Chyron Corporation Reports 1999 Second Quarter Results, Restructuring Charge and Private Placement of $4 Million Convertible Debt.

MELVILLE, N.Y.--(BUSINESS WIRE)--

Chyron Corporation (NYSE:CHY), manufacturer of the world's premier television character generators, graphics, routing and automation systems, today announced financial results for the second quarter of 1999.

Net revenues for the quarter ended June 30, 1999 were $16.2 million, compared to $21.1 million for the same period in 1998. The net loss for the second quarter was $25.2 million or $0.78 per share compared to a net loss of $4.8 million or $0.15 per share for the same period in 1998. These results reflect product line restructuring and other nonrecurring charges of $6.7 million and the establishment of a full valuation allowance against its net deferred tax asset of $14 million.

Net revenues for the six months ended June 30, 1999 were $31.2 million compared to $42.6 million for the same period in 1998. For the six months ended June 30, 1999, the Company reported a net loss of $27 million or $0.84 per share compared to a net loss of $4.8 million or $0.15 per share for the same period in 1998, including the restructuring and nonrecurring charges.

The delay in the rollout of HDTV by broadcasters and their reluctance to purchase analog equipment has significantly impacted the Company's ability to achieve its internal revenue and earnings targets. To weather this difficult time and to better position itself for the future, the Company has critically evaluated its product lines and its position in the industry. This evaluation has resulted in a more focused strategy on products that serve a broader spectrum of delivery options and the elimination of certain non-producing products which will allow the Company to be in a better position to remain competitive through the difficult times facing the industry. During the second quarter of 1999, the Company recorded nonrecurring charges totaling $6.7 million, of which $5.0 million was directly related to the change in strategy. These primarily non-cash restructuring and nonrecurring charges include the write-down of certain capitalized software, inventory write-downs due to changes in product strategy, severance costs resulting from staff reductions and the write-down of an equity investment. The only component of the charge that will require a cash outlay is severance of approximately $0.4 million. Following this restructuring, future operating costs are expected to be reduced by approximately $0.8 million per quarter.

In the second quarter of 1999, the Company also established a full valuation allowance against its net deferred tax asset of $14 million. The Company's net deferred tax asset includes substantial amounts of net operating loss carryforwards. Inability to generate taxable income within the carryforward period would affect the ultimate realization of such asset. Consequently, management determined that the uncertainty regarding the realization of this asset is sufficient to warrant the establishment of an allowance.

During July 1999, the Company raised $4.0 million through the issuance of convertible debentures to its major investors. The investment is an indication of the confidence the Company's major investors have in the Company's future business and its new CEO, Roger Henderson. These funds will be used to build the restructured operations and to fund research and development, particularly for the contemplated Internet initiatives. The notes have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements.

Second quarter 1999 revenues declined by $4.9 million when compared with second quarter 1998 revenues due to lower sales volumes of graphics products of $2.6 million, the loss of $1.5 million in revenues associated with the Trilogy division, which was sold in August 1998, and lower sales volumes of Pro-Bel products of $0.8 million. From a geographic perspective, while there was an overall decline in domestic sales of graphics products and foreign sales of Pro-Bel products, U.S. sales of Pro-Bel products increased by $2.4 million. While router sales to DIRECTV have played an important role in this growth, it is the increasing number of smaller contracts for TX Series digital master control switchers, MAPP(TM) automation systems and Freeway routers that present encouraging signs for continuing this positive trend.

Gross profit decreased to $5.2 million for the second quarter of 1999 from $9.7 million for the same 1998 period. The respective gross margin percentages were 31.9% and 45.9%. This decline is attributable to the lower level of sales volume and $2.2 million of inventory write-downs. Gross margins in the graphics business have suffered due to a lower level of absorption of overhead costs resulting from lower sales volumes. Underlying margins for Pro-Bel products during the period have improved due to stronger sales of new products with greater margins.

Selling, general and administrative expenses declined to $7.4 million for the quarter ended June 30, 1999 compared with $9.0 million in the comparable period in 1998. Research and development expenses, net of amounts capitalized, also decreased in the second quarter of 1999 to $2.0 million, or 12.3% of net sales, versus $2.5 million, or 11.9% of net sales, for the comparable 1998 quarter. These reductions were primarily due to the elimination of operating costs associated with the Trilogy and Concerto divisions, as well as other expense reductions.

