NEWBRIDGE NETWORKS ANNOUNCES FINANCIAL RESULTS FOR THIRD QUARTER OF FISCAL YEAR 1998
KANATA, Ont., Feb. 24 // - Newbridge Networks Corporation today
announced financial results for the third quarter of fiscal year 1998, which
ended February 1, 1998. Revenue for the third quarter was $359 million,
compared with revenue of $333 million for the third quarter of fiscal 1997.
Revenue for the first nine months of fiscal 1998 was $1,225 million, an
increase of more than 30 percent compared with the same period of the prior
fiscal year. Excluding one-time charges and gains, pro forma fully diluted
earnings per share for the quarter were 10 cents, in accordance with Canadian
GAAP. Pro forma diluted earnings per share in U.S. currency were 7 cents,
calculated in accordance with U.S. GAAP, and translated at the average
exchange rate for the quarter of $0.7006, as reported by the Federal Reserve
Bank of New York.
One-time gains and charges in the quarter were:
1) A gain of $48 million, before income tax, associated with the
disposition of the Company's equity position in Broadband
Networks Inc.;
2) Amortization of $26.4 million under Canadian GAAP related to
research and development in process associated with the acquisition
of Radnet Ltd., which was jointly acquired by Newbridge and Siemens
during the quarter. As was previously disclosed, the remaining $26.4
million of R&D in process will be amortized in the fourth quarter of
fiscal 1998. Under U.S. GAAP, the full $53 million related to the R&D
in process was written off in the third quarter;
3) A charge of $181 million, before income tax, for restructuring costs
associated with the Company's Enterprise LAN Distribution business,
mainly related to the former UB Networks. The restructuring charge
includes severance; facilities closure costs; a write-down of
inventory and other assets; and write-off of goodwill.
The net loss, after one-time gains and charges, was $144 million or 82
cents per share, in accordance with Canadian GAAP. Under U.S. GAAP, the net
loss was $171 million or 68 cents per share in U.S. currency.
The decline in revenue from the previous quarter resulted principally
from lower revenue for the Company's time division multiplexer (TDM) systems.
The decline was felt across the Company's three largest international markets
for TDM equipment: Europe, Asia and Latin America, due in part to the
volatility in general economic conditions in certain countries in Latin
America and Asia. The cumulative sales of Newbridge(R) systems increased to
more than 200,000 networking nodes during the quarter. The large installed
base of TDM equipment represents a significant downstream opportunity to
evolve the Newbridge TDM-based circuit-switched networks of the world's 200
largest carriers to multiservices networks comprising frame relay,
asynchronous transfer mode (ATM), managed Internet Protocol (IP) and other
networking traffic.
The Company's WAN packet business represented more than 50 percent of
total revenue, up from 45 percent in the previous quarter. This resulted from
sequential revenue growth for the MainStreetXpress(TM) 36170 Multiservices
Switch, which partially offset a revenue decline in the Company's more mature
packet system, the 36120 MainStreet Packet Transfer Exchange frame relay
system. Revenue for this latter product is expected to increase in the fourth
quarter of fiscal 1998.
Revenue for the Company's ATM products achieved record levels again in
the third quarter of fiscal 1998 - the ninth consecutive record quarter for
ATM revenue. ATM wide area network (WAN) revenue was more than double the
level achieved a year ago; the principal contributor to this performance was
the MainStreetXpress 36170 Multiservices Switch, for which revenue increased
by more than 150 percent year over year.
Order intake for ATM equipment, driven principally by the
MainStreetXpress 36170 product, increased by more than 80 percent compared
with the corresponding quarter last year. Orders for the MainStreetXpress
36170 multiservices platform increased by approximately 125 percent compared
with the corresponding quarter last year.
There were approximately 80 customers for the MainStreetXpress 36170
multiservices platform in the quarter - including 20 new customers - boosting
the total number of customers for the product to more than 250. These are
predominantly public carrier customers and represent many of the world's
largest telecommunications service providers. More than 90 percent of the
MainStreetXpress 36170 system customers are Newbridge TDM customers,
underscoring the value of both the large installed base of Newbridge TDM
equipment and the breadth of the Company's carrier and corporate customer
base, as organizations migrate to a unifying multiservices ATM platform to
meet their networking traffic requirements.
The recent announcements for both the Hunan and Guangdong Post and
Telecommunications Authority (PTA) contract wins were examples of this. These
public service providers in the People's Republic of China are long-time
Newbridge TDM customers who are now beginning to add packet services -
including frame relay, cell relay and managed IP services - based on the
Newbridge multiservices ATM platform.
