ESS Technology Announces Share Repurchase Program And Comments on CFRA Report
FREMONT, Calif., May 7 /PRNewswire-FirstCall/ -- ESS Technology, Inc. (Nasdaq: ESST - news), a leading provider of silicon solutions for digital video, home networking, and digital home systems today announced that its Board of Directors has authorized the company to repurchase, at market prices and as market conditions warrant, up to 3,000,000 shares of ESS common stock. The stock will be repurchased on the open market from time to time at management's discretion. The 3,000,000 shares authorized for repurchase today include approximately 600,000 shares that remain available for repurchase under ESS's previously announced repurchase plans.
Robert Blair, president and chief executive officer of ESS Technology commented, "We believe that ESS is succeeding in achieving our strategy and objectives, including becoming the number one supplier of DVD chips worldwide, improving our historical margins, and adding over $62 million in cash from operations to our balance sheet during the last 2 quarters. We believe our stock is very undervalued and the current share price provides an attractive opportunity to reduce the outstanding shares and enhance shareholder value."
Mr. Blair continued, "Separately, we are aware of a report recently issued by the Center for Financial Research and Analysis, Inc. (CFRA) which is extremely misleading. The report implies that ESS may be hiding expenses to inflate its operating profits by having its former subsidiary, Vialta, Inc., pay for these expenses. This is absolutely false. ESS spun off Vialta to ESS's shareholders in August 2001 so that investors of either company would have more visibility into the business and finances of both companies and the two companies have been operated as separate independent public companies since that time. Prior to the spin-off, ESS provided various R&D and administrative services for Vialta. This information is shown in the enclosed table and has been reported in our respective 10Ks and 10Qs. As you can see from the table, the primary expense paid by Vialta to ESS since the fourth quarter of 2001 is for the lease of one of ESS's buildings at market rates. To imply anything improper is being done is false, misleading, and a disservice to both ESS's and Vialta's shareholders and employees."
Mr. Blair added, "Additionally, the CFRA report goes on to 'raise concern' about our Hong Kong distributor handling over 50% of ESS's revenues, and the potential of 'an impaired relationship with such a major customer.' This distributor, Dynax Electronics, is located in Hong Kong and has been ESS's distributor since 1995. Dynax handles the product delivery and letter of credit collection processes for ESS's customers in Hong Kong and China and is paid a 1%-3% fee for these services. Sales and support for these Hong Kong and China customers are handled directly by ESS and include the following ESS customers: ChangHong, Desay, Jiangkui, Skyworth, TCL, Tonic and others. Dynax is not considered an ESS customer and ESS recognizes no revenue for shipments until Dynax delivers the products to ESS's customers. Once again, the CFRA report is misleading."
Mr. Blair concluded, "ESS is a solid company with a strong balance sheet and the leading position in the fast-growing digital video market worldwide. We believe our strategy of becoming the leading consumer digital entertainment supplier is working. We are comfortable with the revenue and earnings guidance given at our last conference call, and as we stated at that time, we expect to continue to grow our DVD shipments 10%-20% each quarter for the coming two quarters. We believe our market position, our strong technology, and the new products scheduled for introduction during the coming year will enable our company to continue to be a leading player in the growing consumer digital entertainment market. We believe the implications in the CFRA report are highly misleading, inappropriate, and a disservice to our shareholders, employees, and customers."
About ESS Technology
ESS Technology, Inc., is a leading supplier of high-performance feature-rich products for the rapidly growing DVD and digital entertainment markets. The company is also a leading provider of products that enable the emergence of digital home systems delivering and managing entertainment and information in the home.
ESS, headquartered in Fremont, California, has R&D, sales, and technical support offices worldwide. ESS Technology's common stock is traded on the Nasdaq under the symbol ESST. ESS Technology's web site address is: esstech.com .
The matters discussed in this news release include certain forward-looking statements that involve risks and uncertainties, including, but not limited to, the impact of competitive products and pricing, the timely availability and acceptance of the Company's new products, the dependence on continued growth in demand for consumer multimedia products, and the other risks detailed from time to time in the SEC reports of ESS, including the reports on Form 10-K and Form 10-Q. Actual results could differ materially from those projected in the forward-looking statements.
NOTE: Other product or service names mentioned herein are the trademarks of their respective owners.
ESS TECHNOLOGY, INC.
Condensed Consolidated Statements of Operation
(Unaudited)
(in thousands, except per share date)
For the quarter ended
31-Mar 31-Dec 30-Sep 30-Jun 31-Mar Total
2002 2001 2001
Net revenues
Vialta $16 $0 $0 $490 $637 1,127(A)
Other Customers 79,099 83,266 72,397 64,419 50,171 270,253
79,115 83,266 72,397 64,909 50,808 271,380
Cost of revenues 44,839 48,725 45,930 45,970 39,606 180,231
Gross profit 34,276 34,541 26,467 18,939 11,202 91,149
Operating expenses:
Research
and development 6,381 6,681 7,273 7,592 6,411 27,957(B)
Selling,
general and
administrative 10,356 11,420 11,686 8,917 8,666 40,689(B)
Operating income
(loss) 17,539 16,440 7,508 2,430 (3,875) 22,503
Nonoperating income
(loss), net (1,267) 701 989 (20,795) 325(18,780)(C)
Income (loss)
before provision
for income taxes 16,272 17,141 8,497 (18,365) (3,550) 3,723
Provision
for (benefit from)
income taxes (114) 862 425 (8,167) (382) (7,262)
Net income (loss)
from continued
operations 16,386 16,279 8,072 (10,198) (3,168) 10,985
Loss from discontinued
operations 0 0 0 0 (4,205) (4,205)
Income (loss)
from disposal
of discontinued
operations 0 0 4,715 0 (13,312) (8,597)
Net income (loss) $16,386 $16,279 $12,787 $(10,198) $(20,685) (1,817)
ESS expenses have been reduced by the following net payments from Vialta:
Research
and development $0 $0 $626 $667 $602 1,895(B)
Selling, general and
administrative, net $(10) $41 $848 $1,077 $1,075 3,041(B)
Total operating
expenses $(10) $41 $1,474 $1,744 $1,677 $4,936
Nonoperating income
(loss), net $463 $485 $155 $0 $0 640(C)
Total Vialta expenses
included in ESS
amounts during
the period $453 $526 $1,629 $1,744 $1,677 $5,576
(A) Revenue recognized for chips sold to Vialta by ESS during the period
under Chip Purchase Agreement.
(B) ESS amounts included the above net charges to Vialta during the period
under Master Transitional Services Agreement.
(C) ESS amounts included the above charges to Vialta during the period
under Real Estate Matters Agreements.
SOURCE: ESS Technology, Inc. |
