CHESTNUT RIDGE, N.Y., Oct. 28, 2009 (GLOBE NEWSWIRE) -- LeCroy Corporation (Nasdaq:LCRY), a leading supplier of oscilloscopes and serial data test solutions, today announced financial results for its fiscal first quarter ("first quarter of fiscal 2010") ended October 3, 2009.
LeCroy reported first-quarter fiscal 2010 revenue of $28.0 million compared with $27.2 million in the sequential fourth quarter of 2009 and $40.7 million in the first quarter of fiscal 2009. The Company also reported GAAP gross margin of 56.0%, GAAP operating income of $645,000 and GAAP net loss of $482,000, or $0.04 net loss per common share. This compares with GAAP gross margin of 56.6%, GAAP operating income of $2.6 million and GAAP net income of $1.1 million, or $0.09 net income per diluted common share, in the year-ago period.
LeCroy reported a first-quarter fiscal 2010 non-GAAP gross margin of 56.2%, which excludes $65,000 in share-based compensation expense. Non-GAAP operating income of $1.6 million for the first quarter of fiscal 2010 excludes $893,000 in share-based compensation expense and a $68,000 business realignment charge. Non-GAAP net income, which excludes a $43,000 business realignment charge, a $705,000 share-based compensation expense and $390,000 for the non-cash amortization of debt discount on convertible notes, was $656,000, or $0.05 non-GAAP net income per diluted common share. This compares with a 56.7% non-GAAP gross margin, which excludes $47,000 in share-based compensation expense; $3.5 million of non-GAAP operating income, which excludes $877,000 of share-based compensation expense; and $2.2 million of non-GAAP net income, or $0.18 non-GAAP net income per diluted common share, which excludes $631,000 in share-based compensation expense and $440,000 for the non-cash amortization of debt discount on convertible notes, in the year-ago quarter.
Effective at the beginning of fiscal 2010, the Company adopted FASB Staff Position APB No. 14-1, "Accounting for Convertible Debt Instruments that may be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("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 4.0 percent 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 a five-year period. The new accounting pronouncement required retroactive application; consequently, the prior-year amounts have been revised.
Comments on the Quarter
"LeCroy began fiscal 2010 with a solid first-quarter performance and financial results in line with our expectations," said LeCroy President and Chief Executive Officer Tom Reslewic. "Overall, revenues were slightly higher than we expected and greater than our sequential fourth-quarter revenues. The U.S. and China showed significant sequential improvements, while other regions like Europe and Japan approached the bottom during the first quarter. Oscilloscopes performed very well on a sequential basis, more than offsetting a weaker quarter for our protocol solutions business. In addition, we continued to manage our expenses effectively. We delivered non-GAAP operating margins of 5.7 percent, which matched our expectations. Our operations generated $2.8 million of cash during the quarter, driven primarily by working capital improvements."
"It was another excellent quarter for our high-end scopes, principally in the U.S.," said Reslewic. "Orders for the WaveMaster 8 Zi have continued to surpass our expectations since the product's launch in January 2009."
"While LeCroy's protocol solutions business had a soft quarter, we believe the protocol products are poised to return to meaningful growth," said Reslewic. "With an improving economic cycle and positive technology trends in PCI Express Gen 3 and USB 3.0, we are optimistic that our first-to-market solutions that address these technologies will begin to contribute meaningfully to revenues in the second half of our fiscal year."
Outlook and Guidance
"Our business has started to come off the bottom in key geographic segments," said Reslewic. "We expect improvements in Europe for the second quarter of fiscal 2010, while we think recovery in the Japan market will take another couple of quarters to materialize. We anticipate that strong demand for our high-end scopes will continue, driven by the success of the WaveMaster 8 Zi. In addition, we have seen recent gains for our mid-range product line as the overall economy gradually improves."
"For the second quarter of fiscal 2010, we anticipate revenues in the range of $28 million to $30 million, with non-GAAP operating margins continuing in the range of 5 to 7 percent," concluded Reslewic.
Conference Call Information
LeCroy will broadcast its quarterly conference call for investors live over the Internet today, Wednesday, October 28, 2009 at 10:00 a.m. ET. To access the webcast, visit the "Events Calendar" in the "Investor Relations" portion of the "About LeCroy" section at www.lecroy.com. The call may also 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.
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 - Financial Periods
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. Fiscal year ended July 3, 2010 will represent a 53 week period, while fiscal year ended June 27, 2009 represented a 52 week period. Therefore, the first quarter of fiscal 2010 was a 14-week period compared with a 13-week period for the first quarter of fiscal 2009.
Safe Harbor
This release contains forward-looking statements, including those pertaining, but not limited to expectations regarding: the belief that Protocol Solutions Group products are poised to return to meaningful growth, and that an improving economic cycle and positive technology trends in PCI Express Gen 3 and USB 3.0 provide reason for optimism that these technologies will begin to contribute meaningfully to revenues in the second half of fiscal 2010; the belief that the business has begun to come off the bottom in certain geographic segments and Europe and Japan have approached the bottom in the first quarter of 2010; the belief that strong demand will continue for LeCroy's high-end scopes; recent gains for LeCroy's mid-range product line as the economy gradually improves; and LeCroy's anticipation of revenues for the second quarter of fiscal 2010 in the range of $28 million to $30 million, with non-GAAP operating margins in the range of 5 to 7 percent.
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 our 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.
