Ancor Reports Third Quarter Results
Company Says Outlook Improving With New Contracts, New Switch
MINNEAPOLIS, Oct. 28 /PRNewswire/ -- Ancor Communications, Inc.
(Nasdaq: ANCR) today reported a net loss of $3,115,604, or $.24 per diluted
share, on revenues of $230,301 for the third quarter ended September 30,
1998. In the comparable 1997 period, the company reported a net loss of
$2,452,636, or $.23 per diluted share, on revenues of $3,423,837.
For the nine months ended September 30, 1998, Ancor reported a net loss of
$13,181,257, or $1.11 per diluted share, on revenues of $1,409,563. Results
for the nine-month period include a charge of $4.4 million taken in the second
quarter of 1998 for additions to reserves for inventory. In the nine months
ended September 30, 1997, Ancor reported a net loss of $6,084,783, or $.59 per
diluted share, on revenues of $7,328,414.
Per share figures for the three and nine-month periods ended September 30,
1998 reflect an increase in the number of shares outstanding resulting from
conversion of a portion of the company's Preferred Shares into Common Shares.
Approximately $7.0 million of the company's preferred stock currently remains
outstanding. Common Shares outstanding currently total 19.7 million.
Third Quarter Results
Hendrickson said Ancor's third quarter results were in line with the
company's previous guidance regarding its expected financial performance in
the second half of the current year. "As expected, we shipped no product to
Japan during the 1998 third quarter as a result of the difficult market
conditions in Asia and the restructuring of our distribution in Japan. In
addition, our decision to focus on the developing opportunities in the storage
area networking marketplace has diminished our revenues from high performance
local area networking," said Hendrickson.
After the close of its third quarter, Ancor entered into an exclusive
partnership with Netmarks, Inc., a leading Japanese supplier of network
integration services, to distribute Ancor Fibre Channel switches to storage
system providers and end users in Japan. Netmarks retained key technical
talent from Ancor's former distributor to assist with sales and support of
Ancor products in Japan.
"Netmarks is a strong partner, formed as a joint venture by several
leading Japanese companies, and currently generating approximately $100
million in annual sales," said Hendrickson. "With this new distribution
relationship, we are associating Ancor with a solid, experienced company that
we expect will represent us very well in Japan."
Outlook Improving on New Contracts, New Switch Introduction
Hendrickson said Ancor's outlook is improving as a result of contracts won
during the quarter and the introduction of a new, low-cost, 8-port Fibre
Channel switch intended primarily for storage area network (SAN) applications
in the Windows(R) NT marketplace.
During the quarter, Ancor received a $1.9 million order from Boeing for
GigWorks Fibre Channel switches to be used in an upgrade of Boeing's Airborne
Warning and Control System (AWACS). The company expects to complete shipments
against this order during its fourth quarter, which ends December 31, 1998.
In addition, the company has signed a licensing and royalty agreement with
INRANGE Technologies Corporation, a unit of General Signal Corporation,
providing initial proceeds of $7.0 million of licensing fees and $2.0 million
of prepaid royalties. Under this agreement, Ancor received a $3.0 million
payment in the third quarter of 1998 and will receive additional $3.0 million
payments in its 1998 fourth quarter and its 1999 first quarter. The company
will record the license fee as revenue over the five-year term of the contract
and royalty revenue as INRANGE products ship.
"The agreement with INRANGE is a breakthrough for Ancor," said
Hendrickson. "INRANGE's decision to incorporate our Fibre Channel technology
in their products affirms the value of Fibre Channel as a SAN solution in
demanding, high-end, data center environments. INRANGE has indicated it
expects to offer our Fibre Channel technology in their CD/9000 Channel
Director and other products in the future. Sales of these products are
expected to generate incremental royalty revenues in the future beyond the
initial $2.0 million of prepaid royalties."
To position the company to participate in entry-level storage networking
opportunities in the Windows(R) NT marketplace, Ancor recently introduced its
GigWorks(TM) MKII-8 Fibre Channel Switch. The MKII-8 is a low-cost, 8-port
switch that sets a new standard for price performance in Fibre Channel
technology for storage area network applications.
"The MKII-8 provides the dedicated bandwidth, stability and advanced
management features of larger Fibre Channel switches such as our MKII-16 at
prices comparable to a 'managed hub.' This low-cost switch should enable
Fibre Channel SAN solutions to be implemented at a much wider range of network
and budget sizes," said Hendrickson. The company demonstrated the MKII-8 in a
data backup configuration at the recent Networld + Interop trade show and has
delivered units for evaluation to many prospective customers.
