LeCroy Reports 44% Year-on-Year Oscilloscope Order Growth and 35% Sales Increase In Fourth Quarter of Fiscal 2010

CHESTNUT RIDGE, N.Y., Aug. 18 /PRNewswire-FirstCall/ -- LeCroy Corporation (Nasdaq: LCRY), a leading supplier of oscilloscopes and serial data test solutions, today announced financial results for its fiscal fourth quarter and year ended July 3, 2010.

LeCroy reported fourth-quarter fiscal 2010 revenue of $36.8 million, compared with $33.6 million in the sequential third quarter of fiscal 2010 and $27.2 million in the fourth quarter of fiscal 2009.  The Company also reported GAAP gross margin of 59.7%, GAAP operating income of $2.8 million, and GAAP net income of $176,000, or $0.01 per diluted share, for the fourth quarter of fiscal 2010.  This compares with GAAP gross margin of 46.9%, a GAAP operating loss of $3.5 million and a GAAP net loss of $3.8 million, or $0.31 per share, in the year-ago period.

LeCroy reported fourth-quarter fiscal 2010 non-GAAP gross margin of 59.8%, which excludes $46,000 in share-based compensation expense, compared with a 58.5% fourth-quarter fiscal 2009 non-GAAP gross margin, which excluded a $3.1 million non-cash charge for the write-down of inventory, $44,000 in share-based compensation and $34,000 of business realignment charges.  Non-GAAP operating income for the quarter was $3.6 million, which excludes $637,000 in share-based compensation expense and a $93,000 business realignment charge, compared with $1.6 million in the fourth quarter of fiscal 2009, which excluded a $3.1 million non-cash charge for the write-down of inventory, $1.0 million in share-based compensation and $971,000 in business realignment charges.  

Non-GAAP net income for the fourth quarter of fiscal 2010 was $1.4 million, or $0.11 per diluted share, which excludes $737,000 in share-based compensation, $372,000 for the non-cash amortization of debt discount on convertible notes, and an $88,000 business realignment charge.  This compares with $161,000 of non-GAAP net income, or $0.01 per diluted share, in the fourth quarter of the previous year, which excludes a $2.0 million non-cash charge for the write-down of inventory, $870,000 in share-based compensation, $646,000 in business realignment charges and $408,000 in non-cash amortization of debt discount on convertible notes.  

Comments on the Quarter

"This was an excellent quarter for LeCroy," said President and Chief Executive Officer Tom Reslewic.  "Total orders grew 39% year-over-year and 6% sequentially, driven by robust orders for oscilloscopes which grew 44% year-on-year.  Sales volume increased 35% year-over-year and by more than 9% on a sequential basis.  Our non-GAAP gross margins were 59.8%, reflecting the growth in sales volume and shift in product mix towards high-end oscilloscopes."

"The strong demand we are seeing at the high-end of the oscilloscope market is being driven by research for next-generation, high-speed data communications, to serve the worldwide proliferation of mobile devices," Reslewic said.  "The high-end oscilloscopes we have launched during the past two years – led by the highly successful 30 GHz WaveMaster 8 Zi – have cemented LeCroy's reputation with customers at the leading edge of high-speed data communications test solutions."

"We are managing our operations toward further improving the leverage in our operating model, while at the same time capitalizing on opportunities to drive continued growth," said Reslewic.  "We are successfully managing this balance, as we improved our non-GAAP operating margin both year-over-year and sequentially to 9.7% in the fourth quarter of fiscal 2010.   We also generated $2.3 million in cash from operations in the quarter, which we used to further pay down LeCroy's bank debt by $3.0 million, resulting in a net debt balance of $48.8 million."    

Outlook and Guidance

"Oscilloscope orders thus far in the first quarter of fiscal 2011 are very strong and foretell a promising start to the new fiscal year," Reslewic said.  "We expect to continue capitalizing on the growth in applications for faster data communication rates with the most well-received suite of new products in LeCroy's history."

