4/28/2003 - Oak Technology, Inc., (Nasdaq: OAKT) a leading provider of embedded solutions for the HDTV and Digital Imaging markets, announced that for the third quarter of fiscal 2003, ended March 31, 2003, the company reported total net revenues of $25.9 million and a total net loss of $18.0 million, or ($0.32) per share, on a GAAP basis. This compares to total net revenues of $42.1 million and a total net loss of $1.7 million, or ($0.03) per share, on a GAAP basis for the same quarter one year ago.
On a pro forma basis, excluding the amortization of intangibles, acquisition-related expenses, deferred stock compensation and restructuring expenses, the company reported a net loss for the third quarter of fiscal 2003 of $9.7 million, or ($0.17) per share as compared with pro forma net income of $1.7 million, or $0.03 per diluted share, on a comparable basis, for the same quarter one year ago.
For the first nine months of fiscal 2003, the company reported $84.5 million in total net revenues and a total net loss of $46.6 million, or ($0.83) per share, on a GAAP basis. This compares with total net revenues of $111.7 million and a total net loss of $14.3 million, or ($0.26) per share, on a GAAP basis, for the same period one year ago.
On a pro forma basis, excluding the amortization of intangibles, acquisition-related expenses, deferred stock compensation and restructuring expenses, the company reported a net loss for the first nine months of fiscal 2003 of $23.6 million, or ($0.42) per share, as compared with a pro forma net loss of $2.3 million, or ($0.04) per share, on a comparable basis, for the same period one year ago.
Over the past nine months, Oak has successfully executed three strategic initiatives to focus on transitioning from a PC company to a consumer electronics company. The first initiative was the acquisition of TeraLogic, Inc., a leading developer of HDTV hardware and software, completed during the second fiscal quarter. Second, Oak leveraged the company's optical storage assets by selling the company's PC optical storage business, excluding certain intellectual property and patents, to Sunplus Technology Co., Ltd. of Taiwan in return for $16 million in cash (net of withholding taxes) and $14 million to be received in Sunplus stock. In addition, Oak initiated a program to license the company's retained optical storage patents and intellectual property rights. The first step in this program was the licensing of certain intellectual property to Samsung Electronics Co., Ltd. to enable a partnership between Samsung and Sunext Technology, a Taiwan pre-IPO company formed by Oak and Sunplus, to jointly develop and manufacture next-generation optical System-on-a-Chip (SOC) solutions. Third, Oak has been reducing its cost structure by approximately 40% from December 2002 through June 2003, which will bring the company's pro forma breakeven point in revenue to $28 million per quarter. The company believes these three strategic initiatives position Oak for positive operating cash flow beginning in the September quarter and improved financial performance into the future.
"We have succeeded in completing the major pieces of our plan to restructure Oak and reposition the company for a concentrated consumer focus," said Young Sohn, Oak's chairman and chief executive officer. "We are very pleased with the strong momentum with our TeraLogic and Imaging businesses as demonstrated by our successful design wins with HDTV and laser/inkjet market leaders."Momentum in HDTV is continuing in the third quarter. More than 10 leading consumer customers are actively designing Oak's Generation9TM "HDTV System-on-a-Chip" into their G9-based products. We have sold 40 Cougar-G9 development platforms and recently received our first production orders for the G9. We expect the ramp to start in the second half of calendar 2003. At the same time, we have continued to see solid results and year-over-year growth in the March quarter for the Generation 8 revenues.
"Our QuatroTM System-on-a-Chip for desktop laser printers and inkjet MFPs has now been ramping into production for a full quarter. In addition, we now have over 10 customers actively designing Quatro-based products, which are currently scheduled to begin production in late calendar 2003, fueling a volume growth ramp throughout calendar 2004.
"With the most difficult part of the transition behind us, we believe we are well positioned with strong products in certain high growth consumer markets. This should leave us on track for an improvement in financial performance for the June quarter."
RECENT BUSINESS DEVELOPMENTS
Oak announced the availability of TeraLogic Group's Cougar-G9 digital reference design for the HDTV. The Cougar-G9 development platform enables customers to use a seamless, integrated solution for rapid product development in both VxWorks and Linux operating systems. This approach reduces a customer's development effort while providing a significant time-to-market advantage -- making digital entertainment a reality sooner for a broader group of consumers.
Oak's Quatro SOC inkjet MFP reference design, based on proven technology and industry-leading hardware and software solutions, enables customers to significantly reduce the development cycle for fast time-to-market implementation. Oak's MFP reference design provides all of the key functions required in an MFP, including the latest USB 2.0 implementation and Conexant and Network WebWare's connectivity solutions.
