Financial: Emulex Q1 Results - Company Financial Information

Edge: Work-Group Computing Report, Oct 26, 1998

Emulex Corp. (Nasdaq:EMLX), a leader in gigabit fibre channel, printer server and network access products, Tuesday announced results for its first fiscal quarter ended Sept. 27, 1998.

Revenues totaled $14.1 million, compared with $15.0 million reported for the same quarter a year ago. Net income for the first quarter of fiscal 1999 amounted to $422,000, or 7 cents per share on a diluted basis, compared with net income of $609,000, or 10 cents per share on a diluted basis, for the same quarter a year ago.

"First quarter results reflected both our streamlined product strategy and organization which we initiated last fiscal year," stated Paul F. Folino, president and chief executive officer. During the third quarter of fiscal 1998, Emulex had announced strategies to outsource manufacturing of its products and consolidate its network access product sector.

"While the measures implemented last fiscal year yielded reduced operating expenses in the first quarter, gross profit margins are just beginning to reflect the cost savings from Emulex's new contract manufacturing strategy," noted Folino.

Gross margin in the first quarter of fiscal 1999 improved to 41 percent compared with 40 percent in the fourth quarter of fiscal 1998, while operating expenses, declined to $5.3 million, or 37 percent of revenue, from $5.8 million, excluding unusual items, or 42 percent of revenue, over the same period.

"Combined shipments of fibre channel host bus adapters and hubs rose to a record level in the first quarter, as key OEM customers deployed fibre channel solutions in increasing volumes to end-user customers," stated Folino.

"At 39 percent of our total sales, our flagship LightPulse fibre channel product line has expanded to become the largest product sector at Emulex. With fibre channel OEM relationships in place covering 60 percent of the top 20 server manufacturers in the world, and our new manufacturing resources fully deployed, Emulex is now well positioned to address the demands of this emerging industry."

Emulex is a leading designer of high-performance network connectivity products including fibre channel, printer server and network access products. The company's hardware and software-based networking solutions improve communication in computer networks and enhance data flow between computers and peripherals. Fibre channel is a high-performance ANSI standard interface that is supported by the 120 worldwide member Fibre Channel Association that includes Sun, Hewlett-Packard and Seagate.

As a leading developer and supplier of fibre channel technology, Emulex's fibre channel devices support all implementations of the fibre channel standard, including arbitrated loop, switched fabric and point-to-point topologies. The company markets to OEMs and end users through its own worldwide selling organization, as well as two-tier distribution partners. Corporate headquarters are located in Costa Mesa.

In the quarter ended Dec. 28, 1997, the company adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share." All prior periods have been restated accordingly for basic and diluted earnings per share.

                     EMULEX CORP. AND SUBSIDIARIES
              Condensed Consolidated Statements of Income
                 (in thousands, except per share data)
                              (unaudited)
                                          Three Months Ended
                                Sept. 27,                Sept.28,
                                    1998                     1997
Net revenues                      $14,051                 $15,007
Cost of sales                       8,343                   8,880
                                  --------               --------
  Gross profit                      5,708                   6,127
Operating expenses:
  Engineering and development       2,640                   2,393
  Selling, general and
   administrative                   2,611                   3,071
                                  --------                -------
    Total operating expenses        5,251                   5,464
                                  --------                -------
    Operating income                  457                     663
Nonoperating income                    12                      14
                                  --------                -------
    Income before income taxes        469                     677
Income tax provision                   47                      68
                                  --------                -------
     Net income                   $   422                   $ 609
                                  ========                =======
Net income per share:
     Basic                        $  0.07                   $0.10
                                  ========                =======
     Diluted                      $  0.07                   $0.10
                                  ========                =======
Number of shares used in per share computations:
     Basic                          6,133                   6,103
                                  ========                =======
     Diluted                        6,414                   6,312
                                  ========                =======
                     EMULEX CORP. AND SUBSIDIARIES
                 Condensed Consolidated Balance Sheets
                            (in thousands)
                              (unaudited)
                                      Sept. 27,          June 28,
                                        1998               1998
Assets
Current assets:
   Cash and cash equivalents          $  3,885            $ 1,776
   Accounts and notes receivables, net  14,263             12,141
   Inventories, net                      7,290              9,906
   Prepaid expenses                        652                476
   Deferred income taxes                    85                 85
                                      --------            -------
     Total current assets               26,175             24,384
Property, plant & equipment, net         4,504              5,112
Prepaid expenses and other assets          679                661
                                       -------             ------
                                       $31,358            $30,157
                                       =======              =====
Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable                    $10,334             $6,909
   Accrued liabilities                   4,102              4,105
   Accrued consolidation charges           432              3,173
   Income taxes payable and other
    current liabilities                    270                212
                                       -------             ------
       Total current liabilities        15,138             14,399
Deferred income taxes and other
 liabilities                             2,167              2,152
Total stockholders' equity              14,053             13,606
                                       -------             ------
                                       $31,358            $30,157
                                       =======             ======