Tellabs Reports First-Quarter Earnings Results

Company Announces Plan to Align Expenses With Revenue and Exit SALIX(R)

Product Line



Apr 18, 2001, 01:00 ET from Tellabs

    LISLE, Ill., April 18 /PRNewswire/ -- Tellabs today announced first-
 quarter sales of $772 million, up 21% from $639 million a year ago, driven by
 demand for Tellabs' core optical networking products. First-quarter net income
 amounted to $123 million, up 13%, from $108 million a year ago and diluted
 earnings per share were 29 cents, up 12% from last year (all comparisons to
 prior year in this release refer to the attached pro forma results of
 operations).
     In light of reduced and deferred spending by major communications
 carriers, Tellabs will realign its cost structure with its current
 expectations for lower revenue growth. The company will further reduce
 discretionary spending, eliminate salary increases this year, institute a pay-
 cut for all corporate officers, align manufacturing capability with demand
 expectations, and terminate the SALIX next-generation-switching product
 effort.
     As a result, the company will take a restructuring and other one-time
 charges in the second quarter for costs associated with reducing its workforce
 by about 550 people, consolidation of excess facilities, related fixed asset
 disposals, asset impairment and excess inventory. Tellabs also eliminated 450
 temporary or contract positions during the quarter and will not fill 1,100
 open positions. Total charges are expected to be in the range of $150 million
 to $225 million. On an annualized basis, the workforce-related actions are
 expected to reduce Tellabs' overall cost structure by approximately 5% to 6%.
     Tellabs now expects 2001 revenues of $3.6 billion to $3.7 billion; 2001
 earnings per share are now expected to range between $1.55 and $1.65,
 excluding the goodwill from the Future Networks Inc. acquisition.
     "These actions are unfortunate because they affect a lot of talented
 people," said Tellabs President and CEO Richard C. Notebaert. "By paring back
 our efforts in next-generation switching, we are aligning with our customers'
 priorities and strengthening our initiatives in high-growth areas such as
 optical networking. Despite the current challenges, I am as confident as ever
 in Tellabs' long-term prospects and our ability to deliver strong revenue and
 earnings growth in the future."
     Optical Networking -- For the first quarter 2001, sales of optical
 networking equipment rose 22% to $482 million. During the quarter, Tellabs
 shipped 3 million DS-1-equivalent ports of TITAN 5000 series optical
 networking products and continued to ship its new TITAN(R) 6000 series
 products for customer deployment.
     Broadband Access -- Sales of broadband access products amounted to
 $153 million, which was consistent with last year's quarter. Sales of the
 managed digital network product line posted year-over-year improvement, which
 offset slower sales from the CABLESPAN(R) product line. During the quarter,
 Tellabs completed its acquisition of Future Networks Inc., a leader in
 standards-based voice and data modem technology, which enables Tellabs to
 provide cable operators with a complete solution for cable-data modem and
 voice-over-IP services.
     Voice Quality Enhancement -- Sales in the voice-quality-enhancement market
 amounted to $33 million, compared with $54 million last year. During the
 quarter, Tellabs announced voice-quality enhancement contracts with major
 carriers such as Globtel and KPN International Network Services.
     Services and Solutions -- Building on growth in its core optical
 networking business, Services and Solutions revenues increased 160%, to
 $104 million in the first quarter of 2001.
     Simultaneous Webcast and Teleconference Replay -- Tellabs will host a
 teleconference at 7:30 a.m. Central Time on Wednesday, April 18, to discuss
 first-quarter 2001 results. Internet users can hear a simultaneous live
 webcast of the teleconference at www.tellabs.com . A taped replay of the call
 will be available for 48 hours, beginning at 9:30 a.m. Central Time, at
 800-633-8284. (Outside the United States, call 858-812-6440.) When prompted,
 enter the Tellabs reservation number: 18414716.
     In 80 countries around the globe, Tellabs helps the world's leading
 communications service providers build tomorrow's converged networks of voice,
 data and video. Tellabs' employees design, build and service optical
 networking, broadband access and voice-quality enhancement equipment. Today,
 most telephone calls and Internet sessions in the United States flow through
 equipment from Tellabs (Nasdaq:   TLAB) ( www.tellabs.com ).
 
