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PCTEL Announces Strong Third Quarter Results

PCTEL Announces Strong Third Quarter Results

October 21, 2002
PCTEL Announces Strong Third Quarter Results

PCTEL Announces Strong Third Quarter Results

CHICAGO, Oct. 21 /PRNewswire-FirstCall/ -- PCTEL, Inc. (Nasdaq: PCTI), a leading provider of Internet access products and 802.11 mobility software, today announced financial results for the third quarter of 2002. Total revenue was $12.5 million for the third quarter of 2002 compared to $4.7 million reported in the third quarter of 2001. Net income for the third quarter of 2002 was $3.2 million, or $0.16 per diluted share, compared to a net loss of $(41.4) million, or $(2.13) per share reported in the third quarter of 2001.

Revenue increased $3.0 million, or 31 percent from the second quarter of 2002 due to stronger modem sales and improved licensing revenue. The company's HSP product sales enabled the utilization of $3.8 million of inventory that was previously reserved as excess in the third quarter of 2001. This utilization of reserved inventory favorably impacted product margins and net income for the quarter.

Cash and short-term investments ended the quarter at $112.2 million, an increase of $1.2 million from last quarter. During the third quarter, the company used $0.7 million of cash to purchase 125,800 shares of the company's stock pursuant to a one million-share stock buyback program announced in August. The company plans to resume its share buyback during November.

"We have worked hard since late last year to navigate PCTEL through challenging times in our industry, "said Marty Singer, PCTEL's Chairman and CEO. "While there is much work to be done, the past quarter's results suggest that we have made significant progress. Costs are under control, product revenues have increased three quarters in a row, and there is strong interest in our approach to wireless roaming. Although cautious about an uncertain economy and challenged by price pressure in our modem business, I am guardedly optimistic about our future. We remain committed to our plan of record: we will continue to rationalize the costs of our commodity HSP business, realize the commercial value of our intellectual property, support our Wi-Fi software initiative, and accelerate our growth through accretive acquisitions in highly related businesses. The management and the people at PCTEL continue to exceed my expectations and I am excited to be part of this team," added Singer.

The company previously announced that it had relocated its corporate headquarters to Chicago shortly after it acquired the assets of a Chicago- based Wi-Fi (802.11) software company. Over the next three months finance and additional development resources will move to Chicago. Separately, the company is consolidating facilities in Taiwan and moving its Milpitas operation to a smaller and more cost-effective facility.

CONFERENCE CALL / WEBCAST

The company will hold a conference call at 8:00 AM EDT (5:00 AM PDT) tomorrow with Marty Singer, chairman and chief executive officer, and John Schoen, chief operating officer and chief financial officer. The session will include brief remarks, and can be accessed by calling (888) 482-4526 (domestic) or (706) 679-0409 (international) Conference ID 5864704.

To listen via the Internet, please visit, www.pctel.com, or http://www.shareholder.com/pctel/MediaList.cfm .

REPLAY: The replay will be available on PCTEL's web site at www.pctel.com or by calling (800) 642-1687 (domestic) or (706) 645-9291 (international); access code: 5864704.

About PCTEL

PCTEL, founded in March 1994, is a leading provider of innovative and cost-effective Internet access solutions. PCTEL's products include analog soft modems, DSP-based modems and WLAN software products that simplify installation, roaming, Internet access and billing. The company maintains a portfolio of more than 80 analog and broadband communications and wireless patents, issued or pending, including key and essential patents for modem technology. The company's products are sold to PC manufacturers, PC board and card manufacturers, wireless carriers, wireless ISPs, software distributors, and system integrators. PCTEL headquarters are located at 8725 West Higgins Road, Suite 400, Chicago, IL 60631. Telephone: 773-243-3000. For more information, please visit our web site at: http://www.pctel.com .

PCTEL Safe Harbor Statement

This press release contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Specifically, the statements regarding PCTEL's future business prospects, including its ability to achieve continued revenue growth; its ability to continue to reduce its operating expenses; its intention to repurchase additional shares of its common stock; its expectations regarding the future growth of its wireless business; its ability to improve its return on investment from its intellectual property assets; its ability to complete strategic transactions, including any acquisition transaction whether accretive or not; and the expected benefits associated with the relocation of its headquarters to Chicago, the planned consolidations of its facilities in Taiwan and its relocation of its operations in Milpitas are forward looking statements within the meaning of the safe harbor. These statements are based on management's current expectations and actual results may differ materially from those projected as a result of certain risks and uncertainties. These risks and uncertainties include, but are not limited to: the demand for personal computers and the markets addressed by the PCTEL's and its customers' products; the cyclical nature of the semiconductor and PC industries; demand for and market acceptance of new alternative Internet access devices; PCTEL's ability to successfully address the cost structure of its modem products; PCTEL's success at developing and sustaining its wireless business; PCTEL's ability to develop and implement new technologies and to obtain protection for the related intellectual property; risks associated with potential acquisitions, including integration risks and the diversion of management attention; competitive risks, including, but not limited, to competitive pricing pressures; and PCTEL's ability to correctly forecast the requirements of customers and end users. Operating and financial results can also be affected by market conditions resulting in revenues deviating from projections, increased operating expenses, additions to reserve positions, lower gross margins and higher working capital ratios. These risks and uncertainties and others that relate to PCTEL's business, financial condition and future operating results, including, but not limited to, those detailed from time to time in PCTEL's Securities and Exchange Commission filings, can affect actual results. These forward-looking statements are made only as of the date hereof, and PCTEL disclaims any obligation to update or revise the information contained in any forward-looking statement, whether as a result of new information, future events or otherwise.

