IRVINE, Calif. -- Aug. 1, 1996 -- AST Research,
Inc. (ASTA-NASDAQ) today announced revenues of $553.7 million for
the second quarter of fiscal year 1996, ended June 29. This
compares with revenues of $662.0 million reported during the
comparable prior year period and $530.0 million during the first
quarter of fiscal year 1996.
The company reported a net loss of $98.7 million, or net loss
per share of $2.21 during the second quarter of fiscal year 1996,
compared to a net loss of $31.6 million and net loss per share of 98
cents reported during the prior year period. The net loss includes
charges of $13.6 million, or approximately 30 cents per share,
including $6.5 million that was taken as part of the company's
previously-announced worldwide restructuring activities and $7.1
million of other charges.
"Second quarter performance, excluding the $13.6 million in
charges, improved by $30.6 million when compared with the
immediately preceding quarter, indicating that our efforts to grow
market share and return to profitability are definitely moving in
the right direction," said Ian Diery, president and chief executive
officer. "We grew revenues in the U.S. sequentially which resulted
in a domestic market share increase and the re-establishment of AST
as a top 10 PC supplier."
Improved internal processes that were established months earlier
began to achieve results during the second quarter. "We made
further progress towards our goals of being first to market with new
technologies, maintaining aggressive pricing levels relative to
direct manufacturers and improved quality and customer satisfaction
levels within the company's service and support operations, said
Diery. "AST also maintained tight asset management controls which
resulted in above-average inventory turn levels, as well as a six
percentage point gross margin improvement from the preceding
quarter."
Worldwide revenues for the second quarter included sales of
$538.7 million, as well as $15 million that was received from
Samsung as part of a previously-announced intellectual property
assignment agreement. Worldwide sales represented a 19 percent
decrease from the prior year period, and a four percent increase
over first quarter. Lower year-over-year sales in the quarter was
primarily caused by sluggish international performance.
Sales of $337.9 million in the Americas represented a four
percent decline over the prior-year period but a 30 percent increase
when compared to the immediately preceding quarter. Sales within
the company's Europe and Asia Pacific regions declined 35 percent
over the prior year's quarter and were 23 percent lower versus last
quarter.
"On a sequential basis, we've shown dramatic improvement in
domestic sales, due largely from having the right mix of leading-
edge products available at aggressive price points which are
typically at or below those of direct PC manufacturers like Dell and
Gateway," said Diery. "With this as a foundation, we've used
aggressive advertising and other brand awareness efforts to enhance
customer knowledge about the outstanding value that our products
represent across the desktop, notebook and server platforms."
Unit shipments during the second quarter totaled approximately
321,000, comprised of 274,000 desktops and 47,000 notebooks. The
total represented a decline of approximately 19 percent over the
prior year period and an increase of seven percent when compared
sequentially. Total second quarter notebook shipments decreased 13
percent over last year's second quarter but were 57 percent higher
as compared sequentially.
"Despite tough competition, executing on our strategy has
resulted in a significant jump in domestic unit shipments during the
second quarter," said Diery. "AST has returned as a top 10 PC
company due to increases in business desktop and notebook systems,
as well as the success of our sub-$1,000 PCs that are selling at Wal-
Mart."
Balance Sheet Summary
During the second quarter, AST sustained its sharp focus on
improving its balance sheet and maintaining prudent inventory
management.
At June 29, 1996, total cash and cash equivalents were $66.9
million, with $95.0 million in short-term borrowings against a $200
million credit line. Total net inventory was $218.1 million, up
from $190.4 million at Mar. 30 and represented inventory turns of
9.8. Accounts receivable totaled $387.5 million, which represented
63 days sales outstanding.
In July, the company repaid its $90 million three-year
promissory note to Tandy Corp. utilizing $30 million in newly issued
common stock and $60 million in cash. Cash paid to Tandy was
advanced to AST by Samsung, which resulted in Samsung receiving
approximately 8.5 million shares of newly-issued AST stock.
"Samsung and AST will continue to closely monitor the potential
need that AST may have for further financial support from Samsung,"
said Kwang Ho Kim, AST chairman and Samsung Electronics vice
chairman, president and chief executive officer.
Second Quarter Summary
During the quarter, AST made significant improvements in its
strategic direction of being first to market with leading-edge
products, maintaining short and flexible supply lines, becoming the
best and most reliable supplier to the indirect channel and becoming
the company of choice to supply product worldwide.
