SGI Somnigroup International Inc

SGI Reports Fourth Quarter and Fiscal Year 2005 Results MOUNTAIN VIEW, Calif., July 28 /PRNewswire-FirstCall/ -- Silicon Graphics (NYSE:SGI) today announced results for its fourth fiscal quarter and fiscal year ended June 24, 2005. Revenue for the fourth quarter was $172 million, in line with the preliminary results announced July 7, 2005. Gross margin was 36.7% compared with 34.5% in the third quarter. SGI's fourth-quarter operating loss was $16 million, compared with an operating loss of $45 million in the third quarter. Net income, including the net gain from the sale of a portion of the Company's interest in SGI Japan, was $8 million or $0.02 per share on a fully diluted basis, compared with a net loss of $45 million or $0.17 per share in the third quarter. Revenue for fiscal 2005 was $730 million. The net loss was $76 million or $0.29 per share for the fiscal year. "Our fourth quarter showed sequential revenue and bookings growth, and the lowest operating expenses for the fiscal year," said Chairman and CEO Bob Bishop. "Nevertheless, we need to accelerate the turnaround and strengthen our financial position going forward." SGI has retained the turnaround firm of Alix Partners LLC to advise it in further reducing expenses, increasing revenue and improving liquidity. SGI expects to announce significant restructuring actions later this quarter, and is actively pursuing financing alternatives, including amending or replacing its asset-based credit facility to increase borrowing availability. As previously disclosed, SGI did not meet its EBITDA covenant for the fourth quarter under its asset-based credit agreement. Covenant waivers have been obtained on several prior occasions. As of June 24, 2005, unrestricted cash, cash equivalents and marketable investments were $64 million compared with $84 million at March 25, 2005. SGI will conduct a conference call today at 2 p.m. PT to provide additional details. The webcast is available at http://www.sgi.com/company_info/investors/events.html . The dial-in number is (800) 817-2743 or (913) 981-4915 for participants outside North America. An audio replay of this call will be available after 5 p.m. PT today at (888) 203-1112 (passcode: 7788439) or (719) 457-0820 (passcode: 7788439) and will be available for seven days. All links to the archived Webcast and audio replay are available through SGI's Web site at http://www.sgi.com/company_info/investors/. Forward-Looking Statements This news release contains certain forward-looking statements, including statements relating to our financial and operating results for the quarter ended June 24, 2005. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may vary materially from the expected results described in this release. Factors that could cause actual results to differ materially from those described in this release include the process of calculating, reviewing and analyzing, and completing the audit with respect to, the final financial results for the quarter and the fiscal year; the failure to achieve expected revenue and gross margin levels; failure to manage costs and generate improved operating results; failure to maintain adequate cash resources for the operation of the business; the failure to receive waivers under the Company's asset-based financing arrangements or to secure additional financing, and the other risks and uncertainties detailed from time to time in the Company's SEC reports, including the report on Form 10-Q for the quarter ended March 25, 2005. Silicon Graphics is under no obligation to, and expressly disclaims any obligation to, further update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. SILICON GRAPHICS | The Source of Innovation and Discovery(TM) SGI, also known as Silicon Graphics, Inc., is the world's leader in high- performance computing, visualization and storage. SGI's vision is to provide technology that enables the most significant scientific and creative breakthroughs of the 21st century. Whether it's sharing images to aid in brain surgery, finding oil more efficiently, studying global climate or enabling the transition from analog to digital broadcasting, SGI is dedicated to addressing the next class of challenges for scientific, engineering and creative users. With offices worldwide, the company is headquartered in Mountain View, Calif., and can be found on the Web at http://www.sgi.com/. NOTE: Silicon Graphics, SGI, the SGI cube and the SGI logo are registered