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EMLX
82 15/16
-53/64
delayed 20 mins - disclaimer
Thursday April 13, 4:33 pm Eastern Time
Company Press Release
Emulex Reports Record Third Quarter Operating Income
Operating Income Expands Over 500%
COSTA MESA, Calif.--(BUSINESS WIRE)--April 13, 2000--Emulex Corp. (Nasdaq:EMLX - news), the world's largest supplier of fibre channel adapters, Thursday announced results for its third fiscal quarter ended March 26, 2000.
Revenues expanded 100% to $36.5 million, up from the $18.2 million reported for the same quarter a year ago. Net income for the third quarter of fiscal 2000 rose to $7.7 million, or $0.20 per share on a diluted basis, compared with net income of $1.4 million, or $0.05 per diluted share, for the same quarter a year ago. During the third quarter of fiscal 2000, Emulex began recording an effective tax rate of 35%, while net income for the third quarter of the prior fiscal year benefited from a lower effective tax rate of 10%(1).
Assuming a 35% tax rate for both fiscal years, net income for the third quarter of fiscal 2000 amounted to $7.7 million, or $0.20 per share on a diluted basis, up over 680% from net income of $978,000, or $0.04 per diluted share, for the same quarter a year ago.
``Emulex's momentum continued to be driven by expanding sales of fibre channel adapters which grew 13% sequentially, while fibre channel backlog expanded 30% sequentially,' stated Paul F. Folino, president and chief executive officer. ``We believe the fibre channel sector remains very robust,' Folino continued.
``Sell-through of adapters through the distribution channel increased in the third quarter, as demand for fibre channel's high-performance and scalability continued to expand among end users. Furthermore, OEM deployment of Emulex's LP8000 series of adapters, which offers leading edge performance in a single-chip solution, also continued to expand in the third quarter. The LP8000, introduced in January 1999, provides OEMs with a more than 20% reduction in cost over our prior generation adapters, but also generates higher gross margin.'
Gross margin expanded from 47% in the second quarter to 48% in the third quarter. Driven by expanding gross margin and efficiencies of scale, operating margin and operating income expanded sequentially in the third quarter to a record 26% and $9.4 million, respectively, compared with 23% and $7.7 million in the second quarter of fiscal 2000.
Emulex's traditional networking product sector, which is comprised of network access products and printer servers, continued to mature and collectively declined 20% from a year ago.
For the nine months ended March 2000, Emulex's revenues totaled $99.0 million, compared with $48.0 million reported a year ago. Net income for the first nine months of fiscal 2000 amounted to $23.2 million or $0.61 per share on a diluted basis, compared with $2.2 million or $0.08 per diluted share for the same period a year ago. Assuming a 35% tax rate for the full nine months(2), net income for the nine-month period ending March 2000 would have amounted to $18.9 million, or $0.50 per diluted share, compared with $1.6 million, or $0.06 per diluted share, for the prior year.
``While we continue to believe that Emulex's future prospects will be driven primarily by the underlying momentum in the fibre channel industry with existing OEMs, we were very pleased to achieve penetration of another new OEM account, Hewlett-Packard, in the third quarter,' stated Folino.
After qualifying Emulex as a certified Host Bus Adapter vendor in its Open SAN Initiative, Hewlett-Packard certified the Emulex LightPulse LP8000 host adapter as a recommended host connection for Windows 2000 environments. ``Emulex OEM design wins, which in earlier years were comprised largely of UNIX solutions, have more recently been dominated by Windows implementations, including this most recent design win from HP,' noted Folino.
In the past two years, Emulex has captured OEM design wins for Windows solutions at many of the world's largest storage and server suppliers, including Avid, Compaq, Comparex, EMC, Fujitsu-Siemens, Hitachi, MTI, NEC and Unisys.
``We were especially pleased that Emulex's leading position in the fibre channel host bus adapter market was quantified in a recent study by IDC,' stated Folino. In its report, IDC ranked Emulex first in worldwide supplier revenues, at 41% of the non-captive merchant supplier market and 27% of the total supplier market for fibre channel host bus adapters in calendar year 1999.
``Emulex's leading market share has been carved out solely within the PCI sector of the host bus adapter market,' noted Folino. ``With Emulex now entering the qualification phase with key OEMs for our new SBus adapters, we are positioned to address the SBus sector as well, which accounted for more than 15% of total unit shipments in 1999 according to IDC.' IDC also forecasted the market for fibre channel host bus adapters to grow approximately 60% annually to more than $1.7 billion by 2003.
Also during the third quarter, StorageTek approved Emulex's LightPulse(TM) LP8000 host bus adapter for use with its new 9840 native fibre channel tape drive system. ``The SAN market has been awaiting native fibre channel tape solutions and Emulex is uniquely positioned to support these high performance backup solutions, not only with our newest adapters, but also with prior generation adapters,' noted Folino.
Emulex has implemented the new FCP-2 protocol enhancements that support native fibre channel tape in firmware, so the entire installed base of the market leading LP8000 and its predecessor, the LP7000E, are fully upgradeable to support the new standard. ``This is an excellent example of the benefits of our firmware/ASIC adapter architecture which allows for full field upgradeability through a software download while protecting the customer's initial investment,' stated Folino.