     Forward-Looking Statements -- This news release contains forward-looking
 statements that involve risks and uncertainties. Actual results may differ
 from the results discussed in the forward-looking statements. Factors that
 might cause such a difference include, but are not limited to, risks
 associated with introducing new products, entering new markets, availability
 of resources, competitive response, and economic changes impacting the
 telecommunications industry. The company undertakes 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. For a more
 detailed description of the risk factors, please refer to the company's SEC
 filings.
     Tellabs, the Tellabs logo, TITAN, CABLESPAN, and SALIX are registered
 trademarks of Tellabs or one of its affiliates in the United States and/or
 other countries.
 
 
                                 TELLABS, INC.
                             Results of Operations
                 (Amounts in thousands, except per-share data)
                                  (Unaudited)
 
                                                       Three Months Ended
                                                    03/30/01        03/31/00
 
     Net Sales                                       $772,108       $631,285
     Cost of Goods Sold                               366,202        299,094
     Gross Profit                                     405,906        332,191
 
     Operating Exp.
       Marketing & G.A.                               111,060         86,966
       Research & Development                         127,604         93,020
       Merger Costs                                       ---          5,760
       Goodwill Amortization                            4,505          3,015
     Total Operating Expenses                         243,169        188,761
 
     Operating Profit                                 162,737        143,430
     Interest/Other-Net                                16,105         37,771
     Profit Before Tax                                178,842        181,201
 
     Income Taxes                                      56,335         60,690
     Net Profit Before Cum. Effect                    122,507        120,511
 
     Cumulative Effect of Change In
      Acctg. Principle (Net of Tax)                       ---        (29,161)
 
     Profit After Cum. Effect                        $122,507        $91,350
 
     Earnings per Share Before
       Cumulative Effect
        Basic                                           $0.30          $0.29
        Diluted                                         $0.29          $0.29
 
     Cumulative Effect per Share
        Basic                                             ---          $0.07
        Diluted                                           ---          $0.07
 
     Earnings per Share
        Basic                                           $0.30          $0.22
        Diluted                                         $0.29          $0.22
 
     Average Number of Shares
      of Common Stock Outstanding
        Basic                                         408,771        408,794
        Diluted                                       416,282        418,909
 
 
                                 TELLABS, INC.
                        Pro Forma Results of Operations
                 (Amounts in thousands, except per-share data)
                                  (Unaudited)
 
                                                       Three Months Ended
                                                     03/30/01       03/31/00*
 
     Net Sales                                       $772,108       $639,490
     Cost of Goods Sold                               366,202        307,916
     Gross Profit                                     405,906        331,574
 
     Operating Exp.(A)
       Marketing & G.A.                               111,060         86,966
       Research & Development                         127,604         93,020
       Goodwill Amortization                            4,505          3,015
     Total Operating Expenses                         243,169        183,001
 
     Operating Profit                                 162,737        148,573
     Interest/Other-Net(B)                             16,105         14,022
     Profit Before Tax                                178,842        162,595
 
     Income Taxes                                      56,335         54,469
     Net Profit                                      $122,507       $108,126
 
     Earnings per Share
        Basic                                           $0.30          $0.26
        Diluted                                         $0.29          $0.26
 
     Average Number of Shares
      of Common Stock Outstanding
        Basic                                         408,771        408,794
        Diluted                                       416,282        418,909
 
     Pro-forma Adjustments
      *  Year 2000 results of operations are not restated to reflect the
         adoption of the Securities Exchange Commission's Staff Accounting
         Bulletin No. 101.
     (A) 2000 results exclude a pre-tax charge of $5.8 million ($0.01 per
         diluted share) related to the merger with SALIX Technologies, Inc.
     (B) 2000 results exclude a pre-tax gain of $19.2 million ($0.03 per
         diluted share) on the sale of stock held as an investment and a
         pre-tax gain of $4.6 million ($0.01 per diluted share) on a
         distribution from one of the Company's technology investments.
 
