Newbridge Networks Announces Record Results for
Second Quarter of Fiscal 1999
KANATA, ONTARIO--Newbridge Networks Corporation (NYSE: NN - news; TSE: NNC - news) today announced
financial results for the second quarter of fiscal year 1999, ending November 1, 1998.
''Achieving record quarterly revenue levels; increasing net earnings 34 percent over the previous quarter; nearly doubling
return-on-invested-capital to 15 percent; and growing our WAN packet sales by a double-digit sequential rate clearly
indicate that our renewed focus on financial performance and market share growth is producing results,'' said Alan Lutz,
President and Chief Operating Officer, Newbridge Networks. ''I want to thank all the employees of Newbridge for their
contribution to a solid quarter.''
Revenue for the second quarter of fiscal 1999 was $457 million, an increase of 7 percent compared with the previous
quarter. The net earnings, including non-recurring gains and charges, were $53 million, which represents 30 cents per share
under Canadian and U.S. GAAP, or 20 cents per share in U.S. currency at the average exchange rate for the quarter of
$0.6520.
The non-recurring gain generated in the quarter was associated with the divestiture of ACC. Non-recurring charges incurred
were the Layer 2 switching end-of-life program, Asia Pacific resources relocation and the write down of certain investments.
Pro-forma net earnings (excluding non-recurring gains and charges) for the quarter were $48 million, an increase of 34
percent compared with the previous quarter (27 cents per share under Canadian and U.S. GAAP). Pro forma diluted
earnings per share in U.S. currency were 18 cents, calculated in accordance with U.S. GAAP.
Revenue growth was driven by double-digit sequential growth in the Company's key wide area network (WAN) packet
business. The MainStreetXpress(tm) 36170 Multiservices Switch - the industry's leading multiservices asynchronous transfer
mode (ATM) platform - continues to be the prime driver for the Company's WAN packet revenue growth. More than 20
new customers purchased the product in the quarter, bringing the total number of customers for the MainStreetXpress
36170 Switch to over 300. This customer base represents the largest public service providers throughout the world.
Book-to-bill for the MainStreetXpress 36170 and the company as a whole was greater than one. Over the last three years,
the Company's WAN packet business has grown consistently by 12 percent, on average, quarter over quarter.
Time division multiplexer (TDM) revenue reached $194 million, the highest TDM revenue in five quarters. All three
geographic sales and marketing regions - North and South America; Europe, Middle East and Africa; and Asia Pacific -
achieved revenue growth compared with the previous quarter.
Company management again demonstrated improved financial control in the quarter. The Company's cash position
increased by $252 million compared with the previous quarter to $761 million at quarter end. Days of sales outstanding
(DSOs) improved a further 10 days, down to 82 days, compared with 92 days the previous quarter and 99 days two
quarters ago.
Inventory declined by $20 million and inventory turns improved from 3.7 turns in the first quarter of fiscal 1999 to 4.3 turns
in the second quarter. Operating expense increase was contained to only $2 million or one percent compared with the prior
quarter. As a result, operating expenses, as a percentage of revenue, declined from 46 percent in the first quarter to 43
percent in the second quarter of fiscal 1999.
''As I have stated consistently in my discussions with our shareholders, members of the financial analyst community and the
media, the number one goal for the management team and employees of Newbridge is to restore credibility with the
investment community by demonstrating consistent and improved financial performance,'' continued Mr. Lutz. ''The second
quarter represented another solid step in this direction. We continue to improve the quality of the management team and the
level of effectiveness and accountability of the entire organization. The senior management appointments announced during
the quarter were positive steps in this regard. Newbridge exits the second quarter with very strong financial fundamentals
and regained momentum in the networking market.''
Newbridge Networks designs, manufactures, markets and services networking solutions to organizations in more than 100
countries throughout the world. The Company leverages its relationship with a growing family of Newbridge Affiliate
companies and strategic alliances with Siemens and 3Com Corporation to deliver seamless, end-to-end solutions.
Newbridge customers include the world's 300 largest telecommunications service providers and more than 10,000
corporations, government organizations and other institutions. Founded in 1986, the Company employs more than 6,000
people on five continents. News and information are available at www.newbridge.com.
Newbridge, logo are registered trademarks of Newbridge Networks Corporation.
MainStreetXpress is a trademark used by the Siemens / Newbridge Alliance for comprehensive solutions in broadband
communication. No agency relationship, partnership, or joint ownership of a legal entity is to be inferred or implied by the
term alliance.
Management will be hosting a conference call on Tuesday, November 24th at 5:00 p.m. (Eastern Standard Time).
Should you wish to listen to this teleconference from within North America please call 800-542-1365. International callers
please dial 303-267-1001. Please dial in ten minutes prior to the scheduled start of the call.
