1/30/2003 - RadiSys Corporation (Nasdaq: RSYS), a leading global provider of embedded solutions, reported revenues of $47.3 million for the quarter ended December 31, 2002, a 15% decrease from $55.9 million during the same period a year ago. The net income for the quarter was $941 thousand, or $.05 per share (diluted), versus a net loss of $13.4 million, or $.77 per share (diluted), a year ago. The results for the quarter ended December 31, 2002 include a gain of $1.2 million associated with the sale of the Company's Multibus business and an $850 thousand reversal of restructuring liabilities. Excluding the $1.2 million gain and an $850 thousand reversal of restructuring liabilities, net loss for the quarter ended December 31, 2002 was $295 thousand, or $.02 per share (diluted).
Cash earnings, excluding the $1.2 million gain and an $850 thousand reversal of prior quarter's restructuring accruals, was $67 thousand, or $.00 per share (diluted). The Company defines cash earnings per share as net income excluding intangibles amortization of $765 thousand pre-tax. Given the small difference now between earnings and cash earnings the Company will not report cash earnings moving forward.
For the year ended December 31, 2002 revenues were $200.1 million, a decrease of 12% from revenues of $227.8 million for the year ended December 31, 2001. Net loss for the year ended December 31, 2002 was $3.3 million, or $.19 per share (diluted), compared to a net loss of $34.5 million or $2.00 per share (diluted) for the year ended December 31, 2001.
"As I indicated earlier this month, our business in the fourth quarter held up well and I'm pleased that we were able to deliver to our original guidance of improved earnings on similar revenues to our third quarter", stated Scott Grout, CEO. "Our revenue and design wins continue to be more and more diversified as 37% of our revenue and 36% of our design wins were in Commercial Systems, 29% and 46%, respectively, in Enterprise Systems and 34% and 18%, respectively, in Service Provider Systems. We dropped our DSO two days to 52 days, increased our inventory turns to 5.3 from 4.9 last quarter and generated $4.5 million in cash flow from operations."
Effective November 7th, the Company sold its Multibus business to US Technologies for $1.2 million, transferring manufacturing, service, components and repair rights for over 300 end-of-life Multibus products to US Technologies. The Company retained nine active Multibus products purchased by current customers.
Also during the quarter, the Company reversed $850 thousand of restructuring liabilities. The reversal of restructuring liabilities was primarily attributable to lower than expected severance expenses as well as reduced future obligations associated with vacated leased facilities.
RadiSys achieved 11 new design wins in the quarter. RadiSys characterizes a design win as a project estimated to produce more than $500 thousand in revenue per year when in production. Six of the wins are significantly larger, each of which is estimated to produce more than $2 million in revenue per year once in full production. Of the 11 wins, five are in Enterprise Systems, four are in Commercial Systems, and two are in Service Provider Systems. Design wins ramp into production volume at varying rates; on average the ramp begins about 12 months after the win occurs.
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.
Commenting on the outlook, Scott Grout, CEO, said "We currently expect to see revenue levels for Q1 similar to Q4. We expect earnings to continue to improve and therefore anticipate being slightly profitable, excluding the restructuring charge we announced on January 13th."
The Company also previously announced on January 13th that it was taking several steps intended to further improve its profitability and market diversification. These steps include an increased level of outsourced manufacturing for product cost reduction, the planned sale of its Savvi, next-generation telecom signaling business to enable further diversification, and other reductions in spending. These actions will result in a restructuring charge in the first quarter of between $2M and $2.5M, and are expected to result in quarterly savings of approximately $2M. Additionally, depending on management's resolution with regard to the disposition of its Savvi business, there may be a goodwill and intangible impairment charge of up to $4 million during the first quarter.
The Company's board of directors has authorized the repurchase of $20 million of its convertible notes. The Company bought back approximately $21 million face value of convertible notes during 2002. The Company intends to purchase the notes in the open market or through privately negotiated transactions from time to time over the next several months, subject to market conditions.
In closing, Mr. Grout stated "This was a challenging, but important, transition year for RadiSys. The Company did a commendable job driving the business to break-even while maintaining significant investments in research and development and new product introduction. These investments enabled the Company to achieve 46 new design wins in a diverse set of end markets, which will be the foundation for our success long-term. The team also positioned the Company for success by building a strong balance sheet generating $18 million of operating cash flow during the year and exiting the year with $119 million in cash and investments. I believe these accomplishments, coupled with the actions we announced earlier this quarter, will position us to be profitable while increasing our investments in programs where we can leverage our strengths in an attractive and diversified set of end markets."
RadiSys is a leading global provider of embedded solutions to the commercial systems, enterprise systems, and service provider systems markets. Using its extensive expertise in a wide variety of technologies, RadiSys focuses on industry-leading Intel architecture while working in a close "virtual division" relationship with its customers -- significantly improving their time-to-market advantage and reducing cost. The broad range of RadiSys product offerings include board-level embedded computers; blade servers; motherboards; network interfaces and packet processing engines; communications middleware and software such as SS7/IP internetworking and protocol stacks; platforms based on PCI, CompactPCI, CompactPCI 2.16 and ATCA; turnkey gateway systems and professional services.
RadiSys is a registered trademark.
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