Revenue Rises 53 Percent and Pro Forma Operating Income Increases 72 Percent
Versus Q1 2000
SAN JOSE, Calif., July 20 /PRNewswire/ -- SDL, Inc. (Nasdaq: SDLI) today
announced record revenues of $110.5 million and pro forma net income of
$27.2 million, or $0.33 per diluted share, for the second quarter ended
June 30, 2000.
Driven by significant increases in shipments of communications products
for both terrestrial and undersea fiber optic systems, second quarter revenue
was 156 percent above that reported for the second quarter ended June 30, 1999
and 53 percent higher than revenue in the first quarter of 2000. Revenue from
fiber optic communications products increased 60 percent over the first
quarter and by 242 percent over the prior year quarter. Results for the
second quarter include three full months of operations for the Queensgate and
Veritech acquisitions and four weeks of operations at Photonics Integration
Research (PIRI). Excluding these three acquired businesses, total revenue
increased by 31 percent sequentially and by 116 percent over the prior year
quarter, and base fiber optic communications revenue grew by 36 percent
sequentially and by 189 percent over the June 1999 quarter.
Including acquisition-related and purchased intangibles amortization
charges and non-cash stock compensation expense, the company reported a net
loss of $70.7 million, or $0.89 per diluted share for the quarter. This
includes $26.2 million of charges for in-process research and development
related to the Veritech and PIRI transactions, $71.6 million of amortization
of purchased intangible assets and $4.8 million of non-cash stock compensation
expense.
On a pro forma basis, excluding acquisition-related charges, amortization
of purchased intangible assets and non-cash stock compensation expense, SDL
reported net income of $27.2 million, or $0.33 per share for the quarter, an
increase of 342 percent over the $6.1 million, or $0.09 per share, pro forma
net income for the quarter ended June 30, 1999. Pro forma operating income
rose by 72 percent over Q1 2000. Pro forma operating margin was a record
34.4 percent, up 3.9 points from the March 2000 quarter and up 16.9 points
from the prior year quarter. Almost half of the sequential increase was
derived from strong margins from the three recent acquisitions and the
remainder from continued gross margin improvement in the base business due to
the growth in telecom volume and increases in yields and factory efficiency.
The following table summarizes pro forma results for the quarters ended
June 30, 2000 and 1999.
(in millions, except share amounts) Three months ended
June 30
2000 1999
Revenues $110.5 $43.2
Gross margin (a) 58.1 18.2
Income from operations (a) 38.0 7.6
Income before income taxes (a) 43.0 7.9
Net income (a) 27.2 6.1
Net income per diluted share (a) $0.33 $0.09
Diluted weighted average shares outstanding 83.5 65.9
(a) Pro forma results for the quarter ended June 30, 2000 exclude the
in-process research and development charges related to the Veritech
and PIRI acquisitions, amortization of purchased intangible assets and
non-cash stock compensation expenses. Pro forma results for the
quarter ended June 30, 1999 exclude the merger expenses related to the
acquisition of IOC International, amortization of purchased intangible
assets and non-cash stock compensation expenses.
For the six months ended June 30, 2000, SDL reported revenue of
$182.7 million, up 126 percent compared to revenues of $80.8 million in the
first six months of 1999. Pro forma net income for the same period was a
record $44.2 million or $0.55 per diluted share, compared to pro forma net
income of $11.0 million or $0.17 per diluted share in the first half of 1999.
Commenting on the quarter's performance, SDL's Chairman and Chief
Executive Officer, Donald R. Scifres said, "SDL's fiber optic businesses,
including the three recently acquired businesses, Queensgate, PIRI and
Veritech, continued to expand at a rapid rate. Q2 highlights include the
continued revenue growth in both terrestrial and undersea fiber optic market
sectors, markedly higher margins due to operating efficiencies, improved
product mix and higher yields, and a major improvement in cash flow."
Scifres concluded, "Looking forward, we are in the process of expanding
our manufacturing capabilities at our three new operations as well as at our
Santa Clara, California manufacturing site in order to accommodate the
expected strong demand for fiber optic products. Based on excellent order
levels, the second half of 2000 is also projected to be strong."
Statements in this press release which are not historical including
statements regarding SDL's or management's intentions, hopes, beliefs,
expectations, representations, projections, plans or predictions of the future
are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements include statements regarding
the company's plans to expand manufacturing capabilities at four of its sites
in anticipation of strong customer demand for fiber optic products, and the
company's expectations for strong performance in the second half of 2000. It
is important to note that the Company's actual results could differ materially
from those in any such forward-looking statements. Factors that could cause
actual results to differ materially include risks related to the company's
inability to meet customer demand with its existing facilities, the company's
inability to expand manufacturing facilities successfully to meet customer
demand, uncertainties in competition and in customer demand for the company's
products, and the risk factors listed from time to time in the Company's SEC
reports including but not limited to, the annual report on Form 10-K for the
year ended December 31, 1999, and Form 10-Q for the quarter ended March 31,
2000.
