Advanced Fibre Communications Announces First Quarter Results

Apr 18, 2001, 01:00 ET from Advanced Fibre Communications, Inc.

    PETALUMA, Calif., April 18 /PRNewswire/ --
 Advanced Fibre Communications(R), Inc. (AFC(R)) (Nasdaq: AFCI) today announced
 financial results for the first quarter ended March 31, 2001. Revenues for the
 quarter were $82,211,000 compared with $85,419,000 for the first quarter of
 2000.
     Net income for the first quarter was $149,951,000 or $1.80 earnings per
 share (diluted). Net income included $250,509,000 related to implementation of
 Statement of Financial Accounting Standards No. 133 (SFAS 133), and our
 decision to reclassify our investment in Cisco Systems and the related
 costless collar hedge as trading securities. Without this non-operating item
 and the associated tax effect, the net loss would have been $5,365,000 or
 $.06 loss per share.
     In the first quarter of 2000, the Company recorded net income of
 $28,371,000 or $.33 earnings per share (diluted). This included a
 $32,750,000 cash payment from Marconi Communications Inc. as part of a
 settlement of outstanding litigation. Without this gain and the associated tax
 effect, net income in the first quarter of 2000 would have been $6,757,000 or
 $0.08 earnings per share (diluted).
     There were several one-time adjustments that affected both revenues and
 earnings for the first quarter of 2001.
     AFC was unable to recognize $11,923,000 of revenues during the quarter. Of
 these revenues, approximately $10,048,000 related to products and services
 provided to Winstar Communications Inc. (Winstar) and approximately
 $1,875,000 related to shipments made to a value-added reseller (VAR) through
 which AFC supplies product to a major incumbent local exchange carrier (ILEC).
 Winstar filed for Chapter 11 Bankruptcy Protection today and as such, it is
 very unlikely that AFC will be paid for product that was shipped in
 January 2001. For that reason, we did not recognize these revenues.
     "During the first quarter we experienced lower than expected shipments to
 Tellabs and some of our large ILEC customers," said John A. Schofield,
 president and chief executive officer for AFC. "This resulted in an
 approximate $6 million revenue shortfall, compared with planned revenues. In
 addition, subsequent to the close of the quarter, we became concerned about
 our ability to collect payment in a timely manner from Winstar and the VAR."
     "Looking forward," Mr. Schofield continued, "we project no future business
 this year with either Winstar or Tellabs and, therefore, we have taken an
 inventory charge associated with certain materials and products for these
 two accounts."
     Inventory reserves associated with the loss of future business to Winstar
 and Tellabs and bad debt reserves for the VAR together resulted in a charge of
 $11,406,000.
     To summarize, if we had been able to recognize the aforementioned revenues
 related to Winstar and the VAR, total revenues for the quarter would have been
 $94,134,000. Excluding the one-time effect of implementation of SFAS 133 and
 the aforementioned one-time charges, net income for the first quarter of 2001
 would have been $10,126,000 or $0.12 per share (diluted). This compares to
 $.08 per share (diluted) recorded after adjustment for the Marconi credit in
 the first quarter of 2000.
     The Company's effective tax rate, including the effect of SFAS 133
 implementation, is 38% compared to 34% for fiscal 2000.
     "Obviously we are not pleased with the results of the quarter, and in
 particular, with the rapid deterioration in the financial condition of
 Winstar, our largest customer in 2000, which had a material impact on our
 results," said Mr. Schofield. "Though we remain concerned about the
 deteriorating economic environment, I feel that the long-term opportunity for
 broadband in the access networks of the world remains significant. Even though
 there is a substantial slowdown in capital spending in the telecom sector, AFC
 remains one of the leading companies in the broadband access arena. I firmly
 believe that our slowdown is not caused by losing business to competitors, but
 rather to the pressures impacting competitive local exchange carriers (CLECs)
 and large ILECs in the United States."
     "We have a strong balance sheet with approximately $874 million in cash
 and securities. At the same time, we are diligently managing expenses and
 taking a close look at all areas of our business to identify ways to cut
 costs," added Mr. Schofield. "We are managing our company to cope with this
 rapidly changing environment while ensuring our products and technology remain
 capable of delivering the legacy voice services demanded by providers today,
 and a seamless, cost-effective transition to a packet-switched data network of
 the future."
     "The focus of AFC remains delivering large quantities of our equipment to
 a small number of very large, well-financed ILECs and post telephone
 & telegraph (PTT) carriers," concluded Mr. Schofield, "while at the same time
 retaining our dominant position as the access supplier of choice to the
 smaller ILEC market in the United States and Canada."
 
