Crossroads Systems Announces Fiscal Second Quarter Results; Solid Execution and Improved Customer Focus Drive Performance in Soft Market.Business Editors & High-Tech high-tech also hi-tech adj. Informal Of, relating to, or resembling high technology. high-tech Adjective same as hi-tech Adj. 1. Writers AUSTIN Austin. 1 City (1990 pop. 21,907), seat of Mower co., SE Minn., on the Cedar River, near the Iowa line; inc. 1868. The commercial and industrial center of a rich farm region, it is noted as home to the Hormel meatpacking company, whose Spam Town museum , Texas--(BUSINESS WIRE)--May 21, 2001 Crossroads Systems, Inc. (Nasdaq:CRDS CRDS Contribution pour Le Remboursement de la Dette Sociale (French: Social Debt Repayment Contribution) CRDS Cavity Ring-Down Spectroscopy CRDS Community Rehabilitation and Disability Studies ) a global provider of connectivity for storage networking solutions, today reported its second quarter results for the period ending April 30, 2001. Total revenues for the second quarter of fiscal 2001 were $10.2 million compared with $10.0 million for the first quarter of fiscal 2001 and $11.1 million in the second quarter of fiscal 2000. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net loss, which excludes the effects of amortization of goodwill and stock-based compensation, was $5.9 million, or $0.21 per share for the second quarter of fiscal 2001, compared with a pro forma net loss of $4.6 million, or $0.17 per share, for the first quarter of fiscal 2001. This compares with a pro forma net loss of $1.6 million, or $0.06 per share, for the second quarter of fiscal 2000. Actual net loss for the second quarter of fiscal 2001 was $11.6 million, or $0.42 per share. This compares with a net loss of $10.7 million, or $0.39 per share for the first quarter of fiscal 2001 and a net loss of $21.6 million, or $0.83 per share, for the second quarter of fiscal 2000. "I am pleased to report that at a time when the overall economy softened soft·en v. soft·ened, soft·en·ing, soft·ens v.tr. 1. To make soft or softer. 2. To undermine or reduce the strength, morale, or resistance of. 3. and capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. was limited, Crossroads grew revenues over the prior quarter," said Brian R. Smith, Crossroads chairman and chief executive officer. "We believe this growth in revenue shows the continued demand for Crossroads' products and services. It reinforces the growth potential of our served market and why Crossroads' will be a key storage solutions player in the years to come." Recent highlights include: -- Financial Performance: Crossroads delivered total revenues of $10.2 million for the second quarter of fiscal 2001, and excluding amortization of stock-based compensation, recorded a gross margin of 40.2 percent. The number of Day Sales Outstanding was 45 and inventory turns improved to 6.1 times. Crossroads ended the quarter with $51.4 million in cash and short-term investments, compared with $56.4 million in cash and short-term investments at the end of the first quarter of fiscal 2001. -- Partnership Developments: Crossroads continued to establish partnerships and joint marketing opportunities with a number of companies, including: -- sanrise, a storage solutions provider that has chosen Crossroads as the best-of-breed routers to increase the speed and performance of sanrise's storagetone SAN solution; -- BMC Software, where Crossroads is part of the consortium to develop, test and integrate storage management products for enterprise customers; -- Banderacom, a fabless InfiniBand semiconductor company, in which Crossroads participated in a Series B round of funding in May, evidencing our commitment to InfiniBand; and, -- Tantia Technologies, to provide connectivity and speed data movement between Sun Microsystems enterprise servers and S/390 mainframes. In addition, Chaparral chaparral (chăpərăl`), type of plant community in which shrubs are dominant. It occurs usually in regions having from 10 to 20 in. (25–50 cm) of rainfall annually and with a Mediterranean-type climate. Network Storage Inc. dropped its suit filed against Crossroads Systems for unfairly interfering with its business and defamation defamation In law, issuance of false statements about a person that injure his reputation or that deter others from associating with him. Libel and slander are the legal subcategories of defamation. Libel is defamation in print, pictures, or any other visual symbols. . The judge in the matter ordered the dismissal with prejudice dismissal with prejudice n. see dismissal. . Crossroads filed a patent infringement patent infringement n. the manufacture and/or use of an invention or improvement for which someone else owns a patent issued by the government, without obtaining permission