ESS Technology Reports First Quarter Results, Accounts for Vialta As a Discontinued Operation Following Formalization of Spin Off Plans

Apr 25, 2001, 01:00 ET from ESS Technology

    FREMONT, Calif., April 25 /PRNewswire/ -- ESS Technology (Nasdaq:   ESST)
 today reported first quarter results and announced that it has adopted a plan
 to declare the financial results of its subsidiary, Vialta, as discontinued
 operations.  Accordingly, Vialta will be accounted for as a discontinued
 operation on ESS's first quarter financial statements for all periods
 presented.
     Excluding discontinued operations, ESS reported net revenues for the first
 quarter ended March 31, 2001 of $50.8 million, a decrease of 6.3% from the
 fourth quarter 2000 net revenues of $54.2 million. ESS net loss from
 continuing operations is $2.9 million or $0.07 per diluted share which
 compares to net income from continuing operations during the fourth quarter of
 2000 of $2.8 million or $0.06 per diluted share. Including results from
 discontinued operations, net of minority interest, ESS had a net loss of
 $20.7 million, or $0.49 per diluted share for the first quarter which compares
 to a net loss of $1.6 million, or $0.04 per diluted share in the fourth
 quarter of 2000.  The net loss per diluted share for the quarter includes a
 net loss of $0.07 from continuing operations, a net loss of $0.10 from
 discontinued operations, and a loss on disposal of discontinued operations
 $0.32 per diluted share.
     Robert Blair, president and chief executive officer of ESS Technology
 commented, "ESS's board of directors approved a plan to distribute shares in
 its subsidiary, Vialta, to our shareholders within the next twelve months.
 Accordingly, Vialta is reported in the financial statements as a discontinued
 operation for all periods presented. We believe this will enhance ESS's and
 Vialta's abilities to pursue their business opportunities. What this means to
 our shareholders is that our shareholders will effectively receive the benefit
 of Vialta's current and future value by directly owning Vialta's shares. We
 believe this is in the best interests of our shareholders because it provides
 investors better visibility into each company."
     Blair continued, "ESS's core business in the first quarter was quite
 solid, with the exception of DVD products. Going into the first quarter, DVD
 inventory in the retail distribution channel was much larger than had been
 anticipated by our customers and it has taken most of the first quarter to
 absorb the high level of inventory. It now appears that this inventory has
 been sold, and our DVD chipset demand in the first few weeks of the second
 quarter has returned to normal levels. Bookings for our other product lines
 have also been strong so far in the second quarter.
     "Despite the overall slowdown in the economy, DVD retail sales have
 continued to grow in the U.S. in the first quarter. Our major DVD customers
 are placing new orders, we have had success gaining new design wins with new
 customers throughout the world, and we believe that we will gain market share
 in the DVD market during the remainder of this year. We expect that the
 combination of increased DVD business, together with the reporting of Vialta
 as discontinued operations, will return ESS's consolidated results to
 profitability for the balance of the year."
 
     About ESS Technology
     ESS Technology, Inc., a leader in Internet, communications, digital video
 and PC audio, provides advanced products enabling the convergence of
 communications, computer, consumer, and Internet markets.  ESS's subsidiary,
 Vialta, provides advanced, easy-to-use products and applications for the
 Internet.  Products include multimedia appliances, applications, and content
 for the Internet, which enable the user to experience new levels of
 entertainment and e-Commerce.
     ESS, headquartered in Fremont, Calif., has R&D, sales and technical
 support offices worldwide.  ESS Technology's common stock is traded on the
 Nasdaq under the symbol ESST.  ESS's web site address is:
 http://www.esstech.com.
 