Revenue and order intake for the Company's VIVID(TM) switched routing
system increased by approximately 60 percent and 40 percent, respectively, on
a sequential basis, reaching record levels in the quarter. Enterprise LAN
Distribution revenue associated with the former UB Networks products declined,
as expected, on a sequential basis, resulting in overall LAN packet revenue up
slightly from the preceding quarter.
Total orders exceeded shipments in the quarter, resulting in a moderate
increase in closing backlog. The book-to-bill ratio was greater than one for
both WAN packet and TDM products.
''The financial results for the third quarter were clearly a
disappointment to me,'' said Terence Matthews, Chairman and CEO of Newbridge
Networks Corporation. ''Despite these results, the third quarter was
nevertheless a period of progress for the Company in other areas. We firmly
established our position in the ATM access space with the acquisition of
Radnet, strengthened our development of the broadband wireless business,
reinforced our relationships with 3Com and Siemens, and rationalized and
stabilized our enterprise business, including sizing our investment in this
market to the anticipated levels of future business.
''Newbridge has a track record of success in the enterprise market. From
the earliest days of the Company, we have consistently derived about one-third
of our revenue from Global Fortune 1000 companies. We have refocused on this
market from our traditional position of strength as a world leader in wide
area networking systems. In this regard, the Carrier Scale Internetworking(TM)
(CSI) strategy we announced in October, in conjunction with Siemens and 3Com,
is gaining momentum with corporate and carrier customers and with other
suppliers. The Company recently hosted a meeting of many companies at a
special interest group session for CSI. I am pleased to report a great deal of
interest for the furtherance of CSI premium IP services for business
customers.
''I believe the Company has learned from our experiences in the third
quarter. We have taken actions with respect to rationalizing operating costs
for our enterprise business and effecting the necessary balance sheet
adjustments. Let me assure you that we will be taking further steps to ensure
Newbridge is positioned to capitalize on the opportunities that the networking
industry affords. We will announce these initiatives as we progress.
''Newbridge is in a strong position in its core WAN business. The
Company continues to leverage its broad and long-standing customer base
throughout the world. We are intent on capturing additional business in our
core markets related to new access technologies, multiservices ATM and new
networking applications.''
This news release may contain certain forward-looking statements that
involve risks and uncertainties. Actual results may differ materially from
results indicated in any forward-looking statements. The Company cautions
that, among other things, in view of the rapid technological changes in the
networking industry, if technologies or standards supported by the Company's
products, or common carrier services based on the Company's products become
obsolete or fail to gain widespread commercial acceptance, the Company's
business may be adversely affected. Additional information identifying risks
and uncertainties is contained in the Company's most recent Form 10-K annual
report filed with the SEC.
Newbridge Networks is a world leader in designing, manufacturing,
marketing and servicing a comprehensive family of networking products and
systems that delivers the power of multimedia communications to organizations
in more than 100 countries throughout the world. Newbridge products are the
choice of an expanding range of customers which includes the world's 200
largest telecommunications service providers, as well as more than 10,000
corporate customers, government organizations and other institutions. The
Company has facilities throughout Canada, the United States, Latin America,
Europe, the Middle East, Africa and Asia.
Newbridge Networks Corporation is a public company whose shares are
listed on the New York Stock Exchange (NN) in the United States and on The
Toronto Stock Exchange (NNC) in Canada.
