Adept Technology Announces Cost Reduction Program
SAN JOSE, Calif.--July 26, 2001--Adept Technology, Inc. today announced that it is implementing a cost reduction program during the first quarter of fiscal 2002. The company also revised its business outlook for fourth quarter."The weak global economic conditions are affecting our customers' businesses across the board and they are in turn reducing or delaying their capital spending," stated Brian R. Carlisle, chairman and chief executive officer of Adept. "This may very well be the fastest deceleration we have ever experienced, which now requires us to make some difficult business decisions. We cannot predict the length of the current slowdown, but at this time we have not changed our long-term vision and business strategy for the next three to five years. It is disappointing to all of us that this downturn comes just as our investments during the past year and a half are beginning to bear fruit in terms of major new photonics, semiconductor, robotics and controls products."
The company now expects revenue for the fourth quarter to be down approximately 13 to 14 percent from third quarter revenue of $23.9 million, lower than the previous outlook that fourth quarter revenue would be flat to down 10 percent. In response to softness in orders and lowered revenue expectations, the company has finalized a major cost-reduction plan to be implemented during the first quarter of fiscal 2002.
"Personally, of all the difficult decisions we've had to make, the toughest was the reductions in headcount," said Carlisle. Adept expects to take a restructuring charge and/or sell certain assets in conjunction with the cost reduction program. These actions could result in one-time charges up to approximately $7.0 million to $8.5 million during the first quarter of fiscal 2002, of which approximately $2 million will be in cash. The charge comprises the following three components:
| -- | Workforce reduction and compensation adjustment charge: Through attrition and layoffs, as well as additional layoffs to be implemented during the first quarter of fiscal 2002, Adept is reducing its workforce by approximately 20%. The company will also be instituting a company-wide compensation adjustment. When the reduction in headcount and compensation adjustment are fully implemented Adept believes its overall cost structure related to personnel will be reduced by approximately $11 to $12 million on an annualized basis for fiscal 2002. Initial savings will begin during the first fiscal quarter of 2002. Adept expects to take a one-time charge for separation expenses of about $0.7 to $0.9 million during the first quarter of fiscal 2002 related to its reduction in workforce. |
| -- | Consolidation of excess facilities and related fixed assets charge: In connection with the workforce reduction, Adept expects to consolidate its workforce into designated facilities, which could result in an excess facilities charge of approximately $5 to $5.5 million. Adept expects these efforts to reduce operating expenses associated with the facilities by approximately $0.8 million on an annualized basis. |
| -- | Restructuring of non-strategic business assets: The company expects to sell and/or restructure certain non-strategic business assets which could result in a charge of approximately $1.5 to $2 million during the first quarter of fiscal 2002. These actions are expected to result in reduced operating expenses of $1.5 million on an annualized basis. |
Due to the combined effects of the current business environment and Adept's reduced revenue expectations in the near term, the company will take a one-time inventory write-down charge of approximately $4.9 million during the fourth quarter of fiscal 2001.
The company's outlook for gross margin percentage for the fourth quarter is now 30 percent, plus or minus a point, prior to the one-time inventory write-off of $4.9 million. This is down from the previous expectation of 38 to 40 percent. The decrease in gross margin percentage is primarily due to a significant decline in revenue from the semiconductor industry, declining orders with OEM customers in our base business, and significantly reduced shipments in relation to relatively fixed overhead cost structure. Adept expects its cash balance at the end of the first quarter of fiscal 2002 to be approximately $15 to $16 million with no debt.
"Although employee headcount reductions are painful measures, our goal is to allocate resources in line with revenue levels, while maintaining our critical spending in areas related to development of innovative flexible automation solutions," noted Carlisle. "Even with this severe market slowdown, we continue to capture additional opportunities for our flexible automation solutions with semiconductor and fiber optic customers. We remain very confident in our long-term growth opportunities."
Adept will address the topics discussed in this release in greater detail next week during the company's scheduled earnings conference call.