Three-Five Systems Announces First Quarter Results

Apr 17, 2001, 01:00 ET from Three-Five Systems, Inc.

    TEMPE, Ariz., April 17 /PRNewswire/ -- Three-Five Systems, Inc.
 (NYSE:   TFS) today announced its financial results for the first quarter ended
 March 31, 2001.
     Revenue for the first quarter was $35.6 million compared to revenue of
 $39.2 million for the first quarter of 2000.  Net income for the first quarter
 of 2001 was $242,000, or $0.01 per share, compared to $3.6 million, or
 $0.18 per share, in the first quarter of 2000.  The reduced earnings per share
 is primarily attributable to reduced gross margins and increased operating
 expenditures. The company's gross margins have been affected because of the
 current intense pricing pressures in the display industry resulting from
 excess LCD capacities and inventory issues with the OEM users of displays,
 such as mobile handset makers.  In the first quarter of 2001, the company's
 operating expenses totaled $6.2 million compared to $5.0 million for the first
 quarter of 2000, an increase of $1.2 million.  A substantial portion of that
 increase in operating expenses was related to the ramp up of LCoS(TM)
 microdisplay products, the company's newest display technology, which enables
 the development of multi-media projectors, monitors, HDTVs and handheld
 Internet appliances.
     The company ended the first quarter of 2001 with $153.9 million in cash
 and short-term investments, no outstanding borrowings on its working capital
 line of credit, and no long-term debt.  Total capital expenditures for the
 first quarter of 2001 were $1.6 million, most of which were for production
 upgrades and investments in manufacturing for LCoS(TM) microdisplays.
 Operating cash outflow for Three-Five Systems in the first quarter of 2001 was
 $7.2 million, primarily as a result of increased inventories and receivables.
 Inventories increased as a result of push outs of product orders from the
 company's OEM customers.  Accounts receivable increased as a result of OEM
 customers extending payment terms on outstanding accounts.  Under the
 company's $30 million stock buy-back program announced in December 2000, the
 company purchased almost 150,000 shares of its common stock for a total of
 $2.5 million in the first quarter of 2001.  Since the start of the buy-back
 program, the company has purchased just over 390,000 shares for $7.2 million.
     Several weeks ago, the company announced that weak and uncertain demand in
 the cellular handset industry and continued issues with handset inventories
 had led to cancellations, delays, and push-outs for existing and new
 customers' programs and, consequently, limited visibility for the company with
 regard to revenue expectations for the remainder of the year.  In addition,
 the company said that the pressure on display prices had intensified, and that
 the company was experiencing accelerated reductions of its LCD module selling
 prices.  Based on those unsettled conditions and pricing pressures, the
 company reported that it expected its revenue in the second quarter of 2001 to
 be in the range of $20 to $30 million and to report a loss in that second
 quarter in the range of $.25 to $.35 per share.
     Jack L. Saltich, President and Chief Executive Officer, commented, "It is
 evident that worldwide economic conditions are uncertain at this time, and as
 a result our visibility is clouded for the next several quarters.
 Consequently our outlook from a few weeks ago remains unchanged.  It is
 important to note, however, that our strong financial position will allow us
 to execute our strategies of (1) expanding and diversifying our core LCD
 business through our numerous design wins that we had in 2000 and (2)
 expending research and development resources to add new display technologies
 to our product offering."
     Saltich continued, "Our key new display technology is LCoS microdisplays.
 The level of customer demand that we are seeing with respect to this
 revolutionary technology is surpassing our expectations.  We continue to focus
 on four target markets -- televisions, multi-media projectors, large monitors
 and personal display systems -- and we have multiple customer programs in
 development."
     "In conclusion, I would say that although the outlook on the economy is
 uncertain, Three-Five is well positioned in a variety of ways.  We have the
 marketing strength to continue to seek out and win new customers in new
 markets.  We have the financial strength to continue to make investments in
 technology and strategic opportunities.  Most importantly, we have the
 technical strength to make significant inroads into completely new display
 technologies."
 