"For the first quarter of fiscal 2011, we expect to report sequential and year-over-year growth over the fiscal fourth quarter of 2010, despite normal seasonal headwinds, with revenues in the range of $37 million to $38 million and non-GAAP operating margins in the 9% to 10% range.  For full-year fiscal 2011, we expect to report revenues in the range of $155 million to $160 million, and non-GAAP operating margins in the 10% to 11% range," said Reslewic.

"We are excited about our prospects for continued growth as we prepare for another comprehensive round of product introductions," Reslewic said.  "Beginning in the current first fiscal quarter and continuing through the spring, this series of launches will span LeCroy's full product range, adding capabilities and models.  We also plan to introduce products in completely new categories."

Conference Call Information

LeCroy will broadcast its quarterly conference call for investors live over the Internet today, Wednesday, August 18, 2010 at 10:00 a.m. ET.  To access the webcast, visit the "Events Calendar" in the "Investors" section of LeCroy's website at www.lecroy.com.  The call also may be accessed by dialing (877) 709-8155 or (201) 689-8881.  For interested individuals unable to join the live conference call, a webcast replay will be available on the Company's website for approximately one year.

About LeCroy Corporation

LeCroy Corporation is a worldwide leader in serial data test solutions, creating advanced instruments that drive product innovation by quickly measuring, analyzing and verifying complex electronic signals.  The Company offers high-performance oscilloscopes, serial data analyzers and global communications protocol test solutions used by design engineers in the computer, semiconductor and consumer electronics, data storage, automotive and industrial, and military and aerospace markets.  LeCroy's 45-year heritage of technical innovation is the foundation for its recognized leadership in "WaveShape Analysis" - capturing, viewing and measuring the high-speed signals that drive today's information and communications technologies.  LeCroy is headquartered in Chestnut Ridge, New York.  Company information is available at http://www.lecroy.com.

Basis of Presentation

The Company's fiscal years end on the Saturday closest to June 30, resulting in an additional week of results every five or six years. The fiscal year ending July 3, 2010 represents a 53-week period, while the fiscal year ended June 27, 2009 represented a 52-week period.

Effective at the beginning of fiscal 2010, the Company adopted new accounting guidance for convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement (formerly "FSP APB No. 14-1"), which requires that issuers of convertible debt instruments separately account for the liability and equity components in a manner that will reflect the entity's nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. A portion of the carrying value of the $72 million 4% convertible notes (approximately $17.9 million) was retroactively reclassified to equity as of its October 2006 issuance date, representing the equity component of the proceeds from the notes.  The discount is being accreted to interest expense over the contractual term of the notes or five years. The new accounting pronouncement required retroactive application; consequently, the prior-year amounts have been revised.

Safe Harbor

The Company is undergoing an audit of its fiscal 2010 financial results. These audit procedures are not yet complete as of the date of this press release. There can be no assurance that our financial results as disclosed in this press release will not change following the completion of the audit. Further, this release contains forward-looking statements, including those pertaining, but not limited to expectations regarding: the anticipated worldwide proliferation of an increasing number of mobile devices; LeCroy's ability to manage its operations toward further improving the leverage in its operating model, while at the same time capitalizing on opportunities to drive continued growth; the Company's ability to continue capitalizing on the growth in applications for faster data communication rates with the most well-received suite of new products in its history; the Company's expectations to report sequential growth over the fiscal fourth quarter of 2010 with revenues in the range of $37 million to $38 million and non-GAAP operating margins in the 9% to 10% range; the Company's expectations to report full-year fiscal 2011 revenues in the range of $155 million to $160 million and non-GAAP operating margins in the 10% to 11% range; LeCroy's prospects for continued growth as it prepares for another comprehensive round of product introductions; and the expected new product launches beginning in the current first fiscal quarter and continuing through the spring.