     About AFC
     Headquartered in Petaluma, Calif., Advanced Fibre Communications, Inc. is
 an industry-leading designer and manufacturer of broadband access solutions
 for the local loop. With a customer base of more than 800 service providers
 worldwide, ranging from major incumbents to independent operators and
 international PTTs, AFC continues to build and support the world's evolving
 high-speed, next-generation access network architecture.
     AFC's OmniMAX(TM) portfolio consists of integrated multiservice access
 platforms (IMAPs), integrated access devices (IADs), network element
 management systems, and environmentally hardened outside plant cabinets and
 technologies. AFC's comprehensive family of OmniMAX products can be quickly
 and cost-effectively deployed by either domestic or international service
 providers to build next-generation access networks or to upgrade legacy access
 networks for delivering additional voice and emerging broadband services.
     Except for historical information contained in this press release, the
 foregoing contains forward-looking statements that involve risks and
 uncertainties. Actual results may differ materially from those indicated by
 such forward-looking statements based on a variety of risks and uncertainties,
 including the risks and uncertainties relating to AFC's continued success at
 large accounts, the continued financial strength and stability of our
 customers, growth in demand for our broadband services, our ability to
 successfully reduce and manage expenses, competition, the successful
 development and market acceptance of AFC's new products and features, and a
 downturn in the telecommunications industry. We undertake no obligation to
 revise or update these forward-looking statements to reflect events or
 circumstances after today or to reflect the occurrence of unanticipated
 events. Information about potential factors that could affect our financial
 results is included in our Annual Report on Form 10-K and Quarterly Reports on
 Form 10-Q, which have been filed with the Securities and Exchange Commission.
     NOTE:  Advanced Fibre Communications, AFC, the AFC logo, and the UMC1000
 are registered trademarks of Advanced Fibre Communications, Inc. OmniMAX,
 AccessMAX, EMAX, EMAXplus, DMAX, DataMAX, TransMAX, PremMAX, EdgeAccess ATM,
 ATLAS, and Panorama are trademarks of Advanced Fibre Communications, Inc.
 -
                        ADVANCED FIBRE COMMUNICATIONS, INC.
                     SUMMARY STATEMENTS OF INCOME (Unaudited)
                   (Amounts in thousands, except per share data)
 
 
                                                         Three Months Ended
                                                              March 31,
                                                        2001            2000
 
        Revenues                                      $82,211         $85,419
 
        Cost of revenues                               48,648          45,904
 
        Gross profit                                   33,563          39,515
 
        Operating expenses:
           Research and development                    15,966          14,672
           Sales and marketing                         12,831           9,579
           General and administrative                  16,368           7,227
              Total operating expenses                 45,165          31,478
 
        Operating income (loss)                       (11,602)          8,037
 
        Recognized gain on trading investment         250,509              --
        Other income                                    2,949          34,950
        Other income, net                             253,458          34,950
 
        Income before income taxes                    241,856          42,987
 
        Income taxes                                   91,905          14,616
 
        Net income                                   $149,951         $28,371
 
 
        Basic earnings per share:                       $1.85           $0.36
 
        Shares used in per share computations          80,963          79,624
 
 
        Diluted earnings per share:                     $1.80           $0.33
 
        Shares used in per share computations          83,101          84,968
 
 
        Pro forma diluted loss per share,
           excluding effect of SFAS 133
           implementation, and associated tax
           effect                                      $(0.06)
 
        Shares used in per share computations          83,101
 
 
        Pro forma diluted earnings per share,
           excluding Marconi settlement credit,
           and associated tax effect                                    $0.08
 
        Shares used in per share computations                          84,968
 
 
     ADVANCED FIBRE COMMUNICATIONS, INC.
     SUMMARY BALANCE SHEETS (Unaudited)
     (In thousands)
 
 
                                                March 31,          December 31,
                                                  2001                 2000
 
       Assets
 
         Current assets:
           Cash and cash equivalents             $28,932               $8,368
           Marketable securities                 845,198              866,785
           Accounts receivable, net               67,217              100,098
           Inventories, net                       61,383               59,356
           Other current assets                   18,384               24,059
             Total current assets              1,021,114            1,058,666
 
         Property and equipment, net              65,900               66,699
         Other assets                              9,342               10,809
             Total assets                     $1,096,356           $1,136,174
 
 
       Liabilities & Stockholders'
        Equity
 
         Current liabilities:
           Accounts payable                      $10,335              $19,920
           Accrued and other liabilities          40,740               49,348
           Deferred tax liabilities              235,479              244,675
             Total current liabilities           286,554              313,943
 
         Long term liabilities                     2,632                2,566
 
         Commitments and contingencies                --                   --
 
         Total stockholders' equity              807,170              819,665
 
             Total liabilities and
              stockholders' equity            $1,096,356           $1,136,174
 
