Osicom Reports Third Quarter Results, Backlog Expands to $22 Million
December 3, 1998 04:36 PM
SANTA MONICA, Calif.--(BUSINESS WIRE)--Dec. 3, 1998--Osicom Technologies, Inc. FIBR , today reported revenue of $19.0 million for its third fiscal quarter ending October 31, 1998. This compares to revenue of $23.4 million for the third fiscal quarter ended October 31, 1997. The Company reported a loss of $3.6 million or $0.47 per share for the third fiscal quarter of this year, compared to a loss of $4.6 million, or $.85 per share for the same period last year. Company-wide gross margin increased from 31.9% in the third fiscal quarter of last year to a record high of 36.5% in the quarter ended October 31, 1998. The loss per share for the comparable prior period has been restated to reflect the one for three reverse stock split in July.
The Company reported a total cash balance of $3.8 million as of October 31, 1998, up from the $3.4 million reported in the same period in the prior year. Short-term borrowing at the end of the third quarter against the Company's current credit facilities of $27.5 million was $16.4 million, and long-term debt was $3.1 million. To support the current sales growth that we are experiencing and near term production ramp-up in the Transmission, NETsilicon , Network Access and Far East Division. The Company is expanding its available financial resources by an additional $10 million dollars through a combination of bank line expansions and other non-dilutive measures.
The Company reported that backlog increased to $22.2 million as of October 31, 1998, up from the prior quarter's $15.2 million, reflecting strong growth in NETsilicon's backlog and a return to historical backlog for the Far East Division.
CEO, Par Chadha stated, "We have worked long and hard over the last two years to get where we are today. The level of interest in the GigaMux line of products, the success and reception of the NET+ARM chip and significant recovery of our Far East Division reflects the beginning of a significant business transformation. Our near term focus is to strengthen our sales and marketing efforts and we have therefore added depth of management to each of the business units. This will allow us to capitalize on our flagship products."
Segment Analysis
Osicom's VP of Finance, Christopher E. Sue, provided an analysis of the Company's third fiscal quarter performance by business segment. "Reported revenues for the third quarter were less than expected due to continued softness in the Far East and a delay of key components in the NETsilicon business. We are extremely happy to report that our backlog in the Far East division has dramatically turned around and the NETsilicon issue was promptly resolved. Our GigaMux product continued to gain momentum in terms of interest and sales, NETsilicon continued its impressive pace of design win attainment and our Far East Division's backlog is near historical high levels. Furthermore, as a result of the second quarter's restructuring efforts, our overall cost structure was effectively reduced."
Network Access
Gil Goldbeck, VP of Finance and Operations, remarked, "Revenues from Network Access products were $7.2 million compared to the $10.3 million reported in the same period in the prior year. Distribution sales of LAN/WAN products increased 58% over the same period in the prior year. OEM, VAR, and Carrier Sales declined by 31% over the same period in the prior year. We have realigned our sales and marketing group to strengthen sales in these channels. We also look forward to launching a new suite of products over the next few quarters."
The management team of the Network Access business unit has recently been strengthened by the November 23 appointment of a new Chief Operating Officer, Sunil Rajadhyksha. Rajadhyksha had previously worked with the Company on the successful development of the wireless PDA communication products in the Company's Far East Division. Rajadhyksha will have full operating, sales and marketing, and technology development responsibility for the business unit.
Far East Division
Uni Precision Industrial, Ltd. ("Uni"), the Company's Hong Kong-based wholly-owned subsidiary has been the single largest contributing factor in the Company's declining revenues over the last fifteen months. Revenues for the third quarter ended October 31, 1998 were $5.9 million compared with $9.5 million for the same period last year. Revenues for the third fiscal quarter were lower than expected by approximately $1 million. Sales in the Far East Division for the fourth fiscal quarter will however be positively impacted by the previously announced $11 million order which has already been increased to more than $12 million by the RBOC customer. Further bolstering future sales of the Division will be the previously announced contract to supply a wireless PDA communication product to a customer in Japan, the fulfillment of which is expected to begin during the Company's first fiscal quarter of next year. When completed over its 2-year span, the contract is expected to represent over $90 million in sales to the Division.
