U.S. ROBOTICS REPORTS RECORD REVENUES AND EARNINGS FOR FISCAL 1996; REVENUES UP 122%, EARNINGS UP 158%
Fourth Quarter Revenues a Record $611 Million
Fourth Quarter Earnings, Before a Non-Recurring Charge, Were $67.5 Million ($.71 per Share); Up 97% vs. Fourth Quarter '95
SKOKIE, Illinois -- November 4, 1996 -- U. S. Robotics Corporation (NASDAQ:USRX) today reported record revenues of $1,977.5 million and record earnings of $224.0 million (excluding a non-recurring charge) for its fiscal year ended September 29, 1996.
For the fourth quarter, revenues were a record $611.4 million. Revenues for the fourth quarter increased $318.0 million, or 108% over the $293.4 million for the fourth quarter ended October 1, 1995, and increased 11.8% over the $546.8 million reported for the third quarter ended June 30, 1996.
Net earnings for the fourth quarter reflected a non-recurring charge of $54.0 million incurred in connection with the acquisition of Scorpio Communications, Ltd. Excluding the non-recurring charge, net earnings for the fourth quarter of fiscal 1996 were a record $67.5 million ($.71 per share on 95.7 million shares), up 97% over the $34.2 million posted for the fourth quarter of fiscal 1995. Including the non-recurring charge, net earnings and earnings per share for the fourth quarter were $13.5 million and $.14, respectively.
Revenues for the year were $1,977.5 million, up 122% from $889.3 million for fiscal 1995. Fiscal 1996 revenues from international operations, including Canada, were $517.2 million, or 26% of total sales, an increase of $286.8 million or 124% over 1995.
Excluding non-recurring charges in both 1996 and 1995, net earnings for 1996 were $224.0 million ($2.36 per share on 94.9 million weighted average shares outstanding), an increase of 151% over the corresponding 1995 total of $89.2 million ($1.05 per share on 85.3 million shares). Including the non-recurring charges, net income for the year climbed 158% to $170.0 million, or $1.79 per share.
The company attributed the growth in sales to continuing strong demand for all of its product lines in all of the markets it serves, noting that increasing unit sales more than offset price reductions effected during the course of the year. For example, unit sales of the company's desktop and PC card products in the fourth quarter were up over 97% compared with the corresponding period in 1995, while average selling prices fell slightly more than 6% from the third quarter to the fourth quarter of 1996, primarily because of the retail price reduction for Sportster desktop products which the company implemented at the beginning of July.
"Our sales growth is driven by growing worldwide demand for access to information over wide area networks and especially the Internet," said Casey Cowell, U.S. Robotics Chairman, CEO and President. "Demand is strong across the board, but the factors contributing to our growth are especially evident in the success of our Total Control network systems products that are being deployed by most of the world's leading Internet and on-line service providers."
The company reported that sales of its Total Control wide area network hub product line, first introduced in 1993, totaled approximately $400 million for fiscal 1996.
Although not disclosing quarterly sales figures for all its network systems products, the company noted that the percentage of total revenues for the 1996 fourth quarter attributable to sales of these products was up substantially from the third quarter. Compared with fiscal 1995, sales of all network systems products were up 189% while revenues from the sale of desktop and PC card products were up 106%.
Gross margins for fiscal 1996 were 41.9%, up from the 41.4% recorded for fiscal 1995. The increase was due principally to a higher percentage of total revenues being attributable to sales of higher-margin systems products, partially offset by lower margins attributable to certain PC card product lines.
Gross margins for the fourth quarter were 41.9%, unchanged from the third quarter ended in June. The effect of higher sales of systems products as a percent of total revenues was offset by reduced gross margins in the desktop and PC card businesses, reflecting competitive pricing pressures and price reductions related to disposition of remaining stocks of 14.4 Kbps products.
Total operating expenses, excluding the non-recurring charge, for the fourth quarter were $148.4 million or 24% of sales. As a percentage of sales, these expenses increased slightly from 23% in the preceding quarter. The primary reason for the increase was higher selling and marketing expenses.