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 less non-cash charges for share-based compensation expense included in cost of revenues. 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 reported under GAAP less primarily non-cash charges for share-based compensation costs and business realignment charges. Non-GAAP operating income is not a substitute for GAAP operating income.
We define non-GAAP net income as net (loss) income reported under GAAP (plus) less primarily non-cash charges for 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 31% and 37.5%, 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 (loss) income.
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 (loss) income per diluted common share.
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.
LeCROY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
---------------------------------------------------------------------
Quarter Ended
Oct 3, Sept 27,
2009 2008
In thousands, except per share data (14 weeks) (13 weeks) *
---------------------------------------------------------------------
Revenues:
Test and measurement products $ 25,807 $ 38,430
Service and other 2,194 2,294
-------- --------
Total revenues 28,001 40,724
Cost of revenues:
Share-based compensation 65 47
Other costs of revenues 12,269 17,643
-------- --------
12,334 17,690
-------- --------
Gross profit 15,667 23,034
Operating expenses:
Selling, general and administrative:
Share-based compensation 579 585
Other selling, general and
administrative expenses 8,324 11,998
-------- --------
8,903 12,583
Research and development:
Share-based compensation 249 245
Other research and development expenses 5,870 7,558
-------- --------
6,119 7,803
-------- --------
Total operating expenses 15,022 20,386
-------- --------
Operating income 645 2,648
Other income (expense):
Gain on extinguishment of convertible debt,
net of issue cost write-off 364 292
Interest income 11 35
Interest expense (788) (854)
Amortization of debt discount on
convertible notes (605) (751)
Other, net (132) 256
-------- --------
Other (expense) income, net (1,150) (1,022)
(Loss) income before income taxes (505) 1,626
(Benefit) provision for income taxes (23) 531
-------- --------
Net (loss) income $ (482) $ 1,095
======== ========
Net (loss) income per common share
Basic $ (0.04) $ 0.09
Diluted $ (0.04) $ 0.09
Weighted average number of common shares:
Basic 12,265 11,881
Diluted 12,265 12,077
* Adjusted for the retrospective adoption of FSP APB 14-1,
"Accounting for Convertible Debt Instruments That May Be Settled
in Cash Upon Conversion (Including Partial Cash Settlement)", in
the first quarter of fiscal 2010.
LeCROY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
---------------------------------------------------------------------
Oct 3, June 27,
In thousands 2009 2009 *
---------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 9,328 $ 6,413
Accounts receivable, net 22,373 25,209
Inventories, net 32,156 34,987
Other current assets 11,729 11,564
-------- --------
Total current assets 75,586 78,173
Property and equipment, net 21,447 21,817
Intangible assets, net 479 502
Other non-current assets 8,076 7,186
-------- --------
TOTAL ASSETS $105,588 $107,678
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,373 $ 14,169
Accrued expenses and other current
liabilities 12,728 12,983
-------- --------
Total current liabilities 22,101 27,152
Long-term bank debt 20,000 17,500
Convertible notes, net of unamortized
discount of $5,521 and $6,277, respectively 41,829 42,073
Deferred revenue and other non-current
liabilities 3,616 3,635
-------- --------
Total liabilities 87,546 90,360
Stockholders' equity 18,042 17,318
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $105,588 $107,678
======== ========
* Adjusted for the retrospective adoption of FSP APB 14-1,
"Accounting for Convertible Debt Instruments That May Be Settled
in Cash Upon Conversion (Including Partial Cash Settlement)", in
the first quarter of fiscal 2010.
LeCROY CORPORATION
RECONCILIATION OF REPORTED GAAP RESULTS
TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
---------------------------------------------------------------------
Quarter Ended
Oct 3, Sept 27,
2009 2008
In thousands (14 weeks) (13 weeks) *
---------------------------------------------------------------------
GAAP gross profit, as reported $ 15,667 $ 23,034
Non GAAP adjustments:
Share-based compensation 65 47
-------- --------
Non GAAP gross profit $ 15,732 $ 23,081
======== ========
---------------------------------------------------------------------
Quarter Ended
Oct 3, Sept 27,
2009 2008
In thousands (14 weeks) (13 weeks) *
---------------------------------------------------------------------
GAAP operating income, as reported $ 645 $ 2,648
Non GAAP adjustments:
Share-based compensation 893 877
Business realignment - severance charge 68 --
-------- --------
Non GAAP operating income $ 1,606 $ 3,525
======== ========
---------------------------------------------------------------------
Quarter Ended
Oct 3, Sept 27,
2009 2008
In thousands (14 weeks) (13 weeks) *
---------------------------------------------------------------------
GAAP net (loss) income, as reported $ (482) $ 1,095
After-tax effect of Non GAAP adjustments:
Share-based compensation 705 631
Business realignment - severance charge 43 --
Non-cash amortization of debt discount on
convertible notes 390 440
-------- --------
Non GAAP net income $ 656 $ 2,166
======== ========
---------------------------------------------------------------------
Quarter Ended
Oct 3, Sept 27,
2009 2008
In thousands, except per share data (14 weeks) (13 weeks) *
---------------------------------------------------------------------
Net (loss) income per common share
Diluted, as reported $ (0.04) $ 0.09
Diluted, non GAAP $ 0.05 $ 0.18
Weighted average number of common shares:
Diluted, as reported 12,265 12,077
Diluted, non GAAP 12,471 12,077