 
                                 TELLABS, INC.
                     Condensed Consolidated Balance Sheets
                             (Dollars in thousands)
 
                                                      2001            2000
                                                  First Quarter     Year End
 
     Assets
     Current Assets
       Cash and investments                        $1,019,064     $1,022,347
       Accounts receivable, less allowance            594,936        802,546
       Inventories                                    533,941        428,255
       Other current assets                            54,965         69,331
        Total Current Assets                        2,202,906      2,322,479
 
     Property, Plant and Equipment                    814,525        756,895
       Accumulated depreciation                      (311,510)      (296,134)
                                                      503,015        460,761
 
     Goodwill                                         167,303         73,924
     Other Assets                                     213,176        215,903
        Total Assets                               $3,086,400     $3,073,067
 
     Liabilities
     Current Liabilities
       Accounts payable                              $136,503       $155,006
       Accrued liabilities                            119,953        164,045
       Income taxes                                    46,769         93,294
        Total Current Liabilities                     303,225        412,345
 
     Long-Term Debt                                     2,850          2,850
     Other Long-Term Liabilities                       26,938         24,221
     Deferred Income Taxes                                925          6,067
        Total Liabilities                             333,938        445,483
 
     Stockholders' Equity
     Common Stock, $.01 Par Value                       4,122          4,112
     Additional Paid-In Capital                       472,809        441,909
     Treasury Stock                                  (126,476)      (126,476)
     Cumulative Translation Adjustment               (154,255)      (127,018)
     Unrealized Holding (Losses) Gains on Securities   (4,861)        (3,559)
     Retained Earnings                              2,561,123      2,438,616
 
        Total Stockholders' Equity                  2,752,462      2,627,584
        Total Liab. & Stockholders' Equity         $3,086,400     $3,073,067
 
 