Actual performance and results of operations may differ materially from those projected or suggested in the forward-looking statements due to certain risks and uncertainties including, without limitation, adverse changes in general economic or political conditions in any of the major countries in which LeCroy does business; volume and timing of orders received; changes in the mix of products sold; competitive pricing pressure; the availability and timing of funding for the Company's current products; delays in development or shipment of LeCroy's new products or existing products; introduction of new products by existing and new competitors; failure to successfully manage transitions to new markets; failure to anticipate and develop new products and services in response to changes in demand; failure to obtain and maintain cost reductions; difficulty in predicting revenue from new products; disputes and litigation; inability to protect LeCroy's intellectual property from third-party infringers; failure to manage LeCroy's sales and distribution channels effectively; disruption of LeCroy's business due to catastrophic events; risks associated with international operations; fluctuations in foreign currency exchange rates; changes in, or interpretations of, accounting principles; inventory write-down; impairment of long-lived assets; valuation of deferred tax assets; unanticipated changes in, or interpretations of, tax rules and regulations; LeCroy's inability to attract and retain key personnel; LeCroy's inability to purchase its convertible debt; and interruptions or terminations in LeCroy's relationships with turnkey assemblers.  

For further discussion of these and other risks and uncertainties, individuals should refer to LeCroy's SEC filings, which are available at the Company's website www.lecroy.com.  The financial information set forth in this press release reflects estimates based on information available at this time. These amounts could differ from actual reported amounts stated in LeCroy's Annual Report on Form 10-K for the year ended July 3, 2010, which the Company expects to file in September 2010.

LeCroy undertakes no obligation to publicly update forward-looking statements, whether because of new information, future events or otherwise.  Further information on potential factors that could affect LeCroy Corporation's business is described in the Company's reports on file with the SEC.

Use of Non-GAAP Financial Measures  

Certain disclosures in this press release include "non-GAAP financial measures." A non-GAAP financial measure is defined as a numerical measure of a company's financial performance, financial position or cash flows that excludes or includes amounts so as to be different from the most directly comparable measure calculated and presented in accordance with GAAP in the Consolidated Balance Sheets, Consolidated Statements of Operations or Cash Flows of the Company.

The non-GAAP results are a supplement to the financial statements based on generally accepted accounting principles ("GAAP"). The Company believes this presentation provides investors and LeCroy management with additional insight into its underlying results because of the materiality of certain primarily non-cash charges. The Company excludes these expenses when evaluating core operating activities and for strategic decision making, forecasting future results and evaluating current performance.

We define non-GAAP gross profit as gross profit as reported under GAAP plus non-cash charges for inventory write-down, share-based compensation costs included in cost of revenues, incremental cost of revenues related to the fair value adjustment for the acquired Catalyst inventory and business realignment charges. Non-GAAP gross margin is computed as non-GAAP gross profit as a percentage of total revenues.  Non-GAAP gross profit and non-GAAP gross margin are not substitutes for comparable GAAP measures.

We define non-GAAP operating income as operating income (loss) reported under GAAP plus primarily non-cash charges for impairment of goodwill, inventory write-down, incremental cost of revenue related to the fair value adjustment for the acquired Catalyst inventory, share-based compensation costs and business realignment charges. Non-GAAP operating income is not a substitute for GAAP operating income (loss).

We define non-GAAP net income as net income (loss) reported under GAAP  plus primarily non-cash charges for impairment of goodwill, inventory write-down, incremental cost of revenue related to the fair value adjustment for the acquired Catalyst inventory, share-based compensation costs, business realignment charges and amortization of debt discount on  convertible notes, each net of applicable income taxes, such that the effective blended statutory rate, for non-GAAP net income is approximately 34% and 35%, on a year-to-date basis, adjusted for tax return filing true-ups and reserve adjustments, for each of the full fiscal 2009 and 2010 years, respectively. Non-GAAP net income is not a substitute for GAAP net income (loss).

We define non-GAAP net income per diluted common share as non-GAAP net income divided by the weighted average number of shares outstanding plus the dilutive effect of stock options, restricted stock and the convertible notes, calculated consistent with GAAP, as applicable.  Non-GAAP net income per diluted common share is not a substitute for GAAP net income (loss) per diluted common share.

We define net debt as bank and convertible debt less cash and cash equivalents.  Non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP net income per diluted common share, as we defined them, may differ from similarly named measures used by other entities and, consequently, could be misleading unless all entities calculate and define such non-GAAP measures in the same manner.  A presentation of, and a reconciliation of, our non-GAAP financial measures with the most directly comparable GAAP measures are included in the accompanying financial data.

SOURCE LeCroy Corporation