STEC Announces Fourth Quarter and Full-Year 2012 Results

STEC Announces Fourth Quarter and Full-Year 2012 Results

SANTA ANA, Calif., March 14, 2013 (GLOBE NEWSWIRE) -- STEC, Inc.
(Nasdaq:STEC), announced today the Company's financial results for the fourth
quarter and full-year ended December 31, 2012.

Revenue for the fourth quarter of 2012 was $35.1 million, a decrease of 39.6%
from $58.1 million for the fourth quarter of 2011 and a decrease of 16.6% from
$42.1 million for the third quarter of 2012.

GAAP gross profit margin was 32.2% for the fourth quarter of 2012, compared to
41.1% for the fourth quarter of 2011 and 37.0% for the third quarter of 2012.
GAAP diluted loss per share was $0.50 for the fourth quarter of 2012, compared
to $0.08 for the fourth quarter of 2011 and $0.42 for the third quarter of
2012.

Non-GAAP gross profit margin was 32.8% for the fourth quarter of 2012,
compared to 41.5% for the fourth quarter of 2011 and 37.5% for the third
quarter of 2012. Non-GAAP diluted loss per share was $0.35 for the fourth
quarter of 2012, compared to $0.02 for the fourth quarter of 2011 and $0.24
for the third quarter of 2012.

Revenue for full-year 2012 was $168.3 million, a decrease of 45.4% from $308.1
million for full-year 2011. GAAP gross profit margin was 35.6% for full-year
2012, compared to 43.6% for full-year 2011. GAAP full-year 2012 diluted loss
per share was $2.22, compared to full-year 2011 diluted earnings per share of
$0.50. Non-GAAP gross profit margin was 36.1% for full-year 2012, compared to
43.8% for full-year 2011. Non-GAAP diluted loss per share was $1.03 for
full-year 2012, compared to non-GAAP diluted earnings per share of $0.70 for
full-year 2011.

A reconciliation of GAAP to non-GAAP results is provided in the tables
included in this release.

Business Outlook

"Although we experienced another very challenging quarter, I am very pleased
with the headway that we made towards the successful implementation of our
business strategy that is focused on diversifying our customer base," said
Mark Moshayedi, STEC's Chief Executive Officer and President. "The strategic
goal is to attain a solid mix of channel distributors and Enterprise customers
along with our OEM customers.

"While the transition from being an OEM-driven company is taking place over
time, evidence of our progress includes achieving our first
greater-than-10%-of-revenue non-OEM customer, in the second half of 2012. In
2012 and continuing in 2013, we've been executing on our new strategic
marketing initiatives and have recruited seasoned personnel with significant
Enterprise expertise. I believe that we are now well-positioned to target our
key vertical markets. As an organization, we are evolving into a storage
systems and solutions provider and away from simply providing components.

"These transitions are never easy, but we are confident in our people and core
technologies. The combination of storage, SSD, and applications expertise that
we are bringing together will not only distinguish ourselves in the
marketplace, but we expect will also begin to pay off as we continue to
execute our strategy in 2013 and beyond."

Guidance

STEC's current expectation for the first quarter of 2013 is as follows:

  *Revenue to range from $21 million to $23 million.
  *Non-GAAP diluted loss per share to range from $0.40 to $0.42.

STEC's projected non-GAAP loss per share results exclude employee stock
compensation expense and other items that the Company does not consider
indicative of its underlying business performance.

Conference Call

STEC will hold an open conference call to discuss results for the fourth
quarter and full-year 2012. The call will take place today at 1:30 p.m.,
Pacific/ 4:30 p.m., Eastern. The call-in numbers for the conference are (877)
645-6380 (United States and Canada) and (914) 495-8562 (International).

Webcast

This call will be webcast. The webcast can be accessed by clicking on the blue
"Investors" tab at the top of the home page at www.stec-inc.com. Then click on
the "Audio Presentations" button.

Replay

The webcast will also be archived and available for replay beginning
approximately two hours after the live call concludes.

About STEC, Inc.

STEC, Inc. is a leading provider of enterprise-class, solid-state storage
solutions designed for the ever-growing performance, reliability and endurance
requirements of today's advanced data centers. The industry's first company to
deploy solid-state drives (SSDs) into large-scale enterprise environments,
STEC offers the industry's widest range of solid-state storage solutions,
which protect critical information for major business and government
organizations worldwide. Headquartered in Santa Ana, California, STEC also
serves the embedded and military/aerospace markets with SSDs for industrial
and rugged environments. For more information, visit www.stec-inc.com.