 

SOURCE Advanced Fibre Communications, Inc.
    PETALUMA, Calif., April 18 /PRNewswire/ --
 Advanced Fibre Communications(R), Inc. (AFC(R)) (Nasdaq: AFCI) today announced
 financial results for the first quarter ended March 31, 2001. Revenues for the
 quarter were $82,211,000 compared with $85,419,000 for the first quarter of
 2000.
     Net income for the first quarter was $149,951,000 or $1.80 earnings per
 share (diluted). Net income included $250,509,000 related to implementation of
 Statement of Financial Accounting Standards No. 133 (SFAS 133), and our
 decision to reclassify our investment in Cisco Systems and the related
 costless collar hedge as trading securities. Without this non-operating item
 and the associated tax effect, the net loss would have been $5,365,000 or
 $.06 loss per share.
     In the first quarter of 2000, the Company recorded net income of
 $28,371,000 or $.33 earnings per share (diluted). This included a
 $32,750,000 cash payment from Marconi Communications Inc. as part of a
 settlement of outstanding litigation. Without this gain and the associated tax
 effect, net income in the first quarter of 2000 would have been $6,757,000 or
 $0.08 earnings per share (diluted).
     There were several one-time adjustments that affected both revenues and
 earnings for the first quarter of 2001.
     AFC was unable to recognize $11,923,000 of revenues during the quarter. Of
 these revenues, approximately $10,048,000 related to products and services
 provided to Winstar Communications Inc. (Winstar) and approximately
 $1,875,000 related to shipments made to a value-added reseller (VAR) through
 which AFC supplies product to a major incumbent local exchange carrier (ILEC).
 Winstar filed for Chapter 11 Bankruptcy Protection today and as such, it is
 very unlikely that AFC will be paid for product that was shipped in
 January 2001. For that reason, we did not recognize these revenues.
     "During the first quarter we experienced lower than expected shipments to
 Tellabs and some of our large ILEC customers," said John A. Schofield,
 president and chief executive officer for AFC. "This resulted in an
 approximate $6 million revenue shortfall, compared with planned revenues. In
 addition, subsequent to the close of the quarter, we became concerned about
 our ability to collect payment in a timely manner from Winstar and the VAR."
     "Looking forward," Mr. Schofield continued, "we project no future business
 this year with either Winstar or Tellabs and, therefore, we have taken an
 inventory charge associated with certain materials and products for these
 two accounts."
     Inventory reserves associated with the loss of future business to Winstar
 and Tellabs and bad debt reserves for the VAR together resulted in a charge of
 $11,406,000.
     To summarize, if we had been able to recognize the aforementioned revenues
 related to Winstar and the VAR, total revenues for the quarter would have been
 $94,134,000. Excluding the one-time effect of implementation of SFAS 133 and
 the aforementioned one-time charges, net income for the first quarter of 2001
 would have been $10,126,000 or $0.12 per share (diluted). This compares to
 $.08 per share (diluted) recorded after adjustment for the Marconi credit in
 the first quarter of 2000.
     The Company's effective tax rate, including the effect of SFAS 133
 implementation, is 38% compared to 34% for fiscal 2000.
     "Obviously we are not pleased with the results of the quarter, and in
 particular, with the rapid deterioration in the financial condition of
 Winstar, our largest customer in 2000, which had a material impact on our
 results," said Mr. Schofield. "Though we remain concerned about the
 deteriorating economic environment, I feel that the long-term opportunity for
 broadband in the access networks of the world remains significant. Even though
 there is a substantial slowdown in capital spending in the telecom sector, AFC
 remains one of the leading companies in the broadband access arena. I firmly
 believe that our slowdown is not caused by losing business to competitors, but
 rather to the pressures impacting competitive local exchange carriers (CLECs)
 and large ILECs in the United States."
     "We have a strong balance sheet with approximately $874 million in cash
 and securities. At the same time, we are diligently managing expenses and
 taking a close look at all areas of our business to identify ways to cut
 costs," added Mr. Schofield. "We are managing our company to cope with this
 rapidly changing environment while ensuring our products and technology remain
 capable of delivering the legacy voice services demanded by providers today,
 and a seamless, cost-effective transition to a packet-switched data network of
 the future."
     "The focus of AFC remains delivering large quantities of our equipment to
 a small number of very large, well-financed ILECs and post telephone
 & telegraph (PTT) carriers," concluded Mr. Schofield, "while at the same time
 retaining our dominant position as the access supplier of choice to the
 smaller ILEC market in the United States and Canada."
 
