Ariel Corporation Reports Preliminary Unaudited Third Quarter Results

    CRANBURY, N.J., Nov. 1 /PRNewswire/ -- Ariel Corp. (Nasdaq:   ADSP) today
 reported net sales of $2,869,593 for the three months ended September 30,
 1999, a decrease of $310,659 from net sales of $3,180,252 for the three months
 ended September 30, 1998.  Ariel reported a net loss of ($2,983,993) or
 ($0.31) basic and dilutive loss per share for the three months ended
 September 30, 1999 compared to a net income of $23,240,144 or basic earnings
 per share of $2.39 and diluted earnings per share of $2.36 for the three
 months ended September 30, 1998.
     1998 earnings reflect a one-time gain on the sale of Ariel's DSLAM group
 to Cabletron Systems, Inc. of Rochester, New Hampshire on September 1, 1998.
 The gain represents approximately $2.80 per share diluted after transaction
 costs, interest and administrative expenses.  Before giving affect to this
 transaction Ariel's 1998 third quarter loss per share diluted was ($.44).
     Ariel's net sales for the nine months ended September 30, 1999 decreased
 36% to $8,694,254 from  $13,568,059 reported for the nine months ended
 September 30, 1998.  The revenue decrease includes a reduction in sales of
 approximately $4 million to computer equipment suppliers, including
 $3.2 million to Compaq.  Decreases in revenues from 1998 reflect a decline in
 enterprise demand for high-end communications options -- as anticipated by
 Ariel's shift to internet service providers (ISPs) and technical original
 equipment manufacturers
     Gross margins were $1,736,512 or 61% of sales for the third quarter of
 1999, up 18% from the 43% reported for the same period last year.  For the
 nine months ending September 30, 1999 gross margins were $5,039,304 or 58% of
 sales as compared to $5,617,045 or 41% for the same period last year.  The
 increase in gross margin as a percent of sales reflects a significantly
 improved mix of sales concentrated in Technical OEMs and end users vs.
 lower-margin PC equipment business.
     Losses from operations for the three months ended September 30, 1999 were
 $2,885,440 as compared to $5,129,992 for the three months ended
 September 30, 1998.  Losses for the three months ended September 30, 1999
 included approximately $370,000 of non-recurring expenses.  Losses from
 operations for the first nine months of 1999 decreased $932,585 to $9,190,058
 as compared to $10,122,643 for the same period in 1998.  Reduced operating
 losses were the result of improved gross margins rates combined with a
 reduction in operating expenses.  Operating expense reductions were the result
 of the sale of the DSLAM group and tighter expense controls.
     Jay H. Atlas, CEO and President, commented, "Third quarter results were in
 line with our expectations as we continue to establish strategic alliances and
 transition our products, marketing, and sales programs to more effectively
 focus on the ISP and Technical OEM markets.  Internet industry opinion and
 initial customer reactions to our PowerPOP(TM) architecture remain positive as
 we continue to develop our sales channel.  The September announcement of our
 partnership with the Aviation Communications Division for AT&T's ePlane
 Service(TM) inflight internet service and the recent introduction of our
 RS4200, a new high-density remote access solution for ISP's, are expected to
 further strengthen our position in our target markets."
 
     More About Ariel
     Ariel Corp. is a leading provider of high-density remote access plug-in
 cards for applications such as Internet access, corporate Intranet/Extranet
 access, on-line services, telecommuting, transaction processing, and unified
 messaging.  Ariel's remote access products make it easy for OEMs and system
 integrators targeting ISPs, corporate enterprises and other service providers
 to add high-density remote access to open systems platforms running a variety
 of popular operating systems, including Windows NT and Linux.  Ariel's
 high-density remote access cards provide V.34, V.90-compatible 56K, and basic
 rate ISDN remote dial-in, LAN dial-out, and Internet back-haul.  Available in
 ISA, PCI and CompactPCI formats, the cards connect to T1, E1, ISDN, and POTS
 lines.  Ariel's remote access products run Windows NT and Linux out of the
 box. An SDK is available for OEMs who want to use Ariel's remote access
 products with other operating systems.
     For more information on Ariel products, please contact Ariel Corporation
 at 2540 Route 130, Cranbury, NJ 08512. Phone: 609-860-2900. Fax: 609-860-1155.
 E-mail: info@ariel.com.  World Wide Web: http://www.ariel.com.
 