The Company is pursuing the sale of this business unit in order to focus on its core, higher-margin businesses. To that end, the Company is in discussions with several interested parties and will disclose further details as they develop.
Transmission Products
Revenues for the quarter ended October 31, 1998 were $3.9 million compared with $3.1 million during the same period in the prior year, reflecting the addition of GigaMux sales. During the quarter, GigaMux was successfully deployed in two major US-based telecommunications providers, one of which has already delivered to us purchase orders for two additional systems. Quarter over quarter, the number of potential customers that have begun to consider or evaluate the GigaMux has almost doubled, rising from 41 to 77. Of these 77 evaluators, 35 are in Phase I, 20 are in Phase II, and 22 are in Phase III.
"During the third quarter we expanded our sales and marketing efforts," said Transmission's Vice President of Sales and Marketing, James Chitkowski, "We took steps towards a comprehensive marketing program. One of the key elements of this program was the launch of a series of DWDM seminars intended to inundate the marketplace with the capabilities and adaptability of metro DWDM. The seminars have gone a long way to not only help potential customers understand how to create more capacity on their fiber, but also given them a clear understanding of the GigaMux flexibility. This effort has resulted in numerous in-depth discussions between potential customers and our sales force."
During the quarter we have continued to make progress with partnering relationships. For example, today we are demonstrating the interoperability of ATM and metro DWDM with Fore Systems at the Cable West Show in Anaheim, California.
NETsilicon
Revenues for the quarter ended October 31, 1998 were $3.0 million as compared with $0.9 million for the same period last year. The $3.0 million was below Company expectations due to a temporary delay in the receipt of NET+ARM chip from the supplying foundry. NETsilicon CFO, Daniel Sullivan commented "Our supplier has addressed this issue. We are also adding additional capacity to prevent this type of occurrence in the future. Most importantly, this issue has not seriously impacted our relations with our customers."
NETsilicon's CEO, Pete Peterson said "We have continued to capture design wins, as we have since the NET+ARM was launched on January 5th. As of October 31, 1998, we had a total of 59 design wins in imaging and new markets. Furthermore, we took significant steps to broaden our sales and support infrastructure during the quarter. For instance, during the third quarter, we launched the NET+ARM Developers Program. This program, which already has 10 design houses committed to it, provides NET+ARM training and value-added services to third-party developers and design houses. We also expanded our sales and marketing efforts in key technology regions of the United States by entering into sales agreements with 3 companies, which is a significant step in expanding our nation-wide sales and support organization."
NETsilicon filed a registration statement on August 26, 1998 to offer its shares to the public via a rights offering to Osicom shareholders. The Company today announced that its previously disclosed intention to consider effecting this sale of stock to the public via a traditional IPO has been resolved, and the Company now plans to offer shares of NETsilicon via a traditional IPO as soon as practicable, marketing conditions permitting.
Conference Call
The Company will hold a conference call to discuss the quarterly results with analysts, shareholders, and any other interested parties on Thursday, December 3, 1998, beginning at 4:30 p.m. EST.
Interested parties may dial 1-800-863-3908 in order to participate. The security code is Osicom. In addition, the conference call will be simultaneously broadcast via RealAudio(tm) on Osicom's website homepage located at www.osicom.com and accessible by clicking on the banner "Osicom Q3 Conference Call." A RealPlayer(tm) is required to listen to the webcast and can be downloaded from Osicom's website
Playback of the telephone conference will be available from 7:00 p.m. EST on December 3 to 11:59 a.m. EST on December 10. Interested parties may access the playback by dialing 1-800-858-5309 (in the US) and 33-4-260-0890 (outside the US). The access code is 40084 and the passcode is 31128.
Webcast playback will also be available at osicom.com
About Osicom
Osicom Technologies is a leading provider of integrated networking and bandwidth aggregation solutions for enhancing the performance of existing data and telecommunications networks. The Company combines expertise across multiple disciplines to offer fiber transport, remote access, virtual private networking, video switching and transport, and network systems-on-silicon to carrier and enterprise customers. The Company brings value to its customers by offering end-to-end, single vendor solutions as an integrated set. Osicom's offerings feature open architectures, offer complete scalability and fully support industry standards. The Company's flagship products are the GigaMux family of Dense Wavelength Division Multiplexers (DWDM) for short-haul Metro applications, the NET+ARM system-on-silicon for network connectivity, and the IQX-200 family of scaleable Remote Access Servers. For additional company, product or financial information, visit the Osicom website, www.osicom.com, or call toll free 888-OSICOM8. For calls originating outside the United States, call 301-317-7710.