     About AFC
     Headquartered in Petaluma, Calif., Advanced Fibre Communications, Inc. is
 an industry-leading designer and manufacturer of broadband access solutions
 for the local loop. With a customer base of more than 800 service providers
 worldwide, ranging from major incumbents to independent operators and
 international PTTs, AFC continues to build and support the world's evolving
 high-speed, next-generation access network architecture.
     AFC's OmniMAX(TM) portfolio consists of integrated multiservice access
 platforms (IMAPs), integrated access devices (IADs), network element
 management systems, and environmentally hardened outside plant cabinets and
 technologies. AFC's comprehensive family of OmniMAX products can be quickly
 and cost-effectively deployed by either domestic or international service
 providers to build next-generation access networks or to upgrade legacy access
 networks for delivering additional voice and emerging broadband services.
     Except for historical information contained in this press release, the
 foregoing contains forward-looking statements that involve risks and
 uncertainties. Actual results may differ materially from those indicated by
 such forward-looking statements based on a variety of risks and uncertainties,
 including the risks and uncertainties relating to AFC's continued success at
 large accounts, the continued financial strength and stability of our
 customers, growth in demand for our broadband services, our ability to
 successfully reduce and manage expenses, competition, the successful
 development and market acceptance of AFC's new products and features, and a
 downturn in the telecommunications industry. We undertake no obligation to
 revise or update these forward-looking statements to reflect events or
 circumstances after today or to reflect the occurrence of unanticipated
 events. Information about potential factors that could affect our financial
 results is included in our Annual Report on Form 10-K and Quarterly Reports on
 Form 10-Q, which have been filed with the Securities and Exchange Commission.
     NOTE:  Advanced Fibre Communications, AFC, the AFC logo, and the UMC1000
 are registered trademarks of Advanced Fibre Communications, Inc. OmniMAX,
 AccessMAX, EMAX, EMAXplus, DMAX, DataMAX, TransMAX, PremMAX, EdgeAccess ATM,
 ATLAS, and Panorama are trademarks of Advanced Fibre Communications, Inc.
 -
                        ADVANCED FIBRE COMMUNICATIONS, INC.
                     SUMMARY STATEMENTS OF INCOME (Unaudited)
                   (Amounts in thousands, except per share data)
 
 
                                                         Three Months Ended
                                                              March 31,
                                                        2001            2000
 
        Revenues                                      $82,211         $85,419
 
        Cost of revenues                               48,648          45,904
 
        Gross profit                                   33,563          39,515
 
        Operating expenses:
           Research and development                    15,966          14,672
           Sales and marketing                         12,831           9,579
           General and administrative                  16,368           7,227
              Total operating expenses                 45,165          31,478
 
        Operating income (loss)                       (11,602)          8,037
 
        Recognized gain on trading investment         250,509              --
        Other income                                    2,949          34,950
        Other income, net                             253,458          34,950
 
        Income before income taxes                    241,856          42,987
 
        Income taxes                                   91,905          14,616
 
        Net income                                   $149,951         $28,371
 
 
        Basic earnings per share:                       $1.85           $0.36
 
        Shares used in per share computations          80,963          79,624
 
 
        Diluted earnings per share:                     $1.80           $0.33
 
        Shares used in per share computations          83,101          84,968
 
 
        Pro forma diluted loss per share,
           excluding effect of SFAS 133
           implementation, and associated tax
           effect                                      $(0.06)
 
        Shares used in per share computations          83,101
 
 
        Pro forma diluted earnings per share,
           excluding Marconi settlement credit,
           and associated tax effect                                    $0.08
 
        Shares used in per share computations                          84,968
 
 
     ADVANCED FIBRE COMMUNICATIONS, INC.
     SUMMARY BALANCE SHEETS (Unaudited)
     (In thousands)
 
 
                                                March 31,          December 31,
                                                  2001                 2000
 
       Assets
 
         Current assets:
           Cash and cash equivalents             $28,932               $8,368
           Marketable securities                 845,198              866,785
           Accounts receivable, net               67,217              100,098
           Inventories, net                       61,383               59,356
           Other current assets                   18,384               24,059
             Total current assets              1,021,114            1,058,666
 
         Property and equipment, net              65,900               66,699
         Other assets                              9,342               10,809
             Total assets                     $1,096,356           $1,136,174
 
 
       Liabilities & Stockholders'
        Equity
 
         Current liabilities:
           Accounts payable                      $10,335              $19,920
           Accrued and other liabilities          40,740               49,348
           Deferred tax liabilities              235,479              244,675
             Total current liabilities           286,554              313,943
 
         Long term liabilities                     2,632                2,566
 
         Commitments and contingencies                --                   --
 
         Total stockholders' equity              807,170              819,665
 
             Total liabilities and
              stockholders' equity            $1,096,356           $1,136,174
 
 SOURCE  Advanced Fibre Communications, Inc.