Mitel Corporation Releases Fiscal 2001 Second Quarter Results
Friday November 3, 7:34 am Eastern Time
Press Release
OTTAWA--(BUSINESS WIRE)--Nov. 3, 2000--MITEL (TSE:MLT. - news; NYSE:MLT - news; LSE:MLT.L)
* Record Semiconductor sales, up 39%
* Order backlog remains strong
Mitel Corporation (NYSE:MLT - news; TSE:MLT. - news) today announced second quarter results for the Fiscal 2001 quarterly period ended September 29, 2000.
``We continue to benefit from a strong performance by our Semiconductor division while our Systems business is beginning to recover,'' said Kirk K. Mandy, President and Chief Executive Officer, Mitel Corporation. ``Our integration of Vertex Networks is proceeding smoothly and we continue to make important R&D investments in high-growth areas related to the Internet and broadband interconnection.''
Revenue for the quarter reached $359.8 million, up 3% from $348.8 million for the same period last year.
Adjusted Net Income (+) for the quarter was $30.5 million or $0.24 per share, up from $27.7 million or $0.23 per share in the second quarter of Fiscal 2000. The improvement results from solid growth of the company's Semiconductor business in the areas of broadband networking, subscriber access and digital TV, offset by weak performance in the Systems business.
Order backlog at the end of the quarter was $312.5 million, compared with $322.8 million at the close of the previous quarter.
In the second quarter, Mitel recorded net income of $6.6 million, or $0.05 per share, after the amortization of acquired intangibles of $23.9 million. This compares to a net income of $12.5 million, or $0.10 per share in the same period of Fiscal 2000, after the amortization of acquired intangibles of $15.2 million.
For the quarter, cash flow from operations before working capital changes was $63.8 million, up by 12% from $57.2 million for the same period in the previous year. This results chiefly from increased earnings in the company's Semiconductor division.
Cash and short-term investments reached $230 million at September 29, 2000, up from $165.9 million at the end of the previous quarter.
Review of Operations
Mitel Semiconductor
Mitel Semiconductor sales for the second quarter of Fiscal 2001 reached a record $194.3 million, a 39% increase over the $139.4 million achieved for the same period in Fiscal 2000.
For the quarter, operating income was $40.2 million, up substantially from the $16.6 million recorded for the same period last year. This improvement resulted from higher sales and improved manufacturing utilization.
Semiconductor order backlog was $279.7 million for the quarter, compared with $287.9 million at the end of the previous quarter, and up by $27.1 million from the beginning of the year.
``Our Semiconductor business continues to perform well in areas of broadband networking, subscriber access and set-top boxes,'' said Mandy. ``In addition, our integration of Vertex Networks is on track and producing results. In September we introduced the first products from this integration and are currently offering a more compelling selling proposition focused on improved IP-based Quality of Service (QoS) in local and wide area networking.''
Mitel Communications Systems
Mitel Communications Systems recorded second quarter revenue of $165.5 million, up from $145.0 million in the first quarter, and this compared to $209.4 million for the second quarter of Fiscal 2000.
The division's operating income for the quarter was $3.7 million as compared to an operating loss in the previous quarter. For the same period last year, operating income was $26.3 million.
``As expected, sales have rebounded from the previous quarter,'' said Mandy. ``We are maintaining a tight control on costs while continuing investment in R&D as we lead the evolution from conventional PBX technology to IP-based solutions.''
Margins and Expenses
Gross margin for the quarter improved from 47% of revenue last year to 49%, reflecting higher shipments, an improved product mix and increased production efficiencies in Semiconductor.
Selling and administrative expenses declined to 24% of sales, a reduction of one percentage point from the same quarter of Fiscal 2000.
Research and development expenses were 13% of sales, up sharply by three percentage points from the second quarter of last year. For Fiscal 2001, second quarter R&D expenses were $45.9 million. The increase is attributable to the consolidation of R&D expenses from Vertex Networks coupled with the increased R&D activity in the Semiconductor division.
