Tuesday October 30, 8:33 am Eastern Time
Press Release
SOURCE: Vari-L Company, Inc.
Vari-L Company Announces First Quarter Results for Fiscal 2002; Company Achieves Positive Cash Flow Despite Sharp Industry Downturn
DENVER, Oct. 30 /PRNewswire/ -- Vari-L Company, Inc. (OTC: VARL - news), a leading provider of advanced components for the wireless telecommunications industry, today announced results for its first fiscal quarter ended September 30, 2001.
The Company also announced it will conduct a conference call on Tuesday, October 30, at 2:30 p.m. Mountain Time. The call-in number is 1-800-366-3908. The conference I.D. number is 410281. The call will also be broadcast over the Internet through PR Newswire's web site at videonewswire.com. To listen to the live call, please go to the web site 15 minutes early to register and download any necessary audio software. A replay will be made available shortly after the call at www.prnewswire.com.
Results of Operations for the Three Months Ended September 30, 2001 Compared With the Three Months Ended September 30, 2000
Net sales for the three months ended September 30, 2001 were $5.7 million compared with $11.5 million for the three months ended September 30, 2000. This decline is primarily due to the overall slowdown in the wireless telecommunications industry in general and a decrease in demand for commercial signal source products used in commercial wireless applications. Net sales from commercial signal source products were $4.3 million for the first quarter versus $9.4 million for the comparable quarter last year. Net sales from all other products increased to $1.4 million for the first quarter from $1.3 million in the same quarter a year ago.
Gross profit for the first quarter was $2.1 million, or 36.8 percent of net sales, compared with $5.4 million, or 47.0 percent of net sales, for the same quarter last year. The lower gross profit margin in the period ended September 30, 2001 is primarily attributable to fixed manufacturing overhead incurred, which does not significantly vary with changes in sales volume. Included in cost of goods sold for the first quarter is a charge of $56,000 for an adjustment to inventory carrying costs. Included in cost of goods sold for the first quarter a year ago is a charge of $546,000 for excess and obsolete inventory.
Total operating expenses, exclusive of non-cash stock compensation and expenses relating to the accounting restatements and the related shareholder litigation, decreased $821,000 to $3.1 million for the three months ended September 30, 2001 compared with $3.9 million for the three months ended September 30, 2000. The decrease in operating expenses was primarily attributable to lower commissions on lower sales volumes, lower fees paid to independent contractors for interim management and accounting services, and fewer employees engaged in research and development efforts.
With the successful completion of the accounting restatements and the recent resolution of the SEC investigation (pending court approval), expenses relating to the accounting restatements and the related shareholder litigation for the three months ended September 30, 2001 declined to $85,000 from $1.2 million in the same period last year. The Company anticipates that future expenses in this category will be limited to the costs of shareholder litigation, which is ongoing.
The net loss for the three months ended September 30, 2001 was $1.1 million, or $0.16 per share, compared with a net loss of $201,000, or $0.03 per share, for the three months ended September 30, 2000. Excluding the impact of stock compensation, which is a non-cash charge, and expenses relating to accounting restatements (which management believes are not indicative of continuing operating expenses), net loss for the first quarter would have been $1.0 million, or $0.14 per share, compared with net income of $1.3 million, or $0.18 per share (basic and diluted), for the same quarter a year ago.
``Consistent with the guidance we provided in our year-end news release of September 27, our net sales directly reflect a global softening in demand for commercial wireless components,'' said Chuck Bland, president and CEO. ``This downturn in the wireless industry has affected virtually all wireless product and service providers, and most of our key customers have reduced their order flow in order to work off excess inventory as they, too, await the market rebound.
``While we are not yet prepared to offer specific guidance as to the timing of the expected turnaround, we are encouraged by several recent customer requests for expedited product deliveries,'' Bland added. ``Our continued investment in new product development underscores our confidence that the downturn will not be protracted and that demand for wireless components is likely to increase in the second half of our fiscal year. In the meantime, we continue to focus on reducing our overall cost structure while increasing efficiencies in all areas of our operations.''