     The matters discussed in this news release include certain forward-looking
 statements that involve risks and uncertainties, including, but not limited
 to, the timely availability and acceptance of the company's new products, the
 impact of competitive products and pricing including unanticipated declines in
 average selling price for the company's products, the dependence on continued
 growth in demand for PC and consumer multimedia products, the effect of
 quarter to quarter variations in revenue and earnings, the effect of general
 economic conditions both domestically and internationally on the demand for
 the company's products, as well as the other risks detailed from time to time
 in the SEC reports of ESS, including the reports on Form 10-K and Form 10Q.
 Actual results could differ materially from those projected in the
 forward-looking statements.
 
 
     ESS TECHNOLOGY, INC.
     CONSOLIDATED BALANCE SHEETS -- UNAUDITED
     (in thousands)
 
                                                       Mar. 2001    Dec. 2000
 
     ASSETS
     Current assets:
     Cash and cash equivalents                          $45,227      $25,715
     Short-term investments                              13,387       33,123
     Accounts receivable, net                            38,390       51,311
     Inventories                                         85,343       98,940
     Prepaid expenses and other assets                    2,714        2,627
     Net assets of discontinued operations               28,691       46,208
 
     Total current assets                               213,752      257,924
 
     Property, plant and equipment, net                  28,821       31,081
     Other assets                                         5,151        4,737
 
     Total assets                                      $247,724     $293,742
 
     LIABILITIES AND SHAREHOLDERS' EQUITY
 
     Current liabilities:
     Accounts payable and accrued expenses              $54,055      $69,574
     Income taxes payable and deferred income taxes       2,518        3,678
 
     Total current liabilities                           56,573       73,252
 
     Non-current deferred tax liability                   9,061        9,061
 
     Shareholders' equity:
     Preferred stock, no par value, 10,000 shares
      authorized; none issued and outstanding                --           --
     Common stock, no par value, 100,000 shares
      authorized; 42,611 and 42,138 shares issued
      and outstanding at March 31, 2001 and
      December 31, 2000, respectively                   149,434      149,197
     Other comprehensive loss                          (16,120)      (7,378)
     Retained earnings                                   48,776       69,610
 
     Total shareholders' equity                         182,090      211,429
 
     Total liabilities and shareholders' equity        $247,724     $293,742
 
 
     ESS TECHNOLOGY, INC.
     CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
     (in thousands, except per share date)
 
     Quarter Ended                             Mar. 2001 Mar. 2000   Dec. 2000
 
     Net revenues                               $50,808    $82,996    $54,202
     Cost of revenues                            39,606     51,588     40,616
 
     Gross profit                                11,202     31,408     13,586
 
     Operating expenses:
     Research and development                     7,013      8,464      6,858
     In-process research and development             --      2,625         --
     Selling, general and administrative          9,741      9,800      7,834
 
     Operating income (loss)                    (5,552)     10,519    (1,106)
 
     Nonoperating income, net                     2,002      4,821      4,524
 
     Income (loss) before income taxes          (3,550)     15,340      3,418
     Provision for (benefit from) income taxes    (641)      3,054        582
 
     Net income (loss) from continuing
      operations                                (2,909)     12,286      2,836
 
     Loss from discontinued operations,
      net of minority interest                  (4,367)    (3,595)    (4,431)
     Loss on disposal of discontinued
      operations, net of minority interest     (13,409)         --         --
     Net loss from discontinued operations,
      net of minority interest                 (17,776)    (3,595)    (4,431)
 
     Net income (loss)                        $(20,685)     $8,691   $(1,595)
 
     Net income (loss) per share:
       Basic:
         Continuing operations                  $(0.07)      $0.29      $0.06
         Discontinued operations                 (0.42)     (0.08)     (0.10)
                                                $(0.49)      $0.21   $ (0.04)
 
       Diluted:
         Continuing operations                  $(0.07)      $0.26      $0.06
         Discontinued operations                 (0.42)     (0.07)     (0.10)
                                                $(0.49)      $0.19    $(0.04)
 
     Shares used in calculating net income
      (loss) per share:
       Basic                                     42,370     41,804     42,699
       Diluted                                   42,370     46,869     42,699
 