For information about STEC and to subscribe to the Company's "Email Alerts"
service, please visit STEC's web site at www.stec-inc.com, click on the blue
"Investors" tab at the top of the home page and then click "Email Alerts."

The STEC, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=1079

STEC and the STEC logo are either registered trademarks or trademarks of STEC,
Inc. in the United States and certain other countries.All other trademarks or
brand names referred to herein are the property of their respective owners.

Use of Non-GAAP Financial Information. To supplement the consolidated
financial results prepared in accordance with U.S. Generally Accepted
Accounting Principles ("GAAP"), STEC uses non-GAAP financial measures
(non-GAAP gross profit, non-GAAP gross profit percentage, non-GAAP operating
expenses, non-GAAP operating (loss) income, non-GAAP operating margin
percentage, non-GAAP other income (expense), non-GAAP (loss) income and
non-GAAP diluted (loss) earnings per share) that exclude employee stock
compensation expense, employee severance, securities litigation related costs,
SEC investigation and litigation costs, intellectual property litigation
costs, litigation loss contingency and deferred tax asset valuation allowance.
Management excludes these items because it believes that the non-GAAP measures
enhance an investor's overall understanding of STEC's financial performance
and future prospects by being more reflective of the Company's core, recurring
operational activities and to be more comparable with the results of the
Company over various periods. Management uses non-GAAP financial measures
internally for strategic decision making, forecasting future results and
evaluating current performance. Guidance is provided only on a non-GAAP basis
due to the inherent difficulty of forecasting the timing or amount of such
items. Difficulties in forecasting the non-GAAP items include the timing of
issuing employee stock compensation, which could impact the valuation and
related expense, and the timing of employee severance payments. These items
could be materially significant to the Company's GAAP results in any period.
By disclosing non-GAAP financial measures, management intends to provide
investors with a more meaningful, consistent comparison of the Company's core
operating results and trends for the periods presented. Non-GAAP financial
measures are not prepared in accordance with GAAP; therefore, the information
is not necessarily comparable to other companies' financial information and
should be considered as a supplement to, not a substitute for, or superior to,
the corresponding measures calculated in accordance with GAAP. A complete
reconciliation between GAAP and non-GAAP information referred to in this
release is provided in tables included in this release. Certain amounts
reported in prior releases may have been reclassified to conform to the
current quarter's non-GAAP presentation.

Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995 This release contains forward-looking statements that involve risks and
uncertainties, including, but not limited to, statements concerning the
rapidly evolving enterprise storage and server markets; growing acceptance,
adoption and qualification of SSDs within the enterprise storage and server
markets; the launch, marketing, qualification and production of the Company's
product and solution initiatives; the qualification and sale of the Company's
products and solutions into emerging SSD system vendors, enterprises and
non-traditional end-user customers, along with OEM customers; diversifying the
Company's customer base; leveraging the Company's sales and marketing and
channel-support infrastructure to cater to enterprises directly and develop a
new vertical market strategy; recruiting seasoned personnel; the Company's key
product line initiatives and development; the capabilities, performance, cost
advantages, and benefits of Company's products and solutions, and developing
technologies; anticipated increase in sales of the Company's products and
solutions; the future financial performance and outlook of the Company; and
expected first quarter of 2013 revenue and loss per share. Such
forward-looking statements are based on current expectations and involve
inherent risks and uncertainties, including factors that could delay, divert
or change any of them, and could cause actual outcomes and results to differ
materially from current expectations. Although the Company believes that the
forward-looking statements contained in this release are reasonable, it can
give no assurance that its expectations will be fulfilled. Additional
important factors which could cause actual results to differ materially from
those expressed or implied in the forward-looking statements are detailed in
filings with the Securities and Exchange Commission made from time to time by
the Company, including its Annual Report on Form 10-K, its Quarterly Reports
on Form 10-Q, and its Current Reports on Form 8-K. Special attention is
directed to the portions of those documents entitled "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The information contained in this press release is a statement of
the Company's present intention, belief or expectation. The Company may change
its intention, belief, or expectation, at any time and without notice, based
upon any changes in such factors, in the Company's assumptions or otherwise.
Except as required by law, the Company undertakes no obligation to release
publicly any revisions to any forward-looking statements to reflect events or
circumstances occurring after the date hereof or to reflect the occurrence of
unanticipated events.

