4/12...TFS...Three-Five Systems Announces Record First
Quarter Financial Results
Company Posts 70% Comparable Revenue Growth; Higher Gross
Margins; Record Number of Design Wins
TEMPE, Ariz., April 12 /PRNewswire/ -- Three-Five Systems, Inc. (NYSE: TFS - news) today announced its financial and operational results for the first quarter of fiscal 2000, ended March 31, 2000. Simultaneously, the Company announced a record number of new design wins for the quarter, most of which were for new customers.
Revenue for the first quarter of 2000 increased to a first quarter record of $39.2 million, up 70% over 1999's comparable quarter of $23.0 million. Three-Five reported net income of $3.6 million, or $.27 per diluted share, for the first quarter of 2000, compared with a net loss of $642,000, or $0.07 per diluted share, for the first quarter of 1999.
The company attributed its strong revenue growth rate to the continued strong worldwide demand for mobile handsets. Over 80% of Three-Five's first quarter production was sold to OEMs for use in mobile handsets. A continuation of high production levels and associated strong revenue growth was achieved despite supply constraints with IC drivers, a market condition that has existed the last few quarters and is expected to continue through the summer. Furthermore, the continued high production levels at Three-Five's worldwide manufacturing facilities and the efficiencies obtained in its operations allowed the company to increase its gross margin over the levels achieved in the fourth quarter of 1999.
Cash flow from operations was approximately $2.8 million for the quarter ended March 31, 2000. The company's cash flow from operations over the last two quarters has totaled over $17 million. As a result, the company's financial condition remains strong with no debt on its balance sheet and over $45.4 million in cash. In addition, working capital has risen to $63.3 million and an additional $25.0 million remains available on the company's unused and unsecured credit line. Capital expenditures for the first quarter were $3.2 million.
Operating expenses for the quarter totaled $5.0 million, or 12.8% of sales. Specifically, selling, general and administrative expenses in the first quarter of 2000 were $2.3 million, or 5.9% of revenue, as compared with SG&A in the first quarter of 1999 of $2.5 million, or 10.9% of revenue. As previously discussed, the company's goal in 2000 is to leverage its SG&A expenses by keeping in check the actual dollar expense levels in 2000. Research, development and engineering expenses in the first quarter of 2000 were $2.8 million, or 7.1% of revenue, as compared with RD&E in the first quarter of 1999 of $1.8 million, or 7.8% of revenue. RD&E continues to increase as the company intensifies its focus on its LCoS(TM) microdisplay technology. Approximately $2.0 million of the company's operating expense is directly attributed to LCoS(TM) microdisplays, all of which is currently reflected in the RD&E and SG&A expense categories.
Three-Five also announced today that it was awarded 11 new design wins in its core LCD display business during the first quarter. The design wins are for LCD modules to be used in products such as mobile handsets, data collection devices, and MP3 players. Of the 11 design wins, seven are for new customers and five of those new customers are mobile handset manufacturers. Three-Five anticipates that production shipments for some of these design wins will commence in the second half of 2000. If all of these design wins go into production, the expected sales from these first quarter design wins alone are well in excess of $100 million on an annualized basis.
Commenting on the quarter, Jack L. Saltich, President and CEO of Three-Five Systems said, ``Due to the strong mobile handset industry growth, this quarter's expected seasonal slowdown was less than in previous years. Based on our outstanding design win success from new customers and the strong program loading of our existing customers, the second half of the year is looking stronger than we originally anticipated. We now estimate that 60% or more of our 2000 revenue will occur in the second half of the year and that our revenue growth will be between 35% and 40% for 2000. In addition, we are close to winning some very large volume programs in our core business from other new customers, and those have the potential to add an additional positive impact in late 2000.''
``At the same time that we have strong demand for our core LCD products, we continue to move closer to full scale production of LCoS(TM) (Liquid Crystal on Silicon) microdisplays,'' Saltich continued. ``Several optical companies have selected our LCoS(TM) microdisplay for use in the light engines that they are developing for sale to OEM producers of monitors and television sets. In addition, we are working directly with several business projector companies who have selected our LCoS(TM) microdisplay to develop high-resolution audio-visual projectors. Most of our customers plan product introductions within the next six to twelve months.''
