ESS Technology Reports Second Quarter Results
Wednesday July 24, 4:25 pm Eastern Time
Press Release
SOURCE: ESS Technology, Inc.
Revenue of $86.0 Million and EPS of $0.36
Reports Record DVD Shipments for Quarter
FREMONT, Calif., July 24 /PRNewswire-FirstCall/ -- ESS Technology (Nasdaq: ESST - News) today reported net revenues for the second quarter of 2002 of $86.0 million, up $21.1 million or 32.5% percent from the same period last year, and up $6.9 million or 8.7% compared to revenues of $79.1 million in the first quarter of 2002.
Net income for the second quarter of 2002 was $17.3 million, or $0.36 per diluted share, compared to a net loss of $10.2 million, or ($0.24) per diluted share, in the second quarter of 2001. For the first quarter of 2002, net income was $16.4 million, or $0.34 per diluted share.
Pro forma net income for the second quarter of 2002 was $18.0 million, compared to $4.3 million for the second quarter 2001 and $17.9 million for the first quarter 2002. Pro forma earnings per diluted share were $0.37, compared to pro forma earnings of $0.10 per diluted share in the same period last year and unchanged from the pro forma $0.37 earned in the first quarter of 2002. Pro forma net income and loss excludes the effects of the amortization of intangible assets, the effects of the write-down of investments, the realized losses on the sale of Cisco stock, and the effects of the discontinued operations.
Gross margin for the second quarter of 2002 was 41%, up from 29% for the second quarter of 2001 and down from 43% for the first quarter of 2002.
Robert L. Blair, president and chief executive officer commented, "We are excited about the results of the second quarter for many reasons. The second quarter results were very strong with overall revenue growth of 8.7% sequentially during this normally slow quarter. In addition, ESS expanded geographically with several new design wins from Japan and Korea and we believe we continued to increase our worldwide DVD market share."
Mr. Blair continued, "We were also quite pleased with our performance in the VCD market. During the quarter we grew VCD revenue, improved margins, and increased our share of the VCD market -- all in the face of strong competition.
"We believe we will maintain our leadership position in the areas of new products, features and services through the introduction of our Vibratto II product, an integrated DVD system-on-a-chip, our new Visba3 integrated VCD chip, and our ESS 7010 encoder chip for a sub-$300 priced recordable DVR/DVD, all of which are scheduled for production shipments in the fourth quarter of 2002. With these new product introductions, we believe we can continue to lead the high growth market for digital home entertainment products," Mr. Blair concluded.
Third Quarter 2002 Guidance
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.
As we stated three weeks ago, we expect to grow our DVD unit shipment by 10%-15% in the third quarter of 2002 compared to the second quarter, and expect overall revenues for the third quarter to be $86 -$90 million. We expect earnings per diluted share to be in the range of $0.35 to $0.38.
[Harry: On the surface they appear to be growing rev and increasing market share. New product introduction should off gross margin declines in older products. The sub $300 recordable DVD product is especially intriguing. HLYW CC confirming acceptance of DVD products through increae rentals. ]
ESS will provide more guidance on its third quarter and fourth quarter 2002 and overall 2003 outlook during the earnings conference call.
[Harry: I can't get into the CC call. The link does not appear to work and no phone number is in the press release.]
Earnings Conference Call
ESS Technology, Inc. has scheduled a conference call for 5:00 p.m. ET today to discuss its second quarter results. An Internet simulcast and reply will be available at www.esstech.com and firstcallevents.com .
About ESS Technology
ESS Technology, Inc., is a leading supplier of high-performance feature-rich chips, applications and solutions for the rapidly expanding DVD and digital entertainment markets. ESS provides advanced products that enable the emergence of digital home systems that deliver and manage entertainment and information in the home.
ESS, headquartered in Fremont, California, has R&D, sales, and technical support offices worldwide. ESS Technology's common stock is traded on the Nasdaq under the symbol "ESST." ESS Technology's web site address is: esstech.com .
(ATTACHMENTS: Consolidated Summary Statements)
The matters discussed in this news release include certain forward-looking statements that involve risks and uncertainties, including, but not limited to, the impact of competitive products and pricing, the possible reduction of consumer spending occasioned by general economic conditions, the timely availability and acceptance of the Company's new products, the dependence on continued growth in demand for consumer multimedia products, and the other risks detailed from time to time in the SEC reports of ESS, including the reports on Form 10-K and Form 10-Q. Actual results could differ materially from those projected in the forward-looking statements.
NOTE: All trademarks mentioned in this news release are owned by their respective holders and are used in this news release for identification purposes only.