SDL's products power the transmission of data, voice and Internet
information over fiber optic networks to meet the needs of telecommunications,
dense wavelength division multiplexing (DWDM), cable television and satellite
communications applications. They enable customers to meet the bandwidth
needs of increasing Internet, data, video and voice traffic by expanding their
fiber optic communications networks much more quickly and efficiently than
would be possible using conventional electronic and optical technologies.
SDL's optical products also serve a variety of non-communications
applications, including materials processing and printing. Additional
information about SDL, Inc. is available on the Internet at http://www.sdli.com .
SDL, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data - unaudited)
Three Months Ended Six Months Ended
June, 30 June 30,
2000 1999 2000 1999
Total revenues $110,512 $43,171 $182,718 $80,837
Cost of revenues 55,214 24,973 92,830 48,006
Gross profit 55,298 18,198 89,888 32,831
Operating expenses
Research and development 8,569 4,292 14,472 8,073
Selling, general and
administrative 13,504 6,443 20,802 12,123
Merger costs - 2,677 - 2,677
In-process research and
development 26,200 - 27,400 1,495
Amortization of purchased
intangibles 71,627 210 73,371 389
Total operating expenses 119,900 13,622 136,045 24,757
Operating income (loss) (64,602) 4,576 (46,157) 8,074
Interest income, net 5,029 297 9,514 583
Income (loss) before
income taxes (59,573) 4,873 (36,643) 8,657
Provision for income taxes 11,158 1,662 19,844 2,823
Net income (loss) ($70,731) $3,211 ($56,487) $5,834
Net income (loss) per share
- basic ($0.89) $0.05 ($0.75) $0.10
Net income (loss) per share
- diluted ($0.89) $0.05 ($0.75) $0.09
Number of weighted average
shares - basic 79,246 61,984 75,633 61,036
Number of weighted average
shares - diluted 79,246 65,922 75,633 65,108
SDL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
2000 1999
(unaudited) (A)
Assets
Current assets:
Cash, cash equivalents and
marketable securities $378,785 $314,135
Accounts receivable, net 67,024 41,445
Inventory 46,971 32,070
Other current assets 6,051 3,659
Total current assets 498,831 391,309
Property and equipment, net 86,036 59,772
Intangible assets 2,942,641 2,948
Other assets 8,452 6,924
$3,535,960 $460,953
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $25,092 $18,277
Other accrued liabilities 60,929 17,770
Total current liabilities 86,021 36,047
Long-term liabilities 4,966 4,758
Stockholders' equity 3,444,973 420,148
$3,535,960 $460,953
(A) Derived from audited financial statements included in the Company's
Annual Report Form 10-K filed with the Securities and Exchange
Commission.
SDL, Inc.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data - unaudited)
Three Months Ended June 30, 2000
Pro Forma
As Reported Adjustments Pro Forma
Total revenues $110,512 $- $110,512
Cost of revenues (a) 55,214 (2,840) 52,374
Gross profit 55,298 2,840 58,138
Operating expenses
Research and development (a) 8,569 (989) 7,580
Selling, general and
administrative (a) 13,504 (934) 12,570
In-process research and
development (b) 26,200 (26,200) -
Amortization of purchased
intangibles (c) 71,627 (71,627) -
Total operating expenses 119,900 (99,750) 20,150
Operating income (loss) (64,602) 102,590 37,988
Interest income, net 5,029 - 5,029
Income (loss) before income taxes (59,573) 102,590 43,017
Provision for income taxes (d) 11,158 4,676 15,834
Net income (loss) ($70,731) $97,914 $27,183
Net income (loss) per share
- basic ($0.89) $0.34
Net income (loss) per share
- diluted ($0.89) $0.33
Number of weighted average
shares - basic 79,246 79,246
Number of weighted average
shares - diluted 79,246 83,473
(a) Adjusted to exclude $4,763,000 of non-cash stock compensation expense
(b) Adjusted to exclude In Process R&D charges
(c) Adjusted to exclude amortization of purchased intangible assets
(d) Adjusted to exclude income tax effects of (a) and (c) to derive a pro
forma effect tax rate of 36.5 percent
SDL, Inc.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data - unaudited)
Six Months Ended June 30, 2000
Pro Forma
As Reported Adjustments Pro Forma
Total revenues $182,718 $- $182,718