Three-Five Systems, Inc. is a recognized leader in the design and manufacture of liquid crystal display (LCD) modules for OEM customers in wireless communications and data collection, medical electronics, and other commercial and consumer marketplaces. The company has developed proprietary LCD products such as LCiD(TM), a sunlight readable display. In addition to traditional LCDs, the company is developing other display technologies such as the LCoS(TM) (Liquid Crystal on Silicon) microdisplay, a tiny, high resolution, low power display designed for new markets such as HDTV, monitors, business projectors and wireless Internet appliances. At its Tempe, Arizona headquarters, Three-Five operates the highest volume LCD manufacturing line in North America and houses the David R. Buchanan LCD Laboratory, an R&D facility dedicated to the development of advanced display technologies. The company's web site is located at www.threefive.com.
Certain statements contained in this document may be deemed to be forward-looking statements under federal securities laws, and Three-Five Systems intends that such forward-looking statements be subject to the safe-harbor created thereby. Such forward-looking statements include but are not limited to i) expectations of the financial growth (including the estimated revenue growth rate and the percentage of revenue occurring in each half of the fiscal year) and operating results of the company; ii) expectations of sales revenue as a result of design wins and production orders, including the expectation of production start dates and potential annualized revenue; (iii) expectations regarding the expense levels of SG&A, and iv) the timing of the availability of Three-Five's advanced technologies for commercial deployment, including expectations regarding the introduction of customers' products using the LCoS(TM) microdisplay. Three-Five Systems cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements contained herein. Such factors include, but are not limited to, a) changes in the markets for the company's products; b) changes in the market for customers' products; (c) the failure of key technologies to deliver commercially acceptable performance; d) the ability of Three-Five Systems' management, individually or collectively, to guide the company in a successful manner, and other risks as detailed from time to time in Three-Five Systems' SEC reports, including Quarterly Reports on Form 10-Q, Current Reports on form 8-K and Annual Reports on Form 10-K.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
THREE MONTHS ENDED MAR 31,
1999 2000
(unaudited) (unaudited)
(in thousands, except
per share data)
Net Sales $23,044 $39,162
Costs and Expenses:
Cost of Sales 20,191 29,360
Selling, General and Administrative 2,449 2,262
Research, Development and Engineering 1,821 2,763
24,461 34,385
Operating Income (Loss) (1,417) 4,777
Interest and Other Income
(Expenses), Net (185) 580
Income (Loss) before Provision for
(Benefit From) Income Taxes (1,602) 5,357
Provision for (Benefit From) Income Taxes (960) 1,770
Net Income (Loss) $(642) $3,587
Earnings (Loss) per Common Share
Basic $(.07) $.28
Diluted $(.07) $.27
Weighted Average Number of Common Shares
Basic 9,345 12,617
Diluted 9,345 13,365
CONDENSED CONSOLIDATED BALANCE SHEETS DEC 31, MAR 31,
1999 2000
(unaudited) (audited)
ASSETS (in thousands)
Cash and Cash Equivalents $45,363 $45,413
Accounts Receivable, Net 20,886 18,509
Inventory, Net 12,344 12,865
Deferred Tax Asset 3,231 3,231
Other Current Assets 1,047 1,656
Total Current Assets 82,871 81,674
Property, Plant and Equipment, net 40,546 42,171
Other Assets 3,513 4,001
Total Assets $126,930 $127,846
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable $13,450 $10,153
Accrued Liabilities 7,526 6,108
Current Taxes Payable 1,042 2,143
Total Current Liabilities 22,018 18,404
Deferred Tax Liability 3,692 3,693
Total Liabilities 25,710 22,097
Stockholders' Equity 101,220 105,749
Total Liabilities and
Stockholders' Equity $126,930 $127,846
SOURCE: Three-Five Systems, Inc. |
