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STEC Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 10, 2011 05:22PM

STEC Inc. (STEC) filed Quarterly Report for the period ended 2011-03-31. Stec Inc. has a market cap of $1.02 billion; its shares were traded at around $19.98 with a P/E ratio of 37.7 and P/S ratio of 3.7. Stec Inc. had an annual average earning growth of 33.5% over the past 5 years.



Highlight of Business Operations:

Net Revenues. Our revenues increased 145% from $38.8 million in the first quarter of 2010 to $94.9 million in the first quarter of 2011 due primarily to a 277% increase in Flash-based product sales, partially offset by a 72% decrease in sales of DRAM products. Within Flash-based product sales, shipments of our Zeus IOPS SSDs into the enterprise-storage market increased 567% from $10.4 million in the first quarter of 2010 to $69.4 million in the first quarter of 2011. The quarterly increase in Flash-based product revenues was due primarily to a $60.3 million increase in Flash-based product sales to three customers. An inventory carryover in early 2010 related to sales made to our largest customer during the second half of 2009 negatively impacted our Flash-based product revenues in the first quarter of 2010. The quarterly decrease in sales of DRAM products in absolute dollars was due primarily to a decrease in product sales to a single customer.

General and Administrative. General and administrative expenses are comprised primarily of personnel costs for our executive and administrative employees, professional fees and facilities overhead. General and administrative expenses increased 7% from $6.9 million in the first quarter of 2010 to $7.4 million in the first quarter of 2011. General and administrative expenses as a percentage of revenues decreased from 17.9% in the first quarter of 2010 to 7.8% in the first quarter of 2011. The increase in general and administrative expenses in absolute dollars was due primarily to a $750,000 increase in payroll and payroll-related costs due to an increase in employee headcount and stock-based compensation, partially offset by a $450,000 decrease in legal fees. The decrease in general and administrative expenses as a percentage of

Provision (Benefit) for Income Taxes. We recorded a provision for income taxes of $1.0 million and a benefit for income taxes of $1.9 million in the first quarter of 2011 and 2010, respectively. The provision for income taxes as a percentage of income before provision for income taxes decreased from 26.4% in the first quarter of 2010 to 6.6% in the first quarter of 2011 due primarily to a change in the revenue composition, which resulted in increased international sales and earnings in jurisdictions outside of the U.S. that were taxed at rates lower than U.S. federal statutory rates. The decrease was also due to federal research and development tax credits of $190,000 from which we received benefits in the first quarter of 2011 but did not receive benefits in the first quarter of 2010 because the federal government had not yet extended the tax credits to be effective for 2010 as of March 31, 2010. In December 2010, the federal government retroactively extended the research and development tax credits through December 31, 2011. We operate under a tax holiday in Malaysia, which is effective through September 30, 2022 subject to meeting certain conditions. The impact of the Malaysia tax holiday decreased our provision for income taxes by $2.3 million in the first quarter of 2011 and increased our benefit for income taxes by $530,000 in the first quarter of 2010. The benefit of the tax holiday on earnings per share was $0.04 and $0.01 for the first quarter of 2011 and 2010, respectively.

Net income (loss). Net income was $14.1 million and net loss was $5.4 million in the first quarter of 2011 and 2010, respectively. The quarterly increase in net income was due primarily to a $27.1 million increase in gross profit, partially offset by a $4.8 million increase in operating expenses and a $2.9 million increase in the provision for income taxes.

As of March 31, 2011, we had working capital of $292.5 million, including $190.8 million of cash and cash equivalents compared to working capital of $272.6 million, including $170.5 million of cash and cash equivalents as of December 31, 2010 and working capital of $219.7 million, including $158.5 million of cash, cash equivalents and short-term investments as of March 31, 2010. Current assets were 12.4 times current liabilities as of March 31, 2011, compared to 7.9 times current liabilities as of December 31, 2010, and 9.6 times current liabilities as of March 31, 2010.

Net cash provided by operating activities was $18.9 million in the first quarter of 2011 and resulted primarily from net income of $14.1 million, a $7.3 million decrease in inventory, a $7.0 million decrease in accounts receivable, net of reserves, non-cash depreciation and amortization of $3.0 million, and $2.8 million of stock-based compensation expense, partially offset by a $15.1 million decrease in accounts payable. Inventory decreased due primarily to lower inventory purchases in the first quarter of 2011, compared to the fourth quarter of 2010. In 2010, we had increased purchases of raw materials under non-cancelable inventory purchase commitments in preparation of anticipated demand in 2011. Accounts receivable, net of

Read the The complete Report



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