BBN ANNOUNCES SECOND QUARTER FISCAL YEAR 1997 RESULTS; EXPANDS AOL CONTRACT TO $500 MILLION OVER FOUR YEARS.CAMBRIDGE Cambridge, city, Canada Cambridge (kām`brĭj), city (1991 pop. 92,772), S Ont., Canada, on the Grand River, NW of Hamilton. It was formed in 1973 with the amalgamation of Galt, Hespeler, and Preston, all founded in the early 19th cent. , Mass.--(BUSINESS WIRE)--Jan. 23, 1997--BBN Corporation (NYSE NYSE See: New York Stock Exchange :BBN (BBN Technologies, Cambridge, MA, www.bbn.com) A consulting firm that participated in the development of some of the most extensive networks in the world, including ARPANET, which evolved into the Internet. It was founded in 1948 as a consulting service in acoustics by Dr. ) today reported second-quarter revenue of $83.9 million, a 54 percent increase from $54.6 million in the second quarter of a year ago. Revenue for the six months ended December December: see month. 31, 1996 was $158.2 million, an increase of 51 percent over $104.8 million for the six months ended December 31, 1995. The revenue increase for both the three and six-month periods ended December 31, 1996 reflects continued significant growth in BBN Planet, BBN's Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the services division. BBN Planet contributed approximately 47 percent of total revenue for the quarter. BBN Planet had second-quarter revenue of $39.2 million, a 142 percent increase over revenue of $16.2 million for the comparable quarter ended December 31, 1995 and a 20 percent sequential increase over $32.7 million in the quarter ended September September: see month. 30, 1996. For the six-month period, BBN Planet's revenue was $71.9 million compared to $26.8 million in the comparable six-month period a year ago, an increase of 168 percent. BBN Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. George George, river, c.345 mi (560 km) long, rising in a lake on the Quebec-Labrador boundary, E Canada. It flows N through Indian Lake (125 sq mi/324 sq km) to Ungava Bay (an arm of Hudson Strait). H. Conrades said, "During the second quarter, BBN achieved significant revenue growth, reflecting continued strong customer demand for BBN Planet's Internet services. America America [for Amerigo Vespucci], the lands of the Western Hemisphere—North America, Central (or Middle) America, and South America. The world map published in 1507 by Martin Waldseemüller is the first known cartographic use of the name. Online-related revenue was $18 million, representing 46 percent of BBN Planet's revenue for the quarter. Revenue from BBN Planet's value-added services A value-added service (VAS) is a telecommunications industry term for non-core services or, in short, all services beyond standard voice calls and fax transmissions. , which include Web hosting Making a Web site available on the Internet. Many ISPs host a few personal Web pages for an individual at no additional cost above the monthly service fee, but the address is subordinate to the ISP; for example, www.friendlyisp.com/pat_smith. , managed security, consulting and systems integration services, grew by approximately 28 percent over the previous quarter, and now represents approximately 15 percent of BBN Planet revenues." For the second quarter ended December 31, 1996, BBN's operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. was $10.5 million, compared to an operating loss of $7.4 million in the second quarter of fiscal year 1996 and $10.9 million in the preceding quarter ended September 30, 1996. The operating loss for the six months ended December 31, 1996 was $21.4 million, compared to $14.2 million in the six-month period of fiscal year 1996. The second quarter and year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. operating losses for the periods ended December 31, 1996 primarily reflect BBN's continued investment in BBN Planet's network infrastructure and related operations, and sales and marketing expenditures. The loss from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the three and six-month periods ended December 31, 1996 was $10.2 million, or $.48 per share, and $20.9 million, or $.98 per share, respectively, compared to $5.5 million, or $.32 per share, and $10.0 million, or $.57 per share, respectively for the three and six month periods ended December 31, 1995. Income from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. for the six months ended December 31, 1996 was $20.0 million, or $.94 per share compared to a loss from discontinued operations of $6.6 million, or $.37 per share for the prior year six-month period. The loss from discontinued operations for the second quarter of the prior fiscal year was $2.3 million, or $.13 per share. The current fiscal year's income results from the sale, in the first quarter of fiscal year 1997, of a majority interest in BBN Domain. The loss from discontinued operations for the three and six-month periods ended December 31, 1995 relates to the operating results of BBN Domain. The net loss was $10.2 million, or $.48 per share, for the second quarter ended December 31, 1996, compared to a net loss of $7.9 million, or $.45 per share in the comparable quarter ended December 31, 1995. For the six-month period ended December 31, 1996, net loss was $.9 million, or $.04 per share compared to $16.5 million, or $.94 per share for the six months ended December 31, 1995. BUSINESS OUTLOOK Mr. Conrades said, "We are committed to providing our customers with high-quality Internet services during a time when the Internet is experiencing explosive growth. Network usage per connection has been growing and is projected to increase