New Threads Only:  Add to Google Reader or Homepage
New Threads & Replies:  Add to Google Reader or Homepage
Forums are for serious investors only. GuruFocus Forum Rules.

Forum List » Business News and Headlines
SEC Filings, Earing Reports, Press Releases
New Topic Search
Goto Thread: PreviousNext
Goto: Forum ListMessage ListNew TopicSearchLog In
STEC Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 6, 2012 05:06PM

STEC Inc. (STEC) filed Quarterly Report for the period ended 2012-09-30. Stec, Inc. has a market cap of $274.4 million; its shares were traded at around $5.55 with and P/S ratio of 0.9. Stec, Inc. had an annual average earning growth of 19.1% over the past 5 years.



Highlight of Business Operations:

(Benefit) Provision for Income Taxes. We recorded a benefit for income taxes of $646,000 in the third quarter of 2012 and a provision for income taxes of $686,000 in the third quarter of 2011. Our effective tax rate was a 3.2% benefit in the third quarter of 2012 and a 12.4% provision in the third quarter of 2011. Our effective tax rate each quarter will differ from previous quarters due to various factors, such as tax legislation, the results of tax audits, the effectiveness of our tax-planning strategies, discrete items, the effect from changes to the valuation allowance and the mix of domestic and foreign earnings. The change in our effective tax rate for the third quarter of 2012 from the same period in 2011 was due primarily to the effects of a full non-cash valuation allowance against all of our net U.S. deferred tax assets. We operate under an income tax holiday in Malaysia, which is effective through September 29, 2027 subject to meeting certain conditions. The impact of the Malaysia income tax holiday decreased our provision for income taxes by $916,000 and $1.0 million in the third quarter of 2012 and 2011, respectively. The benefit of the income tax holiday on earnings per share was $0.02 and $0.02 in the third quarter of 2012 and 2011, respectively.

Net Revenues. Our revenues decreased 47% from $249.9 million in the first nine months of 2011 to $133.2 million in the first nine months of 2012 due primarily to an $111.4 million, or 46%, decrease in Flash-based product sales, which primarily is a result of a slower than anticipated transition to our next generation products and increased competition in the enterprise market that has decreased our market share with certain customers. Within Flash-based product sales, shipments of our ZeusIOPS® SSDs into the enterprise market decreased 44% from $189.9 million in the first nine months of 2011 to $105.6 million in the first nine months of 2012.

Sales and Marketing. Sales and marketing expenses are comprised primarily of payroll and payroll-related expenses for our domestic and international sales and marketing employees. Sales and marketing expenses increased 18% from $17.6 million in the first nine months of 2011 to $20.8 million in the first nine months of 2012. Sales and marketing expenses as a percentage of revenues increased from 7.0% in the first nine months of 2011 to 15.7% in the first nine months of 2012. The increase in sales and marketing expenses in absolute dollars was due primarily to a $3.2 million increase in payroll and payroll-related costs due to an increase in employee headcount and stock-based compensation and a $995,000 increase in marketing and advertising related costs as part of our efforts to expand our customer base, partially offset by a $1.5 million decrease in sales commissions due to lower revenues during the first nine months of 2012. The increase in sales and marketing expenses as a percentage of revenues was due primarily to the fixed nature of sales and marketing costs such as certain payroll and payroll-related expenses, excluding sales commissions, and the decrease in revenues in the first nine months of 2012 compared to the first nine months of 2011.

Provision for Income Taxes. We recorded a provision for income taxes of $8.9 million and $2.0 million in the first nine months of 2012 and 2011, respectively. Our effective tax rate was 12.4% and 6.5% in the first nine months of 2012 and 2011, respectively. Our effective tax rate each quarter will differ from previous quarters due to various factors, such as tax legislation, the results of tax audits, the effectiveness of our tax-planning strategies, discrete items, the effect from changes to the valuation allowance and the mix of domestic and foreign earnings. The change in our effective tax rate for the nine months ended September 30, 2012 from the same period in 2011 was due primarily to the effects of a full non-cash valuation allowance against all of our net U.S. deferred tax assets that was established in the second quarter of 2012. We operate under an income tax holiday in Malaysia, which is effective through September 29, 2027 subject to meeting certain conditions. The impact of the Malaysia income tax holiday decreased our provision for income taxes by $3.0 million and $5.2 million in the first nine months of 2012 and 2011, respectively. The benefit of the income tax holiday on earnings per share was $0.07 and $0.10 in the first nine months of 2012 and 2011, respectively.

Net cash provided by operating activities was $12.1 million in the first nine months of 2012 and resulted primarily from a $17.3 million decrease in account receivables, net of reserves, a $14.1 million decrease in inventory, a $6.6 million increase in accrued and other liabilities, a $5.2 million increase in accounts payable, a $15.2 million settlement charge, $12.0 million of non-cash stock-based compensation expense, $11.3 million of non-cash depreciation and amortization, and a $10.6 million non-cash decrease in deferred income taxes, partially offset by a net loss of $80.1 million. Inventory decreased due primarily to lower inventory purchases in 2012, compared to 2011. 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, 2011, and 2012. Accounts receivable decreased due primarily to a decrease in revenues in the third quarter of 2012, compared to the fourth quarter of 2011. Deferred income taxes decreased due primarily to the establishment of a non-cash valuation allowance of $32.3 million against all of our net U.S. deferred tax assets during nine months ended September 30, 2012. During the first nine months of 2012, we recorded approximately $21.8 million of settlement costs and legal fees in excess of our insurance deductible under our director and officer insurance coverage and our insurance carriers paid $2.9 million of claims for legal fees incurred by us. 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.

Read the The complete Report



Stocks Discussed: STEC,
Rate this post:




Sorry, only registered users may post in this forum.

Please Login if you have an account or Create a Free Account if you don't




Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial