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STEC Inc. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: February 28, 2012 05:19PM

STEC Inc. (STEC) filed Annual Report for the period ended 2011-12-31. Stec Inc has a market cap of $442.2 million; its shares were traded at around $9.32 with a P/E ratio of 11.3 and P/S ratio of 1.6. Stec Inc had an annual average earning growth of 33.5% over the past 5 years.



Highlight of Business Operations:

Flash-based product revenue was $294.6 million, $237.4 million and $308.2 million in 2011, 2010 and 2009, respectively. The increase in Flash-based product revenues from 2010 to 2011 was due primarily to a $91.4 million increase in Flash-based product sales to two customers, partially offset by a $25.0 million decrease in Flash-based product sales to one customer. The decrease in Flash-based product revenues from 2009 to 2010 was due primarily to a $69.9 million decrease in Flash-based product sales to two customers. Sales of Flash-based products represented 96%, 85% and 87% of our total revenues in 2011, 2010 and 2009, respectively.

We also offer both monolithic DRAM modules and DRAM modules based on our proprietary stacking technology. We derived $10.2 million, $42.5 million, and $38.8 million in revenues from the sale of DRAM products during 2011, 2010, and 2009, respectively. Sales of DRAM products represented 3%, 15%, and 11% of our total revenues in 2011, 2010, and 2009, respectively. The decrease in sales of DRAM products from 2010 to 2011 was due primarily to our focus on growing SSD-based product sales which resulted in a change in the composition of our product mix in 2011, reflecting a greater percentage of SSD revenues and a decrease in DRAM revenues. The increase in sales of DRAM products from 2009 to 2010 was due primarily to an increase in product sales to a single customer. Since our revenue growth initiatives are focused on sales of our SSDs and sales of our DRAM products are made to a limited number of customers, we expect this variability to continue in the future.

Net cash provided by operating activities was $71.6 million in 2011 and resulted primarily from a $30.3 million decrease in inventory, net income of $25.1, a $17.4 million decrease in accounts receivable, $13.5 million of stock based compensation expense, and non-cash depreciation and amortization of $13.1 million, partially offset by a $19.6 million decrease in account payable. Inventory and accounts payable decreased due primarily to lower inventory purchases in 2011, compared to 2010. In 2010, we had increased purchases of raw materials under non-cancelable inventory purchase commitments in order to guarantee the availability of components for anticipated sales demand in 2010 and 2011. Accounts receivable, net of reserves, decreased due primarily to a decrease in revenues in the fourth quarter of 2011, compared to the fourth quarter of 2010. During 2011, we incurred approximately $4.4 million of legal fees in excess of our insurance deductible under our director and officer insurance coverage. During 2011, our insurance carriers paid $3.5 million of claims for legal fees incurred by us. Accordingly, we have recognized a liability, with a corresponding receivable that offsets legal expense, until the remainder of our claims are paid by our insurance carriers, subject to their reservation of rights.

amortization of $12.3 million, and $9.2 million of stock-based compensation expense, partially offset by a $46.2 million increase in inventory, a $3.6 million decrease in accounts payable, a $2.7 million benefit from non-cash deferred income taxes, and $2.1 million of excess tax benefits from share-based payment arrangements. Accounts receivable, net of reserves, decreased due primarily to a decrease in sales at the end of the fourth quarter of 2010, compared to sales at the end of the fourth quarter of 2009. Inventory increased due primarily to an increase in purchases of raw materials under non-cancelable inventory purchase commitments and a decrease in our inventory turns in the fourth quarter of 2010, compared to the fourth quarter of 2009 as we prepared to meet anticipated sales demand in 2010 and 2011. Accounts payable decreased as a result of lower inventory purchases in the fourth quarter of 2010, compared to the fourth quarter of 2009. During 2010, we incurred approximately $4.1 million of legal fees in excess of our insurance deductible under our director and officer insurance coverage. During 2010, our insurance carriers paid $3.7 million of claims for legal fees incurred by us. Accordingly, we have recognized a liability, with a corresponding receivable that offsets legal expense, until the remainder of our claims are paid by our insurance carriers.

Net cash provided by operating activities was $99.8 million in 2009 and resulted primarily from net income of $72.6 million, a $21.2 million decrease in inventory, a $14.5 million increase in accounts payable, a $16.0 million increase in income taxes, non-cash depreciation and amortization of $12.2 million, and $5.1 million of stock-based compensation expense, partially offset by a $34.9 million increase in accounts receivable, net of reserves and $9.8 million of excess tax benefits from share-based payment arrangements. Inventory decreased due primarily to an increase in sales in 2009 compared to 2008. In 2008, we had increased our purchases of Flash inventory in anticipation of increased production volumes for SSD products based on customer forecast and orders related to new product launches set for 2009. Accounts payable increased due to the timing of payments and as a result of higher inventory purchases in the three months ended December 31, 2009 compared to the three months ended December 31, 2008. Accounts receivable, net of reserves, increased due primarily to an increase in sales in the fourth quarter of 2009, compared to the fourth quarter of 2008.

Read the The complete Report



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