To All. Please help me out here. As we know current expectations
for Q3 are at $0.12 and many people are worried on even that much.
On 9/22 MRVC filed this with the SEC:
In August 1998, MRV announced that it expects operating results in
the third quarter of 1998 to be adversely affected by weaker than
anticipated demand for its networking products and delays in its
transitions to next generation, higher margin, networking products.
The Company expects that:
- revenue will be down 10% to 15% from second quarter
revenue of $65.7 million,
- the gross margin percentage will be down to or slightly
below 43% from the second quarter percentage of 44.1%
- and operating expenses, consisting of selling, general and
administrative expenses and research and development
expenses, to be approximately 8% to 10% higher than
second quarter total operating expenses of $17.4 million.
The Company currently plans to introduce its next generation
networking products before the end of 1998.
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I ran these numbers on a spreadsheet, making a separate column
for each assumed range from the SEC document. I used a GM of 42.9%.
For other income, I added the $90 million at 5.5% for 1/4 year
and other investments of $50.
I think this is valid, because the interest payments on the
$100 million are paid every June and December, so they will have
increased interest, but not interest expense.
Tax rate was assumed to be the same as in Q2 (28.75%)
Basic EPS used 26,492 shares. Diluted used 28,536, the same as in Q2,
so the positive effects of the share buyback is not considered.
For Yuks, I included two last columns where a 10% revenue INCREASE is
assumed, to simulate what this new cost structure might look like with
a good Q4.
Here are the results: (Sorry for SI's lousy formatting)
Q2 Earnings Reduced 10%, Reduced 10%, Reduced 15%, Reduced 15%, Increased 10%, Increased 10%,
as reported 1.08 Op Exp 1.10 Op Exp 1.08 Op Exp 1.10 Op Exp 1.08 Op Exp 1.10 Op Exp
G. M. 0.441 0.429 0.429 0.429 0.429 0.429 0.429
Revenue 65,742.00 59,167.80 59,167.80 55,880.70 55,880.70 72,316.20 72,316.20
COGS 36,749.78 33,784.81 33,784.81 31,907.88 31,907.88 41,292.55 41,292.55
R&D 5,282.00 5,704.56 5,810.20 5,704.56 5,810.20 5,704.56 5,810.20
SG&A 12,119.00 13,088.52 13,330.90 13,088.52 13,330.90 13,088.52 13,330.90
Op Inc 11,591.22 6,589.91 6,241.89 5,179.74 4,831.72 12,230.57 11,882.55
Oth Inc 690.00 1,960.00 1,960.00 1,960.00 1,960.00 1,960.00 1,960.00
Pre-Tax 12,281.22 8,549.91 8,201.89 7,139.74 6,791.72 14,190.57 13,842.55
Tax (3,529.99) (2,457.50) (2,357.47) (2,052.18) (1,952.14) (4,078.80) (3,978.76)
Net Inc 8,751.23 6,092.41 5,844.42 5,087.56 4,839.58 10,111.77 9,863.79
Basic 0.33 0.23 0.22 0.19 0.18 0.38 0.37
Diluted 0.31 0.21 0.20 0.18 0.17 0.35 0.35
As you can see, EPS is significantly higher that 12 cents
with even the most pessimistic assumptions. To get $0.12, you
have to take Gross Margins down all the way to 39% - way to low to be realistic.
Have I made any errors? Comments? Do we have reason to hope? |
