U.S. Robotics Reports Record Revenues and Earnings for First Quarter;
Revenues up 77%, Earnings up 66%
BusinessWire, Tuesday, January 21, 1997 at 16:25
SKOKIE, Ill.--(BUSINESS WIRE)--Jan. 21, 1997--
-- First Quarter Revenues a Record $645.4 Million --
-- First Quarter Earnings, a Record $69.0 Million ($.72 per Share) --
U.S. Robotics Corporation (NASDAQ:USRX) today reported record
revenues of $645.4 million and record net earnings of $69.0 million
($.72 per share on 96.3 million weighted averages shares outstanding)
for its fiscal first quarter ended December 29, 1996.
Revenues for the first quarter of fiscal 1997 increased 77% over
the $364.8 million recorded for the corresponding quarter of the
previous year. Net earnings for the first quarter of fiscal 1997
increased 66% from the $41.6 million recorded for the first quarter
of fiscal 1996. Net earnings per share for the quarter were $.72,
based on 96.3 million weighted average shares outstanding, compared
to $.45 on 92.9 million weighted average shares outstanding for the
first quarter of the prior year.
The company attributed the growth in revenues to continuing
strong demand for its products in all of the markets it serves
worldwide, noting that increased unit sales of its PC-related
products were the primary reason for the higher revenues and
earnings. Unit sales of the company's PC-related products, which
include desktop modems, PC card modems and the Pilot connected
organizer, in the first quarter were up 80%, while average selling
prices for these products were unchanged compared to the
corresponding period in 1996.
Gross margins increased to 42.8% in the current quarter compared
to 41.8% for the corresponding period in 1996. This increase was due
primarily to reductions in the manufactured cost of the company's
products, partially offset by changes in the mix of products sold in
each of the periods. Operating expenses were $165.0 million or 25.6%
of sales in the quarter compared to $88.9 million or 24.3% of sales
in the corresponding period of 1996. The increase was related
primarily to increased selling and marketing costs.
The increased commitment of resources to sales activities relates
to the company's entire business but is particularly critical to
expanding international sales of its network systems products.
Substantial marketing expenditures also were made in connection with
the introduction of the company's new x2 technology (56Kbps). x2 is
a key breakthrough in modem technology that enables Internet and
other network downstream connections at speeds nearly twice as fast
as those currently available over standard telephone lines.
Revenues for the first quarter of fiscal 1997 increased by
$34.0 million, or 6% over the $611.4 million reported for the fourth
quarter of fiscal 1996. Net earnings for the first quarter increased
411% to $69.0 million from the $13.5 million posted for the preceding
quarter. Net earnings per share increased $.58 over the previous
quarter's $.14 per share on 95.7 million weighted averages shares
outstanding. Included in the fourth quarter results was an
acquisition related non-recurring charge of $54.0 million. Excluding
the non-recurring charge, net earnings for the fourth quarter of
fiscal 1996 were $67.5 million or $.71 per share.
Revenues from sales of the company's desktop and PC card modem
products increased slightly as a percentage of total revenues during
the quarter. The change in the percentage of total revenues
attributable to the sale of systems products was primarily due to
lower shipments to a single large customer in the December quarter
compared to the September quarter. Total international sales for the
quarter were $193.5 million, or 30% of total sales, up from 25% for
the fourth quarter of fiscal 1996.
Sales of modem products to end users by the company's
distribution channel partners increased significantly during the
first quarter, continuing an established trend. Shipments of
Sportster products by the company to its distributors were extremely
strong during the last two weeks of December. This was due to the
fulfillment of replenishment orders received from these customers at
the close of the holiday selling season. At the end of the December
quarter, Sportster inventory levels held by North American
distribution channel customers, as measured in weeks of sales, were
essentially unchanged from those at the end of the September quarter.
Gross margins increased 42.8% in the December quarter from 41.9%
in the September quarter. The increase was primarily due to reduced
costs to manufacture the company's products, partially offset by
changes in product mix.
Total operating expenses for the first quarter were $165.0
million or 25.6% of net sales. As a percentage of net sales, these
expenses increased slightly from 24.3% in the preceding quarter. The
primary reasons were increased employee-related costs stemming from a
6% rise in the number of employees in sales, marketing and research
and development during the quarter as well as increases in spending
related to marketing and advertising programs due to the company's x2
launch. The company continued to make substantial investments in
building its worldwide sales force, expanding it approximately 5%
over and above the 20% increase in the September quarter.
Outlook
The following statements include forward-looking statements and
actual results may differ materially.
Commenting on the quarter, U.S. Robotics President and Chief
Operating Officer John McCartney said, "Demand continues to be
strong for our expanding portfolio of information access products,
including Total Control Enterprise Network Hubs, Sportster modems,
Megahertz PC cards and Pilot connected organizers. In addition, the
coming availability of our x2 56 Kbps technology is expected to have
a widespread impact on Internet users by enabling them to have a more
satisfying online experience." Mr. McCartney added that the company
expects demand for all of its product lines to continue to grow
substantially during the remainder of the 1997 fiscal year as
world-wide requirements for highly integrated, cost-effective,
end-to-end information access solutions increase.
Mr. McCartney stated that revenue growth in the second quarter
of 1997 will depend to a large extent on the timing of its Internet
and online service provider customers making available x2 (56Kbps)
service and the resultant consumer and corporate demand for x2
enabled products. While gross margin increased 0.9% during the
December quarter, he reiterated that the company expects gross
margins for 1997 to remain consistent with the approximately 41%-42%
achieved during 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 those listed in the company's most recent report on
Form 10-K and included from time to time in other 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.
Tables follow.
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