Cost of revenues (a) 92,830 (2,840) $89,990
Gross profit 89,888 2,840 92,728
Operating expenses
Research and development (a) 14,472 (989) 13,483
Selling, general and
administrative (a) 20,802 (1,588) 19,214
In-process research and
development (b) 27,400 (27,400) -
Amortization of purchased
intangibles (c) 73,371 (73,371) -
Total operating expenses 136,045 (103,348) 32,697
Operating income (loss) (46,157) 106,188 60,031
Interest income, net 9,514 - 9,514
Income (loss) before income taxes (36,643) 106,188 69,545
Provision for income taxes (d) 19,844 5,540 25,384
Net income (loss) ($56,487) $100,648 $44,161
Net income (loss) per share
- basic ($0.75) $0.58
Net income (loss) per share
- diluted ($0.75) $0.55
Number of weighted average
shares - basic 75,633 75,633
Number of weighted average
shares - diluted 75,633 79,990
(a) Adjusted to exclude $5,417,000 of non-cash stock compensation expense
(b) Adjusted to exclude In Process R&D charges
(c) Adjusted to exclude amortization of purchased intangible assets
(d) Adjusted to exclude income tax effects of (a) and (c) to derive a pro
forma effective tax rate of 36.5 percent
SDL, Inc.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data - unaudited)
Three Months Ended June 30, 1999
Pro Forma
As Reported Adjustments Pro Forma
Total revenues $43,171 $- $43,171
Cost of revenues 24,973 - 24,973
Gross profit 18,198 - 18,198
Operating expenses
Research and development 4,292 - 4,292
Selling, general and
administrative (a) 6,443 (108) 6,335
Merger costs (b) 2,677 (2,677) -
Amortization of purchased
intangibles (c) 210 (210) -
Total operating expenses 13,622 (2,995) 10,627
Operating income 4,576 2,995 7,571
Interest income, net 297 - 297
Income before income taxes 4,873 2,995 7,868
Provision for income taxes (d) 1,662 69 1,731
Net income $3,211 $2,926 $6,137
Net income per share - basic $0.05 $0.10
Net income per share - diluted $0.05 $0.09
Number of weighted average
shares - basic 61,984 61,894
Number of weighted average
shares - diluted 65,922 65,922
(a) Adjusted to exclude $108,000 of non-cash stock compensation expense
(b) Adjusted to exclude merger costs related to the pooling of interests
transaction with IOC
(c) Adjusted to exclude amortization of purchased intangible assets
(d) Adjusted to exclude (a), (b) and (c) to derive a pro forma effective
tax rate of 22 percent
SDL, Inc.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data - unaudited)
Six Months Ended June 30, 1999
Pro Forma
As Reported Adjustments Pro Forma
Total revenues $80,837 $- 80,837
Cost of revenues (a) 48,006 (700) 47,306
Gross profit 32,831 700 33,531
Operating expenses
Research and development 8,073 - 8,073
Selling, general and
administrative (b) 12,123 (176) 11,947
Merger costs (c) 2,677 (2,677) -
In-process research and
development (d) 1,495 (1,495) -
Amortization of purchased
intangibles (e) 389 (389) -
Total operating expenses 24,757 (4,737) 20,020
Operating income 8,074 5,437 13,511
Interest income, net 583 - 583
Income before income taxes 8,657 5,437 14,094
Provision for income taxes 2,823 278 3,101
Net income $5,834 $5,159 $10,993
Net income per share - basic $0.10 $0.18
Net income per share - diluted $0.09 $0.17
Number of weighted average
shares - basic 61,036 61,036
Number of weighted average
shares - diluted 65,108 65,108
(a) Adjusted to exclude $700,000 one-time charge related to the
acquisition of Polaroid's fiber laser business in February 1999
(b) Adjusted to exclude $176,000 of non-cash stock compensation expense
(c) Adjusted to exclude merger costs related to the pooling of interests
transaction with IOC
(d) Adjusted to exclude in-process R&D charges
(e) Adjusted to exclude amortization of purchased intangible assets
(f) Adjusted to exclude (a), (b), (c), and (e) to derive a pro forma
effective tax rate of 22 percent
SOURCE SDL, Inc.
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Related links:
http://www.sdli.com
CONTACT:
Donald R. Scifres, Chairman and CEO, or
Michael L. Foster, VP Finance and CFO, of SDL, Inc.,
408-943-9411, or general, Lisa Horn Chainey or Marcia Nakamura,
investors, Susan Katz, or media, Chris Wood, of Financial
Relations Board, 415-986-1591
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