     About Three-Five Systems, Inc.(R)
     Three-Five Systems, Inc. (NYSE:   TFS) is a recognized leader in the design
 and manufacture of liquid crystal display (LCD) modules and technology for OEM
 customers in wireless communications and data collection, medical electronics,
 and other commercial and consumer device marketplaces.  The company has also
 developed LCoS(TM) (Liquid Crystal on Silicon) microdisplays.  These tiny,
 high-resolution, low power displays are currently being supplied to customers
 developing revolutionary microdisplay-based products including high-definition
 television sets, business projectors, computer monitors and wireless Internet
 appliances.  At its Tempe, Arizona headquarters, Three-Five operates a design
 center, the highest volume LCD manufacturing line in North America, and the
 David R. Buchanan LCD laboratory, dedicated to the development of advanced
 display technologies.  Support for the company's growing global customer base
 is also provided at production facilities in Manila, the Philippines and
 production and design center facilities in Beijing, China.  The company's web
 site is located at www.threefive.com.
 
     Certain statements contained in this press release may be deemed to be
 forward-looking statements under federal securities laws, and Three-Five
 Systems intends that such forward-looking statements be subject to the
 safe-harbor created thereby.  Such forward-looking statements include
 (1) expectations regarding the amount and timing of revenue and the operating
 results of the company (including expectations regarding earnings per share)
 and (2) expectations regarding Three-Five Systems winning new customers and
 making inroads into new display technologies.  Three-Five Systems cautions
 that these statements are qualified by important factors that could cause
 actual results to differ materially from those reflected by the forward-
 looking statements contained herein.  Such factors include (a) changes in the
 markets for the company's products; (b) changes in the market for customers'
 products; (c) the failure of key technologies, such as LCoS microdisplays to
 deliver commercially acceptable performance; (d) the ability of Three-Five
 Systems' management, individually or collectively, to guide the company in a
 successful manner; and (e) other risks as detailed from time to time in Three-
 Five Systems' SEC reports, including the company's most recent Registration
 Statement on Form S-3, Quarterly Reports on Form 10-Q, Current Reports on Form
 8-K and Annual Report on Form 10-K.
 
 
      CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 
                                                   THREE MONTHS ENDED MAR 31,
                                                      2000           2001
                                                   (unaudited)   (unaudited)
                                                     (in thousands, except
                                                        per share data)
 
     Net Sales                                       $39,162       $35,616
     Costs and Expenses:
        Cost of Sales                                 29,360        31,243
        Selling, General and Administrative            2,262         2,491
        Research, Development and Engineering          2,763         3,661
                                                      34,385        37,395
        Operating Income (Loss)                        4,777        (1,779)
     Interest and Other Income, Net                      580         2,140
     Income before Provision for Income Taxes          5,357           361
        Provision for Income Taxes                     1,770           119
     Net Income                                       $3,587          $242
     Earnings per Common Share:
        Basic                                          $0.19         $0.01
        Diluted                                        $0.18         $0.01
     Weighted Average Number of Common Shares:
        Basic                                         18,926        21,429
        Diluted                                       20,047        22,054
 
 
      CONDENSED CONSOLIDATED BALANCE SHEETS           DEC 31,      MAR 31,
                                                       2000          2001
                                                     (audited)   (unaudited)
     ASSETS                                              (in thousands)
 
     Cash and Cash Equivalents                       $98,876      $103,727
     Short-term Investments                           66,695        50,127
     Accounts Receivable, Net                         23,635        26,799
     Inventory                                        20,516        25,485
     Deferred Tax Asset                                4,346         4,346
     Other Current Assets                              1,778         2,405
         Total Current Assets                        215,846       212,889
     Long-term Investments                             4,534         4,528
     Property, Plant and Equipment, Net               43,254        43,417
     Other Assets                                      4,209         5,209
         Total Assets                               $267,843      $266,043
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
     Accounts Payable                                $11,404       $14,484
     Accrued Liabilities                               7,005         3,774
     Current Taxes Payable                               239           295
     Term Loan                                         2,706         2,706
         Total Current Liabilities                    21,354        21,259
     Deferred Tax Liability                            4,487         4,487
         Total Liabilities                            25,841        25,746
     Stockholders' Equity                            242,002       240,297
         Total Liabilities and
          Stockholders' Equity                      $267,843      $266,043
 