trademarks and The Source of Innovation and Discovery is a trademark of Silicon Graphics, Inc., in the United States and/or other countries worldwide. All other trademarks mentioned herein are the property of their respective owners. MEDIA CONTACT Caroline Japic 650.933.7210 Investor Relations Beth Howe 650.933.8279 SGI PR HOTLINE 650.933.7777 SGI PR FACSIMILE 650.933.0283 SILICON GRAPHICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share amounts) Three Months Ended Twelve Months Ended June 24, June 25, June 24, June 25, 2005 2004 (1) 2005 2004 (1) (unaudited) (audited) (unaudited) (*) Product and other revenue $102,943 $109,783 $391,322 $432,718 Product revenue from related party (2) 4,457 14,629 44,658 66,426 Service revenue 64,816 83,283 293,985 342,858 Total revenue 172,216 207,695 729,965 842,002 Costs and expenses: Cost of product and other revenue 70,871 76,360 285,428 292,628 Cost of service revenue 38,087 47,922 179,648 200,217 Research and development 20,234 23,283 92,705 108,763 Selling, general and administrative 57,956 65,656 244,568 257,742 Other operating expense (3) 1,424 1,959 24,083 47,825 Total costs and expenses 188,572 215,180 826,432 907,175 Operating loss (16,356) (7,485) (96,467) (65,173) Interest expense (3,354) (3,331) (16,052) (19,234) Interest and other income (expense), net 26,562 (4) 479 28,773 (4) (25,366) (5) Income (loss) from continuing operations before income taxes 6,852 (10,337) (83,746) (109,773) Income tax benefit (995) (2,778) (8,014) (9,527) Net income (loss) from continuing operations 7,847 (7,559) (75,732) (100,246) Discontinued operations: Net income (loss) from discontinued operations, net of tax -- 676 -- 3,975 Gain (loss) on disposition of discontinued operations, net of tax -- 50,501 (276) 50,501 Net income (loss) $7,847 $43,618 $(76,008) $(45,770) Net income (loss) per common share: Continuing operations: Basic $0.03 $(0.03) $(0.29) $(0.44) Diluted $0.02 $(0.03) $(0.29) $(0.44) Discontinued operations: Basic and diluted $-- $0.20 $(0.00) $0.24 Net income (loss) per common share: Basic $0.03 $0.17 $(0.29) $(0.20) Diluted $0.02 $0.17 $(0.29) $(0.20) Shares used in the calculation of net income (loss) per common share: Basic 265,149 261,001 263,430 227,837 Diluted 417,845 261,001 263,430 227,837 (*) Derived from audited financial statements. (1) The results of our Alias application software business for periods prior to its sale in June 2004, are reflected as discontinued operations. (2) Represents product sales to SGI Japan, a related party for which we own a 24% equity interest at June 24, 2005 and owned a 40% equity interest at June 25, 2004. (3) Represents charges for estimated restructuring costs and charges associated with the impairment of assets. (4) The three- and twelve-month periods ended June 24, 2005 include a gain of approximately $21 million on the sale of a portion of our equity investment in SGI Japan. (5) The twelve-month period ended June 25, 2004 includes a $31 million non-cash charge resulting from the extinguishment of the exchanged 5.25% Senior Convertible Notes due in 2004. SILICON GRAPHICS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) June 24, June 25, 2005 2004 (1) ASSETS (unaudited) Current assets: Cash and cash equivalents $64,247 $154,855 Short-term marketable investments 39 2,010 Short-term restricted investments 39,757 23,585 Accounts receivable, net 93,335 113,901 Inventories 75,662 66,938 Prepaid expenses and other current assets 41,587 34,916 Total current assets 314,627 396,205 Restricted investments 413 909 Net property and equipment 56,257 74,595 Other assets 79,004 98,215 $450,301 $569,924 LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable $56,231 $65,119 Accrued compensation 34,062 37,053 Income taxes payable 2,689 6,082 Other current liabilities 72,530 98,467 Current portion of long-term debt 1,820 17,775 Current portion of deferred revenue 98,305 96,058 Total current liabilities 265,637 320,554 Long-term debt 261,992 264,212 Long-term deferred revenue 36,188 25,749 Other liabilities 77,672 82,087 Total liabilities 641,489 692,602 Total stockholders' deficit (191,188) (122,678) $450,301 $569,924 (1) Derived from audited financial statements. DATASOURCE: SGI CONTACT: media, Caroline Japic, +1-650-933-7210, or , or investors, Beth Howe, +1-650-933-8279, or , both of SGI, or SGI PR HOTLINE, +1-650-933-7777, or SGI PR FACSIMILE, +1-650-933-0283 Web site: http://www.sgi.com/

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