                                                           
STEC, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
                                                           
                                          December 31, 2012 December31, 2011
ASSETS:                                                     
Current Assets:                                             
Cash and cash equivalents                  $158,232        $180,853
Accounts receivable, net of allowances of
$6,248 at December 31, 2012 and $6,117 at  13,515           27,368
December31, 2011
Inventory                                  41,760           61,736
Insurance claim receivable                 20,563           1,583
Other current assets                       10,212           8,865
Total current assets                       244,282          280,405
                                                           
Leasehold interest in land                 2,503            2,549
Property, plant and equipment, net         30,343           34,287
Goodwill                                   1,682            1,682
Long-term intangible assets, net           5,144            6,185
Deferred income taxes, net                 --              9,100
Other long-term assets                     5,817            818
Total assets                               $289,771        $335,026
                                                           
LIABILITIES AND SHAREHOLDERS' EQUITY:                       
Current Liabilities:                                        
Accounts payable                           $6,818          $6,837
Accrued and other liabilities              51,586           12,753
Total current liabilities                  58,404           19,590
Other long-term liabilities                6,185            5,083
Commitments and contingencies              --              --
Shareholders' Equity:                                       
Preferred stock, $0.001 par value, 20,000
shares authorized, no shares issued and   --              --
outstanding
Common stock, $0.001 par value, 100,000
shares authorized, 46,805 shares issued
and outstanding as of December 31, 2012    47               46
and 46,110 shares issued and outstanding
as of December31, 2011
Additional paid-in capital                 150,263          132,211
Retained earnings                          74,872           178,096
Total shareholders' equity                 225,182          310,353
Total liabilities and shareholders' equity $289,771        $335,026
                                                           

                                                                
STEC, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands, except per share amounts)
                           
                           Quarter Ended December 31, Year Ended December 31,
                           2012          2011         2012         2011
Net revenues                $35,135     $58,135    $168,308   $308,059
Cost of revenues            23,831       34,260      108,469     173,852
Gross profit                11,304       23,875      59,839      134,207
                                                                
Sales and marketing         7,346        6,236       28,188      23,790
General and administrative  11,816       7,917       47,096      30,563
Research and development    16,132       15,148      66,617      54,656
Total operating expenses    35,294       29,301      141,901     109,009
                                                                
Operating (loss) income     (23,990)     (5,426)     (82,062)    25,198
Other (expense) income, net 821          58          (12,305)    107
(Loss) income from
operations before income    (23,169)     (5,368)     (94,367)    25,305
taxes
Provision for income taxes  14           1,782       8,857       205
Net (loss) income          (23,155)     (3,586)     (103,224)   25,100
Comprehensive (loss) income $(23,155)   $(3,586)   $(103,224) $25,100
                                                                
Net (loss) income per                                            
share:
Basic                       $(0.50)     $(0.08)    $(2.22)    $0.50
Diluted                     $(0.50)     $(0.08)    $(2.22)    $0.50
                                                                
Shares used in per share                                         
computation:
Basic                       46,763       46,106      46,472      49,847
Diluted                     46,763       46,106      46,472      50,652
                                                                

                                  STEC, INC.

                           Non-GAAP Reconciliations

The non-GAAP financial measures included in the following tables are non-GAAP
gross profit, non-GAAP gross profit percentage, non-GAAP operating expenses,
non-GAAP operating (loss) income, non-GAAP other (expense) income, non-GAAP
operating margin percentage, non-GAAP (loss) income and non-GAAP diluted
(loss) earnings per share, which adjust for the following items: (a) employee
stock compensation expense, (b) employee severance, (c) securities litigation
related costs, (d) SEC investigation and litigation costs, (e) intellectual
property litigation costs, (f) litigation loss contingency and (g) deferred
tax asset valuation allowance. Management believes these non-GAAP financial
measures enhance an investor's overall understanding of the Company's
financial performance and future prospects by being more reflective of the
Company's core, recurring operational activities and are more comparable with
the results of the Company over various periods. Management uses non-GAAP
financial measures internally for strategic decision making, forecasting
future results and evaluating current performance. Non-GAAP financial measures
are not prepared in accordance with GAAP; therefore, the information is not
necessarily comparable to other companies' financial information and should be
considered as a supplement to, not a substitute for, or superior to, the
corresponding measures calculated in accordance with GAAP.