 

SOURCE Three-Five Systems, Inc.
    TEMPE, Ariz., April 17 /PRNewswire/ -- Three-Five Systems, Inc.
 (NYSE:   TFS) today announced its financial results for the first quarter ended
 March 31, 2001.
     Revenue for the first quarter was $35.6 million compared to revenue of
 $39.2 million for the first quarter of 2000.  Net income for the first quarter
 of 2001 was $242,000, or $0.01 per share, compared to $3.6 million, or
 $0.18 per share, in the first quarter of 2000.  The reduced earnings per share
 is primarily attributable to reduced gross margins and increased operating
 expenditures. The company's gross margins have been affected because of the
 current intense pricing pressures in the display industry resulting from
 excess LCD capacities and inventory issues with the OEM users of displays,
 such as mobile handset makers.  In the first quarter of 2001, the company's
 operating expenses totaled $6.2 million compared to $5.0 million for the first
 quarter of 2000, an increase of $1.2 million.  A substantial portion of that
 increase in operating expenses was related to the ramp up of LCoS(TM)
 microdisplay products, the company's newest display technology, which enables
 the development of multi-media projectors, monitors, HDTVs and handheld
 Internet appliances.
     The company ended the first quarter of 2001 with $153.9 million in cash
 and short-term investments, no outstanding borrowings on its working capital
 line of credit, and no long-term debt.  Total capital expenditures for the
 first quarter of 2001 were $1.6 million, most of which were for production
 upgrades and investments in manufacturing for LCoS(TM) microdisplays.
 Operating cash outflow for Three-Five Systems in the first quarter of 2001 was
 $7.2 million, primarily as a result of increased inventories and receivables.
 Inventories increased as a result of push outs of product orders from the
 company's OEM customers.  Accounts receivable increased as a result of OEM
 customers extending payment terms on outstanding accounts.  Under the
 company's $30 million stock buy-back program announced in December 2000, the
 company purchased almost 150,000 shares of its common stock for a total of
 $2.5 million in the first quarter of 2001.  Since the start of the buy-back
 program, the company has purchased just over 390,000 shares for $7.2 million.
     Several weeks ago, the company announced that weak and uncertain demand in
 the cellular handset industry and continued issues with handset inventories
 had led to cancellations, delays, and push-outs for existing and new
 customers' programs and, consequently, limited visibility for the company with
 regard to revenue expectations for the remainder of the year.  In addition,
 the company said that the pressure on display prices had intensified, and that
 the company was experiencing accelerated reductions of its LCD module selling
 prices.  Based on those unsettled conditions and pricing pressures, the
 company reported that it expected its revenue in the second quarter of 2001 to
 be in the range of $20 to $30 million and to report a loss in that second
 quarter in the range of $.25 to $.35 per share.
     Jack L. Saltich, President and Chief Executive Officer, commented, "It is
 evident that worldwide economic conditions are uncertain at this time, and as
 a result our visibility is clouded for the next several quarters.
 Consequently our outlook from a few weeks ago remains unchanged.  It is
 important to note, however, that our strong financial position will allow us
 to execute our strategies of (1) expanding and diversifying our core LCD
 business through our numerous design wins that we had in 2000 and (2)
 expending research and development resources to add new display technologies
 to our product offering."
     Saltich continued, "Our key new display technology is LCoS microdisplays.
 The level of customer demand that we are seeing with respect to this
 revolutionary technology is surpassing our expectations.  We continue to focus
 on four target markets -- televisions, multi-media projectors, large monitors
 and personal display systems -- and we have multiple customer programs in
 development."
     "In conclusion, I would say that although the outlook on the economy is
 uncertain, Three-Five is well positioned in a variety of ways.  We have the
 marketing strength to continue to seek out and win new customers in new
 markets.  We have the financial strength to continue to make investments in
 technology and strategic opportunities.  Most importantly, we have the
 technical strength to make significant inroads into completely new display
 technologies."
 