                                 PCTEL, Inc.

               Condensed Consolidated Statements of Operations
                 (in thousands, except per share information)
                                 (Unaudited)

                                  Three Months Ended     Nine Months Ended
                                     September 30,         September 30,
                                    2002        2001       2002       2001

    REVENUES                      $12,548      $4,738    $32,447    $33,444
    COST OF REVENUES                7,481       5,070     18,275     25,302
    INVENTORY LOSSES (RECOVERY)    (3,795)     11,288     (5,348)    11,288
    GROSS PROFIT                    8,862     (11,620)    19,520     (3,146)
    OPERATING EXPENSES:
      Research and development      2,477       2,824      7,634      9,102
      Sales and marketing           1,904       2,322      5,395      9,011
      General and administrative    1,248       3,665      3,856      8,746
      Amortization of goodwill and
       other intangible assets         50       1,027         50      2,922
      Goodwill impairment               -      15,550          -     15,550
      Restructuring charges            88         274        735      2,381
      Amortization of deferred
       compensation                   170         289        528        843
        Total operating expenses    5,937      25,951     18,198     48,555
    INCOME (LOSS) FROM OPERATIONS   2,925     (37,571)     1,322    (51,701)
    OTHER INCOME, NET:
      Other income, net               641       1,409      2,631      4,875
    INCOME (LOSS) BEFORE PROVISION
     FOR INCOME TAXES               3,566     (36,162)     3,953    (46,826)
    PROVISION FOR INCOME TAXES        352       5,274        415      5,290
    NET INCOME (LOSS)              $3,214    $(41,436)    $3,538   $(52,116)

    Basic earnings (loss)
     per share                      $0.16      $(2.13)     $0.18     $(2.73)
    Shares used in computing
     basic earnings (loss)
     per share                     19,972      19,414     19,876     19,100

    Diluted earnings (loss)
     per share                      $0.16      $(2.13)     $0.18     $(2.73)
    Shares used in computing
     diluted earnings (loss)
     per share                     20,002      19,414     19,992     19,100


                                 PCTEL, Inc.

                    Condensed Consolidated Balance Sheets
                   (in thousands, except share information)

                                                  September 30,  December 31,
                                                      2002           2001
                                                   (unaudited)
                       ASSETS
    CURRENT ASSETS:
      Cash and cash equivalents                      $44,049        $38,393
      Short-term investments                          68,157         87,235
      Accounts receivable, net                         4,234          2,849
      Inventories, net                                 1,542          2,870
      Prepaid expenses and other assets                7,094          5,055
      Deferred tax asset                                   -            400
        Total current assets                         125,076        136,802
    PROPERTY AND EQUIPMENT, net                        2,101          2,769
    GOODWILL AND OTHER INTANGIBLE ASSETS, net          1,649            384
    OTHER ASSETS                                       2,856            228
    TOTAL ASSETS                                    $131,682       $140,183

               LIABILITIES AND STOCKHOLDERS' EQUITY
    CURRENT LIABILITIES:
      Accounts payable                                $1,006         $4,944
      Accrued royalties                                3,508         12,343
      Income taxes payable                             6,852          5,573
      Accrued liabilities                              6,070          9,421
      Current portion of long-term liabilities             4              -
        Total current liabilities                     17,440         32,281
    LONG-TERM LIABILITIES                                 49            141
        Total liabilities                             17,489         32,422

    STOCKHOLDERS' EQUITY:
      Common stock                                        20             20
      Additional paid-in capital                     153,266        150,319
      Deferred compensation                             (802)        (1,158)
      Retained deficit                               (38,694)       (42,232)
      Accumulated other comprehensive income             403            812
        Total stockholders' equity                   114,193        107,761
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      $131,682       $140,183

CONTACT: John Schoen, COO-CFO, +1-773-243-3000, john_schoen@pctel.com , or Jack Seller, Director, Marketing, +1-773-243-3016, jack_seller@pctel.com , both of PCTEL, Inc.

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