rapidly, requiring an additional level of investment in the second half of the fiscal year for network capacity, redundancy and systems infrastructure, including expansion of our customer care services. We believe that the fiscal year 1997 revenue growth in BBN's value-added services will not be sufficient to offset these increased infrastructure investments. We expect that these investments will increase BBN Planet's operating loss in the third quarter, and will extend the time frame for our goal of achieving EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become break-even beyond the fourth quarter of fiscal year 1997. "We also expect revenue growth for the full year to exceed expectations. BBN's revenue growth for the first half of our fiscal year primarily reflects the success of our strategic relationships. Establishing and maintaining partnerships such as AOL (A division of Time Warner, Inc., New York, NY, www.aol.com) The world's largest online information service with access to the Internet, e-mail, chat rooms and a variety of databases and services. , AT&T and Andersen Consulting See Accenture. are integral parts of our business plan, and we continue to pursue additional relationships. "In order to improve our responsiveness to customer needs and market dynamics, BBN Planet has named new general managers with profit and loss responsibility to lead its business lines. These include managed connectivity services; network-centric solutions, including outsourced Web hosting and systems integration; managed security services Security services are state institutions for the provision of intelligence, primarily of a strategic nature, but also including protective security intelligence. Examples include the Security Service (MI5) and the Secret Intelligence Service (MI6) in the United Kingdom, and the ; network consulting; and AOL network management. We also have consolidated sales and marketing functions and aligned them with the business units. These are important steps, reflecting the continuing growth of our Internet services business, and will help us take advantage of the opportunities we see before us." BUSINESS REVIEW During the second quarter, BBN achieved the following milestones: o For over a year now, AOL has made a major commitment to significantly expand AOLnet, a portion of which is built and operated by BBN. Since signing its four-year, $340 million agreement with AOL in September 1996, BBN has received substantial additional work on its portion of AOLnet, expanding the value of the contract to approximately $500 million. Mr. Conrades said, "We are impressed im·press 1 tr.v. im·pressed, im·press·ing, im·press·es 1. To affect strongly, often favorably: by America Online's strong commitment to customer service as expressed through the rapid expansion of AOLnet. BBN is delighted to be a part of the development and operation of the largest high-speed high-speed adj. 1. Operated or designed for operation at high speed: a high-speed food processor. 2. Taking place at high speed: a high-speed chase. 3. dial-up network (1) The switched telephone network regulated by government and administered by common carriers. Also called "plain old telephone system" (POTS) and "public switched telephone network" (PSTN). (2) A network that can be accessed remotely via analog modems or ISDN. in the world." Bob Pittman Pittman may refer to: People
o BBN Planet's anticipated recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. , annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. revenue from managed connectivity and value-added services (rent roll) grew to $78 million, a 22 percent sequential increase from the previous quarter. The total rent roll includes $14 million in value-added services, representing an approximately 30 percent increase from the previous quarter. o As part of BBN's on-going Adj. 1. on-going - currently happening; "an ongoing economic crisis" ongoing current - occurring in or belonging to the present time; "current events"; "the current topic"; "current negotiations"; "current psychoanalytic theories"; "the ship's current position" network investment during the quarter, BBN Planet added capacity in its national backbone and built high-speed interconnection in·ter·con·nect v. in·ter·con·nect·ed, in·ter·con·nect·ing, in·ter·con·nects v.intr. To be connected with each other: The two buildings interconnect. v.tr. points (PoP's) in six cities. BBN also announced that it has opened an Internet hub in London London, city, Canada London, city (1991 pop. 303,165), SE Ont., Canada, on the Thames River. The site was chosen in 1792 by Governor Simcoe to be the capital of Upper Canada, but York was made capital instead. London was settled in 1826. for handling European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. traffic, as part of the company's relationship with Scitor (today renamed EQUANT E´quant n. 1. (Ptolemaic Astron.) A circle around whose circumference a planet or the center of ann epicycle was conceived to move uniformly; - called also eccentric equator ltname>. ). o BBN Planet received orders for more than 600 new high-speed Internet See broadband. connections, a majority of which came from its strategic partnership with AT&T. New BBN customers include EMI (ElectroMagnetic Interference) An electrical disturbance in a system due to natural phenomena, low-frequency waves from electromechanical devices or high-frequency waves (RFI) from chips and other electronic devices. Allowable limits are governed by the FCC. Music Publishing The contractual relationship between a songwriter or music composer and a music publisher, whereby the