year end results revenue way upearnings beat mean by $0.02.
Gennum Reports 2002 Fourth Quarter and Year-End Results
Revenue Growth of 65% in Fourth Quarter Driven by Success of
High-Definition Video Products in Japan and Quick Acceptance of
Digital Hearing Instrument Products
2002 Revenue Up 25%, Net Income Grows by 34% Versus Prior Year
BURLINGTON, ON, Jan. 15 /CNW/ - Gennum Corporation (TSX: GND), a leading
producer of silicon integrated circuits (ICs) and hybrid circuits for the
hearing instrument and video markets, today announced strong results for the
fourth quarter and fiscal year ended November 30, 2002.
Highlights in 2002 included:
- Significant gains in our high-definition television revenues in
Japan.
- Achieving a significant share of the digital signal processing market
for hearing instrument products, only fifteen months after the start
of shipments.
- Being selected to custom design a complex high performance and high
speed data communications IC for a major global networking company.
- Designing in first generation image processing products for several
broadcast customers and maintaining release target of early 2003 for
second generation products.
"The company continues to perform at a very high level," said Ian
McWalter, President and CEO. "The strong growth we have experienced has been
achieved through exemplary new product launches. This reflects excellent
performance by our customers in the rapid introduction of their new products
to market and by Gennum in delivering the right products on time with high
quality. We were able to capture share in the high-definition television area
and in digital hearing instruments and, as a result, grow in markets that were
either flat overall or down. At the same time, careful management of our costs
improved profitability."
Fourth Quarter Financial Review
-------------------------------
Fourth quarter revenue continued to grow significantly, increasing by
65.1% to $36.6 million from the prior year.
The video segment recorded revenue of $21.3 million in the quarter,
compared with $9.1 million in the prior year. The growth in video product
revenue in the fourth quarter of 135.6% was driven by an increase in high-
definition product revenue in Japan, resulting from the commitment by the
Japanese government to convert all current television broadcasting in Japan to
a high-definition format by 2007. The initial step in this commitment is to
convert the first three major broadcast stations to high-definition by 2004.
The global hearing instrument industry showed modest decline overall in
2002. Against this industry backdrop, Gennum's hearing instrument product
revenue for the fourth quarter of 2002 increased by 17.9% from the same
quarter last year, reflecting market share gains by our new digital signal
processing products. We have established a very strong presence in the digital
signal processing market, only fifteen months after the start of shipments.
Digital product revenue for the quarter was $7.8 million, representing a
significant increase from the previous quarter.
Operating expenses (including cost of sales and excluding R&D) as a
percentage of revenue declined to 62.0% ($22.7 million) in the fourth quarter
of 2002 from 75.2% ($16.6 million) in the fourth quarter of 2001. Operating
expense is not a measure of performance calculated in accordance with Canadian
Generally Accepted Accounting Principals (GAAP) and does not have any
standardized meaning under GAAP. Operating expense, as defined by Gennum,
includes all expenditures other than R&D. Operating expenses as a percentage
of revenue has been impacted by three factors. During the quarter, margins
improved as a result of a mix of more video products and fewer hearing
instrument products. The improved margin has been partially offset by
increased sales, marketing and administration costs primarily resulting from
additional performance-based compensation owing under the company's profit
sharing and incentive plans. In addition, in 2001 management discontinued the
practice of allocating non-manufacturing administration costs to inventories.
Quarter-over-quarter R&D spending was up by 58.2% to $8.1 million,
reflecting higher performance based compensation for R&D personnel and the
timing of expenditures incurred on mask sets for new products fabricated in
advanced silicon technology.
Net earnings for the quarter were $5.1 million, or $0.14 per share,
compared with $1.2 million, or $0.04 per share, in the fourth quarter of 2001.
Fiscal 2002 Financial Review
----------------------------
Fiscal 2002 revenue of $116.3 million was up 25.0% from the prior year.
Revenue from video products was $58.0 million, an increase of 33.9% from
fiscal 2001. Video revenue in the second half of the year was driven by
additional high-definition product revenue in Japan, as explained above.
HIP revenue increased by 18.6% to $57.4 million from $48.4 million in
2001. New digital signal processing products recorded revenue of $19.1
million, up from under $1 million in the prior year.