Newbridge Networks Corporation
Condensed Consolidated Statements of Earnings
(Canadian dollars in thousands, except per share data)
Fiscal quarter ended Two fiscal quarters ended
-------------------- -------------------------
November 1, November 2, November 1, November 2,
1998 1997 1998 1997
---- ---- ---- ----
Sales $456,781 $432,169 $882,837 $866,907
Cost of Sales 189,324 159,801 365,886 320,531
--------- -------- --------- ---------
Gross Margin 267,457 272,368 516,951 546,376
Expenses
Selling, general and
administrative 134,831 123,402 263,870 247,259
Research and
development 63,541 66,169 130,697 125,852
Layer 2 Switching end
of life 37,928 -- 37,928 --
Asia Pacific resources
relocation 6,532 -- 6,532 --
--------- -------- --------- ---------
Income from
operations 24,625 82,797 77,924 173,265
Gain on sale
of ACC 128,336 -- 128,336 --
Write down of
investments (61,484) -- (61,484) --
Other income
(expense) (4,021) (372) (6,546) 181
--------- -------- -------- ---------
Earnings before income
taxes and non-controlling
interest 87,456 82,425 138,230 173,446
Provision for
income taxes 35,844 24,324 50,822 51,358
Non-controlling
interest (1,702) 108 (1,426) (259)
--------- -------- -------- ---------
Net earnings $ 53,314 $ 57,993 $ 88,834 $122,347
--------- -------- -------- ---------
--------- -------- -------- ---------
Earnings per share
Cdn. GAAP -
basic 30 cents 33 cents 50 cents 70 cents
Cdn. GAAP - fully
diluted 30 cents 33 cents 50 cents 69 cents
U.S. GAAP -
basic - US$ 20 cents 23 cents 34 cents 49 cents
U.S. GAAP - diluted
- US$ 20 cents 23 cents 33 cents 49 cents
Weighted average number of shares
Basic - Cdn. GAAP and
U.S. GAAP 176,766 174,733 176,430 173,830
Fully diluted -
Cdn. GAAP 176,766 190,516 176,430 189,783
Diluted -
U.S. GAAP 176,766 182,728 180,663 181,036
Newbridge Networks Corporation
Condensed Consolidated Balance Sheets
as at November 1, 1998 and April 30, 1998
(Canadian dollars in thousands)
November 1, April 30,
1998 1998
---- ----
Cash and cash equivalents $ 761,277 $ 499,278
Accounts receivable 408,282 428,527
Inventory 175,928 196,285
Property, plant and equipment 498,302 450,735
Goodwill 42,910 72,719
Other assets 378,975 319,281
---------- ----------
$2,265,674 $1,966,825
---------- ----------
---------- ----------
Accounts payable and accruals $ 335,932 $ 245,811
Income taxes - 5,851
Long term obligations 406,660 387,447
Future tax obligations 103,372 71,197
Non-controlling interest 18,919 22,899
---------- ----------
864,883 733,205
Shareholders' equity 1,400,791 1,233,620
---------- ----------
$2,265,674 $1,966,825
---------- ----------
---------- ----------
Pro forma Statements of Earnings
Excluding Layer 2 Switching End of Life,
Asia Pacific Resources Relocation, Gain on Sale of ACC, and
Investment Write Down
(Canadian dollars in thousands, except per share data)
Fiscal quarter ended Two fiscal quarters ended
-------------------- -------------------------
November 1, November 2, November 1, November 2,
1998 1997 1998 1997
---- ---- ---- ----
Sales $456,781 $432,169 $882,837 $866,907
Cost of Sales 189,324 159,801 365,886 320,531
--------- --------- --------- ---------
Gross Margin 267,457 272,368 516,951 546,376
Expenses
Selling, general and
administrative 134,831 123,402 263,870 247,259
Research and
development 63,541 66,169 130,697 125,852
--------- --------- --------- ---------
Income from
operations 69,085 82,797 122,384 173,265
Other income
(expense) (4,021) (372) (6,546) 181
--------- --------- --------- ---------
Earnings before income
taxes and non-controlling
interest 65,064 82,425 115,838 173,446
Provision for
income taxes 19,194 24,324 34,172 51,358
Non-controlling
interest (1,702) 108 (1,426) (259)
--------- -------- -------- ---------
Net earnings $ 47,572 $ 57,993 $ 83,092 $122,347
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings per share
Cdn. GAAP -
basic 27 cents 33 cents 47 cents 70 cents
Cdn. GAAP - fully
diluted 27 cents 33 cents 47 cents 69 cents
U.S. GAAP - primary
- US$ 18 cents 23 cents 31 cents 49 cents
U.S. GAAP - diluted -
US$ 18 cents 23 cents 31 cents 49 cents
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