FREMONT, Calif. -- May 7, 1996 -- SyQuest
Technology, Inc. (NASDAQ:SYQT) today announced its operating results
for the second quarter ended March 31, 1996. The company reported a
net loss of $51.1 million, or $4.49 per share, on net revenues of
$47.4 million. This compares with net income of $3.7 million, or 31
cents per share, on net revenues of $76.5 million in the second
quarter of fiscal year 1995.
For the first six months of fiscal 1996, SyQuest's net loss was
$84.9 million, or $7.48 per share, on net revenues of $126.1
million. This compares with net income of $5.6 million, or 47 cents
per share, on net revenues of $142.4 million in the first six months
of fiscal 1995.
"The restructuring of company operations that we announced on
February 1 of this year is in the process of being completed," said
Syed H. Iftikar, chief executive officer of SyQuest. "We are
consolidating our high-volume Asian manufacturing operations in
Penang in order to lower our costs. We are also refocusing our
product line in order to be more competitive. However, we are still
rebuilding the business and do not expect to return to profitability
in the current quarter."
SyQuest's restructuring costs in the second quarter consisted of
a one-time, pre-tax charge against earnings of $3.6 million. This
charge included provisions for fixed assets associated with Asian
manufacturing operations, as well as severance compensation and
other benefits for the approximately 1,500 SyQuest employees
affected by the restructuring.
New Management
Consistent with the restructuring, SyQuest continues to rebuild
its senior management team. Effective immediately, the company has
appointed
Iftikar will remain as chief executive officer, joining Marinaro
and Harper as an integral member of the newly formed office of the
president, and will continue to serve on the company's board.
Second-Quarter Results
In the second quarter, net revenues declined 38.0 percent from
$76.5 million in the second quarter of fiscal 1995. Cost of
revenues increased 25.4 percent to $69.0 million, from $55.0 million
a year ago. Adding a provision for losses on purchase commitments
of $3.8 million, this resulted in a gross loss of $25.4 million,
compared with a gross profit of $21.5 million, or 28.1 percent of
revenues, in the year-earlier quarter. The gross loss was due
principally to lower average selling prices for core products,
including the SQ5200 and the SQ3270 drives; to losses associated
with the EZ135 systems introduced in the fourth quarter of fiscal
year 1995; and to the continued shift in revenues from higher-margin
drives to lower-margin systems. Also contributing to the gross loss
were a $12.8-million provision for excess inventories and a $3.1-
million provision for the write-off of inventory and tooling.
Selling, general and administrative expenses increased 32.6
percent, from 14.1 percent of net revenues to 30.2 percent in the
second quarter of fiscal 1996, due to additional provision for bad
debts and to costs associated with the company's European
headquarters, which had opened in October 1995. Research and
development expenses grew 20.8 percent, from 8.0 percent of net
revenues to 15.5 percent, reflecting continued investments in new
products.
Liquidity
The company announced that it has retained the investment
banking firm of Needham & Company to assist in identifying potential
strategic partners and sources of debt and equity financing. It
also said that management is working closely with its banks,
suppliers and potential outsourcing partners to manage cash and
finance operations. SyQuest said that each group has been supportive
and that
The company also said that the new members of its management
team intend to build on the support already received and finalize
pending negotiations, as well as pursue strategic alliances and debt
and equity financing.
Board of Directors
In a separate announcement, SyQuest reported that Robert C.
Wilson has resigned from its board of directors, effective
immediately. Wilson, a partner of Wilson and Chambers, Inc., a
business consulting firm, had served on the SyQuest board since
1982.
"During his lengthy tenure, Bob Wilson has brought a wealth of
wisdom to the SyQuest board," said Iftikar. "He has been a trusted
advisor to me personally and to the company for many years. The
other board members and I will miss him greatly, and we wish him all
the best in his other pursuits.
"At the same time, we are pleased to welcome Ed Marinaro as
chairman," Iftikar added. "Ed is a 36-year veteran of the computer
systems, software and storage industries, having held senior
executive and operating management positions with leading companies
in these fields. His advanced skills and experience will help guide
the future direction of SyQuest."