Details of the items excluded from GAAP financial results in calculating
non-GAAP financial measures and explanatory footnotes are as follows:

  a) Employee stock compensation costs incurred in connection with Accounting
  Standards Codification ("ASC") 718, "Compensation -- Stock Compensation,"
  are comprised on non-cash expenses related to equity compensation provided
  to employees, officers and directors. Management believes non-cash stock
  compensation costs should be excluded when evaluating core operations and
  current performance.

  b) Employee severance relates to costs incurred in conjunction with the
  termination of certain employees. As an accommodation, the Company provides
  compensation in the form of severance to certain employees subject to
  termination without cause. Management believes that severance costs should
  be excluded when evaluating core operations and current performance.

  c) In the fourth quarter of 2009, first quarter of 2010 and fourth quarter
  of 2012, certain securities class action and shareholder derivative lawsuits
  were filed against the Company and certain officers and directors of the
  Company. These costs represent the legal fees related to these class action
  securities and shareholder derivative actions that have not been covered by
  the Company's Directors and Officers insurance policies and include
  indemnifiable legal costs advanced on behalf of these officers and
  directors. Management believes these legal fees should be excluded when
  evaluating core operations and current performance.

  d) The SEC initiated in the fourth quarter of 2009 an investigation of the
  Company and certain officers in connection with trading in the Company's
  securities, which on July 19, 2012 resulted in the SEC filing a civil action
  against the Company's Founder, Manouch Moshayedi. The SEC also notified the
  Company that it would not bring an enforcement action against the Company or
  any of its other officers. These costs represent the legal fees related to
  this investigation and related civil action that have not been covered by
  the Company's Directors and Officers insurance policies and include
  indemnifiable legal costs advanced on behalf of these officers. Management
  believes these legal fees should be excluded when evaluating core operations
  and current performance.

  e) On September 7, 2011, Solid State Storage Solutions, Inc. filed a patent
  infringement suit against the Company and several other defendants.
  According to the complaint, the patents relate to solid-state drives
  employing a controller chip and a plurality of NAND flash devices. On
  December 19, 2012, the Company resolved this matter pursuant to a
  confidential agreement that releases the Company from past claims and
  precludes the plaintiff from again claiming that the Company's products
  infringe their patents. Management believes that legal fees and litigation
  settlement costs incurred in conjunction with this lawsuit should be
  excluded when evaluating core operations and current performance.

  f) In connection with the legal matters described in c) above, the Company
  has accrued an estimated loss contingency.Management believes that the
  litigation loss contingency should be excluded when evaluating core
  operations and current performance.

  g) In accordance with ASC Topic 740, Income Taxes, the Company determined
  based upon an evaluation of all available objectively verifiable evidence,
  including but not limited to the Company's U.S. operations falling into a
  cumulative three year loss, that a non-cash valuation allowance should be
  established against its U.S. deferred tax assets which are comprised
  primarily of accumulated and unused U.S. tax credits and 2012 net operating
  losses. The establishment of a full non-cash valuation allowance on the
  Company's U.S. deferred tax assets does not have any impact on its cash, nor
  does such an allowance preclude the Company from utilizing its tax losses,
  tax credits or other deferred tax assets in future periods.Management
  believes that the non-cash valuation allowance against U.S. deferred tax
  assets benefitted in prior periods should be excluded when evaluating core
  operations and current performance.

  h) The amount represents the estimated income tax effect of the non-GAAP
  adjustments.Starting in the third quarter of 2011, the Company calculated
  the tax effect of non-GAAP adjustments by applying an applicable estimated
  jurisdictional tax rate to each specific non-GAAP item.Prior to the third
  quarter of 2011, the Company utilized the consolidated effective tax rate to
  estimate the tax effect of non-GAAP adjustments.

                                                                
STEC, INC.
Schedule Reconciling GAAP (Loss) Income to Non-GAAP (Loss) Income
($ in thousands, except per share amounts)
(unaudited)
                   
                   For the Quarters Ended              For the Years Ended
                   December 31, December   September   December 31,
                                 31,        30,
                   2012         2011       2012        2012         2011
GAAP net (loss)     $(23,155)  $(3,586) $(19,783) $(103,224) $25,100
income
                                                                
The GAAP amounts
have been adjusted
to exclude the                                                   
following items
(non-GAAP
adjustments):
                                                                
Excluded from cost                                               
of revenues:
Employee stock      $223       $232     $236      $924       $623
compensation (a)
Employee severance  --          --        --         52          --
(b)
Total excluded from 223         232       236        976         623
cost of sales
                                                                
Excluded from                                                    
operating expenses:
Employee stock      3,468       3,596     3,892      14,730      12,886
compensation (a)
Employee severance  430         --        49         883         --
(b)
Securities
litigation related  8           191       2,839      6,539       191
costs (c)
SEC investigation
and litigation      1,102       --        639        2,604       --
costs (d)
IP litigation costs 1,831       132       616        2,963       132
(e)
Total excluded from 6,839       3,919     8,035      27,719      13,209
operating expenses
                                                                