     About Three-Five Systems, Inc.(R)
     Three-Five Systems, Inc. (NYSE:   TFS) is a recognized leader in the design
 and manufacture of liquid crystal display (LCD) modules and technology for OEM
 customers in wireless communications and data collection, medical electronics,
 and other commercial and consumer device marketplaces.  The company has also
 developed LCoS(TM) (Liquid Crystal on Silicon) microdisplays.  These tiny,
 high-resolution, low power displays are currently being supplied to customers
 developing revolutionary microdisplay-based products including high-definition
 television sets, business projectors, computer monitors and wireless Internet
 appliances.  At its Tempe, Arizona headquarters, Three-Five operates a design
 center, the highest volume LCD manufacturing line in North America, and the
 David R. Buchanan LCD laboratory, dedicated to the development of advanced
 display technologies.  Support for the company's growing global customer base
 is also provided at production facilities in Manila, the Philippines and
 production and design center facilities in Beijing, China.  The company's web
 site is located at www.threefive.com.
 
     Certain statements contained in this press release may be deemed to be
 forward-looking statements under federal securities laws, and Three-Five
 Systems intends that such forward-looking statements be subject to the
 safe-harbor created thereby.  Such forward-looking statements include
 (1) expectations regarding the amount and timing of revenue and the operating
 results of the company (including expectations regarding earnings per share)
 and (2) expectations regarding Three-Five Systems winning new customers and
 making inroads into new display technologies.  Three-Five Systems cautions
 that these statements are qualified by important factors that could cause
 actual results to differ materially from those reflected by the forward-
 looking statements contained herein.  Such factors include (a) changes in the
 markets for the company's products; (b) changes in the market for customers'
 products; (c) the failure of key technologies, such as LCoS microdisplays to
 deliver commercially acceptable performance; (d) the ability of Three-Five
 Systems' management, individually or collectively, to guide the company in a
 successful manner; and (e) other risks as detailed from time to time in Three-
 Five Systems' SEC reports, including the company's most recent Registration
 Statement on Form S-3, Quarterly Reports on Form 10-Q, Current Reports on Form
 8-K and Annual Report on Form 10-K.
 
 
      CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 
                                                   THREE MONTHS ENDED MAR 31,
                                                      2000           2001
                                                   (unaudited)   (unaudited)
                                                     (in thousands, except
                                                        per share data)
 
     Net Sales                                       $39,162       $35,616
     Costs and Expenses:
        Cost of Sales                                 29,360        31,243
        Selling, General and Administrative            2,262         2,491
        Research, Development and Engineering          2,763         3,661
                                                      34,385        37,395
        Operating Income (Loss)                        4,777        (1,779)
     Interest and Other Income, Net                      580         2,140
     Income before Provision for Income Taxes          5,357           361
        Provision for Income Taxes                     1,770           119
     Net Income                                       $3,587          $242
     Earnings per Common Share:
        Basic                                          $0.19         $0.01
        Diluted                                        $0.18         $0.01
     Weighted Average Number of Common Shares:
        Basic                                         18,926        21,429
        Diluted                                       20,047        22,054
 
 
      CONDENSED CONSOLIDATED BALANCE SHEETS           DEC 31,      MAR 31,
                                                       2000          2001
                                                     (audited)   (unaudited)
     ASSETS                                              (in thousands)
 
     Cash and Cash Equivalents                       $98,876      $103,727
     Short-term Investments                           66,695        50,127
     Accounts Receivable, Net                         23,635        26,799
     Inventory                                        20,516        25,485
     Deferred Tax Asset                                4,346         4,346
     Other Current Assets                              1,778         2,405
         Total Current Assets                        215,846       212,889
     Long-term Investments                             4,534         4,528
     Property, Plant and Equipment, Net               43,254        43,417
     Other Assets                                      4,209         5,209
         Total Assets                               $267,843      $266,043
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
     Accounts Payable                                $11,404       $14,484
     Accrued Liabilities                               7,005         3,774
     Current Taxes Payable                               239           295
     Term Loan                                         2,706         2,706
         Total Current Liabilities                    21,354        21,259
     Deferred Tax Liability                            4,487         4,487
         Total Liabilities                            25,841        25,746
     Stockholders' Equity                            242,002       240,297
         Total Liabilities and
          Stockholders' Equity                      $267,843      $266,043
 
 SOURCE  Three-Five Systems, Inc.