Ancor Reports Fourth Quarter Results; Initial OEM Contracts Won, Financial Position Improved
MINNEAPOLIS, Feb. 11 /PRNewswire/ -- Ancor Communications, Inc.
(Nasdaq: ANCR) today reported a net loss of $1,317,000, or $.07 per diluted
share, on revenues of $2,984,000 for the fourth quarter ended December 31,
1998. In the comparable 1997 period, the company reported a net loss of
$3,738,000, or $.33 per share, on revenues of $596,000.
For the year ended December 31, 1998, Ancor reported a net loss of
$14,498,000, or $1.04 per share, on revenues of $4,393,000 compared to a net
loss of $9,823,000, or $.93 per share, on revenues of $7,924,000 in 1997.
Results for 1998 include a charge of $4.4 million taken in the second quarter
of 1998 for additions to reserves for inventory.
Per share figures for the quarter and year ended December 31, 1998 reflect
an increase in the number of shares outstanding resulting from the conversion
of a portion of the company's Preferred Shares into Common Shares.
Approximately $250,000 of the company's preferred stock currently remains
outstanding. Common Shares currently outstanding total approximately
24.0 million.
Gross revenues of $1,126,000 for the 1997 fourth quarter were reduced by a
$530,000 charge, resulting in net revenues of $596,000 for the period. In
addition, 1997 fourth quarter results also include special charges of
$1,075,000, or $.10 per share, reflecting the effects of certain inventory and
sales reserves that were established during the quarter.
1998 Fourth Quarter Results
Ken Hendrickson, Ancor's chairman and chief executive officer, said
Ancor's fourth quarter results benefited from shipments to Boeing under a
$1.9 million order for several of the company's GigWorks(TM) Fibre Channel
switches. The order was awarded during the company's third quarter.
Ancor's fourth quarter revenues also reflect modest sales of GigWorks
switches for Storage Area Network applications, revenue recognized under the
licensing agreement with INRANGE Technologies and sales to Netmarks, the
company's new distributor in Japan, for inventory initially delivered to the
company's former distributor. "The transition to our new distribution
arrangement with Netmarks is now complete," said Hendrickson. "Netmarks has
retained key sales and support personnel from our former distributor and is
now focusing on OEM storage area networking opportunities in Japan."
Ancor Wins Four OEM Contracts
Since December 15, 1998, Ancor has won four contracts to provide GigWorks
switches to original equipment manufacturers (OEMs) for storage area network
(SAN) applications. "These contracts, as well as increased interest in Fibre
Channel industry-wide, affirm the growing acceptance of Fibre Channel as the
preferred communications technology for storage area networks," said
Hendrickson.
Ancor has won OEM contracts for its Fibre Channel switches from Prisa
Networks, Forefront Graphics, INRANGE Technologies and JNI (formerly Jaycor
Networks Inc.). Ancor will work with Prisa Networks, a leading Fibre Channel
solutions provider, to offer major components of a fully integrated Fibre
Channel SAN infrastructure as part of the Silicon Graphics(R) Bandwidth
Solutions program. Forefront Graphics will integrate and sell GigWorks MKII
switches as part of its storage area network solution for the entertainment
and pre-press industries. INRANGE Technologies has selected Ancor to provide
GigWorks MKII switches in both 8-port and 16-port configurations for
integration into INRANGE's Fibre Channel/9000 SAN switches. This agreement is
in addition to the licensing agreement with INRANGE announced in the fall of
1998. JNI will test, integrate and sell Ancor's MKII family of switches as
part of a complete SAN solution for the high-end enterprise market.
"We are very encouraged by these OEM agreements and currently expect to be
bringing programs from these customers online in volume in late 1999 or early
the following year," said Hendrickson. He noted that, in anticipation of
customer needs, Ancor continues to add account management and technical
personnel and to expand the infrastructure needed to support higher production
volumes.
"Among the major OEMs, there are many more contracts yet to be awarded.
We continue to pursue additional opportunities very aggressively, with
evaluation units in place at multiple prospective customers," said
Hendrickson.
Hendrickson said that Ancor's open systems architecture should prove
valuable to the company's continuing efforts to win additional OEM contracts.
"Our open systems architecture allows us to easily enhance our products to
comply with evolving standards and interoperability initiatives led by
organizations such as the American National Standards Institute, the Fibre
Channel Association, the Fibre Channel Loop Community, the Storage Networking
Industry Alliance and the EMC FibreAlliance," said Hendrickson. "Our
technology is superior in enabling the any-to-any connectivity the marketplace
requires and that is critical to accelerating the adoption of Fibre Channel in
storage area networks."
Financial Position Improves
During the fourth quarter, Ancor received the second of three scheduled
$3.0 million payments from INRANGE Technologies under a licensing and royalty
agreement the companies signed in September 1998. The company is scheduled to
receive an additional $3.0 million payment in the quarter ending March 31,
1999. The company will record the license fee as revenue over the five-year
term of the contract and royalty revenue as INRANGE products ship.
"Our partnership with INRANGE is proceeding as planned as we continue to
work with them across a range of future products," said Hendrickson. "With
the improvement in our revenues and the payments received under this contract,
our financial position has improved and we are adequately funded for the near
term," he said.