Except for the historical information contained herein, the matters discussed in this news release are forward-looking statements that involve risks and uncertainties. The forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to a variety of factors, including without limitation the company's ability to develop, produce, and market products that incorporate new technology on a timely basis, that are priced competitively and achieve significant market acceptance; higher expenses associated with the development and marketing of new products; changes in product mix; risks of dependence on third-party component suppliers; inventory risks due to shifts in market demand; the presence of competitors with broader product lines and greater financial resources; intellectual property rights and litigation; needs for liquidity; and the other risks detailed from time to time in the company's reports filed with the Securities and Exchange Commission. GigaMux is a trademark of Osicom Technologies, Inc. All other brands and product names are trademarks of their respective owners. *t
OSICOM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In Thousands, except per share amounts) Three Months Ended Nine Months Ended October 31 October 31 1998 1997 1998 1997 NET SALES $ 19,035 $ 23,350 $ 64,903 $ 88,631
COST OF SALES 12,092 15,910 41,791 60,778
GROSS PROFIT 6,943 7,440 23,112 27,853
OPERATING EXPENSES Selling and marketing 4,071 4,433 12,906 13,521 Engineering, research and development 2,466 1,944 7,433 5,317 General and administrative 3,384 4,912 11,831 12,849 Other operating expenses 213 349 639 11,842
TOTAL OPERATING EXPENSES 10,134 11,638 32,809 43,529
INCOME (LOSS) FROM OPERATIONS (3,191) (4,198) (9,697) (15,676)
OTHER INCOME (CHARGES) Investment income 98 115 298 368 Interest expense (552) (567) (1,562) (1,531) Gain on disposal of assets -- (2) -- 424 Other income (charges) 57 46 230 (11)
TOTAL OTHER INCOME (CHARGES) (397) (408) (1,034) (750)
INCOME (LOSS) BEFORE INCOME TAXES (3,588) (4,606) (10,731) (16,426)
PROVISION FOR INCOME TAXES -- -- -- 16
NET INCOME (LOSS) $ (3,588) $ (4,606) $(10,731) $(16,442)
INCOME (LOSS) PER COMMON SHARE
ACCRUED UNDECLARED DIVIDENDS 38 38 113 113
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES $ (3,626) $ (4,644) $(10,844) $(16,555)
PRIMARY AND FULLY DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (RESTATED, IN THOUSANDS) 7,687 5,449 7,289 4,490
NET INCOME (LOSS) PER COMMON SHARE: $ (0.47) $ (0.85) $ (1.49) $ (3.69)
OSICOM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (In Thousands)
Oct. 31, Jan. 31, 1998 1998 (Unaudited) ASSETS
CURRENT ASSETS Cash and equivalents $ 1,250 $ 1,912 Restricted cash 2,515 2,159 Accounts receivable, net 17,783 19,286 Inventory, net 19,859 21,922 Prepaid expenses and other current assets 4,434 5,319 TOTAL CURRENT ASSETS 45,841 50,598
PROPERTY AND EQUIPMENT, NET 16,563 17,008
OTHER ASSETS Purchased technology, net 1,859 2,138 Excess of cost over net assets acquired, net 6,381 6,743 Capitalized software, net 4,979 4,144 Other assets 9,330 9,056 TOTAL OTHER ASSETS 22,549 22,081
TOTAL ASSETS $ 84,953 $ 89,687