Roger Henderson, President and CEO said, "Our Company's performance is below our objectives. While it is certainly attributable to market conditions which are affecting the majority of players in our industry, there are actions we can take to improve our situation. We have already implemented several important initial steps. We have downsized and realigned the Company in a manner that will enable us to achieve substantial savings in the cost structure of the Company. We have reassessed our graphics product strategy in light of the current market trends. We continue to view Duet(TM) as a significant product in the HD/SD marketplace and regard the substantial installed base of iNFiNiT!(R) product as a key competitive edge. We are refocusing our resources to take advantage of this and to position ourselves as a supplier of professional equipment to a wide variety of media content producers. We have had a difficult time over the last eighteen months, as have many of our competitors. With the restructuring and financial injection, however, we are in a stronger position to launch powerful new products. Among them, our high performance Eclipse router will be introduced at the International Broadcasting Convention (IBC) in September."

Henderson continued, "This is perhaps the most exciting time in our industry. The transition to digital has presented our traditional customers with a number of delivery options by which to transmit their programming; from high definition television through interactive TV, enhanced TV, standard definition TV and web multicasting. While broadcasters' uncertainty about future purchase decisions has currently impacted our business, we continue to be enthusiastic about the opportunities that lie ahead. There are indications that the HDTV rollout is beginning to accelerate. This Company has a great brand and a strong loyal customer base both in the U.S. and around the world. We will continue to support existing customers while striving to attract new customers with innovative product introductions designed to take on the new generation of media."

From time to time, including in this press release, the Company may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, changes in the industry, new products, research and development activities and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company's actual results to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the Company's business include, without limitation, the following: product concentration in a mature market, dependence on the emerging digital market and the industry's transition to DTV and HDTV, consumer acceptance of DTV and HDTV, resistance within the broadcast or cable industry to implement DTV and HDTV technology, rapid technological changes, new technologies that could render certain Chyron products to be obsolete, a highly competitive environment, competitors with significantly greater financial resources, new product introductions by competitors, seasonality, fluctuations in quarterly operating results, ability to maintain adequate levels of working capital, expansion into new markets and the Company's ability to successfully implement its acquisition and strategic alliance strategy.

Serving the television industry for three decades, Chyron Corporation has established itself as a leading innovator in the development of television graphics and distribution systems, including products to meet the demands of digital and high definition television. Chyron provides a broad range of leading-edge hardware and software products, including graphics platforms, paint and animation systems, character generators, signal distribution systems, master control switchers, broadcast automation and media management. For more information about Chyron products and services, please visit the company website at www.chyron.com.

All trademarks are held by their respective companies.

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                          CHYRON CORPORATION
      Condensed Consolidated Statements of Operations (Unaudited)
                 (In thousands except per share data)

                                         Three Months      Six Months
                                             Ended            Ended
                                           June 30,          June 30,
                                         1999    1998     1999     1998

Net sales                              $16,199 $21,096  $31,197  $42,621
Gross profit                             5,164   9,680   11,911   20,402
Restructuring and other nonrecurring
  charges                                6,681   3,979    6,681    3,979
Total operating expenses                16,039  15,451   25,160   25,680
Operating loss                         (10,875) (5,771) (13,249)  (5,278)
Interest and other expense, net            227     478      529      836
Loss before provision for income taxes (11,102) (6,249) (13,778)  (6,114)
(Benefit) provision for income taxes    14,076  (1,417)  13,250   (1,316)
Net loss                               (25,178) (4,832) (27,028)  (4,798)

Earnings (loss) per common
  share - basic and diluted            $ (0.78)$ (0.15) $ (0.84) $ (0.15)

Weighted average number of common and
common equivalent shares outstanding    32,086  32,072   32,080   32,072

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           Condensed Consolidated Balance Sheets (Unaudited)
                            (In thousands)

                                                 June 30,    Dec. 31,
                                                   1999        1998

Assets:
Current assets                                   $30,499     $46,067
Total assets                                     $54,705     $83,116

Liabilities and shareholders' equity:
Current liabilities                              $13,926     $16,031
Total liabilities                                 32,329      33,346
Shareholders' equity                              22,376      49,770
Total liabilities and shareholders' equity       $54,705     $83,116