Liquidity and Capital Resources
As of September 30, 2001, working capital was $6.3 million, including cash and cash equivalents of $1.7 million. Working capital at June 30, 2001 was $7.1 million, including cash and cash equivalents of $2.0 million. Operations generated $841,000 of cash from the reduction of accounts receivable through collections and lower sales volumes in the quarter. Additionally, Vari-L continued its focus on reducing inventory levels and increasing inventory turns. The cash generated from these efforts was partially offset by the net loss, adjusted for non-cash charges, and a reduction in both accrued compensation and accounts payable.
Capital expenditures for the three months ended September 30, 2001 were $175,000, primarily related to purchases of new production and test equipment to continue increasing manufacturing capacity.
Notes payable and long-term obligations were reduced by $1.0 million as of September 30, 2001 as compared with June 30, 2001. The Company's new credit facility with Wells Fargo Business Credit allows Vari-L to borrow and re-pay its obligations based upon cash flow needs at any time subject to maximum loan amounts as determined by the Company's borrowing base.
Headquartered in Denver, Vari-L designs, manufactures and markets wireless communications components that generate or process radio frequency (RF) and microwave frequency signals. Vari-L's patented products are used in commercial infrastructure equipment (including cellular/paging/PCS base stations and repeaters, fixed terminal point to point/multi-point data radios including LMDS/MMDS), consumer subscriber products (advanced cellular/PCS/satellite handsets, web-enabled smart phones, 2-way pagers, wireless PDAs, home networking), and military/aerospace platforms (satellite communications/telemetry, missile guidance, electronic warfare, electronic countermeasures, battlefield communications). Vari-L serves a diverse customer base of the world's leading technology companies, including Adaptive Broadband, Agere, Agilent Technologies, Digital Microwave, Ericsson, Glenayre Technologies (Wireless Access), Boeing Satellite Systems, Harris, Lockheed Martin, Lucent Technologies, Microwave Data Systems, Mitsubishi, Motorola, NEC, NeoPoint, Netro, Nokia, Novatel Wireless, Raytheon, and Siemens.
Forward-Looking Statements
Some of the statements in this news release are ``forward-looking statements'' as that term is used in the Private Securities Litigation Reform Act of 1995. In most cases, when we use words like ``believe,'' ``expect,'' ``estimate,'' ``anticipate,'' ``project,'' or ``plan'' to describe something which has not yet occurred, we are making a forward-looking statement. Forward-looking statements we make are based on a number of assumptions by us about the future, usually based on current conditions or on the broader expectations of others. These assumptions may or may not prove to be correct and, as a result, our own forward-looking statements may also be inaccurate. On the other hand, based on what we know today and what we expect in the future, we believe that the forward-looking statements we make in this news release are reasonable.
The tragic events of September 11, 2001 have created broad uncertainty on the global economy as a whole. We are still in the process of assessing the impact on the telecommunications industry in general, and more specifically, on the wireless infrastructure market, as are our customers.
While we believe that our facilities are adequate for our current operations, we believe that a single building or facility would be more efficient and cost effective. Accordingly, we are in the process of identifying potential new sites. At this time, we are limiting the search to facilities within a six-mile radius of our current facilities.
We cannot list here all of the risks and uncertainties that could cause our actual future financial and operating results to differ materially from our historical experience and our present expectations or projections but we can identify many of them. For example, our future results could be affected by the overall market for various types of wireless communications products, the success of the specific products into which our products are integrated, governmental action relating to wireless communications, licensing and regulation, the accuracy of our internal projections as to the demand for certain types of technological innovation, competitors' products and pricing, the success of new product development efforts, the timely release for production and the delivery of products under existing contracts and the ultimate outcome of pending and threatened litigation and regulatory action. It is also important to remember that forward-looking statements speak only as of the date when they are made, and we do not promise that we will publicly update or revise those statements whenever conditions change or future events occur. Accordingly, we do not recommend that any person seeking to evaluate our company should place undue reliance on any forward-looking statement in this news release. |
