Premisys Communications, Inc. Announces Fourth Quarter Revenues and Earnings - Company Financial Information

Cambridge Telcom Report, August 2, 1999

Premisys (Nasdaq: PRMS) has announced revenues and earnings for its fourth fiscal quarter ended June 30, 1999. Revenues for the fourth quarter were $15,284,000. This is a decrease of 43% versus revenues of $26,734,000 reported for the quarter ended March 31, 1999. The net loss for the fourth quarter of fiscal 1999 was $1,311,000, or $0.05 per diluted share, as compared with the net income of $2,375,000, or $0.10 per share, for the quarter ended March 31, 1999.

In comparison to the quarter ended June 30, 1998, net income for the June 1999 quarter decreased 125% from $5,185,000, while revenues decreased by 51% from $31,243,000.

For fiscal 1999, revenues were $92,423,000, down 10% versus revenues of $102,298,000 reported for fiscal 1998. Net income per diluted share decreased from $0.50 in fiscal 1998 to $0.30 in fiscal 1999. In fiscal 1998 net income per share was reduced by $0.10 due to a one-time charge for licensing of cell and packet technologies. Without this charge, net income per share would have decreased from $0.60 in fiscal 1998 to $0.30 in fiscal 1999.

In the quarter ended June 30, 1999, three of the Company's largest customers each accounted for more than 10% of its total revenues. Teleport Communications Group (or AT&T Local Services, "ALS") accounted for 26%, Motorola, Inc. for 24% and Paradyne Corporation for 21%.

Substantially all of the shortfall in revenues and earnings resulted from the Company's failure to obtain large orders expected in June from three of its major OEM partners -- Paradyne, Nortel and XEL. The Paradyne order did not materialize because of a slowdown in a large project in Saudi Arabia into which its customer, Lucent Technologies, has been deploying hundreds of IMACS over several quarters going back to the beginning of 1998. Nortel did not place orders for additional SlimLines because it had not shipped out of its inventory a significant portion of the 3,000 units stocked with its initial order in the March quarter. Orders for StreamLines and IMACS anticipated from Nortel in June were not received because Nortel did not receive orders it had expected from two large CLECs who had approved Premisys products. In the case of XEL, new orders and backlog scheduled for shipment in June were deferred because of software upgrades implemented by Premisys that delayed deployment by GTE in some of its new markets.

Premisys Communications, Inc. designs, manufactures and markets integrated access products for telecommunications service providers. The Company pioneered the integrated access device market with the introduction of the Integrated Multiple Access Communications Server ("IMACS") products in 1991. The IMACS products enable public carriers to provide their business customers with flexible, cost-effective and reliable access to telecommunications services. In 1998, the Company introduced two new integrated access products, the SlimLine and the StreamLine, which address simpler, single T1 access applications. The Company's principal offices are at 48664 Milmont Drive, Fremont CA 94538.

Condensed Consolidated Statement of Operations
(In thousands, except per share data)

                  Three months ended        Twelve months ended
               6/30/98         6/30/99      6/30/98      6/30/99
                     (unaudited)                (unaudited)
Revenues           $31,243       $15,284     $102,298      $92,423
Cost of revenues    10,981         6,725       35,586       36,660
Gross profit        20,262         8,559       66,712       55,763

Operating expenses:
Research and
development         5,097         5,419       16,205       19,823
Charge for in-process
technologies           --            --        4,431           --
Selling, general and
administrative      7,828         6,890       27,705       28,305
Total operating
expenses           12,925        12,309       48,341       48,128

Income (loss) from
operations          7,337       (3,750)       18,371        7,635

Interest and other
income, net           893          780        3,399        3,573
Income (loss) before
income taxes        8,230       (2,970)       21,770       11,208
Provision (benefit) for
income taxes        3,045       (1,659)        8,055        3,587
Net income (loss)  $5,185      $(1,311)      $13,715       $7,621

Net income (loss) per
share:
Basic               $0.20       $(0.05)        $0.54        $0.31
Diluted             $0.19       $(0.05)        $0.50        $0.30

Shares used in computing
net income per share:
Basic              25,874        24,072       25,569       24,600
Diluted            27,608        24,738       27,495       25,384

Condensed Consolidated Balance Sheet
(In thousands, except per share data)

                          June 30,       March 31,       June 30,
                             1998         1999              1999
                                (unaudited)

Current assets:
Cash and short-term
investments               $105,981         $87,976         $84,434
Accounts receivable, net    12,208          16,164           8,459
Inventories                  3,859           9,991          15,231
Deferred tax assets          7,355           7,355           7,895
Prepaid expenses and other
assets                         962           1,180           1,552
Total current assets       130,365         122,666         117,571

Property and equipment, net  8,392           9,339           9,053
Total assets              $138,757        $132,005        $126,624
Current liabilities:
Accounts payable            $6,969          $8,178          $5,759
Accrued and other current
liabilities                 10,277           9,474          10,020
Income taxes payable           735           4,832           1,015
Total current liabilities   17,981          22,484          16,794

Put Warrants                    --          10,625          10,625

Stockholders' equity:
Common Stock, $0.01 par value,
100,000 shares authorized;
25,974, 26,409 and 26,478 shares
issued and outstanding         260             264             265
Additional paid-in capital  85,230          76,717          78,336
Treasury stock, 2,130 and
2,360 shares                    --         (22,303)        (22,303)
Retained earnings           35,286          44,218          42,907
Total stockholders'
equity                     120,776          98,896          99,205
Total liabilities
and equity                $138,757        $132,005        $126,624