AST's first to market strategy resulted in the industry's first
shipments of Bravo business desktops based on 200 MHz Intel Pentium
processors, Manhattan servers and Bravo business desktops based on
180 MHz and 200 MHz Pentium Pro processors and Ascentia mobile
systems based on Intel's 100 MHz and 133 MHz Pentium processors. In
the consumer channel, the company was first to ship Advantage!
desktop systems with 200 MHz Pentium processors and 6X CD-ROM
drives, as well as breaking the $1,000 price barrier for a complete
multimedia system with monitor. AST was also first to begin a
unique notebook service program with Federal Express, called Express
ONE, which enables overnight notebook system exchanges, anywhere
nationwide, to ensure maximum user productivity and minimum
downtime.
To further enhance the company's ability to speed products to
market, AST recently enhanced its product development processes,
including design verification testing, reliability testing and other
prototype engineering activities. Working through these processes
with increased engineering resources is expected to result in
product designs that are more efficiently manufactured, which will
save additional time. In addition, teams from AST and Samsung are
now implementing joint procurement, product development and
manufacturing efficiency projects which are designed to leverage the
combined strengths of both company's resources.
AST is also in the process of significantly enhancing its
research and development efforts, including an expansion of its
product development and engineering staff housed in Irvine. In
total, more than 80 positions are to be added in the current quarter
which will allow the company to more quickly adapt to changing
market requirements and expand into new areas, better implement
concurrent product designs and enhance other systems-related
activities. The majority of the benefits of additional research and
development resources are not expected to be realized until 1997.
Working closely with its major vendors, AST has established
short and flexible supply lines which are beneficial to quickly
adapt to changes in customer demand. Just-in-time (JIT) delivery
and closely-coupled vendor ordering and forecasting programs are
among the worldwide activities that AST is utilizing to enhance
flexibility. In addition, the company has begun development of SAP
systems in its European operations to more closely orchestrate
regional sales, manufacturing and procurement activities. The
company's efforts in Europe are part of a two-year program which
will result in worldwide SAP implementation.
Resellers and end users are beginning to notice AST's efforts in
becoming the best and most reliable supplier to the indirect
channel. AST has received positive feedback regarding its product
and pricing strategy that helps resellers compete against direct
marketers. This also has assisted AST in achieving its goal of
recruiting an additional 400 domestic resellers. In addition, the
company's increased emphasis on service and support has resulted in
an increase in responsiveness to technical support phone calls and
speed in spare parts shipments which are now operating at best-in-
class levels.
AST also achieved progress towards its efforts to become the
company of choice to supply product worldwide. During the quarter,
the company laid the groundwork that will allow companies, both
domestic and internationally-based, to purchase PCs on a worldwide
basis by establishing and staffing a major accounts group that will
target companies with global operations.
Outlook
"We have started to turnaround and have seen significant
progress in the U.S.," said Diery. "Our foundation is more stable
than last quarter, which we expect will act as a catalyst for more
positive future results."
"Our plans for the remainder of the year are to maintain
consistency in bringing new technologies to market in advance of
competitors, while working with our strategic partner towards
expanding market share in the commercial desktop and notebook
arenas."
"Long-term, we aim to continue our efforts to associate first-to-
market and AST together in the minds of our customers," said Diery.
"One extremely important short-term goal is to pave a smooth path
for corporate buyers to make early and strategic investments in
Pentium Pro systems that will utilize the benefits of the
Microsoft's recently-announced Windows NT 4.0 operating system. In
the consumer market, we see communication and networking as the next
trend and will take action to be the first company premiering
several useful technologies, including video conferencing, for home
and home office users."
Forward-Looking Statements
Statements contained in this press release which are not
historical information are forward-looking statements as defined
within the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are subject to risks and uncertainties
which could cause results to differ materially from those projected.
Such potential risks and uncertainties include, but are not limited
to: the level of competitive pricing pressures in the computer
industry; the company's ability to continue to develop, produce and
deliver new products that incorporate leading-edge PC technologies
on a timely basis, that are competitively priced and achieve
significant market acceptance; the effect of any continued losses on
the company's supplier and customer relationships; and its ability
to fund continuing operations. Additional factors which could
affect the company's financial results are included in the company's
report on Form 10-K for Transition Period 1995 which is filed with
the Securities and Exchange Commission.
