JNIC ($8) P/E 18 Misses by 1 Cent, Rev's slightly higher than consensus.
Press Release
JNI Corporation Reports Results for Second Quarter 2001
SAN DIEGO--(BUSINESS WIRE)--July 25, 2001--JNI® Corporation (Nasdaq:JNIC - news):
Achieves Sequential Revenue Growth of 9% to $23 Million
EPS at $0.03 Per Share, Excluding Amortization and Inventory Reserve
Cash Balance Increases to $120 Million
JNI® Corporation (Nasdaq:JNIC - news) today reported financial results for the second quarter ended June 30, 2001, and provided a second quarter summary and a second half 2001 focus.
Second Quarter Operating Results
Net revenues for the second quarter were $23.1 million, a sequential increase of 9% over $21.1 million for the first quarter of 2001, in line with the Company's expectations. Contributing to this growth is the continuing market demand for JNI's high quality Solaris-based products. Compared to the same period last year, second quarter net revenues decreased 4% from $24.0 million for the second quarter of 2000.
During the fourth quarter of 2000, the Company increased its 1 gigabit (Gb) product and associated component inventory levels in anticipation of continued strong sales momentum for these products. Observing that the anticipated increase in demand for these products did not materialize in the fourth quarter of 2000 and the first quarter of 2001, concurrent with the continuing downturn in overall IT spending, the Company determined that its current inventory levels were in excess of projected future demand for 1 Gb product, and recorded an excess inventory charge of $7.7 million. This reserve reduced second quarter gross margin to 26%. Excluding the effect of the inventory reserve, gross margin remained consistent with the first quarter, at 59.5% as compared to 58.8% for the second quarter of 2000.
Commenting on the Company's second quarter performance, President and Chief Executive Officer Neal Waddington said, ``In light of the overall slowdown in IT spending, we are pleased with our top-line results for the second quarter at a growth rate of 9% over the first quarter. This performance at the high-end of our guidance range reflects the continuing demand for JNI's high quality Fibre Channel solutions.
``Emerald III HBA's and their corresponding drivers have been qualified by virtually all storage OEMs and remain a very competitive product in the marketplace. Demand for these products is sound considering the overall economic climate, but we built inventory to meet anticipated demand in Q4 of 2000 and Q1 of 2001 that did not materialize. We believe our Emerald III product will continue to sell concurrent with the introduction of 2 Gb technology, and that the market transition to 2 Gb will be gradual. Therefore, we are comfortable that our remaining levels of Emerald III will sell through as demand increases for our new 2 Gb Emerald IV products.''
Operating expenses increased to $13.9 million, a growth of 46% over the second quarter of 2000, and increased sequentially over the first quarter of 2001 by $1.8 million or 15%, primarily related to increased R&D expenditures. Additionally, the Company recorded non-operational legal costs associated with the defense of its securities class action lawsuit.
JNI achieved net income of $755,000 or $0.03 per diluted share for the second quarter of 2001, excluding both the excess inventory charge of $7.7 million and amortization for intangibles and stock-based compensation of $1.4 million. Including the reserve for excess inventory and excluding amortization charges, the Company had a net loss of $4.3 million, or $0.16 per diluted share for the second quarter ended June 30, 2001, utilizing an effective tax rate of 35%. These results are comparable to net income of $3.1 million, or $0.12 per diluted share for the same year-ago period, excluding amortization for intangibles and stock-based compensation of $1.5 million.
On the basis of Generally Accepted Accounting Principles (GAAP), the Company recorded a net loss of $7.9 million, or $0.29 per share for the second quarter of 2001, as compared to net income of $2.3 million, or $0.09 per diluted share for the second quarter of 2000.
Balance Sheet Highlights
At June 30, 2001, JNI Corporation had total assets of $165.0 million, including increased cash and investments totaling $120.0 million or $4.37 per share. Inventory levels improved sequentially, declining from $22.0 million to $19.4 million. Net inventories, reflecting the excess inventory reserve, were $11.6 million, with $0.9 million at the Company's distributor partner locations. Days sales outstanding showed continued improvement during the second quarter of 2001, at 41 days sales outstanding, compared to 47 days sales outstanding during the first quarter of 2001.
Commenting on specific second quarter achievements, Waddington noted the following: ``Our second quarter sales point to continued stability and JNI's dominance as the leader in SAN connectivity solutions for high-end Sun Solaris operating environments. Our focus on further penetrating the substantial SUN server and storage installed base through GE/Access delivered excellent results in the second quarter. JNI adapters are the only independent adapter solution GE/Access offers to the marketplace, reflecting our dominant position in the space.
``With regard to further partner developments, our broad relationship with Hitachi Data Systems, which includes qualification of our HBAs across a range of operating systems, continued to produce excellent results, growing by 80% quarter over quarter and accounting for more than 10% of Q2 net revenues. We see the potential for continued expansion of this business. In addition, EMC concluded qualification of our Emerald III single port SBus HBA; we expect it to be EMC's preferred single port, 1 Gb solution for connecting Solaris servers to Symmetrix RAID Systems.
``With regard to JNI's 2 Gbit solutions, our Emerald IV SBus, PCI, PCI-X and CPCI qualifications are in process at virtually all storage OEMs and storage groups within server OEMs. We have also experienced excellent reception in the marketplace for our dual ported, Emerald IV PCI-X ASIC technology.
``For the second half of 2001, we will continue to focus on the introduction of our 2 Gb PCI-X/CPCI product suite while delivering broad operating system support for all Emerald-based HBAs,'' Waddington added. ``Given the current economic environment, we will continue to make strides during the third quarter to align our cost structure with challenging market conditions, aiming to reduce our breakeven point to a $20 million revenue level at a 55% gross margin for future quarters. This will better position the Company to remain profitable through challenging economic times and to capitalize on a market recovery. A healthy economy is the underpinning for our return to growth and increased profitability.''
Conference Call and Webcast
Management of JNI will host a conference call with a simultaneous Webcast at 5:00 p.m. Eastern (2:00 p.m. Pacific) today, to discuss the Company's second quarter operating performance. The Webcast can be accessed live via the Internet at www.jni.com or at CCBN's www.StreetEvents.com and companyboardroom.com and type in JNIC under the ticker search. The conference call can be accessed by phone at 703/871-3630. Dial in at least five minutes before start time, or if listening via the Internet, go to the Web sites at least 15 minutes early to register, download, and install any necessary audio software.
For those who cannot listen to the live broadcast, an audio replay will be available through Aug. 1, 2001, by calling 888/266-2086 and entering the passcode 5401854. The Webcast will be available for 90 days.
About JNI Corporation
JNI Corporation is a leading manufacturer of enterprise-level products used to create storage networks, and is the dominant manufacturer of host bus adapters (HBAs) for the Solaris environment. JNI offers a broad line of FibreStar® HBAs, Emerald(TM) ASICs, and EZ Fibre(TM) and DriverSuite(TM) software for SANs. JNI's products operate on Solaris, Windows 2000, Windows NT, HP-UX, AIX, Novell, Linux and Mac OS systems. JNI customers, distributors and strategic partners include Acal FCS, Avid, Bell Microproducts, Brocade, Chaparral, Compaq StorageWorks, Consan, Crossroads, EMC, Eurologic, Gadzoox, GE Access, Hewlett-Packard, Hitachi Data Systems, IBM, Info X, LSI Logic, McDATA, Nishan Systems, StorageTek, Sun Microsystems, TidalWire and Veritas. Company headquarters are in San Diego, with offices throughout the United States and Munich (Munchen), Germany. www.jni.com. |