     Statements contained in this press release that are not historical facts
 are forward-looking statements that are made pursuant to the safe harbor
 provisions of the Private Securities Litigation Reform Act of 1995, as
 amended.  Forward-looking statements involve risks and uncertainties,
 including market acceptance of the Company's products by technical original
 equipment manufacturers and internet service providers, the timely development
 and acceptance of new products, the impact of competitive products and
 pricing, changing market conditions and the other risks detailed from time to
 time in the Company's filings with the SEC.  These risks and uncertainties
 could cause actual results to differ materially from those projected or
 currently expected.  These forward-looking statements represent the Company's
 judgment as of the date of this release.  The Company disclaims, however, any
 intent or obligation to update these forward-looking statements.
 
                               ARIEL CORPORATION
                             CONDENSED PRELIMINARY
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)
 
                              Three Months Ended         Nine months Ended
                                September 30,              September 30,
 
                             1999          1998          1999         1998
     SALES               $2,869,593    $3,180,252   $8,694,254   $13,568,059
     GROSS MARGIN         1,736,512     1,377,682    5,039,304     5,617,045
 
     LOSS FROM
      OPERATIONS       ($2,885,440)  ($5,129,992) ($9,190,058)  ($10,122,643)
     OTHER INCOME
      (EXPENSE), NET       (98,553)    28,738,768     (68,679)    28,554,230
     INCOME/(LOSS)
      BEFORE TAX
      PROVISION        ($2,983,993)   $23,608,776 ($9,258,737)   $18,431,585
     INCOME TAX                   0       368,632            0       368,632
     NET INCOME/(LOSS) ($2,983,993)   $23,240,144 ($9,258,737)   $18,062,953
 
     BASIC PER
      SHARE DATA:
     BASIC WEIGHTED
      AVERAGE OF
      COMMON SHARES
      OUTSTANDING         9,760,150     9,742,926    9,760,150     9,728,223
     BASIC EARNINGS/
     (LOSS) PER SHARE       ($0.31)         $2.39      ($0.95)         $1.86
     DILUTED PER
      SHARE DATA:
     EFFECT OF
      DILUTIVE OPTIONS            0       123,314            0        74,157
     COMMON SHARES
      OUTSTANDING         9,760,150     9,866,240    9,760,150     9,802,380
     BASIC EARNINGS/
     (LOSS) PER SHARE       ($0.31)         $2.36      ($0.95)         $1.84
 
                               ARIEL CORPORATION
                             CONDENSED PRELIMINARY
                           CONSOLIDATED BALANCE SHEET
                                  (Unaudited)
 
                                September 30,           December 31,
     ASSETS                         1999                    1998
 
     Current Assets
     Cash and cash equivalents  $6,152,272             $17,996,575
     Accounts receivable, net    3,191,526               3,593,709
     Inventories                 1,978,500               2,857,326
     Prepaid Expenses              411,668                 449,691
     Other receivables             838,344               1,378,781
                                12,572,310              26,276,082
 
     Equipment, net              1,176,393               1,365,354
 
     Goodwill & Other
      Intangible Assets          4,065,076               5,341,599
 
     Other assets                  618,495                 699,345
     Total assets              $18,432,274             $33,682,380
 
     LIABILITIES & STOCKHOLDERS' EQUITY
 
     Liabilities                $8,308,766             $13,976,883
     Stockholders' equity       10,123,508              19,705,497
     Total liabilities &
      stockholders' equity     $18,432,274             $33,682,380
 
 

SOURCE  Ariel Corporation