The Company
SyQuest Technology, Inc. was founded in 1982 and has shipped
more than 2 million removable cartridge hard disk drive systems and
more than 9 million cartridges. SyQuest is headquartered in
Fremont, California, and maintains manufacturing facilities in
Fremont and Penang, Malaysia, with additional facilities in
Colorado, Europe, Japan and Singapore. The company offers removable
Winchester technology solutions for Windows 95, Windows, Windows NT,
Apple Macintosh, MS-DOS, UNIX, SGI, SunOS and Novell platforms.
SyQuest common stock (SYQT) is publicly traded on the NASDAQ
National Market System. See SyQuest on the World Wide Web at
http://www.syquest.com" target=_new>http://www.syquest.com">http://www.syquest.com
Except for the historical information contained herein, the
matters presented in this news release are forward-looking
statements that involve risks and uncertainties, including the
timely development and market acceptance of new products and
upgrades to existing products, the impact of competitive products
and pricing, and other risks detailed from time to time in the
company's filings with the Securities and Exchange Commission (SEC).
In particular, see Forms 10-Q and 10-K as they are filed.
SYQUEST TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
Three months ended Six months ended
March 31, March 31,
1996 1995 1996 1995
Net revenues $47,445 $76,490 $126,112 $142,382
Cost of revenues 69,003 55,030 149,093 104,995
Provision for losses on
purchase commitments 3,833 -- 11,672 --
-------- -------- --------- --------
Gross Profit (loss) (25,391) 21,460 (34,653) 37,387
Operating Expenses:
Selling, general and
administrative 14,351 10,826 28,815 19,413
Research and development 7,360 6,095 14,520 11,270
Restructuring cost 3,600 -- 3,600 --
------- ------- ------- ------
Total operating expenses 25,311 16,921 46,935 30,683
------- ------- ------- -------
Income (loss) from
operations (50,702) 4,539 (81,588) 6,704
Interest income (expense) (403) 311 (318) 676
------- ------- ------- -------
Income (loss) before
income taxes (51,105) 4,850 (81,906) 7,380
Provision for income taxes -- 1,164 3,000 1,771
------- ------- ------- -------
Net income (loss) ($51,105) $3,686 ($84,906) $5,609
Income (loss) per share:
Net income (loss) ($4.49) $0.31 ($7.48) $0.47
Common and common equivalent
shares used in computing
per share amounts 11,371 11,838 11,351 11,864
SYQUEST TECHNOLOGY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
March 31, September 30,
1996 1995
(Unaudited) (Note)
Assets
Current assets:
Cash and cash equivalents $ 7,273 $ 29,248
Short-term investments 400 400
Accounts receivable 42,893 55,653
Inventories 40,079 34,213
Prepaid expenses and deposits 3,597 2,066
Deferred income taxes 10,254 13,254
------ ------
Total current assets 104,496 134,834
Property, equipment and
leasehold improvements 62,544 57,790
Less: Accumulated
depreciation (29,274) (31,070)
-------- --------
Net property and equipment 33,270 26,720
Other assets 3,012 3,130
------- -------
$140,778 $164,684
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable $ 77,126 $ 41,213
Income taxes payable 860 355
Accrued compensation 5,046 5,206
Accrued expenses and other
liabilities 18,561 15,210
Provision for losses on
purchase commitments 14,237 10,510
Notes payable to bank 17,494 --
------ ------
Total current liabilities 133,324 72,494
Deferred rent 252 276
Deferred income taxes 8,725 8,726
Stockholders' equity (deficit):
Common stock 13 13
Additional paid in capital 79,684 79,489
Treasury stock (12,855) (12,855)
Retained earnings (deficit) (68,365) 16,541
-------- --------
Total stockholders' equity
(deficit) (1,523) 83,188
-------- --------
$140,778 $164,684
CONTACT: SyQuest Technologies, Inc.
