Revenue Rises 33 Percent and Pro forma Operating Income Increases 52 Percent
Versus Prior Quarter
SAN JOSE, Calif., Oct. 19 /PRNewswire/ -- SDL, Inc. (Nasdaq: SDLI) today
announced record revenues of $146.5 million and pro forma net income of
$40.4 million, or $0.45 per diluted share, for the third quarter ended
September 30, 2000.
Driven by significant increases in shipments of communications products
for both terrestrial and undersea fiber optic systems, third quarter revenue
was 208 percent above that reported for the year earlier quarter ended
September 30, 1999 and 33 percent higher than revenue in the second quarter of
2000. Revenue from fiber optic communications products increased 38 percent
over the second quarter and by 332 percent over the prior year quarter, and
represented a record 90 percent of total revenue. Sequential growth remained
strong in both terrestrial (up 42 percent) and undersea (up 28 percent)
sectors of the fiber optic communications business.
Including merger expenses, purchased intangible amortization charges, non-
cash stock compensation expense and payroll tax on stock options, the company
reported a net loss of $115.8 million, or $1.34 per diluted share, for the
quarter.
On a pro forma basis, SDL reported net income of $40.4 million, or
$0.45 per share, for the quarter, an increase of 420 percent over the
$7.8 million, or $0.11 per share, pro forma net income for the quarter ended
September 30, 1999. Pro forma operating income rose by 52 percent over Q2
2000 and increased by more than six times over such income from the prior year
quarter. Due to improved product mix, higher yields and volume efficiencies,
the third quarter pro forma operating margin expanded to a record 39.4 percent
of revenue.
The following table summarizes pro forma results for the quarters ended
September 30, 2000 and 1999.
(in millions, except share amounts) Three months ended
September 30
2000 1999
Revenues $146.5 $47.5
Gross margin (a) 82.9 20.9
Income from operations (a) 57.7 9.4
Income before income taxes (a) 63.7 10.0
Net income (a) 40.4 7.8
Net income per diluted share (a) $0.45 $0.11
Diluted weighted average shares outstanding 90.8 68.3
(a) Pro forma results for the quarter ended September 30, 2000 exclude
merger costs incurred to date associated with the proposed merger
with JDS Uniphase, amortization of purchased intangible assets, non-
cash stock compensation expenses and payroll taxes on stock option
exercises. Pro forma results for the quarter ended September 30,
1999 exclude amortization of purchased intangible assets and non-cash
stock compensation expenses.
For the nine months ended September 30, 2000, SDL reported revenue of
$329.2 million, up 156 percent compared to revenues of $128.3 million in the
first nine months of 1999. Pro forma net income for the same period was a
record $84.6 million or $1.01 per diluted share, compared to pro forma net
income of $18.9 million or $0.29 per diluted share in the first nine months of
1999.
Commenting on the quarter's performance, SDL's Chairman and Chief
Executive Officer, Donald R. Scifres said, "SDL's record financial performance
in the third quarter reflects our leadership position in multiple sectors of
the fiber optics communications market. Demand remained exceptionally strong
in both terrestrial and undersea segments, both in traditional areas of SDL
leadership, such as pump lasers, as well as in emerging product areas such as
Raman amplification and optical transmitter and receiver modules. In order to
serve this growing backlog of orders, we have started or have plans to expand
all of our manufacturing facilities around the world."
Scifres continued, "It is also very gratifying to observe the success of
our integrated communications sales force in selling a broad range of products
to customers who previously purchased only one or two SDL products. With the
many long-term contracts and design wins accomplished this year, we are able
to project that SDL will be a $1 billion company in 2001."
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 leadership position in multiple sectors of the fiber optics
communications market, its plans to expand manufacturing capabilities at all
of its sites in anticipation of growing backlog of orders, and the company's
expectations to be a $1 billion company in 2001. 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 expand
manufacturing facilities successfully to meet customer demand, the company's
inability to meet customer demand with its existing facilities, 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 quarters ended March 31 and June 30, 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 Nine Months Ended
September, 30 September 30,
2000 1999 2000 1999
Total revenues $146,516 $47,507 $329,234 $128,344
Cost of revenues 70,058 26,656 162,888 74,662
Gross profit 76,458 20,851 166,346 53,682
Operating expenses
Research and development 12,214 5,237 26,686 13,310
Selling, general and
administrative 18,127 6,527 38,929 18,650
Merger costs 3,168 - 3,168 2,677
In-process research and
development - - 27,400 1,495
Amortization of purchased
intangibles 151,327 210 224,698 599
Total operating expenses 184,836 11,974 320,881 36,731
Operating income (loss) (108,378) 8,877 (154,535) 16,951
Interest income, net 5,949 589 15,463 1,172
Income (loss) before income
taxes (102,429) 9,466 (139,072) 18,123
Provision for income taxes 13,404 2,082 33,248 4,905
Net income (loss) ($115,833) $7,384 ($172,320) $13,218
Net income (loss) per
share - basic ($1.34) $0.12 ($2.17) $0.21
Net income (loss) per
share - diluted ($1.34) $0.11 ($2.17) $0.20
Number of weighted average
shares - basic 86,608 64,186 79,292 62,086
Number of weighted average
shares - diluted 86,608 68,292 79,292 66,170
