Financial: Xircom Announces Second-Quarter 1999 Results; Record-Breaking Revenues of $97.7 Million and Record Earnings of 42 Cents per Share - Company Financial Information

Edge: Work-Group Computing Report, April 26, 1999

Xircom Inc. (Nasdaq:XIRC) Monday reported record net sales for the second quarter of fiscal 1999, ended March 31, 1999, of $97.7 million, a 52 percent increase compared with $64.1 million for the same period last year. Net income was a record $10.8 million, or 42 cents per share, compared with $3.3 million, or 14 cents per share, for the same period last year and compared with $9.8 million, or 39 cents per share, for the prior quarter. Net sales for the first six months of 1999 totaled $193.7 million, compared with the $116.7 million reported last year, and net income was $20.6 million, or 81 cents per share, compared with $5.7 million, or 25 cents per share, last year. "During the second fiscal quarter, we extended our speed-based distribution processes to our OEM channel," said Dirk Gates, chairman, president and chief executive officer of Xircom.

"We now have better visibility into inventory levels and sell- through at our OEM partners. As a result, we extended the revenue- reserve methodology that we initiated with our distribution partners six quarters ago to cover our OEM channel, and in doing so, this methodology now covers our entire business. "We also began shipping RealPort Integrated PC Cards to six new OEM partners during the quarter, and now RealPort products account for 50 percent of total revenues in only the third full quarter of shipments. From a financial standpoint, we had another solid performance on both the balance sheet and income statement, with many of our operating metrics at, or near, all-time highs." Gates added: "Across the computer hardware and networking industries, there is caution regarding the overall market for the next few quarters. However, the long-term outlook in the mobile market remains very strong. "Increasingly, notebook computers are the computing tool of choice in the enterprise, resulting in notebook sales growing at a faster rate than desktop sales. At the same time, the rate of network connections for notebooks is also increasing, driving strong demand in the mobile connectivity market. "For these reasons, we are still comfortable with current analysts' earnings estimates for fiscal 1999 and fiscal 2000." Xircom -- a Decade of Focus, Innovation and Leadership in Mobile Communications Xircom, founded in 1988, is the world's leading manufacturer and OEM supplier of mobile communications solutions, including Integrated PC Card and PC Card products, which connect portable-computer users to corporate networks, the Internet and other online resources. The company's products are sold and supported in more than 100 countries through a global network of distributors, integrators and resellers. Xircom, with headquarters in Thousand Oaks and regional headquarters offices in Antwerp, Belgium; Tokyo; and Singapore, has 1,200 employees worldwide and trailing four-quarter revenue of $353 million. More information about Xircom and Xircom products may be found at www.xircom.com; U.S. sales 800/438-4526; telephone 805/376-9300; fax 805/376-9311.

                           XIRCOM INC.
            Condensed Consolidated Income Statements
                          (Unaudited)
          (In thousands, except per-share information)

                           Three months ended     Six months ended
                                March 31,             March 31,
                             1999       1998       1999       1998

Net sales                 $97,684    $64,134   $193,706   $116,679
Cost of sales              55,371     42,505    111,831     76,922
Gross profit               42,313     21,629     81,875     39,757
Operating expenses:
 Research and development   5,202      3,876     10,392      7,415
 Sales and marketing       19,606     11,518     37,888     21,795
 General and administrative 3,062      2,348      5,953      4,419
 Total operating expenses  27,870     17,742     54,233     33,629
Operating income           14,443      3,887     27,642      6,128
Other income, net             597        799        973      2,023
Income before income taxes 15,040      4,686     28,615      8,151
Income-tax provision        4,211      1,409      8,012      2,444
Net income                $10,829    $ 3,277   $ 20,603   $  5,707
Diluted earnings per share$   .42    $   .14   $    .81   $    .25
Weighted average shares
 outstanding               25,594     22,924     25,327     22,848
Net sales                  100.0%     100.0%     100.0%     100.0%
Gross profit                43.3%      33.7%      42.3%      34.1%
Research and development     5.3%       6.0%       5.4%       6.4%
Sales and marketing         20.1%      18.0%      19.5%      18.7%
General and administrative   3.1%       3.6%       3.1%       3.7%
                            28.5%      27.6%      28.0%      28.8%
Operating income from
 continuing operations      14.8%       6.1%      14.3%       5.3%
Income-tax rate             28.0%      30.0%      28.0%      30.0%
Net income                  11.1%       5.1%      10.6%       4.9%


                           XIRCOM INC.
              Condensed Consolidated Balance Sheets
                         (In thousands)

                                     (Unaudited)
                                      March 31,           Sept. 30,
                                        1999                  1998
Current assets:
 Cash and cash equivalents          $117,162              $105,796
 Accounts receivable                  31,405                29,280
 Income tax receivable                   285                   285
 Inventories                          16,220                16,121
 Deferred income taxes                11,659                11,659
 Other current assets                  5,748                 4,874
 Total current assets                182,479               168,015
Equipment and improvements, net       31,096                26,730
Other assets                           4,627                   479
Total assets                        $218,202              $195,224
Current liabilities:
 Accounts payable                   $ 13,210              $ 17,269
 Accrued liabilities                  37,474                28,813
 Accrued income taxes                  4,384                 3,308
 Total current liabilities            55,068                49,390
Deferred income taxes                  9,116                 9,116
Shareholders' equity:
 Common stock                             24                    23
 Paid-in capital                     142,558               145,862
 Retained earnings (accumulated
  deficit)                            11,436                (9,167)
 Total shareholders' equity          154,018               136,718
 Total liabilities and shareholders'
  equity                            $218,202              $195,224