics, Inc. dated January 15, 1999.
2.3 Amendment No. 1 to Asset Acquisition Agreement among Adaptec,
Inc., Adaptec Mfg.(s) Pte. Ltd. and ST Microelectronics, Inc.
dated January 15, 1999.
99.1 Press release dated January 18, 1999 with respect
to the sale of the Peripheral Technology Solutions business.
SIGNATURES
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 thereunto duly authorized.
Date: January 15, 1999 ADAPTEC, INC.
By: \s\ANDREW J. BROWN
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Andrew J. Brown, Vice-President
and Chief Financial Officer
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