Operating expenses (including cost of sales and excluding R&D) as a
percentage of revenue decreased to 63.1% from 64.6% in fiscal 2001, driven by
the same factors previously noted.
Investment in R&D increased 22.9% to $27.7 million for the same reasons
noted above. In addition, in 2002 we continued with our plan to improve
product development capacity with the addition of more designers and new
design automation software to handle greater product development complexity.
Income taxes for the year represented 33.3% of income before taxes, up
marginally from 32.2% in 2001. In 2002 a larger percentage of consolidated net
earnings was generated in Japan, which has a higher corporate taxation rate
than Canada.
Net earnings for the year increased by 33.8% to $14.1 million, or $0.40
per share, from $10.5 million, or $0.30 per share, in fiscal 2001, due to the
changes in revenue, operating expenses and R&D investment previously noted.
Inventories at year-end were $23.2 million, down 8.7% from the end of
fiscal 2001. Diligent management of inventories, together with increased
revenue in the year, resulted in decreased inventory levels.
Year-end accounts receivable balances rose to $23.2 million from $12.9
million at the end of the prior year as a result of higher revenue towards the
end of the 2002 fiscal year.
Accounts payable and accrued liabilities at November 30, 2002 were $18.3
million, up from $10.7 million at the end of fiscal 2001, primarily as a
result of the increases in the amounts owing under the company's incentive
plans.
As of November 30, 2002, cash and cash equivalents were $19.3 million, up
$3.6 million from the prior year-end, after funding capital additions of $16.2
million, including a new office facility.
Outlook
-------
"We have two profitable and growing businesses in video transport and
hearing instruments as well as significant opportunities in data
communications and image processing," said Ian McWalter. "We are very
encouraged by our results in 2002. Our team continues to develop capabilities
and solutions that allow us to deliver products that meet the needs of our
international customers. While we have modest expectations for overall growth
in our markets in 2003, we are optimistic that we can continue to gain share.
In the longer term, we are confident that success in our new markets and
continued leadership in our existing ones will enable us to achieve consistent
profitable growth."
Dividend
Gennum has declared a cash dividend of 3 cents per share to be paid on
January 31, 2003 to shareholders of record on January 27, 2003.
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Management will hold a conference call to discuss fourth quarter and year-
end results on Thursday, January 16, 2003 at 9 a.m. (ET). To access the
call, interested participants should dial 1-888-571-5411. The conference
call will also be Webcast live at www.gennum.com or
www.newswire.ca/webcast and subsequently archived on the Gennum site. A
rebroadcast of the call will be available until midnight on January 23,
2003. To access the rebroadcast, dial (416) 640-1917 and enter the
passcode 230244#.
-------------------------------------------------------------------------
Gennum Corporation is a leading producer of silicon integrated circuits
(ICs) and hybrid circuits for the hearing instrument and video markets. Gennum
has offices in Burlington and Ottawa, Canada, and subsidiaries in Japan and
the United Kingdom. Gennum has operated since 1973, and its shares have been
listed on the Toronto Stock Exchange since 1982 (TSX:GND).
This document may contain forward-looking statements relating to Gennum's
operations or to the environment in which it operates, which are based on
Gennum's operations, estimates, forecasts and projections. These
statements are not guarantees of future performance and involve risks and
uncertainties that are difficult to predict, and/or are beyond Gennum's
control. A number of important factors could cause actual outcomes and
results to differ materially from those expressed in these forward-
looking statements. These factors include those set forth in other public
filings. Consequently, readers should not place any undue reliance on
such forward-looking statements. In addition, these forward-looking
statements relate to the date on which they are made. Gennum disclaims
any intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.