James E. Graber, 510/226-4000
BOCA RATON, Fla., May 7, 1996 - ADT Limited (NYSE: ADT) a
leading provider of electronic security services and vehicle auction
services announced today that net income for the first quarter of
1996, after adding back the charge resulting from the application of
Statement of Financial Accounting Standards No. 121 ("SFAS 121"),
was $31.0m, representing an increase of 14 per cent over the figure
of $27.1m for the first quarter of 1995, on net sales of $354.3m
(1995 - $373.3m). Net sales for the first quarter of 1995 included
revenues of $54.5m from the Company's European vehicle auction and
electronic article surveillance businesses, which were sold in the
fourth quarter of 1995.
Commenting, Mr. Michael A. Ashcroft, Chairman and Chief
Executive Officer, said:
"With ADT's new channels of distribution, through strategic
alliances in the retail, financial services and real estate sectors
and its new authorized dealer program, which now has 60
participating dealers, ADT is well positioned to achieve growth in
market share and to increase customer density in chosen markets. We
believe that this strategy is key to building shareholder value.
"The reorganization of the electronic security services business
in North America along business lines is proceeding well and we are
optimistic that the benefits of this reorganization will start to
come through towards the end of 1996 and beyond."
A market purchase program in respect of up to 5,000,000 common
shares has been approved by the board, to be carried out at
prevailing market prices from time to time, depending on market
conditions and other considerations.
Electronic Security Services
Net sales and operating income before goodwill amortization, and
before the charge arising under SFAS 121, from the Electronic
Security Services division for the three months ended March 31, 1996
amounted to $279.7m and $49.4m, respectively, compared to $261.0m
and $42.4m for the comparable period in 1995. ADT's total
annualized service revenues as of March 31, 1996 were approximately
$719m, representing an annualized growth rate of approximately 11
percent.
Residential
The residential marketplace remains very competitive with
industry wide mass marketing initiatives keeping the per system cost
to the consumer down. ADT is meeting the challenge through
strategic alliances and co-ventures. ADT security systems are now
available in approximately 600 RadioShack stores and the ADT/USAA
home security program is producing good results. In the first
quarter, ADT entered into a marketing agreement with HFS, the
world's largest franchisor of hotels and residential real estate
brokerage offices. HFS franchises ERA and Century 21 offices where
ADT monitored home security services will be offered to homebuyers
nationwide.
Although significant installation pricing pressures continue to
dominate the residential marketplace, ADT has achieved an increase
in average monthly monitoring fees for new customers of
approximately 14 percent. This increase will be extended to the
rest of the customer base as contracts renew, generating enhanced
growth in annualized service revenues.
During the first quarter, ADT contracted to install and monitor
60,000 new residential security systems compared with 53,000 systems
in the fourth quarter of 1995. ADT's residential customer base is
now approximately 920,000, of which over 95 percent is located in
the United States.
National Accounts
Demand for large installations remains strong and growth in
access control and CCTV business, particularly in the government and
high end retail sectors, continued to be good. There was also
continuation of the trend towards customers purchasing installations
outright.
Core Commercial
Total revenues from access control and CCTV business showed
strong growth in the quarter. The Focus Quantum product, released
in 1995, is helping fuel growth in the medium size customer market
with unit sales significantly greater than the Focus 200 product it
replaced.
Canada
The reorganization of ADT's business in Canada, where recent
performance has been disappointing, will take longer to achieve than
in the United States. The market outlook, however, other than in
Quebec, is satisfactory and ADT is increasing its focus on
integrated systems business particularly for new construction.
United Kingdom and Continental Europe
ADT is seeing significant growth in CCTV business in the United
Kingdom and, in the first quarter, was awarded a $3.5m contract by
Railtrack for the installation of 72 individual CCTV systems on
station platforms. In continental Europe, the residential and small
commercial business experienced satisfactory growth. An authorized
dealer program was initiated in France and affinity marketing
contracts have been signed with two major insurance companies.
Vehicle Auction Services
Net sales and operating income before goodwill amortization, and
before the charge arising under SFAS 121, from the United States
Vehicle Auction division for the three months ended March 31, 1996
amounted to $74.6m and $11.6m, respectively, compared to $69.6m and
$11.7m for the comparable period in 1995.
