NEWS: Emulex Reports Third Quarter Results
COSTA MESA, Calif.--(BUSINESS WIRE)--April 23, 1998--Emulex Corp. (NASDAQ:EMLX), a leader in gigabit fibre channel, printer server and network access products, Thursday announced results for its third fiscal quarter ended March 29, 1998.
Revenues totaled $15.0 million, compared with $17.0 million reported for the same quarter a year ago. As previously announced, Emulex initiated a program to outsource the manufacturing of its product lines during the third quarter. In conjunction with the planned closure of its Puerto Rican manufacturing operations, the company incurred pretax charges totaling $12.9 million during the third fiscal quarter, including $1.9 million in incremental inventory reserves included in cost of sales and $11.0 million in consolidation charges.
Including these charges, the net loss for the third quarter of fiscal 1998 amounted to $12.8 million, or $2.08 per share on a diluted basis, compared with net income of $1.1 million, or $0.18 per share on a diluted basis, for the same quarter a year ago. Excluding these items, net income for the third quarter of fiscal 1998 would have been $137,000 or $0.02 per share on a diluted basis.
"With the shift in manufacturing strategy now well under way, we expect that our new manufacturing subcontractor, KTEC Electronics, will be building and shipping products accounting for a majority of our revenues by the end of the fourth quarter," stated Paul F. Folino, president and chief executive officer.
"We are pleased that the KTEC Electronics transition, which is positioned to deliver significant opportunities for improved pricing flexibility and gross margins across our entire product line, is proceeding smoothly and according to plan."
Although the fibre channel sector continued to expand from the same period a year ago, many of Emulex's fibre channel OEM customers remained in the development stage and the company's sequential momentum continued to be affected by the timing of OEM launches of new systems based on fibre channel technology. In addition, revenues from fibre channel hubs declined from the same quarter a year ago in advance of the planned introduction of a new-generation product.
"Emulex is now embarking upon a new wave of next-generation fibre channel hubs and adapters, most of which are expected to enter sample production in the fourth quarter of fiscal 1998 and volume production in the first quarter of fiscal 1999," stated Folino.
"These new products, which deliver groundbreaking enhancements such as true dual-channel capability and throughput of 20,000 I/Os per second, are expected to establish new price/performance records in the industry. We believe our expanding design win activity for these new products will be instrumental to growth as we progress into fiscal 1999."
For the nine months ended March 29, 1998, Emulex revenues totaled $45.5 million, compared with $49.0 million reported a year ago. The company recorded a net loss of $11.0 million, or $1.80 per share on a diluted basis, in the first nine months of fiscal 1998, compared with net income of $649,000, or $0.10 per share on a diluted basis, for the same period a year ago. Excluding the charges detailed separately below, Emulex's net income rose 34 percent from $1.2 million, or $0.20 per share on a diluted basis, in the first nine months of fiscal 1997, to $1.7 million, or $0.26 per share on a diluted basis, in the comparable period in fiscal 1998.
Emulex is a leading designer of high-performance network connectivity products including fibre channel, printer server and network access products. The company's hardware and software-based networking solutions improve communication in computer networks and enhance data flow between computers and peripherals. Fibre channel is a high-performance ANSI standard interface that is supported by the 120+ worldwide member Fibre Channel Association that includes Sun, Hewlett-Packard and Seagate.
As a leading developer and supplier of fibre channel technology, Emulex's fibre channel devices support all implementations of the fibre channel standard, including arbitrated loop, switched fabric and point-to-point topologies. The company markets to OEMs and end users through its own worldwide selling organization, as well as two-tier distribution partners.
Corporate headquarters are located in Costa Mesa. News releases and other information about Emulex are available via Emulex's World Wide Web address at emulex.com. -0- Financial Notes:
Net loss for the three months ended March 29, 1998, included incremental excess and obsolete inventory reserves of $1.9 million and consolidation charges of $11.0 million related to the company's transition to subcontracting manufacturing. Excluding these items, net income would have been $137,000, or $0.02 per share on a diluted basis.
Net loss for the nine months ended March 29, 1998, included an income tax benefit of $188,000 related to a recovery under a tax sharing agreement with a former subsidiary, $1.9 million of incremental excess and obsolete inventory reserves and $11.0 million of consolidation charges. Excluding these items, net income would have been $1.7 million, or $0.26 per share on a diluted basis.