<<
Gennum Corporation
CONSOLIDATED STATEMENTS OF EARNINGS
AND RETAINED EARNINGS (unaudited)
(Canadian dollars, amounts in thousands except per share data)
Three Months Ended Year
November 30
2002 2001 2002 2001
-------------------------------------------------------------------------
Revenue 36,615 22,172 116,314 93,077
Investment income 95 68 206 591
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36,710 22,240 116,520 93,668
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Expenses excluding amounts
shown below 22,690 16,681 73,402 60,121
Research and development expense 8,065 5,098 27,671 22,523
Less government assistance (1,606) (1,035) (5,693) (4,521)
-------------------------------------------------------------------------
29,149 20,744 95,380 78,123
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Earnings before income taxes 7,561 1,496 21,140 15,545
Provision for income taxes 2,430 299 7,046 5,009
-------------------------------------------------------------------------
Net earnings for the period 5,131 1,197 14,094 10,536
Retained earnings,
beginning of period 92,424 86,544 86,671 80,415
Dividends (1,070) (1,070) (4,280) (4,280)
-------------------------------------------------------------------------
Retained earnings, end of period 96,485 86,671 96,485 86,671
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per share
Basic $ 0.14 $ 0.04 $ 0.40 $ 0.30
Diluted $ 0.14 $ 0.04 $ 0.39 $ 0.30
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Dividends declared per share $ 0.03 $ 0.03 $ 0.12 $ 0.12
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Gennum Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(Canadian dollars, amounts in thousands)
Three Months Ended Year
November 30
2002 2001 2002 2001
-------------------------------------------------------------------------
OPERATING ACTIVITIES
Net earnings for the period 5,131 1,197 14,094 10,536
Items not affecting cash
Amortization 2,215 1,558 9,170 7,007
Gain on sale of capital assets (100) 0 (100) 0
Future income taxes (236) 0 (882) 195
-------------------------------------------------------------------------
7,010 2,755 22,282 17,738
Net change in non-cash working
capital balances related to
operations 901 855 2,685 (9,045)
-------------------------------------------------------------------------
Cash provided by operating
activities 7,911 3,610 24,967 8,693
-------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of capital assets (4,728) (2,036) (16,162) (12,433)
Proceeds on sale of capital assets 402 0 402 0
-------------------------------------------------------------------------
Cash used in investing activities (4,326) (2,036) (15,760) (12,433)
-------------------------------------------------------------------------
FINANCING ACTIVITIES
Short-term bank loan (45) 1,291 (1,255) 1,291
Dividends paid (1,070) (1,070) (4,280) (4,280)
-------------------------------------------------------------------------
Cash used in financing activities (1,115) 221 (5,535) (2,989)
-------------------------------------------------------------------------
Effect of exchange rate changes
on cash and cash equivalents (170) (35) (69) (537)
-------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents during
the period 2,300 1,760 3,603 (7,266)
Cash and cash equivalents,
beginning of the period 16,961 13,898 15,658 22,924
-------------------------------------------------------------------------
Cash and cash equivalents,
end of the period 19,261 15,658 19,261 15,658
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Gennum Corporation
CONSOLIDATED BALANCE SHEETS (unaudited)
(Canadian dollars, amounts in thousands)
Year
2002 2001
-------------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents 19,261 15,658
Accounts receivable 23,205 12,890
Inventories 23,194 25,405
Prepaid expenses and other assets 4,246 3,652
Income taxes recoverable 0 3,554
-------------------------------------------------------------------------
Total current assets 69,906 61,159
-------------------------------------------------------------------------
Future income taxes 435 172
Capital assets 52,121 45,412
-------------------------------------------------------------------------
122,462 106,743
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Short-term bank loan 0 1,281
Accounts payable and accrued liabilities 18,251 10,656
Income taxes payable 58 0
Future income taxes 806 944
-------------------------------------------------------------------------
Total current liabilities 19,115 12,881
-------------------------------------------------------------------------
Future income taxes 532 1,013
-------------------------------------------------------------------------
Shareholders' equity
Capital stock 6,995 6,994
Retained earnings 96,485 86,671
Cumulative translation adjustment (665) (816)
-------------------------------------------------------------------------
Total shareholders' equity 102,815 92,849
-------------------------------------------------------------------------
122,462 106,743
-------------------------------------------------------------------------
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>>
-30-
For further information: please contact: Ian McWalter, President & Chief
Executive Officer; Peter Bloch, Vice President, Finance & Administration, &
Chief Financial Officer; Gennum Corporation, Tel: (905) 632-2996, Fax:
(905) 632-2055, Web site: www.gennum.com