These results were achieved despite extreme adverse weather
conditions early in the quarter, particularly on the East coast.
Snow removal alone cost approximately $500,000 and the weather
created difficulties for dealers trying to reach auctions and caused
a number of sale days to be lost. However, the overall number of
vehicles sold at ADT Automotive auctions increased by approximately
5 per cent compared to the first quarter of 1995. Demand for used
cars in the quarter was strong and this was reflected in higher
conversion ratios. The number of manufacturers' vehicles entered
for sale was, as expected, lower but the number of vehicles sold
from the fleet/lease sector was 39 percent higher than in the first
quarter of 1995. In addition, ADT Automotive was successful in
increasing the number of vehicles sold on behalf of import
manufacturers.
Demand for used cars remains strong and the division is seeing
an increase in mechanical, clean-up, tire and paint and body work
for rent- a-car companies and for the new used car superstores.
ADT Automotive continues to reinforce its position as an
industry leader and has recently received a number of auction
service quality awards from Ford and Chrysler. Additionally, ADT
Automotive has just launched its first report on the used car market
initiating the ADT Automotive Wholesale Used Car Market Index.
SFAS 121 and Earnings per Share
The Company is required to adopt SFAS 121, the new accounting
standard relating to accounting for the impairment of long-lived
assets and related goodwill. SFAS 121 requires the evaluation of
any long- lived asset impairment loss at the lowest level of asset
grouping for which there are identifiable cash flows, instead of on
a global basis, which is significantly different from previous
accounting practice. The effect of the application of SFAS 121 is
the generation of a non-cash item posted to the income statement
reflecting the difference arising due to the application of the new
valuation methodology. The Company's ability to generate cash is
not affected.
Following a detailed review, an aggregate non-cash charge of
$410.1m relating to the write down of specific assets to their
estimated fair values was recorded, of which $408.4m related to the
carrying value of goodwill. Accordingly, a net loss of $379.1m was
recorded for the quarter, representing a loss per common share of
$2.94. Without this charge, earnings per common share would have
been $0.23 (1995 earnings per common share - $0.21). If the
dispositions of the Company's European vehicle auction and
electronic article surveillance businesses, which took place in the
fourth quarter of 1995, had been effective at the beginning of the
year, 1995 first quarter earnings per share would have been reduced
by $0.04 to $0.17. The effective weighted average number of common
shares outstanding during the first quarter of 1996 was 133.6m (1995
- 129.8m).
Earnings per share comparisons are also affected by additional
amortization arising on the acquisition of Alert, whose intangible
assets are being amortized over an average of 16 years, and by a
reduction in amortization due to the effect of SFAS 121. The net
effect of these is a benefit to quarterly earnings, on a per share
basis, of approximately $0.01.
Background
ADT is the largest single provider of electronic security
services in North America and the second largest provider of
electronic security services in the United Kingdom, providing
continuous monitoring of commercial and residential security systems
to over 1,300,000 customers in North America and Europe.
ADT is also the second largest provider of vehicle auction
services in the United States, operating a network of 28 vehicle
auction centers providing a comprehensive range of vehicle
remarketing services to vehicle dealers and owners and operators of
vehicle fleets.
