REAL Earnings Release
Wednesday April 21, 4:17 pm Eastern Time
Company Press Release
Reliability Incorporated Reports First Quarter 1999 Results
HOUSTON--(BUSINESS WIRE)--April 21, 1999--Reliability Incorporated (Nasdaq:REAL - news) today announced a net loss of $262,000, or $.04 per diluted share, for the first quarter ended March 31, 1999, on revenues of $4,320,000. Net income for the same quarter in 1998 was $1,787,000 or $.29 per diluted share on revenues of $11,480,000. Backlog was $2.5 million at March 31, 1999, as compared to $1.8 million at Dec. 31, 1998.
Larry Edwards, President and CEO commented, ''1999 has started off pretty much as forecasted. Revenue for the first quarter was $4.3 million as compared to the forecast of $4.3 to $4.7 million. In comparison to 1998's fourth quarter revenue of $3.7 million, we at least are seeing an improvement quarter to quarter even though revenue is still at depressed levels. The net loss per diluted share for the first quarter of 1999 was $0.04 compared to the forecasted loss of $0.05 per share for the quarter and a loss of $0.11 per share for the fourth quarter of 1998.
''The Service segment was our best performing segment in the first quarter of 1999, and the December 1998 BEST asset purchase was a positive contributor as expected. Our outlook is that our Southeast Asia Service operations, which are much larger than our U.S. Service operations, will continue to get stronger; however, our U.S. Service operations will remain flat or down due to the price pressures semiconductor manufacturers are experiencing. We believe our Southeast Asia facilities are benefiting from the increase in demand that some memory manufacturers have recently reported. To react to the increased demand for Services provided by the Company, we expanded our test capacity for memory and added some additional burn-in capacity for microprocessors. Although the demand for memory devices such as DRAMs seems closer to being in balance with supply, memory prices as well as Services prices are still very competitive, which makes it difficult to add new capacity.
''The Testing Products segment is seeing more activity in terms of customer inquiries and requests for quote, although new orders for capital equipment have remained at depressed levels. However, Testing Products bookings of new orders for the first quarter of 1999 did exceed shipments for the first time in three quarters, resulting in our book to bill for Testing Products being above 1.0. Semiconductor Equipment and Materials International recently announced the book to bill ratio for the semiconductor assembly and test equipment industry was 1.10 for January and 1.15 for February of 1999, which was the first time the industry book to bill ratio had exceeded 1.0 since January of 1998. However, the ratio was above 1.0 on very low booking and billing levels. Needless to say, the industry and the Company's book to bill must get above 1.0 and stay above 1.0 to rebuild backlog before we will have a real recovery.
''The bright spot is that we are very strong financially. During the first quarter, we paid off $274,000 of long-term debt which was the balance of our mortgage on the land and building of our Houston facility. This eliminated all of our long-term debt. We completed the BEST asset purchase in December of 1998, and now only have a note of $534,000, which will be paid the second quarter of 1999. The Company continued to invest in capital assets and Research and Development ($476,000) in the first quarter of this year. We had $14 million of cash as of March 31, 1999, our current ratio was a very strong 6.2 to 1, and our net worth was $27.4 million or $4.14 per share.
''The following statements are forward looking, based on our current expectations, and actual results may differ materially. Although we believe that our markets have finally hit the bottom, our visibility is still very poor. We are encouraged by the recent strengthening in new orders and revenue in our Services segment in Southeast Asia. Of course, some of the increase is coming from the BEST purchase which should continue to have a positive effect on both revenue and earnings during 1999. Quote activity for Testing Products has increased as some of our customers are evaluating plans to go forward with selected new programs. A few orders have been received, but order levels are still very low. Therefore, there is still a risk that we could bounce along the bottom for a quarter or two. We expect revenue for the second quarter of 1999 to be between $4.7 and $5.1 million as compared to $3.7 million for the fourth quarter of 1998 and $4.3 for the first quarter of 1999. We forecast EPS for the second quarter of 1999 to be between breakeven and a slight profit as compared to the first quarter 1999 $0.04 loss. Our forecast calls for revenue and EPS to continue to improve each quarter in 1999 as the markets for semiconductor equipment and testing services start to gain momentum and grow again. We expect R&D expense in 1999 to continue at the same rate as in 1998, as we invest in new product development for the next generation of memory and micrologic. We are gaining optimism as 1999 progresses, but our visibility and timing is still uncertain.''
For complete information about the company and to access our SEC EDGAR filings, please visit our web site at http:\\www.relinc.com.
''Safe Harbor'' Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Reliability's business which are not historical facts are ''forward looking statements'' that involve risk and uncertainties, including, but not limited to, market acceptance of our products and services, the effects of general economic conditions, the impact of competition, product development schedules, problems with technology, delivery schedules, year 2000 compliance, and supply and demand changes for our products and services and our customers' products and services. Actual results may materially differ from projections.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
1999 1998
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REVENUES $4,320 $11,480
COSTS AND EXPENSES:
Cost of revenues 2,759 5,863
Marketing, general and administrative 1,503 2,399
Research and development 476 614
Provision for restructuring -- 100
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Total expenses 4,738 8,976
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Operating income (loss) (418) 2,504
Interest income, net 158 44
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Income (loss) before income taxes (260) 2,548
Provision for income taxes 2 761
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NET INCOME (LOSS) $(262) $1,787
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Earnings (loss) per share:
Diluted $(.04) $.29
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Basic $(.04) $.29
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Weighted average shares:
Diluted 6,616 6,210
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Basic 6,616 6,061
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CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31, December 31,
1999 1998
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ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $13,964 $15,702
Accounts receivable 2,149 2,178
Inventories 1,271 1,301
Deferred tax assets 525 572
Other current assets 488 441
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Total Current Assets 18,397 20,194
Property, plant and equipment, at cost,
net of accumulated depreciation of
$10,764 ($10,407 in 1998) 9,217 9,536
Assets held for sale 2,135 2,193
Goodwill, net of accumulated amortization 1,349 1,323
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$31,098 $33,246
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to shareholder $534 $534
Accounts payable 639 547
Accrued liabilities 1,460 3,045
Income taxes payable 188 335
Current maturities on long-term debt -- 274
Accrued restructuring costs 134 300
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Total current liabilities 2,955 5,035
Deferred tax liabilities 707 634
Stockholders' equity:
Common stock, 7,838,527 and 7,811,278
shares issued in 1999 and 1998,
respectively 9,461 9,340
Retained earnings 25,819 26,081
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35,280 35,421
Less treasury stock at cost,
1,206,762 shares in 1999 and 1998 7,844 7,844
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Total stockholders' equity 27,436 27,577
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$31,098 $33,246
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For more information, view our web site, including SEC links, at http:\\www.relinc.com.
Reliability Incorporated is based in Houston, with operating facilities in Austin, Texas, Singapore and San Jose, Costa Rica. Reliability and its subsidiaries manufacture burn-in and test equipment, and peripherals for sale to manufacturers and volume users of integrated circuits. The Company also manufactures a line of power sources, including DC-to-DC power converters, and provides conditioning and testing services for integrated circuits in Austin, Texas and Singapore.
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Contact:
Reliability Incorporated, Houston
Max T. Langley, 281/492-0550 ext. 203
or
Margaret A. Chapman, 281/492-0550 ext. 207
Fax: 281/492-0615
relinc.com
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