Net income for the nine months ended March 30, 1997, included a charge of $1.3 million related to the company's consolidation of operations in the first quarter of fiscal 1997, tax related interest income of $238,000 and a $342,000 income tax benefit related to a recovery under a tax sharing agreement with a former subsidiary. Excluding these items, net of tax, net income would have been $1.2 million, or $0.20 per share on a diluted basis.
In the quarter ended Dec. 28, 1997, the company adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share." All prior periods have been restated accordingly for basic and diluted earnings per share.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: With the exception of historical information, the statements set forth above include forward-looking statements that involve risk and uncertainties.
The company wishes to caution readers that a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Those factors include the following: the fact that the company's markets are characterized by rapidly changing technology, evolving industry standards and frequent introductions of new products and enhancements, and the company's ability to respond to such changes; difficulties which the company may experience in consolidating its operations; the fact that the fibre channel market is at an early stage of development; the highly competitive nature of the markets for the company's products; the company's ability to attract and retain skilled personnel; the company's reliance on third party suppliers for components used in the company's products; and the company's reliance on certain OEMs, distributors and key customers.
These and other factors which could cause actual results to differ materially from those in the forward-looking statements are also discussed in the company's filings with the Securities and Exchange Commission, including its recent filings on Form 10-K and Form 10-Q.
This news release refers to various products and companies by their trade names. In most, if not all, cases these designations are claimed as trademarks or registered trademarks by their respective companies. -0- *T
EMULEX CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except per share data) (unaudited)
Three Months Ended
March 29, 1998 March 30, 1997
Net revenues .....................$ 15,019 $ 17,011 Cost of sales..................... 10,816 10,012
Gross profit................. 4,203 6,999
Operating expenses: Engineering and
development................. 2,918 2,640
Selling, general and
administrative.............. 3,025 3,034
Consolidation charges........ 10,993 - --------- --------- Total operating
expenses................ 16,936 5,674
Operating income
(loss).................. (12,733) 1,325
Nonoperating expense.............. (11) (99) --------- ---------
Income (loss) before
income taxes............ (12,744) 1,226
Provision for income taxes....... 11 123
Net income (loss)........... $ (12,755) $ 1,103
Net income (loss) per share: Basic ...................... $ (2.08) $ 0.18
Diluted .................... $ (2.08) $ 0.18
Number of shares used in per share computations: Basic ...................... 6,132 6,061
Diluted .................... 6,132 6,298
-0-
EMULEX CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except per share data) (unaudited)
Nine Months Ended
March 29, 1998 March 30, 1997
Net revenues ................ $ 45,519 $ 49,021 Cost of sales................ 28,270 30,606
Gross profit............ 17,249 18,415
Operating expenses: Engineering and
development............ 8,114 7,341
Selling, general and
administrative......... 9,241 9,480
Consolidation charges .. 10,993 1,280
Total operating
expenses........... 28,348 18,101
Operating income
(loss)............. (11,099) 314
Nonoperating income.......... 54 27
Income (loss) before
income taxes........ (11,045) 341
Benefit from income taxes..... (7) (308) --------- ---------
Net income (loss)....... $ (11,038) $ 649
Net income (loss) per share: Basic .................. $ (1.80) $ 0.11
Diluted ................ $ (1.80) $ 0.10
Number of shares used in per share computations: Basic .................. 6,118 6,030
Diluted ................ 6,118 6,284
-0-
EMULEX CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands) (unaudited)
March 29, June 29, 1998 1997
Assets
Current assets: Cash and cash
equivalents......... $ 1,951 $ 484
Accounts and notes
receivable, net..... 13,142 14,785
Inventories, net..... 11,350 12,713
Prepaid and other
assets.............. 699 1,346
Total current
assets........... 27,142 29,328
Property, plant and equipment, net............ 4,766 6,961 Intangibles and other assets, net............... 358 886
$ 32,266 $ 37,175
Liabilities and Stockholders' Equity
Current liabilities: Accounts payable...... $ 5,574 $ 4,294
Accrued liabilities... 5,300 6,090
Accrued consolidation
charges ............. 5,699 30
Capitalized lease
obligations.......... 73 125
Deferred income
taxes................ 260 320
Total current
liabilities...... 16,906 10,859
Deferred income taxes and other liabilities......... 1,958 2,040
Total stockholders' equity.................... 13,402 24,276
$ 32,266 $ 37,175
*T
--30--RMS/np* CB/np
CONTACT:
Emulex Corp., Costa Mesa
Michael J. Rockenbach, 714/513-8213 |