ADT LIMITED
Consolidated Statements of Income (unaudited)
Three months ended March 31, 1996 1995
$m $m
Net sales 354.3 373.3
Cost of sales (184.4) (200.3)
Selling, general and administrative expenses (112.6) (111.9)
Charge for the impairment of long-lived assets (410.1) --
Goodwill amortization (4.2) (6.6)
Operating (loss) income (357.0) 54.5
Interest income 6.4 3.7
Interest expense (19.7) (22.9)
Other expenses less income (0.5) 1.1
(Loss) income before income taxes (370.8) 36.4
Income taxes (8.3) (9.3)
Net (loss) income (379.1) 27.1
Primary (loss) earnings per common share: $ $
Without charge arising on adoption
of SFAS 121 0.23 0.21
Effect of charge arising on adoption
of SFAS 121 (3.17) --
Net (loss) income per common share (2.94) 0.21
ADT LIMITED
Summarized Consolidated Balance Sheets
Unaudited Audited
March December
31, 1996 31, 1995
$m $m
Assets
Current assets:
Cash and cash equivalents 322.1 341.8
Accounts receivable - net 219.5 169.9
Inventories 29.3 31.0
Prepaid expenses and other current assets 27.5 22.7
Total current assets 598.4 565.4
Property, plant and equipment - net 1,247.6 1,223.5
Goodwill - net 424.1 823.0
Long-term investment 75.5 --
Investment in and loans to associate -- 88.8
Other long-term assets 68.1 74.3
Total assets 2,413.7 2,775.0
Liabilities and shareholders' equity
Current liabilities:
Short-term debt 47.0 38.8
Accounts payable 134.0 92.0
Other current liabilities 167.9 189.1
Total current liabilities 348.9 319.9
Long-term debt 919.6 927.8
Deferred revenue 110.4 94.9
Deferred income taxes 121.2 116.7
Other long-term liabilities 116.4 126.3
Minority interests -- 15.6
Total liabilities 1,616.5 1,601.2
Convertible redeemable preference shares 4.9 4.9
Shareholders' equity 792.3 1,168.9
Total liabilities and shareholders' equity 2,413.7 2,775.0
ADT LIMITED
Business Segment Information (unaudited)
Three months ended March 31, 1996 1995
$m $m
Electronic Security Services
Net sales:
North America 241.6 211.6
Europe.. 38.1 49.4
279.7 261.0
Operating income:
North America 45.1 39.3
Europe.. 4.3 3.1
Operating income before the charge for
the impairment of long-lived assets
and goodwill amortization 49.4 42.4
Charge for the impairment of long-lived assets (397.1) --
Goodwill amortization (3.4) (4.7)
Operating (loss) income (351.1) 37.7
Depreciation 37.0 32.2
Capital expenditures 63.9 55.3
Vehicle Auction Services
Net sales:
United States 74.6 69.6
Europe.. -- 42.7
74.6 112.3
Operating income:
United States 11.6 11.7
Europe.. -- 12.9
Operating income before the charge for
the impairment of long-lived assets
and goodwill amortization 11.6 24.6
Charge for the impairment of long-lived assets (13.0) --
Goodwill amortization (0.8) (1.9)
Operating (loss) income (2.2) 22.7
Depreciation 2.9 4.4
Capital expenditures 3.5 3.7
.. The Company's European vehicle auction and electronic article
surveillance businesses were sold in the fourth quarter of 1995.
ADT LIMITED
Consolidated Statements of Cash Flows (unaudited)
Three months ended March 31, 1996 1995
$m $m
Cash flows from operating activities
Net (loss) income (379.1) 27.1
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Charge for the impairment of long-lived assets 410.1 --
Depreciation 40.0 36.8
Goodwill amortization 4.2 6.6
Interest on ITS Vendor Note (2.1) --
Liquid Yield Option Notes discount amortization 5.0 --
Deferred income taxes 5.8 6.7
Other 0.9 (0.1)
Changes in assets and liabilities (29.8) (3.0)
Net cash provided by operating activities 55.0 74.1
Cash flows from investing activities
Purchase of property, plant and
equipment - net (66.7) (56.7)
Acquisition of businesses (20.6) (5.3)
Disposal of investment in and loans to associate 15.4 --
Other (2.4) 8.1
Net cash utilized by investing activities (74.3) (53.9)
Cash flows from financing activities
Net receipts (repayments) of short-term debt 8.9 (1.2)
Repayments of long-term debt (15.0) --
Purchase of senior subordinated notes -- (7.5)
Other 6.3 3.3
Net cash provided (utilized)
by financing activities 0.2 (5.4)
Effect of currency translation on
cash and cash equivalents (0.6) 0.7
Net (decrease) increase in cash
and cash equivalents (19.7) 15.5
Cash and cash equivalents at
beginning of period 341.8 215.7
Cash and cash equivalents at end of period 322.1 231.2