writer assigns part or all of his or her music copyrights to the publisher in exchange for the publisher's commercial exploitation of the music. , Sears Roebuck & Co., the American Dental Association American Dental Association (ADA), n.pr a nonprofit professional association whose membership is dental professionals in the United States. Its purpose is to assist its members in providing the highest professional and ethical care to the citizens of the , GeoCities Yahoo! GeoCities is a webhosting service founded by David Bohnett and John Rezner in late 1994 as Beverly Hills Internet (BHI). In its original form, site users selected a "city" in which to place their webpages. , and the ISG ISG Iraq Study Group ISG Iraq Survey Group ISG International Steel Group ISG Integrated Security Gateway ISG Information Systems Group ISG Information Systems Group (IBM) ISG Integrated Starter/Generator division of Motorola (Motorola, Inc., Schaumburg, IL, www.motorola.com) A leading manufacturer of semiconductor devices, electronics, telecommunications and satellite systems. Founded in Chicago in 1928 by Paul V. . o Major new customers for value-added services include Ziff-Davis, for which BBN Planet provides the Web hosting, connectivity and systems management services for the Ziff-Davis Web site, http://www.zd.net, one of the top sites for news, entertainment and information. BBN also signed an agreement with Counsel Connect, the leading online service for attorneys, to provide application development and hosting services for the Counsel Connect site, which provides subscribers with a center for legal information and interaction. SUMMARY Mr. Conrades said, "We believe that the investments and other steps we have taken are important to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. BBN's key differentiation in the market -- our unique combination of extensive Internet experience and skills, a national Tier One backbone network A backbone network provides a path for the exchange of information between different LANs or subnetworks.[1] A backbone can tie together diverse networks in the same building, in different buildings in a campus environment, or over wide areas. , value-added services, advanced networking R&D, and the ability to solve complex internetworking internetworking - The interconnection of two or more networks, usually local area networks so that data can pass between hosts on the different networks as though they were one network. This requires some kind of router or gateway. problems." BBN is a leading provider of Internet services for businesses and organizations. For its fiscal year ending June June: see month. 30, 1996, BBN reported revenues of $234 million. For more information, visit BBN's Web site at http://www.bbn.com EDITOR'S NOTE Editor's Note (foaled in 1993 in Kentucky) is an American thoroughbred Stallion racehorse. He was sired by 1992 U.S. Champion 2 YO Colt Forty Niner, who in turn was a son of Champion sire Mr. Prospector and out of the mare, Beware Of The Cat. Trained by D. : Statements about our strategies, and about expectations concerning revenue growth, operating efficiencies, margins, and earnings, are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve risks and uncertainties that could cause the actual results to vary materially. These risks include rapid changes in customer demands or expectations, high technological development and infrastructure costs, the impact of competitive services and pricing, loss of or difficulties with strategic relationships or customers, the yield on our selling and marketing efforts, and the results of financing activities. -0-
BBN Corporation
Consolidated Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
-------------------- -------------------
Dollars in thousands, 1996 1995 1996 1995
except per-share data ------ ------ ------ ------
Revenue $ 83,923 $ 54,608 $ 158,219 $ 104,789
Costs and expenses
Cost of revenue 69,063 40,697 130,490 77,784
Research and development 2,740 2,622 5,892 4,987
Selling, general and
administrative 22,639 18,653 43,269 36,252
---------- ---------- ---------- ----------
94,442 61,972 179,651 119,023
---------- ---------- ---------- ----------
Loss from operations (10,519) (7,364) (21,432) (14,234)
Interest income 1,753 1,077 3,309 2,671
Interest expense (1,394) (1,125) (2,783) (2,259)
Minority interests (28) (15) (30) (84)
---------- ---------- ---------- ----------
Loss from continuing operations
before income taxes (10,188) (7,427) (20,936) (13,906)
Income taxes - (1,882) - (3,931)
---------- ---------- ---------- ----------
Loss from continuing operations (10,188) (5,545) (20,936) (9,975)
Income (loss) from discontinued
operations (net of applicable
income taxes) (1) - (2,345) 20,000 (6,566)
---------- ---------- ---------- ----------
Net income (loss) $ (10,188) $ (7,890) $ (936) $ (16,541)
========== ========== ========== ==========
Income (loss) per share:
Continuing operations $ (.48) $ (.32) $ (.98) $ (.57)
Discontinued operations $ .00 $ (.13) $ .94 $ (.37)
---------- ---------- ---------- ----------
Net income (loss) $ (.48) $ (.45) $ (.04) $ (.94)
========== ========== ========== ==========
Shares used in 21,053,000 17,694,000 21,396,000 17,606,000
per-share calculations ========== ========== ========== ==========
Notes to the Consolidated Statements of Operations:
(1) On July 31, 1996, the Company completed a transaction under
which a majority interest in BBN Domain was purchased by an
investment group, resulting in a gain of $20 million. The results of
BBN Domain for the three and six months ended December 31, 1995 are
reported as discontinued operations.