 
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SOURCE ESS Technology
    FREMONT, Calif., April 25 /PRNewswire/ -- ESS Technology (Nasdaq:   ESST)
 today reported first quarter results and announced that it has adopted a plan
 to declare the financial results of its subsidiary, Vialta, as discontinued
 operations.  Accordingly, Vialta will be accounted for as a discontinued
 operation on ESS's first quarter financial statements for all periods
 presented.
     Excluding discontinued operations, ESS reported net revenues for the first
 quarter ended March 31, 2001 of $50.8 million, a decrease of 6.3% from the
 fourth quarter 2000 net revenues of $54.2 million. ESS net loss from
 continuing operations is $2.9 million or $0.07 per diluted share which
 compares to net income from continuing operations during the fourth quarter of
 2000 of $2.8 million or $0.06 per diluted share. Including results from
 discontinued operations, net of minority interest, ESS had a net loss of
 $20.7 million, or $0.49 per diluted share for the first quarter which compares
 to a net loss of $1.6 million, or $0.04 per diluted share in the fourth
 quarter of 2000.  The net loss per diluted share for the quarter includes a
 net loss of $0.07 from continuing operations, a net loss of $0.10 from
 discontinued operations, and a loss on disposal of discontinued operations
 $0.32 per diluted share.
     Robert Blair, president and chief executive officer of ESS Technology
 commented, "ESS's board of directors approved a plan to distribute shares in
 its subsidiary, Vialta, to our shareholders within the next twelve months.
 Accordingly, Vialta is reported in the financial statements as a discontinued
 operation for all periods presented. We believe this will enhance ESS's and
 Vialta's abilities to pursue their business opportunities. What this means to
 our shareholders is that our shareholders will effectively receive the benefit
 of Vialta's current and future value by directly owning Vialta's shares. We
 believe this is in the best interests of our shareholders because it provides
 investors better visibility into each company."
     Blair continued, "ESS's core business in the first quarter was quite
 solid, with the exception of DVD products. Going into the first quarter, DVD
 inventory in the retail distribution channel was much larger than had been
 anticipated by our customers and it has taken most of the first quarter to
 absorb the high level of inventory. It now appears that this inventory has
 been sold, and our DVD chipset demand in the first few weeks of the second
 quarter has returned to normal levels. Bookings for our other product lines
 have also been strong so far in the second quarter.
     "Despite the overall slowdown in the economy, DVD retail sales have
 continued to grow in the U.S. in the first quarter. Our major DVD customers
 are placing new orders, we have had success gaining new design wins with new
 customers throughout the world, and we believe that we will gain market share
 in the DVD market during the remainder of this year. We expect that the
 combination of increased DVD business, together with the reporting of Vialta
 as discontinued operations, will return ESS's consolidated results to
 profitability for the balance of the year."
 
     About ESS Technology
     ESS Technology, Inc., a leader in Internet, communications, digital video
 and PC audio, provides advanced products enabling the convergence of
 communications, computer, consumer, and Internet markets.  ESS's subsidiary,
 Vialta, provides advanced, easy-to-use products and applications for the
 Internet.  Products include multimedia appliances, applications, and content
 for the Internet, which enable the user to experience new levels of
 entertainment and e-Commerce.
     ESS, headquartered in Fremont, Calif., has R&D, sales and technical
 support offices worldwide.  ESS Technology's common stock is traded on the
 Nasdaq under the symbol ESST.  ESS's web site address is:
 http://www.esstech.com.
 
     The matters discussed in this news release include certain forward-looking
 statements that involve risks and uncertainties, including, but not limited
 to, the timely availability and acceptance of the company's new products, the
 impact of competitive products and pricing including unanticipated declines in
 average selling price for the company's products, the dependence on continued
 growth in demand for PC and consumer multimedia products, the effect of
 quarter to quarter variations in revenue and earnings, the effect of general
 economic conditions both domestically and internationally on the demand for
 the company's products, as well as the other risks detailed from time to time
 in the SEC reports of ESS, including the reports on Form 10-K and Form 10Q.
 Actual results could differ materially from those projected in the
 forward-looking statements.
 