Emulex Corp. is a leading designer, developer and supplier of a broad line of fibre channel host adapters, hubs, ASICs and software products that provide connectivity solutions for fibre channel storage area networks (SANs). The company's products are based on internally developed ASIC technology, and are deployable across a variety of SAN configurations and operating systems, enhancing data flow between computers and peripherals.
Emulex's products offer customers the unique combination of critical reliability, scalability and high performance, and can be customized for mission-critical server and storage system applications. Emulex products have been selected by the world's leading server and storage providers, including Compaq, EMC, Fujitsu-Siemens, Groupe Bull, Hewlett-Packard, Hitachi Data Systems, IBM, NEC and Unisys. In addition, Emulex includes industry leaders Ancor, Brocade, Intel, Microsoft, Legato and VERITAS among its strategic partners.
The company also markets traditional networking products such as printer servers and network access products, including communications servers and WAN adapters. Emulex markets to OEMs and end users through its own worldwide selling organization, as well as two-tier distribution partners. Corporate headquarters are located in Costa Mesa. News releases and other information about Emulex Corp. are available via the Internet at www.emulex.com.
EMULEX -- the fibre channel company
``Safe Harbor' Statement under the Private Securities Litigation Reform Act of 1995: With the exception of historical information, the statements set forth above include forward-looking statements that involve risk and uncertainties. The company wishes to caution readers that a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Those factors include the following: the fact that the company's markets are characterized by rapidly changing technology, evolving industry standards and frequent introductions of new products and enhancements, and the company's ability to respond to such changes; maturation in the network access server and printer server products; the fact that the fibre channel market is at an early stage of development; the highly competitive nature of the markets for the company's products; the company's ability to attract and retain skilled personnel; the company's reliance on third party suppliers for components used in the company's products and on manufacturing subcontractors that assemble and distribute the company's products; the company's reliance on certain OEMs, distributors and key customers; and potential fluctuations in the company's future effective tax rate. These and other factors which could cause actual results to differ materially from those in the forward-looking statements are also discussed in the company's filings with the Securities and Exchange Commission, including its recent filings on Form 10-K and Form 10-Q.
This news release refers to various products and companies by their trade names. In most, if not all, cases these designations are claimed as trademarks or registered trademarks by their respective companies.
EMULEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
Three Months Ended
March 26, March 28,
2000 1999
Net revenues $ 36,518 $ 18,235
Cost of sales 19,149 10,826
Gross profit 17,369 7,409
Operating expenses:
Engineering and development 3,586 3,080
Selling, general and administrative 4,376 2,841
Total operating expenses 7,962 5,921
Operating income 9,407 1,488
Nonoperating income 2,405 17
Income before income taxes 11,812 1,505
Income tax provision (1) 4,134 150
Net income $ 7,678 $ 1,355
Net income per share:
Basic $ 0.21 $ 0.06
Diluted $ 0.20 $ 0.05
Number of shares used in per share computations:
Basic 35,754 24,632
Diluted 38,430 27,647
Note: (1) During the third quarter of fiscal 2000, Emulex began
recording an effective tax rate of 35%, as this represents the
estimated annual effective tax rate exclusive of any reduction in
the deferred tax valuation allowance. Emulex recorded a lower
effective tax rate of 10% in the third quarter of the prior fiscal
year primarily as a result of utilization of net operating loss
carryforwards, which were held net of valuation allowance.
EMULEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
Nine Months Ended
March 26, March 28,
2000 1999
Net revenues $ 99,017 $ 48,032
Cost of sales 53,058 28,772
Cost of sales -- inventory
charges related to consolidation -- 1,304
Total cost of sales 53,058 30,076
Gross Profit 45,959 17,956
Operating expenses:
Engineering and development 10,735 8,381
Selling, general and administrative 12,391 8,166
Consolidation charges, net -- (987)
Total operating expenses 23,126 15,560
Operating income 22,833 2,396
Nonoperating income 6,276 67
Income before income taxes 29,109 2,463
Income tax provision (2) 5,864 246
Net income $ 23,245 $ 2,217
Net income per share:
Basic $ 0.66 $ 0.09
Diluted $ 0.61 $ 0.08
Number of shares used in per share computations:
Basic 35,149 24,589
Diluted 38,173 27,026
Note: (2) The annualized effective tax rate for the nine months ended
March 2000 was recorded at 35%, less a reduction in a portion of
the company's deferred tax valuation allowance recorded in the
first two quarters of fiscal 2000. Emulex recorded a lower
effective tax rate of 10% in the first nine months of fiscal 1999
primarily as a result of utilization of net operating loss
carryforwards, which were held net of valuation allowance.
EMULEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
March 26, June 27,
2000 1999
Assets
Current assets:
Cash and cash equivalents $ 16,269 $ 22,284
Investments 103,701 83,164
Accounts and other receivables, net 24,711 17,088
Inventories, net 12,127 11,083
Prepaid expenses and other current assets 1,539 719
Total current assets 158,347 134,338
Property and equipment, net 3,703 3,168
Long-term investments 52,039 32,216
Deferred income taxes and other assets 3,719 269
$ 217,808 $ 169,991
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 19,895 $ 11,395
Accrued liabilities 7,266 4,291
Income taxes payable and
other current liabilities 608 358
Total current liabilities 27,769 16,044
Deferred income taxes 216 2,054
Total stockholders' equity 189,823 151,893
$ 217,808 $ 169,991
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Contact:
Emulex Corp., Costa Mesa
Michael J. Rockenbach, 714/513-8213
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