of the owner of the patent by contract, license or waiver. case against Chaparral last year and the matter is set for trial in September 2001. Crossroads' pending patent infringement litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. against Pathlight Technology Inc., which was acquired by Advanced Digital Information Corporation (ADIC), is set for trial June 11, 2001. NOTE: Crossroads will hold a conference call (312/470-7109); password Crossroads) and simultaneous Webcast (www.crossroads.com) at 3:30 p.m. (CST CST abbr. 1. Central Standard Time 2. convulsive shock treatment CST Central Standard Time Noun 1. ) today. About Crossroads Systems Inc. With headquarters in Austin, Texas, Crossroads Systems (Nasdaq:CRDS) is a leading global provider of connectivity for storage networks regardless of technology or location. Crossroads enables protocol-independent connectivity at gigabit speeds for a wide range of devices that scale for small businesses to global enterprises. Crossroads' products are in solutions from ADIC, ATL (Active Template Library) A set of software routines from Microsoft that provide the basic framework for creating ActiveX and COM objects. Stemming from the standard template library (STL) that comes with C++ compilers, ATL includes an object wizard that sets up , Compaq, Dell, Fujitsu Siemens (Fujitsu Siemens Computers, Inc. (USA), Milpitas, CA, www.fujitsu-siemens.com) Fujitsu Siemens Computers USA is a wholly owned research and development subsidiary of Fujitsu Siemens Computers. , Groupe Bull Groupe Bull (also known as Bull Computer or simply Bull) is a French computer company based in Les Clayes-sous-Bois, outside Paris. The company has also been known at various times as Bull General Electric, Honeywell Bull, CII Honeywell Bull , Hewlett-Packard, Hitachi Data Systems See HDS. , IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) , McDATA, StorageTek, Sun Microsystems Sun Microsystems, Inc. (NASDAQ: JAVA[3]) is an American vendor of computers, computer components, computer software, and information-technology services, founded on 24 February 1982. , Unisys, ACAL ACAL Asociación de Archiveros de Castilla Y León (Castille and Leon, Spain) ACAL Academia de Ciencias de América Latina (Spanish: Academy of Sciences of Latin America, Venezuela) , Bell Micro, Cranel, Datalink and Tech Data. Crossroads is a voting member of the Storage Networking Industry Association An association of producers and consumers of storage networking products, whose goal is to further storage networking technology and applications. The Storage Networking Industry Association, or SNIA (SNIA (Storage Networking Industry Association, San Francisco, CA, www.snia.org) An organization devoted to the advancement of mission critical storage systems. Founded in 1997, its goal is to determine the standards that must be developed to allow hosts and storage systems to interact via ). For employment opportunities and more information about Crossroads Systems, please visit www.crossroads.com or call 800/643-7148. 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. This release may contain forward-looking statements that involve risks and uncertainties. Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are: the quarterly fluctuations of Crossroads' operating results and Crossroads' inability to accurately predict revenues and budget for expenses for future periods; the extent of Crossroads' future operating losses 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. and negative cash flow; the company's ability to maintain its operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: ; the impact on Crossroads' results or operations due to changes in the Securities and Exchange Commission's accounting standards, including the implementation of SAB SAB Spontaneous abortion. See Abortion. 101 with respect to revenue recognition; the dependence of Crossroads' business on the storage area network market which is evolving and unpredictable; the possibility that the pending shareholder class action lawsuits class action lawsuit A lawsuit in which one party or a limited number of parties sue on behalf of a larger group to which the parties belong. For example, investors may bring a class action lawsuit against a brokerage firm that has actively promoted a tax could result in an adverse outcome to the company; Crossroads' ability to develop new and enhanced products that achieve market acceptance; the effect of competition; the effect of undetected software or hardware errors, which may affect the company's results or reduce demand for Crossroads' products in the long term; Crossroads' inability to protect its intellectual property rights, including any adverse outcome in the company's pending patent litigation with certain of its