IRVINE, Calif., March 30, 2000 (PRIMEZONE) -- Litronic Inc. (Nasdaq:LTNX), a leader in professional Internet data security services and secure electronic commerce applications, announced today financial results for the fourth quarter ended December 31, 1999.
Fourth Quarter and Year End Results
For the fourth quarter ended December 31, 1999, the Company reported revenues of $11.4 million versus $1.7 million for the same quarter last year. Net loss for the quarter was $3.2 million, or $0.33 per basic and diluted share, versus a net loss of $0.5 million, or $0.14 per basic and diluted share, for the same quarter last year.
For the fiscal year ended December 31, 1999, the Company reported revenues of $31.7 million versus $6.7 million for the same period a year ago. Net loss was $7.1 million or $1.00 per basic and diluted share, versus a net loss of $1.4 million or $0.36 per basic and diluted share, for the same period a year ago.
"While the overall market environment for security products and solutions remains strong, we are disappointed with our fourth quarter and fiscal year results," said Kris Shah, Chairman of the Board and CEO of Litronic. "Our growth was affected primarily by an extended sales cycle of our Internet security products. Our fourth quarter results also reflect the increase in sales of lower margin products. We have actively begun to eliminate lower margin products and transition into higher margin Internet security solutions."
The company's Pulsar Data Systems subsidiary closed out the year contributing revenues of $26.5 million. The Company continues to look at a number of alternatives to better position Pulsar in the network systems market and has recently re-focused the Pulsar sales channel strategy by enabling procurement and fulfillment services on the newly created PulsarData.com e-commerce site. This new sales channel offers networking solutions and is an extension to the other channels used for the distribution of Litronic products and services. While Litronic anticipates continuing revenue from PulsarData.com, this revenue will not be a major influencing factor in determining the business strategy for Litronic's Internet security core technologies. The Company continues to look at various opportunities that will leverage its Internet security core technologies and enhance shareholder value.
Recent Customer Wins
As previously announced, Litronic was selected as Bank of America's (NYSE:BAC) smart card integrator for their implementation of the Identrus platform, which provides identity and trust for worldwide business-to-business e-commerce. Litronic was also selected by NetCity.com, an online village to provide the electronic infrastructure for its online members and internal operations. Shah commented, "Clearly, being selected as a major partner by Bank of America and NetCity.com speaks to our product capabilities and the Company's ability to provide the most advanced Internet security solutions to meet the needs of our customers now and in the future."
Fourth Quarter Highlights
During the fourth quarter, the Company strengthened its management team with the appointment of Roy E. Luna as its Chief Financial Officer. Shah said, "I am very proud of the management team we now have in place. Roy's thirty years of financial operations experience is instrumental to the future growth of Litronic." Additionally, a specialized sales force has been put in place to target state and federal government, financial, telecommunications, healthcare and information services companies. Litronic has also increased its commitment to product marketing and has developed a program that is driven by customer needs. Shah added, "Our specialized sales force will ensure that our customers are serviced by individuals who know and understand their business and whose needs are met in the most prompt and efficient manner."
Product News
The Company continues to conduct extensive research and development and will be releasing its Forte smart card in the middle of this year. The Forte smart card is based on an advanced 32-bit microprocessor chip and is an ISO standard smart card that provides the customer with unprecedented performance, security and speed: "The Forte is a new generation of security chip that will provide advanced security features that we expect to embed in a variety of devices, including PC mother boards." Shah commented. Additionally, the Company recently released new versions of ProFile Manager and NetSign expanding the capabilities of both products.
2000 Outlook
Litronic continues to broaden and accelerate its penetration of the Internet security products and services market, estimated to reach $7 billion by 2001. Consumer and business-to-business e-commerce transactions are projected to reach $200 billion by the end of this year, and $1.3 trillion by 2003.
With these trends, the Company continues to focus on increasing top-line growth and expanding gross margins. Although sales and project cycles have increased, they provide Litronic with insight into future revenue potential and deployment needs. As Internet Data Security is an evolving industry, the Company believes that its financial performance should be evaluated on an annual basis rather than by quarter-to-quarter.
Litronic's focus continues to be on increasing Internet security market penetration, maintaining a technological leadership in Internet protocol-based network security, pursuing strategic acquisitions of technologies, products and businesses that complement the Company's products and strengthen its leadership position, servicing its blue chip customer base for technology upgrades and enhancements, and driving incremental business through strategic partnerships, such as VeriSign and Microsoft.
"We believe our years of experience in Internet security products and solutions enables us to anticipate what the market will demand in the future. This places us ahead of the curve in technology leadership and affords us the opportunity to stimulate wide acceptance of our security solutions," Shah commented.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
With the exception of historical information, the matters discussed in this news release relating to the projected growth of e-commerce and of the Internet security market; and to Litronic's ability to penetrate the Internet security market and to integrate its June 1999 acquisition of Pulsar and to transition to commercial markets are forward-looking statements that involve a number of risks and uncertainties, including competition from companies with greater financial and technical resources than Litronic, the difficulty in continuing technical innovation (particularly in light of the competitive market for technical personnel), the effect of differing corporate cultures on the integration of Litronic's June 1999 acquisition of Pulsar and the acceptance of Litronic's products in the commercial marketplace. Other risks inherent in Litronic's business are described in its Securities and Exchange Commission filings, including the Company prospectus. Litronic undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.
LITRONIC INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended
December 31, December 31,
1998 1999
-------- --------
Revenues:
Product $ 1,328 $11,021
License and service 116 349
Research and development 258 --
-------- -------
Total revenues 1,702 11,370
-------- -------
Costs and expenses:
Cost of sales 1,122 10,325
Selling, general and
administrative 641 2,334
Research and development 415 1,056
Amortization of goodwill
and other intangibles -- 621
-------- -------
Total costs and expenses 2,178 14,336
-------- -------
Operating loss (476) (2,966)
Interest expense, net 96 7
-------- -------
Loss before income taxes (572) (2,973)
Provision for (benefit from)
income taxes (1) (34) 242
-------- -------
Net loss $ (538) $(3,215)
======== =======
Net loss per share--basic
and diluted $ (0.14) $ (0.33)
Shares used in per share
computations--basic
and diluted 3,871 9,760
======== =======
Year Ended
December 31, December 31,
1998 1999
------------- ---------
Revenues:
Product $ 5,214 $29,805
License and service 1,041 1,052
Research and development 398 798
--------- -------
Total revenues 6,653 31,655
--------- -------
Costs and expenses:
Cost of sales 3,771 26,771
Selling, general and
administrative 2,631 6,865
Research and development 1,334 3,532
Amortization of goodwill
and other intangibles -- 1,448
--------- -------
Total costs and expenses 7,736 38,616
--------- -------
Operating loss (1,083) (6,961)
Interest expense, net 418 168
--------- -------
Loss before income taxes (1,501) (7,129)
Provision for (benefit from)
income taxes (1) (95) (43)
--------- -------
Net loss $ (1,406) $(7,086)
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Net loss per share--basic
and diluted $ (0.36) $ (1.00)
========= ========
Shares used in per share
computations--basic
and diluted 3,871 7,056
========= =======
(1) Income tax expense for the three months ended December 31, 1999
includes the reversal of a $285 tax benefit that had previously
been recognized during the three months ended June 30, 1999.
CONTACT: Roy Luna
Chief Financial Officer
Litronic Inc.
949-851-1085