Corporate Background
AST Research Inc., a member of the Fortune 500 list of America's
largest industrial and service companies, is one of the world's
leading personal computer manufacturers. The company develops a
broad spectrum of desktop, mobile and server PC products that are
sold in more than 100 countries worldwide. AST systems meet a wide
range of customer needs, ranging from corporate business
applications to advanced home and home office use. Corporate
headquarters is located at 16215 Alton Parkway, P.O. Box 57005,
Irvine, Calif. 92619-7005. Telephone (714) 727-4141 or (800) 876-
4278. Fax: (714) 727-9355. Information about AST and its products
can be found on the World Wide Web at http://www.ast.com" target=_new>http://www.ast.com">http://www.ast.com
AST RESEARCH, INC
Condensed Consolidated Balance Sheets
(In thousands)
Quarter Ended
-------------------------------
June 29, December 31,
1996 1995
(Unaudited)
-------------------------------
Assets:
Cash and cash equivalents $ 66,947 $ 125,387
Accounts receivable, net 387,495 392,598
Inventories 218,149 252,339
Other current assets 49,257 67,297
----------- -----------
Total current assets 721,848 837,621
Property and equipment, net 96,605 98,725
Other assets 103,882 119,696
----------- ----------
Total assets $ 922,335 $ 1,056,042
Liabilities and shareholders' equity:
Current liabilities $ 659,895 $ 614,075
Long-term debt 158,564 125,540
Other non-current liabilities 7,241 5,545
----------- -----------
Total liabilities 825,700 745,160
Common stock and additional capital 415,425 415,182
Retained earnings (deficit) (318,790) (104,300)
----------- -----------
Total shareholders' equity 96,635 310,882
----------- -----------
Total liabilities and
shareholders' equity $ 922,335 $1,056,042
AST RESEARCH, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
(Unaudited) (Unaudited)
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
Net sales $ 538,759 $ 662,002 $ 1,058,731 $ 1,332,178
Revenue from
related party 15,000 - 25,000 -
Total revenue 553,759 662,002 1,083,731 1,332,178
Cost of sales 535,158 606,886 1,084,775 1,190,120
Gross profit (loss) 18,601 55,116 (1,044) 142,058
Selling, general and
administrative
expenses 86,275 80,694 160,416 163,259
Engineering and
development 9,645 8,817 20,159 17,833
Restructuring and
other charges 13,619 - 13,619 -
Operating loss (90,938) (34,395) (198,081) (37,408)
Other expense, net (7,792) (4,898) (16,409) (10,019)
Loss before taxes (98,730) (39,293) (214,490) (47,427)
Income tax benefit - (7,662) - (9,248)
Net loss $(98,730) $ (31,631) $ (214,490) $ (38,179)
Net loss per share $ (2.21) $ (0.98) $ (4.80) $ (1.18)
Shares used in computing net
loss per share 44,723 32,393 44,702 32,385
AST RESEARCH, INC.
Computation of Net Loss per Share
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
(Unaudited) (Unaudited)
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
Shares used in
computing primary
loss per share:
Weighted average
shares of common
stock outstanding 44,723 32,393 44,702 32,385
Effect of stock
options treated as
common stock
equivalents under
the treasury stock
method - - - -
Weighted average common
and common equivalent
shares outstanding 44,723 32,393 44,702 32,385
Net loss $ (98,730) $ (31,631) $(214,490) $(38,179)
Net loss per
share - primary $ (2.21) $ (0.98) $ (4.80) $ (1.18)
Shares used in computing
fully diluted loss
per share:
Weighted average shares
of common stock
outstanding 44,723 32,393 44,702 32,385
Effect of stock options
treated as equivalents
under the treasury
stock method - - - -
Shares assumed issued
on conversion of Liquid
Yield Option Notes - - - -
Weighted average common
and common equivalent
shares outstanding 44,723 32,393 44,702 32,385
Net loss
Net loss - primary
earnings per share $(98,730) $(31,631) $ (214,490) $(38,179)
Adjustment for interest
on LYONs, net
of tax - - - -
Adjusted net loss -
fully diluted
loss per share $(98,730) $(31,631) $ (214,490) $(38,179)
Net loss per share -
fully diluted $ (2.21) $ (0.98) $ (4.80) $ (1.18)
CONTACT: AST Research
Emory Epperson, 714/727-7958 (media)
or
Misty Ohmart, 714/727-7728 (analyst)
DALLAS, Texas -- Aug. 1, 1996 -- Eljer Industries,
Inc. (NYSE:ELJ) today reported results for the second quarter and
six months ended June 30, 1996.
For the second quarter, net income was $3,885,000, or $0.54 per
share, compared with a net loss in the second quarter of 1995 of
$1,206,000, or $0.17 per share. Income from operations, before
litigation costs and unusual items, increased 45% to $5,629,000 in
the second quarter of 1996 from $3,872,000 in the second quarter of
1995. During the second quarter, the Company recorded an unusual
gain of $4.8 million related to the settlement reached in the
litigation with Household International, Inc., its former parent.