ESS TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited) (audited)
June 30 December 31
2002 2001
ASSETS
Current Assets:
Cash and cash equivalents $119,721 $96,995
Short-term investments 61,261 32,039
Accounts receivable, net 34,592 42,642
Inventories 49,189 37,452
Prepaid expenses and other assets 1,967 1,894
Total current assets 266,730 211,022
Property, plant and equipment, net 19,621 22,438
Other assets, net 8,134 4,505
Total Assets $294,485 $237,965
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $51,585 $49,173
Income taxes payable and deferred
income taxes 9,656 4,883
Total current liabilities 61,241 54,056
Non-current deferred tax liability 6,931 6,931
Shareholders' equity:
Common stock 195,756 153,678
Accumulated other comprehensive
income (loss) 157 (1,374)
Retained earnings 30,400 24,674
Total shareholders' equity 226,313 176,978
Total Liabilities and Shareholders'
Equity $294,485 $237,965
ESS TECHNOLOGY, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1)
(unaudited)
(in thousands, except per share data)
Three months ended Six months ended
June 30 June 30 June 30 June 30
2002 2001 2002 2001
Net revenues $86,037 $64,909 $165,152 $115,717
Cost of revenues 50,817 45,970 95,656 85,576
Gross profit 35,220 18,939 69,496 30,141
41% 29% 42% 26%
Operating expenses:
Research and
development 6,766 5,688 13,118 10,519
Selling, general
and administrative 11,051 8,917 21,407 17,583
Operating income 17,403 4,334 34,971 2,039
Nonoperating income,
net 1,496 392 2,774 717
Income before
provision for
income taxes 18,899 4,726 37,745 2,756
Provision for
income taxes 944 403 1,850 100
Net income $17,955 $4,323 $35,895 $2,656
Net income
per share
Basic $0.40 $0.10 $0.80 $0.06
Diluted $0.37 $0.10 $0.74 $0.06
Weighted average
common shares:
Basic 45,147 42,375 44,692 42,371
Diluted 48,446 44,109 48,447 44,159
(1) Pro forma adjustments are detailed within the schedule entitled "Reconciliation of GAAP Basis Net Income to Pro forma Net Income."
ESS TECHNOLOGY, INC.
RECONCILIATION OF GAAP BASIS NET INCOME TO PRO FORMA NET INCOME
(unaudited)
(in thousands)
Three months ended Six months ended
June 30 June 30 June 30 June 30
2002 2001 2002 2001
Net income (loss)
- GAAP basis $17,322 $(10,198) $33,708 $(30,883)
Pro Forma Adjustments;
Amortization of
intangible assets (A) 277 1,288 214 2,452
Write down of
investments (B) 350 616 2,987 1,032
Cisco stock sale (C) 61 21,187 61 21,187
Tax effect to items
(A) and (B) and (C) (55) (8,570) (1,075) (8,649)
Discontinued operation,
net of tax (D) -- -- -- 17,517
Net income -
Pro forma $17,955 $4,323 $35,895 $2,656
(A) Pro forma amounts for all periods presented exclude the effects of amortization of intangible assets amounting to $277 and $1,288 for the three months ended June 30, 2002 and June 30, 2001, respectively, and $214 and $2,452 for the six months ended June 30, 2002 and June 30, 2001, respectively.
(B) Pro forma amounts for all periods presented exclude the effect of the write-down of investments, amounting to $350 and $616 for the three months ended June 30, 2002 and June 30, 2001, respectively, and $2,987 and $1,032 for the six months ended June 30, 2002 and June 30, 2001, respectively.
(C) Pro forma amounts for all periods presented exclude the realized losses on the sale of Cisco stock, amounting to $61 and $21,187 for the three months ended June 30, 2002 and June 30, 2001, respectively, and $61 and $21,187 for the six months ended June 30, 2002 and June 30, 2001, respectively.
(D) Pro forma amounts for all periods presented exclude the effects of the discontinued operation, amounting to $17,517 for the six months ended June 30, 2001.
ESS TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS-GAAP BASIS
(unaudited)
(in thousands, except per share data)
Three months ended Six months ended
June 30 June 30 June 30 June 30
2002 2001 2002 2001
Net revenues $86,037 $64,909 $165,152 $115,717
Cost of revenues 50,817 45,970 95,656 85,576
Gross profit 35,220 18,939 69,496 30,141
41% 29% 42% 26%
Operating expenses:
Research and
development 7,043 7,592 13,424 14,003
Selling, general
and administrative 11,051 8,917 21,407 17,583
Operating income
(loss) 17,126 2,430 34,665 (1,445)
Nonoperating income
(loss), net 1,085 (20,795) (182) (20,470)
Income (loss) before
provision for
(benefit from)
income taxes 18,211 (18,365) 34,483 (21,915)
Provision for
(benefit from)
income taxes 889 (8,167) 775 (8,549)
Income (loss) from
continuing
operations 17,322 (10,198) 33,708 (13,366)
Loss from
discontinued
operation -- -- -- (4,205)
Loss from disposal
of discontinued
operation -- -- -- (13,312)
Net income (loss) $17,322 $(10,198) $33,708 $(30,883)
Net income (loss)
per share:
Basic
Continuing
operations $0.38 $(0.24) $0.75 $(0.32)
Discontinued
operation $-- $-- $-- $(0.41)
$0.38 $(0.24) $0.75 $(0.73)
Diluted
Continuing
operations $0.36 $(0.24) $0.70 $(0.32)
Discontinued
operation $-- $-- $-- $(0.41)
$0.36 $(0.24) $0.70 $(0.73)
Weighted average
common shares:
Basic 45,147 42,375 44,692 42,371
Diluted 48,446 42,375 48,447 42,371
SOURCE: ESS Technology, Inc. |