Fiscal 2001 Outlook
Based on the current view of its businesses, Mitel Corporation is projecting that adjusted earnings per share for the third quarter will be in the order of $0.15 per share. For the year, the company expects adjusted earnings per share to be approximately $0.80 per share, reflecting reduced Systems sales as against earlier expectations.
This projection is based on a growth rate of 30 per cent in Semiconductor sales for the year. Further Systems sales for the year, are expected to be approximately 20 per cent below fiscal 2000..
Mitel to Separate its Semiconductor and Systems Businesses
Mitel also reported that its Board of Directors has determined that it will separate its Systems business from the high-growth Semiconductor business. This decision was developed in response to increasing differences in customer types, technology roadmaps, investment requirements and, most importantly, the competitive needs of the two businesses.
``Both of our divisions are now at a critical juncture,'' said Kirk K. Mandy, President & CEO, Mitel. ``This decision will eliminate any confusion and uncertainty among the largest customers of one division who happen to be the largest competitors of our other division. Our objective is optimizing the business prospects for each division and, hence, shareholder value.''
About Mitel
Mitel is a global provider of semiconductors and communication systems for converging voice and data networks in a rapidly evolving Internet economy. The company has annual revenues of $1.4 billion and employs some 6,000 people worldwide.
(+) As a supplementary measure to assess financial performance, management utilizes Adjusted Net Income and Adjusted Net Income per common share which exclude the impact of amortization of acquired intangibles, special charges, non-cash debt issue and other costs expensed on an early partial debt repayment, and discontinued operations.
Certain statements in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of the company, to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and assumptions include, among others, the risks discussed in documents filed by the Company with the Securities and Exchange Commission. Investors are encouraged to consider the risks detailed in those filings.
A conference call for analysts will be held today from 8:30-9:30am ET. Media can listen by dialing 1-800-273-9672. A replay number is 1-800-408-3053 or 416-695-5800, passcode 576442. The replay will be available until November 8. The call will also be webcast via www.Q1234.com.
A conference call for media will be held today from 9:30-10:00 ET. The call number is 1-800-273-9672. The replay number is 1-800-408-3053 or 416-695-5800, passcode 586171. It will be available until November 8.
Mitel Corporation
CONSOLIDATED BALANCE SHEETS
(in millions of Canadian dollars)
(Unaudited)
Sept. 29, March 31,
2000 2000
--------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 227.6 $ 195.5
Short-term investments 2.4 32.9
Accounts receivable 288.4 288.2
Inventories 190.1 187.7
Prepaid expenses and other 35.2 37.2
Future income tax assets 5.7 9.5
--------------------------
749.4 751.0
Long-term receivables 22.6 21.7
Fixed assets 439.2 457.4
Acquired intangible assets 262.7 3.0
Patents, trademarks and other 9.4 11.3
--------------------------
$ 1,483.3 $ 1,244.4
--------------------------
--------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 189.6 $ 215.4
Income and other taxes payable 9.3 26.2
Future income tax liabilities 6.6 11.7
Deferred revenue 39.9 44.1
Current portion of long-term debt 30.3 57.9
--------------------------
275.7 355.3
Long-term debt 208.9 217.5
Pension liability 16.8 13.4
Future income tax liabilities 23.6 27.2
--------------------------
525.0 613.4
--------------------------
Shareholders' equity:
Capital stock
Preferred shares 36.9 37.0
Common shares 634.0 325.6
Contributed surplus 9.2 9.2
Retained earnings 288.4 262.6
Translation account (10.2) (3.4)
