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ADIC Earns $14 Million, or $0.27 Per Share, in Third Quarter On Slower Growth, Gain On Share Sales
Company to Repurchase Up to Three Million Shares
REDMOND, Wash., Aug 17, 2000 (BUSINESS WIRE) -- Advanced Digital Information Corporation (NASDAQ/NMS Symbol: ADIC chart, msgs) today announced earnings of more than $14.2 million, or 27 cents per diluted share, for the third quarter ending July 31, 2000.
ADIC earnings include a pre-tax gain of $14.3 million on the sale of shares of Crossroads Systems, Inc. (NASDAQ/NMS Symbol: CRDS chart, msgs) owned by the Company. Excluding the effect of this asset sale, earnings were $4.9 million with diluted earnings of 9 cents per share versus 11 cents per share the same period a year ago. Revenues were $66.0 million, an increase of 15 percent from the same period last year.
"Although we are disappointed to report our second consecutive quarter of aggregate comparative revenue growth at or below 20 percent," said Chairman and Chief Executive Officer Peter van Oppen, "the underlying trends continue to foreshadow outstanding future growth." As in the second quarter, the Company's U.S. core library business, which represented over 65 percent of total global revenues in each quarter, grew at rates in excess of 50 percent versus the same period in the prior year. European core library sales were up nearly 10 percent for the period. Both increases were significantly offset by declines in large library sales and associated service revenues of approximately 44 percent overall. Lingering Y2K effects and economic softness in Europe, where large libraries have historically been strongest, were factors in the decline of this business.
"The good news is that our near-term order forecasts suggest fourth quarter and first quarter sales should grow at double digit sequential rates over the immediately preceding quarter and more than 20 percent over comparable quarters in the prior year," according to van Oppen. "New orders for large libraries indicate that, instead of the moderate to precipitous declines experienced in the past two quarters, we will have significant sequential increases in that business. Stabilization should allow continued strong growth in the vast majority of our business to become more apparent in the aggregate revenue totals," he said.
"Robust market opportunities and our strong cash position have persuaded us to continue increasing spending levels," according to President and Chief Operating Officer Chuck Stonecipher. "We expect to see very significant revenues associated with our Dell, Fujitsu Siemens and IBM OEM agreements over the next two quarters. Dell and Siemens are presently shipping and we have been informed that IBM expects shipments of LTO-based products to be imminent. In addition, we have several new product and partnership initiatives, which we expect to finalize over the next two quarters. As a result, we believe the short-term drop in operating earnings, which is more than offset by non-operating earnings, is fully justified by the opportunities before us," Stonecipher said.
Separately, the Company announced that its Board of Directors had authorized repurchase of up to 3 million common shares on the open market. The Company intends to purchase shares from time to time with the goal of partially offsetting the dilutive effects of various incentive programs.
ADIC said gross margin declined from 35.2 percent of sales in third quarter 1999 to 33.4 in the just completed quarter as a result of reduced revenues from large libraries. It also noted that, as anticipated, increased OEM revenues may have a negative effect on gross margin percentage over the next few quarters.
Selling and administrative expenses increased 38 percent from the same period a year ago to $13 million, while research and development expenses were $4.4 million, an increase of 27 percent over the third quarter of fiscal 1999. The Company also noted that OEM sales represented approximately 21 percent of revenue for the period.
The Company reported cash and marketable equity securities, excluding remaining Crossroads shares, total nearly $227 million. Accounts receivable decreased $1.4 from the immediately preceding quarter to $54.4 million. Inventories at July 31 totaled $46.8 million which was essentially level with the amount of inventory the Company had on hand at April 30.
ADIC said it had sold 321,500 shares of Crossroads during the period at an average price of $46 per share resulting in a gain of $14.3 million. The Company continues to hold approximately 1,774,000 share of Crossroads which are recorded at the market price on July 31 of $4.563 per share, or a total $8.1 million. The Company's average cost of Crossroads shares is $1.53 per share. |