SOURCE Tellabs
    LISLE, Ill., April 18 /PRNewswire/ -- Tellabs today announced first-
 quarter sales of $772 million, up 21% from $639 million a year ago, driven by
 demand for Tellabs' core optical networking products. First-quarter net income
 amounted to $123 million, up 13%, from $108 million a year ago and diluted
 earnings per share were 29 cents, up 12% from last year (all comparisons to
 prior year in this release refer to the attached pro forma results of
 operations).
     In light of reduced and deferred spending by major communications
 carriers, Tellabs will realign its cost structure with its current
 expectations for lower revenue growth. The company will further reduce
 discretionary spending, eliminate salary increases this year, institute a pay-
 cut for all corporate officers, align manufacturing capability with demand
 expectations, and terminate the SALIX next-generation-switching product
 effort.
     As a result, the company will take a restructuring and other one-time
 charges in the second quarter for costs associated with reducing its workforce
 by about 550 people, consolidation of excess facilities, related fixed asset
 disposals, asset impairment and excess inventory. Tellabs also eliminated 450
 temporary or contract positions during the quarter and will not fill 1,100
 open positions. Total charges are expected to be in the range of $150 million
 to $225 million. On an annualized basis, the workforce-related actions are
 expected to reduce Tellabs' overall cost structure by approximately 5% to 6%.
     Tellabs now expects 2001 revenues of $3.6 billion to $3.7 billion; 2001
 earnings per share are now expected to range between $1.55 and $1.65,
 excluding the goodwill from the Future Networks Inc. acquisition.
     "These actions are unfortunate because they affect a lot of talented
 people," said Tellabs President and CEO Richard C. Notebaert. "By paring back
 our efforts in next-generation switching, we are aligning with our customers'
 priorities and strengthening our initiatives in high-growth areas such as
 optical networking. Despite the current challenges, I am as confident as ever
 in Tellabs' long-term prospects and our ability to deliver strong revenue and
 earnings growth in the future."
     Optical Networking -- For the first quarter 2001, sales of optical
 networking equipment rose 22% to $482 million. During the quarter, Tellabs
 shipped 3 million DS-1-equivalent ports of TITAN 5000 series optical
 networking products and continued to ship its new TITAN(R) 6000 series
 products for customer deployment.
     Broadband Access -- Sales of broadband access products amounted to
 $153 million, which was consistent with last year's quarter. Sales of the
 managed digital network product line posted year-over-year improvement, which
 offset slower sales from the CABLESPAN(R) product line. During the quarter,
 Tellabs completed its acquisition of Future Networks Inc., a leader in
 standards-based voice and data modem technology, which enables Tellabs to
 provide cable operators with a complete solution for cable-data modem and
 voice-over-IP services.
     Voice Quality Enhancement -- Sales in the voice-quality-enhancement market
 amounted to $33 million, compared with $54 million last year. During the
 quarter, Tellabs announced voice-quality enhancement contracts with major
 carriers such as Globtel and KPN International Network Services.
     Services and Solutions -- Building on growth in its core optical
 networking business, Services and Solutions revenues increased 160%, to
 $104 million in the first quarter of 2001.
     Simultaneous Webcast and Teleconference Replay -- Tellabs will host a
 teleconference at 7:30 a.m. Central Time on Wednesday, April 18, to discuss
 first-quarter 2001 results. Internet users can hear a simultaneous live
 webcast of the teleconference at www.tellabs.com . A taped replay of the call
 will be available for 48 hours, beginning at 9:30 a.m. Central Time, at
 800-633-8284. (Outside the United States, call 858-812-6440.) When prompted,
 enter the Tellabs reservation number: 18414716.
     In 80 countries around the globe, Tellabs helps the world's leading
 communications service providers build tomorrow's converged networks of voice,
 data and video. Tellabs' employees design, build and service optical
 networking, broadband access and voice-quality enhancement equipment. Today,
 most telephone calls and Internet sessions in the United States flow through
 equipment from Tellabs (Nasdaq:   TLAB) ( www.tellabs.com ).
 
     Forward-Looking Statements -- This news release contains forward-looking
 statements that involve risks and uncertainties. Actual results may differ
 from the results discussed in the forward-looking statements. Factors that
 might cause such a difference include, but are not limited to, risks
 associated with introducing new products, entering new markets, availability
 of resources, competitive response, and economic changes impacting the
 telecommunications industry. The company undertakes 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. For a more
 detailed description of the risk factors, please refer to the company's SEC
 filings.
     Tellabs, the Tellabs logo, TITAN, CABLESPAN, and SALIX are registered
 trademarks of Tellabs or one of its affiliates in the United States and/or
 other countries.
 
 
                                 TELLABS, INC.
                             Results of Operations
                 (Amounts in thousands, except per-share data)
                                  (Unaudited)
 
                                                       Three Months Ended
                                                    03/30/01        03/31/00
 
     Net Sales                                       $772,108       $631,285
     Cost of Goods Sold                               366,202        299,094
     Gross Profit                                     405,906        332,191
 
     Operating Exp.
       Marketing & G.A.                               111,060         86,966
       Research & Development                         127,604         93,020
       Merger Costs                                       ---          5,760
       Goodwill Amortization                            4,505          3,015
     Total Operating Expenses                         243,169        188,761
 
     Operating Profit                                 162,737        143,430
     Interest/Other-Net                                16,105         37,771
     Profit Before Tax                                178,842        181,201
 
     Income Taxes                                      56,335         60,690
     Net Profit Before Cum. Effect                    122,507        120,511
 
     Cumulative Effect of Change In
      Acctg. Principle (Net of Tax)                       ---        (29,161)
 
     Profit After Cum. Effect                        $122,507        $91,350
 
     Earnings per Share Before
       Cumulative Effect
        Basic                                           $0.30          $0.29
        Diluted                                         $0.29          $0.29
 