"Entering 1999, we are very confident about our prospects," said
Hendrickson. "Interest in our GigWorks MKII-8 switch is exceeding our
expectations. Thanks to its low per-port price and robustness, we believe
this product is helping accelerate Fibre Channel's deployment in storage area
network applications."
Forward Looking Statements
Information contained in this news release other than historical
information should be considered forward-looking and subject to risks and
uncertainties. Factors which may affect whether such forward-looking
statements can be achieved include: market acceptance of Fibre Channel
products in general, the timing of the adoption of Fibre Channel by the
marketplace, acceptance of Ancor's products in the marketplace, the ability of
Ancor to compete with other companies offering Fibre Channel switches and
products, the timing of customer orders, including whether customers will
purchase products from the Company at the rates and times projected by those
customers, and the ability of INRANGE to successfully market and sell Fibre
Channel products incorporating technology licensed from the Company.
Retention of $2.0 million of prepaid royalties from INRANGE is contingent on
Ancor's completion of certain deliverables defined in the contract with
INRANGE.
About Ancor Communications
Ancor Communications, Inc. provides GigWorks(TM) high performance storage
and data-intensive network solutions based on Fibre Channel technology. The
company was the first to deliver a Fibre Channel switch, and the first to top
the one-gigabit performance level. Ancor is a member of the Fibre Channel
Association, the Storage Networking Industry Alliance, the Fibre Channel Loop
Community, the ANSI Standards Committee and the University of New Hampshire
Fibre Channel Consortium to promote the advancement of Fibre Channel standards
and interoperability. Information about Ancor is available on the World Wide
Web at ancor.com
(Summarized financial data follow)
For more information about Fibre Channel technology and Ancor Fibre
Channel solutions, call 800-342-7379 or access World Wide Web site
ancor.com. Media, contact Mary Miller, Ancor, at 612-932-4071 or
marym@ancor.com or Aaron Pearson, Shandwick, at 612-832-5000 or
apearson@shandwick.com.
Forward-looking statements as defined by the Private Securities Litigation
Reform Act of 1995 are qualified by the risk factors outlined in the documents
Ancor Communications, Inc. files with the Securities and Exchange Commission.
ANCOR COMMUNICATIONS, INCORPORATED
STATEMENT OF OPERATIONS
Three Months Ended Twelve Months Ended
December 31, December 31,
1998 1997 1998 1997
Net sales $2,983,634 $595,587 $4,393,197 $7,924,001
Cost of goods sold 1,023,994 1,067,390 6,431,411 5,990,661
Gross profit 1,959,640 (471,803) (2,038,214) 1,933,340
Operating expenses
Selling, general
and administrative 1,868,400 2,264,171 7,195,294 7,684,638
Research and
development 1,446,243 1,036,179 5,450,943 4,271,393
Total operating
expenses 3,314,643 3,300,350 12,646,237 11,956,031
Operating loss (1,355,003) (3,772,153) (14,684,451) (10,022,691)
Nonoperating income
(expense)
Interest expense (5,513) (8,191) (33,532) (18,717)
Other, primarily
interest income 43,320 42,127 219,530 218,408
Net loss (1,317,196) (3,738,217) (14,498,453) (9,823,000)
Accretion on
convertible
preferred stock (97,082) (69,747) (761,704) (344,939)
Net loss attributable
to common
shareholders ($1,414,278) ($3,807,964)($15,260,157)($10,167,939)
Basic and diluted net
loss per common share ($0.07) ($0.33) ($1.04) ($0.93)
Weighted average common
shares outstanding 21,309,010 11,682,312 14,741,431 10,963,416
ANCOR COMMUNICATIONS, INCORPORATED
BALANCE SHEETS
December 31, December 31,
1998 1997
ASSETS
Current Assets:
Cash and cash equivalents $3,477,236 $2,001,404
Short-term investments 3,970,137 0
Accounts receivable, less allowances
of $39,492 and $804,000, respectively 442,601 1,499,634
Inventories 1,288,868 2,493,722
Prepaid expenses and other current assets 110,398 154,983
Total current assets 9,289,240 6,149,743
Equipment, net of accumulated depreciation 3,120,618 3,273,528
Patents, prepaid royalties, and other assets,
net of accumulated amortization 195,668 269,190
Capitalized software development costs
net of accumulated amortization 132,568 471,043
TOTAL ASSETS $12,738,094 $10,163,504
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $139,791 $65,145
Accounts payable 448,383 963,321
Accrued liabilities 955,677 687,990
Unearned Revenue 2,146,936 1,000
Total current liabilities 3,690,787 1,717,456
Long-term unearned revenue, less current 3,727,919 --
Long-term debt, less current maturities 110,997 129,702
Shareholders' Equity
Capital Stock 46,799,046 35,408,549
Accumulated deficit (41,590,655) (27,092,202)
Total shareholders' equity 5,208,391 8,316,346
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $12,738,094 $10,163,504
SOURCE Ancor Communications, Inc.
CO: Ancor Communications, Inc.
ST: Minnesota
IN: TLS
SU: ERN
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