--------------------------
958.3 631.0
--------------------------
$ 1,483.3 $ 1,244.4
--------------------------
--------------------------
Mitel Corporation
CONSOLIDATED STATEMENTS OF INCOME
(in millions of Canadian dollars, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
Sept. 29, Sept. 24, Sept. 29, Sept. 24,
2000 1999 2000 1999
------------------------------------------
Revenue $ 359.8 $ 348.8 $ 688.6 $ 660.0
------------------------------------------
Cost of sales:
Cost of sales other than
amortization 169.4 166.8 319.8 318.0
Amortization of manufacturing
assets 15.5 17.4 32.5 34.9
------------------------------------------
184.9 184.2 352.3 352.9
------------------------------------------
Gross margin 174.9 164.6 336.3 307.1
------------------------------------------
Expenses:
Selling and administrative 85.1 88.0 172.8 173.4
Research and development (net) 45.9 33.7 85.6 72.5
Amortization of acquired
intangibles 23.9 15.2 27.1 32.3
------------------------------------------
154.9 136.9 285.5 278.2
------------------------------------------
Operating income 20.0 27.7 50.8 28.9
Interest income 3.4 1.7 6.4 3.6
Interest expense (4.8) (5.2) (10.1) (10.4)
Debt issue costs - - (0.6) -
------------------------------------------
Income before income taxes 18.6 24.2 46.5 22.1
Income tax expense 12.0 11.7 18.4 14.2
------------------------------------------
Net income for the period $ 6.6 $ 12.5 $ 28.1 $ 7.9
------------------------------------------
------------------------------------------
Net income attributable to
common shareholders after
preferred share dividends $ 5.8 $ 11.7 $ 26.5 $ 6.3
------------------------------------------
------------------------------------------
Net income per common share:
Basic $ 0.05 $ 0.10 $ 0.23 $ 0.05
------------------------------------------
------------------------------------------
Fully diluted $ 0.05 $ 0.10 $ 0.22 $ 0.05
------------------------------------------
------------------------------------------
Weighted average number of
common shares outstanding
(millions):
Basic 121.3 114.9 117.7 115.6
------------------------------------------
------------------------------------------
Fully diluted 122.6 121.1 120.8 116.0
------------------------------------------
------------------------------------------
Mitel Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of Canadian dollars)
(Unaudited)
Six Months Ended
Sept. 29, Sept. 24,
2000 1999
----------------------------
CASH PROVIDED BY (USED IN)
Operating activities:
Net income for the period $ 28.1 $ 7.9
Amortization of capital and other assets 83.4 84.4
Investment tax credits 5.2 4.5
Loss (gain) on sale of capital assets 2.4 (0.1)
Future income taxes (3.4) (2.8)
Change in pension liability 0.3 0.6
(Increase) decrease in working capital (45.8) 5.6
----------------------------
Total 70.2 100.1
----------------------------
Investing activities:
Change in short-term investments 39.3 (27.8)
Additions to capital and other assets (44.0) (28.1)
Proceeds from disposal of capital assets 1.1 0.1
Acquisitions 10.3 -
Net change in non-cash balances related to
investing activities (3.6) (7.8)
----------------------------
Total 3.1 (63.6)
----------------------------
Financing activities:
Repayment of long-term debt (27.1) (5.3)
Repayment of capital lease liabilities (19.3) (16.4)
Dividends on preferred shares (1.6) (1.6)
Issue of common shares - net 7.0 0.3
Repurchase of common and preferred shares (0.1) (26.1)
Net change in non-cash balances related to
financing activities - (0.1)
----------------------------
Total (41.1) (49.2)
----------------------------
Effect of currency translation on cash (0.1) (0.6)
----------------------------
Increase (decrease) in cash and cash
equivalents 32.1 (13.3)
Cash and cash equivalents, beginning of period 195.5 125.3
----------------------------
Cash and cash equivalents, end of period $ 227.6 $ 112.0
----------------------------
----------------------------