-0-
BBN Corporation
Consolidated Balance Sheets
December 31, June 30,
Dollars in thousands 1996 1996
------------ --------
(unaudited)
Assets:
Cash and cash equivalents
(includes restricted cash
of $4,854 at December 31, 1996
and $4,711 at June 30, 1996) $ 55,001 $ 79,533
Short-term investments 52,499 40,742
Accounts receivable, net 70,638 60,825
Other current assets 13,295 10,314
Net assets of discontinued
operations - 8,082
---------- ----------
Total current assets 191,433 199,496
Property, net 63,090 48,069
Other assets 7,478 1,772
---------- ----------
$ 262,001 $ 249,337
========== ==========
Liabilities and Shareholders' Equity:
Payables and other liabilities $ 63,455 $ 52,623
Accrued restructuring 6,693 7,352
Short term lease obligations 4,215 4,041
Deferred revenue 18,292 15,369
--------- ---------
Total current liabilities 92,655 79,385
6% convertible subordinated debentures
due 2012 73,170 73,170
Capital lease obligations 6,540 8,692
Minority interests 784 754
Redeemable convertible preferred stock
of subsidiary (1) 8,000
Redeemable common stock (1) 8,000
Shareholders' equity 80,852 79,336
--------- ---------
$ 262,001 $ 249,337
========== ==========
(1) On August 6, 1996 the redeemable convertible preferred stock of
subsidiary was exchanged for 400,000 shares of BBN redeemable
common stock.
-0-
BBN Corporation
Supplemental Information
- By Business Unit -
(unaudited)
The following is a summary of revenues and operating income (loss)
from continuing operations by business unit for the three and six
months ended December 31, 1996 and 1995. Prior year information has
been restated to conform with current year presentation.
Three Months Ended Six Months Ended
December 31, December 31,
-------------------- -------------------
Dollars in thousands 1996 1995 1996 1995
------ ------- ------ ------
Revenue:
Planet $ 39,179 $ 16,155 $ 71,884 $ 26,824
Systems & Technologies 45,615 39,041 87,578 78,716
Eliminations (1) (871) (588) (1,243) (751)
---------- ---------- ---------- ----------
$ 83,923 $ 54,608 $ 158,219 $ 104,789
========== ========== ========== ==========
Operating income (loss) from
continuing operations:
Planet $ (11,770) $ (6,914) $ (22,556) $ (14,861)
Systems & Technologies 1,821 692 1,888 2,298
Unallocated corporate
expenses, net (570) (1,142) (764) (1,671)
---------- ---------- ---------- ----------
$ (10,519) $ (7,364) $ (21,432) $ (14,234)
========== ========== ========== ==========
(1) Eliminations consist of inter-divisional sales between business units.
BBN Corporation
Supplemental Information
Planet and Systems & Technologies
Statements of Operations
(unaudited)
The following supplemental information presents the results of
operations of BBN Planet for the three and six months ended December
31, 1996 and 1995.
Three Months Ended Six Months Ended
December 31, December 31,
-------------------- -------------------
Dollars in thousands 1996 1995 1996 1995
------ ------- ------ ------
Revenue $ 39,179 $ 16,155 $ 71,884 $ 26,824
Costs and expenses:
Cost of revenue 37,238 14,583 68,292 24,696
Research and development 1,709 622 3,314 1,344
Selling, general and
administrative 12,002 7,864 22,834 15,645
----------- ---------- ---------- ----------
Loss from operations $ (11,770) $ (6,914) $ (22,556) $ (14,861)
========== ========== ========== ==========
The following supplemental information presents the results of
operations of BBN Systems & Technologies for the three and six months
ended December 31, 1996 and 1995.
Three Months Ended Six Months Ended
December 31, December 31,
-------------------- -------------------
Dollars in thousands 1996 1995 1996 1995
------ ------- ------ ------
Revenue $ 45,615 $ 39,041 $ 87,578 $ 78,716
Costs and expenses:
Cost of revenue 33,539 26,802 64,959 54,381
Research and development 1,031 1,924 2,578 3,509
Selling, general and
administrative 9,224 9,623 18,153 18,528
---------- ---------- ---------- ----------
Income from operations $ 1,821 $ 692 $ 1,888 $ 2,298
========== ========== ========== ==========
-0-
CONTACT: Peter W. Thonis BBN Corporation (617) 873-3512 pthonis@bbn.com |
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