 
     ESS TECHNOLOGY, INC.
     CONSOLIDATED BALANCE SHEETS -- UNAUDITED
     (in thousands)
 
                                                       Mar. 2001    Dec. 2000
 
     ASSETS
     Current assets:
     Cash and cash equivalents                          $45,227      $25,715
     Short-term investments                              13,387       33,123
     Accounts receivable, net                            38,390       51,311
     Inventories                                         85,343       98,940
     Prepaid expenses and other assets                    2,714        2,627
     Net assets of discontinued operations               28,691       46,208
 
     Total current assets                               213,752      257,924
 
     Property, plant and equipment, net                  28,821       31,081
     Other assets                                         5,151        4,737
 
     Total assets                                      $247,724     $293,742
 
     LIABILITIES AND SHAREHOLDERS' EQUITY
 
     Current liabilities:
     Accounts payable and accrued expenses              $54,055      $69,574
     Income taxes payable and deferred income taxes       2,518        3,678
 
     Total current liabilities                           56,573       73,252
 
     Non-current deferred tax liability                   9,061        9,061
 
     Shareholders' equity:
     Preferred stock, no par value, 10,000 shares
      authorized; none issued and outstanding                --           --
     Common stock, no par value, 100,000 shares
      authorized; 42,611 and 42,138 shares issued
      and outstanding at March 31, 2001 and
      December 31, 2000, respectively                   149,434      149,197
     Other comprehensive loss                          (16,120)      (7,378)
     Retained earnings                                   48,776       69,610
 
     Total shareholders' equity                         182,090      211,429
 
     Total liabilities and shareholders' equity        $247,724     $293,742
 
 
     ESS TECHNOLOGY, INC.
     CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
     (in thousands, except per share date)
 
     Quarter Ended                             Mar. 2001 Mar. 2000   Dec. 2000
 
     Net revenues                               $50,808    $82,996    $54,202
     Cost of revenues                            39,606     51,588     40,616
 
     Gross profit                                11,202     31,408     13,586
 
     Operating expenses:
     Research and development                     7,013      8,464      6,858
     In-process research and development             --      2,625         --
     Selling, general and administrative          9,741      9,800      7,834
 
     Operating income (loss)                    (5,552)     10,519    (1,106)
 
     Nonoperating income, net                     2,002      4,821      4,524
 
     Income (loss) before income taxes          (3,550)     15,340      3,418
     Provision for (benefit from) income taxes    (641)      3,054        582
 
     Net income (loss) from continuing
      operations                                (2,909)     12,286      2,836
 
     Loss from discontinued operations,
      net of minority interest                  (4,367)    (3,595)    (4,431)
     Loss on disposal of discontinued
      operations, net of minority interest     (13,409)         --         --
     Net loss from discontinued operations,
      net of minority interest                 (17,776)    (3,595)    (4,431)
 
     Net income (loss)                        $(20,685)     $8,691   $(1,595)
 
     Net income (loss) per share:
       Basic:
         Continuing operations                  $(0.07)      $0.29      $0.06
         Discontinued operations                 (0.42)     (0.08)     (0.10)
                                                $(0.49)      $0.21   $ (0.04)
 
       Diluted:
         Continuing operations                  $(0.07)      $0.26      $0.06
         Discontinued operations                 (0.42)     (0.07)     (0.10)
                                                $(0.49)      $0.19    $(0.04)
 
     Shares used in calculating net income
      (loss) per share:
       Basic                                     42,370     41,804     42,699
       Diluted                                   42,370     46,869     42,699
 
 
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 SOURCE  ESS Technology