Financial: Emulex Q3 Results - Company Financial Information

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

Emulex Corp. (Nasdaq:EMLX), a leader in fibre channel technology and products, Thursday announced results for its third fiscal quarter ended March 28, 1999. Revenues totaled $18.2 million, up 21% from the $15.0 million reported for the same quarter a year ago. Net income for the third quarter of fiscal 1999 amounted to $1.4 million, or $0.20 per share on a diluted basis, compared with a net loss of $12.8 million, or $2.08 per share, for the same quarter a year ago.

Results for the third quarter of the prior fiscal year included unusual items, comprised of $1.9 million of incremental inventory reserves in cost of sales and $11.0 million of consolidation charges. Excluding these items, net income for the third quarter of fiscal 1998 would have been $137,000, or $0.02 per share on a diluted basis. "Third-quarter shipments of fibre channel host adapters and hubs rose 159% from a year ago," stated Paul F. Folino, president and chief executive officer. "In contrast, Emulex's traditional networking product sector, which is comprised of network access and printer servers, continued to mature and collectively declined 12% on a sequential basis. "This decline in our traditional networking product sector was offset by increased shipments in the company's LightPulse fibre channel product line, which expanded 44% sequentially and propelled sequential growth for total revenue to 16%. "As a result of these trends, fibre channel expanded to just over 62% of revenue in the third quarter, up from 50% of revenue in the second quarter. This fibre channel increase enabled Emulex to sequentially expand diluted earnings per share by 82%, from $0.11 to $0.20 per share, excluding unusual items." For the nine months ended March 1999, Emulex's revenues totaled $48.0 million, compared with $45.5 million reported a year ago. Including unusual charges detailed separately below, net income for the first nine months of fiscal 1999 amounted to $2.2 million, or $0.33 per share on a diluted basis, compared with a net loss of $11.0 million, or $1.80 per diluted share for the same period a year ago. Excluding those charges, net income would have been $2.5 million, or $0.37 per share on a diluted basis in the first nine months of fiscal 1999, compared with $1.7 million, or $0.26 per share on a diluted basis for the same period a year ago. Shortly after the close of the third quarter, Emulex announced that it had filed a registration statement with the Securities and Exchange Commission relating to a proposed public offering of 2.1 million shares of common stock, of which 2 million shares will be offered by the company and 100,000 shares will be offered by a selling stockholder. Net proceeds from the offering will be used for working capital and general corporate purposes, including capital expenditures, expansion of sales and marketing and research and product development efforts. Emulex is a leading designer, developer and supplier of a broad line of fibre channel host adapters, hubs, ASICs and software products that enhance access to, and storage of, electronic data and applications. The company's products are based on internally developed ASIC technology, are deployable across a variety of heterogeneous network configurations and operating systems, and enhance data flow between computers and peripherals. Emulex's products offer customers the unique combination of critical reliability, scalability, high performance and customization for mission-critical server and storage system applications. The company also markets traditional networking products such as printer servers and network access products, including communications servers and WAN adapters. Emulex 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. News releases and other information about Emulex are available via Emulex's World Wide Web address at http://www.emulex.com. Financial Notes: Net loss for the three months ended March 29, 1998, included incremental excess and obsolete inventory reserves of $1,899,000 and consolidation charges of $10,993,000 related to the company's transition to subcontracting manufacturing. Excluding these items, net of tax, net income would have been $137,000, or $0.02 per share on a diluted basis. Net income for the nine months ended March 28, 1999, included a gain of $777,000 resulting from the sale of the company's former manufacturing facility in Dorado, Puerto Rico, and additional consolidation charges of $1,094,000 related to the closure of the company's Puerto Rican manufacturing facility announced in the third quarter of fiscal 1998. Excluding these items, net of tax, net income would have been $2,502,000, or $0.37 per share on a diluted basis. Net loss for the nine months ended March 29, 1998, included incremental excess and obsolete inventory reserves of $1,899,000, consolidation charges of $10,993,000 related to the company's transition to subcontracting manufacturing and an income tax benefit of $188,000 related to a recovery under a tax sharing agreement with a former subsidiary of the company. Excluding these items, net of tax, net income would have been $1,666,000, or $0.26 per share on a diluted basis.