competitors; the continuation of Crossroads' successful relationships with its limited number of OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and customers, including its ability to replace revenue from Compaq Computer Corporation (company) Compaq Computer Corporation - The largest US manufacturer and vendor of IBM PC compatible personal computers and servers. Compaq was started in 1982 by three ex-Texas Instruments employees. Quarterly sales $2499M, profits $210M (Aug 1994). http://compaq.com/. and Advanced Digital Information Corporation; Crossroads' ability to retain and recruit key personnel to manage its business successfully; Crossroads' ability to successfully achieve the benefits of the acquisition of Polaris Communications and any subsequent acquisition or strategic relationship; and that Crossroads' stock price could be volatile regardless of Crossroads' actual financial performance and other factors detailed in Crossroads' filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and Quarterly Reports on 10-Q. -- Tables Attached --
CROSSROADS SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
January 31, April 30,
2001 2001
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 46,394 $ 49,412
Short-term investments 10,000 1,967
--------- ---------
Total cash, cash equivalents
and short-term investments 56,394 51,379
Accounts receivable, net 5,108 5,133
Inventories, net 3,872 3,991
Prepaids and other current assets 1,872 1,556
--------- ---------
Total current assets 67,246 62,059
Notes receivable from
related party, net 162 165
Property and equipment, net 10,180 10,938
Intangibles, net 32,088 28,492
Other assets 562 552
--------- ---------
Total assets $ 110,238 $ 102,206
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,515 $ 6,709
Accrued expenses 2,606 2,505
Accrued warranty costs 434 538
Deferred revenue 772 844
--------- ---------
Total current liabilities 9,327 10,596
Stockholders' equity:
Common stock 28 28
Additional paid-in capital 184,905 185,048
Deferred stock-based compensation (8,345) (6,240)
Notes receivable from stockholders (235) (163)
Accumulated deficit (75,188) (86,806)
Treasury stock at cost (254) (257)
--------- ---------
Total stockholders' equity 100,911 91,610
--------- ---------
Total liabilities and
stockholders' equity $ 110,238 $ 102,206
========= =========
CROSSROADS SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In Thousands, Except Share and Per Share Data)
Three Months Ended Six Months Ended
April 30, April 30,
---------------------- ----------------------
2000 2001 2000 2001
---------- ---------- ---------- ----------
Revenue:
Product revenue $ 10,987 $ 9,885 $ 19,679 $ 19,709
Other revenue 136 329 237 479
---------- ---------- ---------- ----------
Total revenue 11,123 10,214 19,916 20,188
Cost of revenue 5,665 6,137 10,389 11,013
---------- ---------- ---------- ----------
Gross profit 5,458 4,077 9,527 9,175
---------- ---------- ---------- ----------
Operating expenses:
Sales and marketing 3,209 4,426 5,612 8,494
Research and
development 2,989 4,062 5,135 8,364
General and
administrative 20,334 4,335 21,900 9,051
Amortization of
intangibles 1,616 3,596 1,616 7,192
---------- ---------- ---------- ----------
Total operating
expenses 28,148 16,419 34,263 33,101
---------- ---------- ---------- ----------
Loss from operations (22,690) (12,342) (24,736) (23,926)
Other income (expense):
Interest and dividend
income 1,138 714 2,299 1,682
Interest expense (2) -- (31) --
Other income (expense) (77) 10 (86) 16
---------- ---------- ---------- ----------
Other income, net 1,059 724 2,182 1,698
---------- ---------- ---------- ----------
Net loss before
cumulative effect of
acct change (21,631) (11,618) (22,554) (22,228)
Cumulative effect of
accounting change(a) -- -- -- (130)
---------- ---------- ---------- ----------
Net loss attributable
to common stock $ (21,631) $ (11,618) $ (22,554) $ (22,358)
========== ========== ========== ==========
Basic and diluted net
loss per share:
Before cumulative
effect of accounting
change $ (0.83) $ (0.42) $ (0.87) $ (0.81)
Cumulative effect of
accounting change(a) -- -- -- (0.01)
---------- ---------- ---------- ----------
Basic and diluted net
loss per share $ (0.83) $ (0.42) $ (0.87) $ (0.82)
========== ========== ========== ==========
Shares used in computing
basic and diluted net
loss per share 26,090,132 27,403,579 25,860,187 27,343,204
========== ========== ========== ==========
(a) Effective November 1, 2000, the Company adopted the provisions of
Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements". The effect of the change was to increase
income $130 (or one cent per share) with an increase to total
revenue and cost of revenue of $207 and $77, respectively.
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