Excluded from other
(expense) income,                                                
net:
Litigation loss     --          --        188        15,188      --
contingency (f)
                   --          --        188        15,188      --
                                                                
Total excluded from
cost of revenues,
operating expenses  7,062       4,151     8,459      43,883      13,832
and other (expense)
income before
income taxes
                                                                
Income tax effect
on non-GAAP         (51)        (1,428)   (70)       (1,702)     (3,716)
adjustments (h)
Total excluded from
cost of revenues
and operating       7,011       2,723     8,389      42,181      10,116
expenses after
taxes
Excluded from
provision for                                                    
income taxes:
Deferred tax asset
valuation allowance --          --        --         13,233      --
(g)
Total non-GAAP
adjustments after   7,011       2,723     8,389      55,414      10,116
income taxes
                                                                
Non-GAAP (loss)     $(16,144)  $(863)   $(11,394) $ (47,810)  $35,216
income
                                                                
GAAP diluted (loss) $(0.50)    $(0.08)  $(0.42)   $(2.22)    $0.50
earnings per share
Impact of non-GAAP
adjustments on      0.15        0.06      0.18       1.19        0.20
diluted (loss)
earnings per share
Non-GAAP diluted
(loss) earnings per $(0.35)    $(0.02)  $(0.24)   $(1.03)    $0.70
share
                                                                
(a) - (h)See
corresponding                                                    
footnotes above.
                                                                

                                                               
STEC, INC.
Selected Non-GAAP Financial Information
($ in thousands)
(unaudited)
                  
                  For the Quarters Ended              For the Years Ended,
                  December 31, December   September   December 31, December
                                31,        30,                      31,
                  2012         2011       2012        2012         2011
                                                               
GAAP gross profit  $11,304    $23,875  $15,554   $59,839    $134,207
Employee stock     223         232       236        924         623
compensation (a)
Employee severance --          --        --         52          --
(b)
Non-GAAP gross     $11,527    $24,107  $15,790   $60,815    $134,830
profit
                                                               
GAAP gross profit  32.2%        41.1%      37.0%       35.6%        43.6%
%
Effect of
reconciling item   0.6%         0.4%       0.5%        0.5%         0.2%
on gross profit %
Non-GAAP gross     32.8%        41.5%      37.5%       36.1%        43.8%
profit %
                                                               
GAAP operating     $35,294    $29,301  $36,968   $141,901   $109,009
expenses
Employee stock     (3,468)     (3,596)   (3,892)    (14,730)    (12,886)
compensation (a)
Employee severance (430)       --        (49)       (883)       --
(b)
Securities
litigation related (8)         (191)     (2,839)    (6,539)     (191)
costs (c)
SEC investigation
and litigation     (1,102)     --        (639)      (2,604)     --
costs (d)
IP litigation      (1,831)     (132)     (616)      (2,963)     (132)
costs (e)
Non-GAAP operating $28,455    $25,382  $28,933   $114,182   $95,800
expenses
                                                               
GAAP operating     $(23,990)  $(5,426) $(21,414) $(82,062)  $25,198
(loss) income
Employee stock     3,691       3,828     4,128      15,654      13,509
compensation (a)
Employee severance 430         --        49         935         --
(b)
Securities
litigation related 8           191       2,839      6,539       191
costs (c)
SEC investigation
and litigation     1,102       --        639        2,604       --
costs (d)
IP litigation      1,831       132       616        2,963       132
costs (e)
Non-GAAP operating $(16,928)  $(1,275) $(13,143) $(53,367)  $39,030
(loss) income
                                                               
GAAP operating     -68.3%       -9.3%      -50.9%      -48.8%       8.2%
margin %
Effect of
reconciling items  20.1%        7.1%       19.6%       17.1%        4.5%
on operating
margin %
Non-GAAP operating -48.2%       -2.2%      -31.3%      -31.7%       12.7%
margin %
                                                               
GAAP other income  $821       $58      $985      $(12,305)  $107
(expense), net
Litigation loss    --          --        188        15,188      --
contingency (f)
Non-GAAP other     $821       $58      $1,173    $2,883     $107
income
                                                               
                                                               
(a) - (f) Refer to
the corresponding                                               
footnotes above.
                                                               

CONTACT: STEC, Inc.
         Mitch Gellman, Vice President of Investor Relations
         (949) 260-8328
         ir@stec-inc.com

STEC, Inc.
 
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