Mitel Corporation
SUPPLEMENTARY SCHEDULES
(in millions of Canadian dollars, except per share amounts)
(Unaudited)
Adjusted Net Income
As a supplementary measure to assess financial performance,
management utilizes Adjusted Net Income and Adjusted Net Income per
common share which exclude the impact of amortization of acquired
intangibles, special charges (net) and non-cash debt issue costs
expensed on an early partial debt repayment. The Adjusted Net Income
and Adjusted Net Income per common share were as follows:
Three Months Ended Six Months Ended
Sept. 29, Sept. 24, Sept. 29, Sept. 24,
2000 1999 2000 1999
------------------------------------------
Net income for the period
as reported $ 6.6 $ 12.5 $ 28.1 $ 7.9
Adjusted net income, as
adjusted for:
Amortization of acquired
intangibles 23.9 15.2 27.1 32.3
Debt issue costs - - 0.6 -
------------------------------------------
Adjusted Net Income for the
period $ 30.5 $ 27.7 $ 55.8 $ 40.2
------------------------------------------
------------------------------------------
Adjusted Net Income per
common share - basic $ 0.24 $ 0.23 $ 0.46 $ 0.33
------------------------------------------
------------------------------------------
Geographic Information
Revenue, based on the geographic location of Mitel's customers, was
distributed as follows:
Three Months Three Months
Ended Ended
Sept. 29, % of Sept. 24, % of
2000 Total 1999 Total
---------------------------------------------------
United States $ 170.7 48 % $ 163.4 47 %
Europe 123.1 34 109.5 31
Asia/Pacific 43.0 12 38.4 11
Canada 15.1 4 19.8 6
Other Regions 7.9 2 17.7 5
---------------------------------------------------
Total $ 359.8 100 % $ 348.8 100 %
---------------------------------------------------
---------------------------------------------------
Six Months Six Months
Ended Ended
Sept. 29, % of Sept. 24, % of
2000 Total 1999 Total
---------------------------------------------------
United States $ 314.9 46 % $ 302.1 46 %
Europe 235.7 34 215.3 33
Asia/Pacific 95.2 14 72.6 11
Canada 29.1 4 36.3 5
Other Regions 13.7 2 33.7 5
---------------------------------------------------
Total $ 688.6 100 % $ 660.0 100 %
---------------------------------------------------
---------------------------------------------------
Mitel Corporation
SUPPLEMENTARY SCHEDULES
(in millions of Canadian dollars)
(Unaudited)
Information On Business Segments
Three Months Ended Unallocated
September 29, 2000 Semiconductor Systems Costs Total
----------------------------------------------------------------------
Total external sales revenue $ 194.3 $ 165.5 $ - $ 359.8
Amortization of buildings and
equipment 22.7 5.2 - 27.9
Amortization of acquired intangibles - - 23.9 23.9
Segment's operating income from
continuing operations 40.2 3.7 (23.9) 20.0
Three Months Ended Unallocated
September 24, 1999 Semiconductor Systems Costs Total
----------------------------------------------------------------------
Total external sales revenue $ 139.4 $ 209.4 $ - $ 348.8
Amortization of buildings and
equipment 20.4 4.4 - 24.8
Amortization of acquired intangibles - - 15.2 15.2
Segment's operating income from
continuing operations 16.6 26.3 (15.2) 27.7
Six Months Ended Unallocated
September 29, 2000 Semiconductor Systems Costs Total
----------------------------------------------------------------------
Total external sales revenue $ 378.1 $ 310.5 $ - $ 688.6
Amortization of buildings
and equipment 44.1 11.1 - 55.2
Amortization of acquired intangibles - - 27.1 27.1
Segment's operating income from
continuing operations 84.7 (6.8) (27.1) 50.8
Six Months Ended Unallocated
September 24, 1999 Semiconductor Systems Costs Total
----------------------------------------------------------------------
Total external sales revenue $ 264.6 $ 395.4 $ - $ 660.0
Amortization of buildings
and equipment 40.5 8.9 - 49.4
Amortization of acquired intangibles - - 32.3 32.3
Segment's operating income from
continuing operations 21.7 39.5 (32.3) 28.9 |