     Cumulative Effect per Share
        Basic                                             ---          $0.07
        Diluted                                           ---          $0.07
 
     Earnings per Share
        Basic                                           $0.30          $0.22
        Diluted                                         $0.29          $0.22
 
     Average Number of Shares
      of Common Stock Outstanding
        Basic                                         408,771        408,794
        Diluted                                       416,282        418,909
 
 
                                 TELLABS, INC.
                        Pro Forma Results of Operations
                 (Amounts in thousands, except per-share data)
                                  (Unaudited)
 
                                                       Three Months Ended
                                                     03/30/01       03/31/00*
 
     Net Sales                                       $772,108       $639,490
     Cost of Goods Sold                               366,202        307,916
     Gross Profit                                     405,906        331,574
 
     Operating Exp.(A)
       Marketing & G.A.                               111,060         86,966
       Research & Development                         127,604         93,020
       Goodwill Amortization                            4,505          3,015
     Total Operating Expenses                         243,169        183,001
 
     Operating Profit                                 162,737        148,573
     Interest/Other-Net(B)                             16,105         14,022
     Profit Before Tax                                178,842        162,595
 
     Income Taxes                                      56,335         54,469
     Net Profit                                      $122,507       $108,126
 
     Earnings per Share
        Basic                                           $0.30          $0.26
        Diluted                                         $0.29          $0.26
 
     Average Number of Shares
      of Common Stock Outstanding
        Basic                                         408,771        408,794
        Diluted                                       416,282        418,909
 
     Pro-forma Adjustments
      *  Year 2000 results of operations are not restated to reflect the
         adoption of the Securities Exchange Commission's Staff Accounting
         Bulletin No. 101.
     (A) 2000 results exclude a pre-tax charge of $5.8 million ($0.01 per
         diluted share) related to the merger with SALIX Technologies, Inc.
     (B) 2000 results exclude a pre-tax gain of $19.2 million ($0.03 per
         diluted share) on the sale of stock held as an investment and a
         pre-tax gain of $4.6 million ($0.01 per diluted share) on a
         distribution from one of the Company's technology investments.
 
 
                                 TELLABS, INC.
                     Condensed Consolidated Balance Sheets
                             (Dollars in thousands)
 
                                                      2001            2000
                                                  First Quarter     Year End
 
     Assets
     Current Assets
       Cash and investments                        $1,019,064     $1,022,347
       Accounts receivable, less allowance            594,936        802,546
       Inventories                                    533,941        428,255
       Other current assets                            54,965         69,331
        Total Current Assets                        2,202,906      2,322,479
 
     Property, Plant and Equipment                    814,525        756,895
       Accumulated depreciation                      (311,510)      (296,134)
                                                      503,015        460,761
 
     Goodwill                                         167,303         73,924
     Other Assets                                     213,176        215,903
        Total Assets                               $3,086,400     $3,073,067
 
     Liabilities
     Current Liabilities
       Accounts payable                              $136,503       $155,006
       Accrued liabilities                            119,953        164,045
       Income taxes                                    46,769         93,294
        Total Current Liabilities                     303,225        412,345
 
     Long-Term Debt                                     2,850          2,850
     Other Long-Term Liabilities                       26,938         24,221
     Deferred Income Taxes                                925          6,067
        Total Liabilities                             333,938        445,483
 
     Stockholders' Equity
     Common Stock, $.01 Par Value                       4,122          4,112
     Additional Paid-In Capital                       472,809        441,909
     Treasury Stock                                  (126,476)      (126,476)
     Cumulative Translation Adjustment               (154,255)      (127,018)
     Unrealized Holding (Losses) Gains on Securities   (4,861)        (3,559)
     Retained Earnings                              2,561,123      2,438,616
 
        Total Stockholders' Equity                  2,752,462      2,627,584
        Total Liab. & Stockholders' Equity         $3,086,400     $3,073,067
 
 SOURCE  Tellabs