<<
Newbridge Networks Corporation
Statements of Earnings
(Canadian dollars in thousands, except per share data)
Three fiscal
Fiscal quarter ended quarters ended
----------------------- -----------------------
February 1, January 26, February 1, January 26,
1998 1997 1998 1997
---- ---- ---- ----
Sales $358,520 $333,267 $1,225,427 $935,386
Cost of Sales 144,813 120,006 465,344 332,934
----------- ----------- ----------- -----------
Gross Margin 213,707 213,261 760,083 602,452
Expenses
Selling, general
and administrative 120,082 81,986 367,341 226,382
Research and development 66,308 38,311 192,160 103,713
Amortization of
in-process R&D 26,381 -- 26,381 --
Restructuring charge 181,444 -- 181,444 --
----------- ----------- ----------- -----------
Income from operations (180,508) 92,964 (7,243) 272,357
Gain on sale of investment 47,960 - 47,960 -
Other income (expense) (516) 2,199 (335) 7,854
----------- ----------- ----------- -----------
Earnings before income
taxes and non-controlling
interest (133,064) 95,163 40,382 280,211
Provision for income taxes 9,457 29,500 60,815 88,973
Non-controlling interest 1,762 2,632 1,503 4,625
----------- ----------- ----------- -----------
Net earnings (loss) -
Cdn. GAAP $(144,283) $ 63,031 $(21,936) $186,613
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings per share
Cdn. GAAP - basic (82) cents 37 cents (13) cents $1.10
Cdn. GAAP - fully
diluted (82) cents 36 cents (13) cents $1.06
Newbridge Networks Corporation
Condensed Balance Sheets
as at February 1, 1998 and April 30, 1997
(Canadian dollars in thousands)
February 1, April 30,
1998 1997
---- ----
Cash and cash equivalents $ 234,133 $ 333,904
Accounts receivable 402,105 387,338
Inventory 208,838 159,495
Property, plant and equipment 411,126 294,939
Goodwill 74,198 125,565
Other assets 336,762 195,462
----------- -----------
$1,667,162 $1,496,703
----------- -----------
----------- -----------
Accounts payable and accruals $ 241,344 $ 201,688
Restructuring reserve 25,329 35,944
Income taxes - 61,551
Long term obligations 66,753 18,170
Deferred taxes 83,860 32,439
Non-controlling interest 23,809 20,412
----------- -----------
441,095 370,204
Shareholders' equity 1,226,067 1,126,499
----------- -----------
$1,667,162 $1,496,703
----------- -----------
----------- -----------
Newbridge Networks Corporation
Reconciliation of Canadian to US GAAP Net Earnings and Earnings Per Share
(Canadian dollars in thousands, except per share data)
Fiscal quarter Three fiscal
ended quarters ended
-------------------- --------------------
February January February January
1, 1998 26, 1997 1, 1998 26, 1997
--------- --------- --------- ---------
Net earnings (loss), Canadian
GAAP $(144,283) $ 63,031 $(21,936) $186,613
Write-off of purchased R&D in
process
- upon acquisition of RadNet (52,762) - (52,762) -
- upon acquisition of UB
Networks - (96,940) - (96,940)
Add back amortization of RadNet
purchased R&D in process
(Cdn. GAAP) 26,381 --- 26,381 ---
--------- --------- --------- ---------
Net earnings (loss), U.S.
GAAP $(170,664) $(33,909) $(48,317) $ 89,673
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average number of
shares
U.S. GAAP - basic 175,376 170,941 174,338 174,807
U.S. GAAP - diluted 175,376 170,941 174,338 174,807
Earnings (loss) per share
U.S. GAAP - basic - US$ (68) cents (15) cents (20) cents 38 cents
U.S. GAAP - diluted - US$ (68) cents (15) cents (20) cents 38 cents
Newbridge Networks Corporation
Pro forma Statements of Earnings- Excluding In-Process R&D,
Restructuring Charge and Realized Gain
(Canadian dollars in thousands, except per share data)
Fiscal quarter Three fiscal
ended quarters ended
-------------------- --------------------
February January February January
1, 1998 26, 1997 1, 1998 26, 1997
--------- --------- --------- ---------
Sales $358,520 $333,267 $1,225,427 $935,386
Cost of Sales 144,813 120,006 465,344 332,934
--------- --------- --------- ---------
Gross Margin 213,707 213,261 760,083 602,452
Expenses
Selling, general
and administrative 120,082 81,986 367,341 226,382
Research and development 66,308 38,311 192,160 103,713
--------- --------- --------- ---------
Income from operations 27,317 92,964 200,582 272,357
Other income (expense) (516) 2,199 (335) 7,854
--------- --------- --------- ---------
Earnings before income taxes
and non-controlling interest 26,801 95,163 200,247 280,211
Provision for income taxes 7,910 29,500 59,268 88,973
Non-controlling interest 1,762 2,632 1,503 4,625
--------- --------- --------- ---------
Net earnings - Cdn. GAAP $ 17,129 $ 63,031 $ 139,476 $186,613
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings per share
Cdn. GAAP - basic 10 cents 37 cents 80 cents $1.10
Cdn. GAAP - fully diluted 10 cents 36 cents 80 cents $1.06
U.S. GAAP - basic - US$ 7 cents 27 cents 57 cents $0.81
U.S. GAAP - diluted - US$ 7 cents 27 cents 55 cents $0.78
>>
-0- 02/24/98
For further information: John Lawlor (613) 591-3600, john_lawlor@newbridge.com
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