Net sales for the 1996 second quarter were $92,983,000 compared with
$92,416,000 in the second quarter of 1995.
For the first half of 1996, net income was $2,938,000, or $0.41
per share, on net sales of $186,397,000, compared with a net loss of
$2,088,000, or $0.29 per share, on net sales of $191,471,000 in the
same period of 1995. Operating income, before litigation costs and
unusual items, was $8,782,000 compared with $7,789,000 in the first
six months of 1995.
Second quarter sales were favorably affected by strengthened
U.S. housing starts and successful new product offerings, partially
offset by the impact of the 11-week long strike at our cast iron
facility (resolved on May 22, 1996) and a weak European economy.
Gross profit margins improved as a result of a more stable raw
material market and continued customer acceptance of price increases
resulting from the escalation of raw material prices in early 1995.
An adjustment was recorded by href="chap11.usbrass.html">United States Brass Corporation,
an indirect, wholly-owned subsidiary, to maintain its equity at zero
during the course of its bankruptcy proceedings. In 1995, the U.S.
Brass adjustment was a favorable $1.1 million as a result of its net
loss due to bankruptcy related legal fees and lower gross profit
margins resulting from significantly higher raw material prices.
The 1996 U.S. Brass adjustment of $1.2 million is unfavorable as
this subsidiary has experienced improved gross margins due to
stabilized raw material prices, success of its new products and
lower litigation costs.
As discussed above, the Company recorded unusual income of $4.8
million in the second quarter of 1996 as a result of the previously
announced settlement in the litigation with Household. The net
proceeds of $24.5 million were used initially to repay U.S. term
debt, as required under the debt agreement. Ultimately, the Company
expects to pay approximately $14.4 million, which represents 75% of
the net proceeds of the Household settlement after a recoupment of
$5.3 in legal fees and expenses, to a trust to be established
pursuant to the tentative settlement reached in connection with the
U.S. Brass bankruptcy proceeding. The net litigation costs of
$247,000 recorded in the 1996 second quarter reflect the $5.3
million recoupment of legal fees and expenses offset by an
additional $4.0 million accrual for other legal matters.
Scott Arbuckle, Chairman and Chief Executive Officer, commented:
"We are pleased that we achieved both operational improvement and
successfully settled the litigation with Household during the
quarter. We are diligently working to resolve the U.S. Brass
issues. Operationally, we had to overcome a difficult European
economy and the impact of the strike at our Salem, Ohio, cast iron
facility. We are encouraged by the favorable market reaction to our
new QestPEX product line, further reinforcing our belief that this
product will ultimately have more applications than the previous
Qest polybutylene product line, being phased out of production."
Eljer Industries, Inc. is a leading manufacturer and marketer
of high quality building products, including plumbing, heating and
ventilation products, for the residential and commercial
construction, remodeling and repair, and do-it-yourself markets.
ELJER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF INCOME
(unaudited)
(In thousands, except per share amounts)
For the Three Months For the Six Months
Ended Ended
6/30/96 7/2/95 6/30/96 7/2/95
NET SALES $92,983 $92,416 $186,397
$191,471 COST OF SALES 68,216 69,606 139,986
145,263 GROSS PROFIT 24,767 22,810 46,411
46,208 SELLING & ADMINISTRATIVE
EXPENSES 19,138 18,938 37,629
38,419 LITIGATION COSTS, net 247 1,834 1,635
4,493 UNUSUAL ITEM - U.S. BRASS
BANKRUPTCY ADJUSTMENT 1,200 (1,076) 852
(2,242) UNUSUAL ITEM - HOUSEHOLD
SETTLEMENT (4,802) -- (4,802)
-- INCOME FROM OPERATIONS 8,984 3,114 11,097
5,538 OTHER EXPENSE, net 68 827 232
931 INTEREST EXPENSE, net 2,882 3,536 5,963
6,665 INCOME (LOSS) BEFORE INCOME
TAXES 6,034 (1,249) 4,902
(2,058) INCOME TAX EXPENSE (BENEFIT) 2,149 (43) 1,964
30 NET INCOME (LOSS) $ 3,885 $ (1,206) $ 2,938
$ (2,088) NET INCOME (LOSS) PER SHARE $ .54 $ (0.17) $
.41 $ (0.29) WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 7,225 7,130 7,205 7,130
CONTACT: Brooks Sherman
Chief Financial Officer
(214) 407-2600
or
Morgen-Walke Associates
Lynn Morgen/June Filingeri
Stan Froelich, Media Contact
(212) 850-6500
Ken Pieper
(214) 663-9390
or
Eljer Industries, Inc.
Linda Pankewicz
(214) 407-2604