Hendrickson said Ancor continues to add capabilities to support its
pursuit of emerging opportunities in the SANs marketplace. In October, the
company added Max Davis as vice president, operations, to oversee its
manufacturing contractors and lead overall quality assurance and manufacturing
cost management initiatives. The company has also established a Silicon
Valley presence through a sales office in San Jose headed by two seasoned
professionals experienced in Fibre Channel storage system sales.
"We continue to execute our strategy to establish Ancor as a leading
provider of Fiber Channel switches for the SANs marketplace and we are pleased
with the progress we made during the third quarter," said Hendrickson. "Fibre
Channel use at the adapter and hub level continues to grow and can be expected
to create a need for Fibre Channel switching as users add more and more
storage devices to their networks."
Forward Looking Statements
Information contained in this news release other than historical
information should be considered forward-looking and subject to risks and
uncertainties. Factors which may affect whether such forward-looking
statements can be achieved include: market acceptance of Fibre Channel
products and the timing of such acceptance, the ability of the Company to
successfully market and sell its products to OEMs and others, the success of
the products incorporating the Company's technology marketed by INRANGE and
the ability of the Company to develop enhancements to its products and
technology and keep pace with technological developments. Retention of $2.0
million of prepaid royalties from INRANGE is contingent upon Ancor's
completion of certain deliverables defined in the Company's technology license
agreement with INRANGE.
About Ancor Communications
Ancor Communications, Inc. provides GigWorks(TM) high performance storage
and data-intensive network solutions based on Fibre Channel technology. The
company was the first to deliver a Fibre Channel switch, and the first to top
the one-gigabit performance level. In addition to Fibre Channel switches,
Ancor products also include adapters and connectivity solutions. Ancor is a
member of the Fibre Channel Association, the Storage Network Industry
Association, the ANSI Standards Committee and the University of New Hampshire
Fibre Channel Consortium to promote the advancement of Fibre Channel standards
and interoperability. Information about Ancor is available on the World Wide
Web at ancor.com
(Summarized financial data follow)
ANCOR COMMUNICATIONS, INCORPORATED
BALANCE SHEETS
September 30, December 31,
1998 1997
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents $3,908,002 $2,001,404
Short-term investments 997,282 0
Accounts receivable, less allowances of
77,558 and $804,000, respectively 254,975 1,499,634
Inventories 2,267,647 2,493,722
Prepaid expenses and other
current assets 254,371 154,983
Total current assets 7,682,277 6,149,743
Equipment, net of
accumulated depreciation 3,087,145 3,273,528
Patents, prepaid royalties,
and other assets, net of
accumulated amortization 211,824 269,190
Capitalized software development costs
net of accumulated amortization 190,627 471,043
TOTAL ASSETS $11,171,873 $10,163,504
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $145,550 $65,145
Accounts payable 594,284 963,321
Accrued liabilities 1,590,698 687,990
Unearned Revenue 2,371,529 1,000
Total current liabilities 4,702,061 1,717,456
Long-term debt, less current maturities 142,268 129,702
Shareholders' Equity
Capital Stock 46,601,003 35,408,549
Accumulated deficit (40,273,459) (27,092,202)
Total shareholders' equity 6,327,544 8,316,346
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $11,171,873 $10,163,504
ANCOR COMMUNICATIONS, INCORPORATED
STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Net sales $230,301 $3,423,837 $1,409,563 $7,328,414
Cost of goods sold 200,898 2,587,013 5,407,417 4,923,271
Gross profit 29,403 836,824 (3,997,854) 2,405,143
Operating expenses
Selling, general and
administrative 1,813,094 1,968,412 5,326,894 4,992,851
Research and
development 1,335,624 1,374,756 4,004,700 3,662,830
Total operating
expenses 3,148,718 3,343,168 9,331,594 8,655,681
Operating loss (3,119,315) (2,506,344) (13,329,448) (6,250,538)
Nonoperating income
(expense)
Interest expense (7,838) (5,363) (28,020) (10,526)
Other, primarily
interest income 11,549 59,071 176,211 176,281
Net loss ($3,115,604) ($2,452,636) ($13,181,257) ($6,084,783)
Basic and diluted
net loss per
common share ($0.24) ($0.23) ($1.11) ($0.59)
Weighted average
common shares
outstanding 13,731,135 10,984,569 12,528,182 10,721,111
SOURCE Ancor Communications
CO: Ancor Communications, Inc.
ST: Minnesota
IN: CPR
SU: ERN
10/28/98 07:02 EST prnewswire.com |