The company made substantial investments in building its sales force both domestically and internationally, during the September quarter, increasing its total sales force worldwide by approximately 20%. U.S. Robotics views these additions as investments that will enable it to take advantage of the market opportunities for its products, including the recently announced x2 technology (56Kbps). x2 is a key breakthrough in modem technology that enables Internet and other network connections at speeds nearly twice as fast as those currently available over standard telephone lines.
The increased commitment of resources to international sales capabilities relate to the company's entire business but are particularly critical to expanding international sales of its network systems products.
Of particular note in the fourth quarter was the acquisition of Scorpio Communications Ltd., which enabled U.S. Robotics to gain state of the art capability in ATM (asynchronous transfer mode) switching. As previously announced, the Scorpio transaction was accounted for as a purchase. In accordance with the applicable accounting rules, $54.0 million of the total purchase price representing "in process technology" was expensed upon closing of the transaction.
Outlook
The following statements include forward-looking statements and actual results may differ materially.
Reviewing the fourth quarter and year-end results, John McCartney, U.S. Robotics executive vice president and chief operating officer, said that the company expects demand for all of its product lines to continue to grow substantially in the 1997 fiscal year as world-wide requirements increase for highly integrated, cost-effective, end-to-end information access solutions. The company anticipates that its sales of network systems products will continue over time to grow at a more rapid rate than sales of its PC related products (desktop and PC Card products). Continued sales growth is expected to be driven by increases in unit sales of existing products and by new product introductions, which will be offset in part by anticipated future reductions in the average selling prices of existing products.
Mr. McCartney also emphasized that the company would continue to invest in new technologies such as x2 (56Kbps), wireless, switching and broadband access, including xDSL, during the coming year. "We feel it is essential to the ongoing health of the company to continue our investments in technology development. The markets we serve will continue to grow at rapid rates during the next several years. The winners in these markets will be the companies that can offer customers fully integrated end-to-end solutions. We intend to position ourselves to take advantage of the huge opportunities in the markets we serve."
U.S. Robotics also expects to continue its historical strategy building share in the markets which it serves. The company intends to continue to build its sales force, with particular focus on expanding sales of its network systems products domestically and internationally. Depending upon the growth in revenues achieved, these investments, coupled with expenses related to the launch of the company's new x2 products, may cause selling and marketing expenses in the first half of fiscal 1997 to represent a higher percentage of total sales than in recent quarters.
The company's ability to achieve its revenue and profitability objectives in fiscal 1997 will depend on many factors beyond the company's control. These include the timing and market acceptance of x2 and other new products and features announced and introduced by the company and its competitors, and the extent to which the company is successful in implementing its ongoing strategy of continuously improving the performance/cost characteristics of its products through improved designs and manufacturing efficiencies. Other factors include rapid changes in technologies and standards relating to information access and telecommunications.
The foregoing forward-looking statements involve a number of risks and uncertainties. In addition to the factors discussed above, among the other factors that could cause actual results to differ materially are the following: changes in business conditions and growth trends affecting the company's products and markets, the personal computer and telecommunications industries and the economy in general; continuing availability of key components and technologies at competitive prices; a variety of other competitive factors such as price reductions by the company and its competitors and resulting effects on market shares; changes in consumer and business purchasing patterns; the company's merger and acquisition activities, including its success in integrating businesses it has acquired and the amounts of any non-recurring charges related to such activities; and other factors listed from time to time in documents filed by the company with the Securities and Exchange Commission.
U.S. Robotics is one of the world's leading suppliers of products and systems that provide access to information. The company designs, manufactures, markets and supports remote access servers, enterprise communications systems, desktop/mobile client products and modems and telephony products that connect computers and other equipment over analog, digital and switched cellular networks, enabling users to gain access to, manage and share data, fax and voice information. Its customers include Internet service providers, regional Bell operating companies, inter-exchange carriers and a wide range of other large and small businesses, institutions and individuals.
© Copyright 1996 U.S. Robotics |