SDL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
2000 1999
(unaudited) (a)
Assets
Current assets:
Cash, cash equivalents and marketable
securities $384,228 $314,135
Accounts receivable, net 82,787 41,445
Inventory 55,760 32,070
Other current assets 7,695 3,659
Total current assets 530,470 391,309
Property and equipment, net 104,051 59,772
Intangible assets 2,791,297 2,948
Other assets 8,071 6,924
$3,433,889 $460,953
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $28,629 $18,277
Other accrued liabilities 46,752 17,770
Total current liabilities 75,381 36,047
Long-term liabilities 5,012 4,758
Stockholders' equity 3,353,496 420,148
$3,433,889 $460,953
(a) Derived from audited financial statements included in the Company's
Annual Report Form on 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 September 30, 2000
Pro Forma
As Reported Adjustments Pro Forma
Total revenues $146,516 $- $146,516
Cost of revenues (a) 70,058 (6,463) 63,595
Gross profit 76,458 6,463 82,921
Operating expenses
Research and development (a) 12,214 (2,239) 9,975
Selling, general and
administrative (a) 18,127 (2,919) 15,208
Merger costs (b) 3,168 (3,168) -
Amortization of purchased
intangibles (c) 151,327 (151,327) -
Total operating expenses 184,836 (159,653) 25,183
Operating income (loss) (108,378) 166,116 57,738
Interest income, net 5,949 - 5,949
Income (loss) before income taxes (102,429) 166,116 63,687
Provision for income taxes (d) 13,404 9,842 23,246
Net income (loss) ($115,833) $156,274 $40,441
Net income (loss) per share - basic ($1.34) $0.47
Net income (loss) per share -
diluted ($1.34) $0.45
Number of weighted average
shares - basic 86,608 86,608
Number of weighted average
shares - diluted 86,608 90,825
(a) Adjusted to exclude $11,621,000 of stock compensation expense and
payroll taxes on stock options
(b) Adjusted to exclude $3,168,000 of costs incurred to date associated
with the proposed merger with JDS Uniphase
(c) Adjusted to exclude amortization of purchased intangible assets
(d) Adjusted to exclude income tax effects of (a), (b) 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)
Nine Months Ended September 30, 2000
Pro Forma
As Reported Adjustments Pro Forma
Total revenues $329,234 $- $329,234
Cost of revenues (a) 162,888 (9,303) $153,585
Gross profit 166,346 9,303 175,649
Operating expenses
Research and development (a) 26,686 (3,228) 23,458
Selling, general and
administrative (a) 38,929 (4,507) 34,422
Merger costs (b) 3,168 (3,168) -
In-process research and
development (c) 27,400 (27,400) -
Amortization of purchased
intangibles (d) 224,698 (224,698) -
Total operating expenses 320,881 (263,001) 57,880
Operating income (loss) (154,535) 272,304 117,769
Interest income, net 15,463 - 15,463
Income (loss) before income taxes (139,072) 272,304 133,232
Provision for income taxes (e) 33,248 15,382 48,630
Net income (loss) ($172,320) $256,922 $84,602
Net income (loss) per share - basic ($2.17) $1.07
Net income (loss) per share -
diluted ($2.17) $1.01
Number of weighted average
shares - basic 79,292 79,292
Number of weighted average
shares - diluted 79,292 83,603
(b) Adjusted to exclude $17,038,000 of stock compensation expense and
payroll taxes on stock options
(c) Adjusted to exclude $3,168,000 of costs incurred to date associated
with the proposed merger with JDS Uniphase
(d) Adjusted to exclude in process R&D charges
(e) Adjusted to exclude amortization of purchased intangible assets
(f) Adjusted to exclude income tax effects of (a), (b) and (d) 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 September 30, 1999
Pro Forma
As Reported Adjustments Pro Forma
Total revenues $47,507 $- $47,507
Cost of revenues 26,656 - 26,656
Gross profit 20,851 - 20,851
Operating expenses
Research and development 5,237 - 5,237
Selling, general and
administrative (a) 6,527 (299) 6,228
Amortization of purchased
intangibles (b) 210 (210) -
Total operating expenses 11,974 (509) 11,465
Operating income 8,877 509 9,386
Interest income, net 589 - 589
Income before income taxes 9,466 509 9,975
Provision for income taxes (c) 2,082 113 2,195
Net income $7,384 $396 $7,780
Net income per share - basic $0.12 $0.12
Net income per share - diluted $0.11 $0.11
Number of weighted average
shares - basic 64,186 64,186
Number of weighted average
shares - diluted 68,292 68,292
(a) Adjusted to exclude $299,000 of non-cash stock compensation expense
(b) Adjusted to exclude amortization of purchased intangible assets
(c) Adjusted to exclude (a) and (b) 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)
Nine Months Ended September 30, 1999
Pro Forma
As Reported Adjustments Pro Forma
Total revenues $128,344 $- 128,344
Cost of revenues (a) 74,662 (700) 73,962
Gross profit 53,682 700 54,382
Operating expenses
Research and development 13,310 - 13,310
Selling, general and
administrative (b) 18,650 (474) 18,176
Merger costs (c) 2,677 (2,677) -
In-process research and
development (d) 1,495 (1,495) -
Amortization of purchased
intangibles (e) 599 (599) -
Total operating expenses 36,731 (5,245) 31,486
Operating income 16,951 5,945 22,896
Interest income, net 1,172 - 1,172
Income before income taxes 18,123 5,945 24,068
Provision for income taxes (f) 4,905 278 5,183
Net income 13,218 $5,667 $18,885
Net income per share - basic $0.21 $0.30
Net income per share - diluted $0.20 $0.29
Number of weighted average
shares - basic 62,086 62,086
Number of weighted average
shares - diluted 66,170 66,170
(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 $474,000 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, both of SDL, Inc.,
408-943-9411; General info., Lisa Horn Chainey, investors, Susan
Katz, or media, Dawn Swidorski, all of The Financial Relations
Board, 415-986-1591
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