Xircom announces second-quarter 1997 results; PC Card net sales of $57.1 million are 43% ahead of last year's comparable period

Business Wire, April 14, 1997

THOUSAND OAKS, Calif.--(BUSINESS WIRE)--April 14, 1997--Xircom Inc. (Nasdaq:XIRC) Monday reported record net sales and earnings from its core PC Card business for the second quarter of fiscal 1997 ended March 31, 1997.

Net sales of PC Card products grew to $57.1 million, an increase of 43% over the second quarter of 1996, and income from PC Card operations were $4.9 million in the second quarter, a 308% improvement over the $1.2 million recorded during the 1996 period.

Net sales of PC Card products for the first six months of fiscal 1997 totaled $113.4 million, an increase of 54% compared with $73.8 million last year, while income from PC Card operations of $9.0 million is substantially higher than the $0.8 million in the prior year.

The company also announced its intention to divest Netaccess Inc., its remote-access subsidiary and, as a result, will now account for this activity as a discontinued operation. Until the divestiture of Netaccess is complete, the core PC Card business will be reported separately as Continuing Operations on the earnings statement, while the results of Netaccess will be reflected on a single-line item titled Discontinued Operations.

Net sales for Netaccess were $4.1 million for the second quarter, a decrease of 24% compared with the prior-year period and a decrease of 32% compared with the first quarter of fiscal 1997. For the six months of 1997, net sales for Netaccess were $10.1 million compared with $9.2 million last year.

Earnings per share from continuing operations for the second quarter of $0.22 far exceeds the $0.06 in 1996. On a year-to-date basis, earnings per share from continuing operations of $0.42 is a significant improvement over the $0.04 during the first six months of last year.

Average shares outstanding used in the per-share calculation were 21,748,000 for the three months of this year vs. 19,448,000 in 1996. The majority of the year-to-year increase is a result of new shares issued in exchange for a $52 million equity investment made by Intel Corp., which was finalized during the second quarter of fiscal 1997.

''Our PC Card business experienced double-digit sales-out unit growth in all three of our geographic regions,'' said Dirk Gates, chairman, president and chief executive officer. ''This growth far exceeded the growth of notebook PC shipments during the quarter, a clear indication that we continue to gain market share in the PC Card space.''

In closing, Gates stated: ''Unfortunately, Netaccess continues to perform below expectations. While we believe the market for Netaccess products will experience significant growth in the future, we also believe the investment necessary to fully exploit the opportunity would be dilutive to our efforts and distract from our primary strategy to maximize the growth and profitability of our PC Card business.

''We have, therefore, decided to divest the Netaccess subsidiary and have engaged an independent financial advisor to assist in the transaction. We are currently in discussions with multiple parties.''

Xircom Corporate Background

Founded in 1988, Xircom is the leading manufacturer of PC Card communications products for connecting mobile and remote portable-computer users to corporate networks, the Internet and other on-line services from a wide variety of locations. World Wide Web: http://www.xircom.com

Xircom has headquarters in Thousand Oaks, and has regional offices in Salem, N.H.; Antwerp, Belgium; and Singapore. Sales: 800/438-4526; telephone: 805/376-9300; fax: 805/376-9311.

This news release contains forward-looking statements based on current expectations that involve a number of risks and uncertainties which could cause actual results to differ materially and include, but are not limited to, market share gains in the PC Card market, growth in the remote access market and future earnings in the PC Card business.

Other additional risks are described in the company's SEC reports on Form 10-Q for the quarters ended March 31, 1997 (to be filed subsequent to this release), and Dec. 31, 1996, as well as the report on Form 10-K for the fiscal year ended Sept. 30, 1996. Investor information may be found on Xircom's Web site at www.xircom.com, or on the SEC's EDGAR electronic filing database. -0-

Note: Xircom is a registered trademark and Netaccess is a

trademark of Xircom Inc. Other company or product names have

been used for identification purposes only and may be

trademarks of their respective companies.

                             Xircom Inc.
              Condensed Consolidated Statements of Income
                             (unaudited)
             (in thousands, except per-share information)


                             Three months ended    Six months ended
                                  March 31,            March 31,
                              1997        1996      1997      1996

Net sales                   $57,140     $39,978  $113,449   $ 73,783
Cost of sales                35,400      26,281    70,893     48,306
Gross profit                 21,740      13,697    42,556     25,477

Operating expenses:
 Research and development     2,738       2,424     5,679      4,692
 Sales and marketing         10,401       7,635    20,483     15,749
 General and administrative   1,660       1,524     3,589      3,212
  Total operating expenses   14,799      11,583    29,751     23,653
Operating income from
  continuing operations       6,941       2,114    12,805      1,824
Other income (expense), net      34        (352)       86       (631)
Income from continuing
  operations before income
  taxes                       6,975       1,762    12,891      1,193
Provision for income taxes    2,092         564     3,867        430
Income from continuing
  operations                  4,883       1,198     9,024        763
Discontinued operations:
 Operating income (loss),
   net of income taxes         (542)        175      (226)      (150)
Net income                  $ 4,341     $ 1,373   $ 8,798    $   613

Weighted average shares
  outstanding                21,748      19,448    21,201     19,428
Net income (loss) per share:
 Continuing operations      $   .22     $   .06    $  .42     $  .04
 Discontinued operations       (.02)        .01        --       (.01)
 Net income                 $   .20     $   .07    $  .42     $  .03

Net sales                     100.0%      100.0%    100.0%     100.0%
Gross profit                   38.0%       34.3%     37.5%      34.5%
Research and development        4.8%        6.1%      5.0%       6.4%
Sales and marketing            18.2%       19.1%     18.0%      21.3%
General and administrative      2.9%        3.8%      3.2%       4.3%
                               25.9%       29.0%     26.2%      32.0%

Operating income from
  continuing operations        12.1%        5.3%     11.3%       2.5%
Income tax rate                30.0%       32.0%     30.0%      36.0%
Income from continuing
  operations                    8.5%        3.0%      8.0%       1.0%
Net income                      7.6%        3.4%      7.8%       0.8%
-0-

                                Xircom Inc.
                   Condensed Consolidated Balance Sheets
                                (unaudited)
                              (in thousands)

                                   March 31, 1997  Sept. 30, 1996

Current assets:
  Cash and cash equivalents            $65,537         $21,377
  Accounts receivable                   49,408          25,006
  Income tax receivable                     --           2,652
  Inventories                           16,680          13,771
  Deferred income taxes                  5,409           5,409
  Other current assets                   2,643           3,330
Total current assets                   139,677          71,545
Equipment and improvements, net         18,030          18,136
Net assets of discontinued operations   15,557          17,151
Other assets                               390             369
Total assets                          $173,654        $107,201

Current liabilities:
  Notes payable to bank               $     --          $5,100
  Accounts payable                      14,516          10,260
  Accrued liabilities                   18,304          18,986
  Current portion of
   long-term obligations                 1,769           1,422
  Accrued income taxes                   2,656           1,066
Total current liabilities               37,245          36,834
Long-term obligations                    1,839           1,860
Deferred income taxes                    2,904           2,904

Shareholders' equity:
  Common stock                              23              20
  Paid-in capital                      140,483          83,221
  Retained earnings
   (accumulated deficit)                (8,840)        (17,638)
Total shareholders' equity             131,666          65,603
Total liabilities and
 shareholders' equity                 $173,654        $107,201