Oak has 136 PDL deployments including Canon and Ricoh, and in the third quarter, Oak's IPS/5ETM PDL and customized print drivers were chosen by Heidelberg Digital for its Digimaster 9150i digital production printer.
Oak sold its optical storage business and certain optical storage assets to Sunplus Technology, a fabless integrated circuit design house based in Taiwan, and the transaction closed on April 3, 2003. Oak will invest in Sunext Technology Co., Ltd., a Taiwan pre-IPO company, as a minority investor.
Samsung, through the licensing of Oak optical storage IP, joined with Oak and Sunplus to develop and manufacture, with Sunext, next-generation optical System-on-a-Chip solutions.
The following statements are based on current expectations for the fourth fiscal quarter as of April 22, 2003. These statements, and the use of such phrases as "expects", "anticipates" and "intends" are forward-looking, and actual results may differ materially.
Total revenues for the fourth fiscal quarter are expected to reflect modest single-digit sequential growth in both the HDTV and Imaging businesses as well as from certain license fees for optical storage assets.
As product mix shifts to products supporting the consumer segment, and certain optical storage license fees are recognized after being paid in installments, gross margin is expected to be in the mid-70 percent range for the quarter.
On a GAAP basis, including a gain on the sale of the company's optical storage business to Sunplus of approximately $0.40 per share, the company expects to report positive earnings per share in the range of $0.27- $0.29 per share.
On a pro forma basis, the company expects a net loss in the range of ($0.04) - ($0.06) per share. Pro forma net loss does not include an estimated gain in the fourth quarter on the sale of the Optical Storage business to Sunplus of approximately $0.40 per share, amortization of intangibles of approximately ($0.05) per share, acquisition-related expenses and deferred stock compensation of ($0.01) per share, and restructuring expenses of approximately ($0.01) per share.
Oak will continue to focus on its goal of pro forma profitability in the second half of calendar 2003. Oak has made and will continue to make significant strides in reducing expenses per our restructuring plan. With the success of Generation9 and Quatro design wins, along with the strength in consumer end markets, Oak expects to achieve pro forma profitability on plan.
Based on current forecasts, the company also hereby confirms that it expects to have more than sufficient cash, cash equivalents and short-term investments to provide adequate working capital to fund operations over the next twelve months. With the exception of commenting on restructuring activities and strategic initiatives designed to return the company to pro forma profitability, Oak will refrain from commenting on quarterly expectations beyond the current quarter due to the continued uncertainties in the economy and its industry.
Oak Technology's procedure for publishing and updating this outlook is as follows. Following the publication of the outlook in its quarterly earnings release, Oak will continue its current practice of having corporate representatives meet privately with investors, the media, investment analysts and others to discuss the markets in which the company operates, Oak's business affairs and the published outlook and publicly disclosed material related to the outlook. This outlook will not be updated during the quarter unless Oak Technology first publishes a notice stating otherwise.
ABOUT PROFORMA ADJUSTMENTS
To supplement the consolidated financial results prepared under generally accepted accounting principles ("GAAP"), Oak uses a non-GAAP conforming, or pro forma measure of net income that is GAAP net income adjusted to exclude certain costs, expenses and gains. Pro forma net income gives an indication of Oak's baseline performance before gains, losses or other charges that are considered by management to be outside of the company's core operating results. In addition, pro forma net income is among the primary indicators management uses as a basis for planning and forecasting future periods. These measures are not in accordance with, or an alternative for, GAAP and may be materially different from pro forma measures used by other companies. Oak computes pro forma net income by adjusting GAAP net income with the impact of amortization of intangibles, acquisition-related charges, restructuring charges, deferred stock compensation and other non-recurring charges and gains.
ABOUT OAK TECHNOLOGY
Oak Technology, Inc., a leading provider of solutions for the storage, manipulation and distribution of digital content, is committed to driving the emerging world of connected consumer appliances. The company's fully integrated products and technologies target two key markets: digital imaging (advanced copiers, printers, faxes, scanners and MFPs) and digital home entertainment (digital TV, HDTV and PVRs). Founded in 1987, Oak is headquartered in Sunnyvale, California, and has sales offices, design centers and research facilities around the world. The company trades on the Nasdaq Stock Exchange under the symbol OAKT. Additional information about Oak and its digital solutions can be found at www.oaktech.com.
Oak Technology is a registered trademark of Oak Technology, Inc. The Oak logo, Generation9, Cougar-G9 and Quatro and IPS are common law trademarks of Oak Technology, Inc.
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