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES Short-term debt $ 16,402 $ 14,905 Current maturities of long term debt 666 742 Accounts payable 16,499 21,768 Accrued liabilities 5,852 4,628 Other current liabilities 813 913 Income taxes payable -- 339 TOTAL CURRENT LIABILITIES 40,232 43,295
Long-term debt and capital lease obligations 3,052 3,294 Deferred income taxes 378 378 TOTAL LIABILITIES 43,662 46,967
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY Preferred stock, $.01 par value; cumulative dividends; liquidation preference $12,738 including accumulated dividends 1 1 Common stock, $.30 par value; 16,667 shares authorized; 8,779 shares issued 8,699 shares outstanding at October 31, 1998; 6,896 shares issued and 6,892 shares outstanding at January 31, 1998 2,634 2,069 Additional paid-in capital 83,242 74,003 Accumulated deficit (44,062) (33,331) Treasury stock, at cost; 80 shares and 22 shares at October 31, 1998 and January 31, 1998, respectively (524) (22) TOTAL STOCKHOLDERS' EQUITY 41,291 42,720
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 84,953 $ 89,687
OSICOM TECHNOLOGIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (In Thousands)
NETWORK EMBEDDED TRANS- FAR SUBTOTAL INTER TOTAL ACCESS NETWORK MISSION EAST DIVISION ELIMINA- TIONS
THREE MONTHS ENDED OCTOBER 31, 1998:
NET SALES $7,204 $3,016 $3,873 $5,860 $19,953 $(918) $19,035
COST OF SALES 4,000 2,047 2,129 4,834 13,010 (918) 12,092
GROSS PROFIT $3,204 $969 $1,744 $1,026 $6,943 $-- $6,943
GROSS MARGIN 44.5% 32.1% 45.0% 17.5% 34.8% 36.5%
THREE MONTHS ENDED JULY 31, 1998:
NET SALES $8,513 $3,199 $3,389 $6,028 $21,129 $(809) $20,320
COST OF SALES 4,650 1,497 2,213 5,429 13,789 (809) 12,980
GROSS PROFIT $3,863 $1,702 $1,176 $599 $7,340 $-- $ 7,340
GROSS MARGIN 45.4% 53.2% 34.7% 9.9% 34.7% 36.1%
THREE MONTHS ENDED APRIL 30, 1998:
NET SALES $7,996 $2,185 $4,607 $11,310 $26,098 $(550) $25,548
COST OF SALES 4,240 1,037 2,280 9,712 17,269 (550) 16,719
GROSS PROFIT $3,756 $1,148 $2,327 $1,598 $8,829 $-- $8,829
GROSS MARGIN 47.0% 52.5% 50.5% 14.1% 33.8% 34.6%
THREE MONTHS ENDED OCTOBER 31, 1997:
NET SALES $10,320 $891 $3,133 $9,524 $23,868 $(518) $23,350
COST OF SALES 5,690 442 2,219 8,077 16,428 (518) 15,910
GROSS PROFIT $4,630 $449 $914 $1,447 $7,440 $-- $7,440
GROSS MARGIN 44.9% 50.4% 29.2% 15.2% 31.2% 31.9%
NINE MONTHS ENDED OCTOBER 31, 1998:
NET SALES $23,713 $8,400 $11,869 $23,198 $67,180 $(2,277) $64,903
COST OF SALES 12,890 4,581 6,622 19,975 44,068 (2,277) 41,791
GROSS PROFIT $10,823 $3,819 $5,247 $3,223 $23,112 $-- $23,112
GROSS MARGIN 45.6% 45.5% 44.2% 13.9% 34.4% 35.6%
NINE MONTHS ENDED OCTOBER 31, 1997:
NET SALES $32,566 $6,065 $ 8,283 $43,115 $90,029 $(1,398) $88,631
COST OF SALES 17,638 3,187 5,246 36,105 62,176 (1,398) 60,778
GROSS PROFIT $14,928 $2,878 $ 3,037 $ 7,010 $27,853 $-- $27,853
GROSS MARGIN 45.8% 47.5% 36.7% 16.3% 30.9% 31.4%
OSICOM TECHNOLOGIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (Continued)
GigaMux(TM) Sales Cycle Evolution
May 28 July 28 August 28 October 28 1998 1998 1998 1998 PHASE 1 14 25 12 35
PHASE 2 4 6 23 20
PHASE 3 4 10 16 22 TOTAL 22 41 51 77 PHASE 1: Customer Requests Information
PHASE 2: Customer Issues Request for Proposal
PHASE 3: Customer Request Price Quotation
|
