Crossroads Systems Reports Fourth Quarter, Fiscal Year 2001 Results; Patent Victories, Compaq Win Highlight Year.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)--Dec. 4, 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 A generic term for connecting devices to each other in order to transfer data back and forth. It often refers to network connections, which embraces bridges, routers, switches and gateways as well as backbone networks. for storage networking solutions, today reported results for its fiscal fourth quarter and fiscal year ended Oct. 31, 2001. Total revenues for the fourth quarter of fiscal 2001 were $8.7 million compared with $8.4 million for the third quarter of fiscal 2001 and $8.4 million in the fourth 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 for the fourth quarter of fiscal 2001, which excludes the effects of stock-based compensation and amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. , was $6.8 million, or $0.25 per share. Pro forma net loss for the third quarter of fiscal 2001 was $7.1 million, or $0.26 per share, and a pro forma net loss for the fourth quarter of fiscal 2000 was $4.8 million, or $0.18 per share. Actual net loss for the fourth quarter of fiscal 2001 was $7.9 million, or $0.29 per share. Actual net loss for the third quarter of fiscal 2001 was $20.8 million, or $0.75 per share, and actual net loss for the fourth quarter of fiscal 2000 was $10.6 million, or $0.39 per share. Total revenues for fiscal year 2001 were $37.3 million compared with $33.0 million for fiscal year 2000 and $18.9 million for fiscal year 1999. Total revenues from Compaq (Compaq Computer Corporation, Houston, TX, www.compaq.com) Compaq was the leading PC manufacturer when it was acquired by HP in 2002. Founded in 1982 by Rod Canion, Jim Harris and Bill Murto, one year later the company shipped 53,000 PC-compatible COMPAQ Portables, resulting in $111 for fiscal 2001 accounted for less than 2 percent of our total revenues, while Compaq revenues accounted for 33 percent and 36 percent of our total revenues in fiscal 2000 and fiscal 1999, respectively. Pro forma net loss for fiscal 2001 was $24.3 million, or $0.89 per share, compared with $14.5 million, or $0.55 per share, for fiscal 2000. This excludes income of $15.0 million associated with the settlement of our patent 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. and certain non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. totaling $41.8 million. These non-cash charges include stock-based compensation, amortization of intangible assets, and a $25.0 million write down of intangible assets. Actual net loss for fiscal 2001 was $51.1 million, or $1.86 per share, compared with $51.0 million, or $1.93 per share, for fiscal 2000. "This year, we grew revenue 13 percent year over year without any meaningful revenue from Compaq, whereas Compaq had accounted for nearly one-third of our revenue in both 2000 and 1999. Overall, our modest revenue growth doesn't does·n't Contraction of does not. fully reflect the improvements we've we've Contraction of we have. we've have made as a company," said Larry Sanders For the television show and fictional character, see . Larry Sanders (born in New York) is an Oxfordshire County Councillor. He has lived in Oxford since 1969. He was trained professionally as a social worker and lawyer. , Crossroads president and chief executive officer. "We believe our ability to win back Compaq and the renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. awareness for data backup and recovery will drive Crossroads' growth for the foreseeable fore·see tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees To see or know beforehand: foresaw the rapid increase in unemployment. future." 2001 Highlights Include: -- Financial Performance -- Crossroads ended the year with $53.7 million in cash and short-term investments, which reflects $1.4 million of cash used as part of our authorized $5 million stock buy-back program and $15 million of cash provided from the settlement of our patent litigation. This compares with cash and short-term investments of $60.7 million and $60.0 million at the end of fiscal third quarter 2001 and fiscal 2000, respectively. -- Crossroads improved its Days Sales Outstanding to 40 at the end of the fiscal fourth quarter, which is down from 46 days in the fiscal third quarter and 62 days at the end of fiscal fourth quarter 2000. -- Inventory Turns increased to 7.4 turns in the fiscal fourth quarter from 6.9 turns in fiscal third quarter and 4.6 turns at the end of fiscal 2000. -- Excluding amortization of stock-based compensation, Crossroads' gross margin was 41.4 percent for fiscal 2001. -- Operational Highlights -- Compaq Win. Crossroads won back Compaq Computer Corp. in an agreement under which both companies will develop a range of solutions for protecting data in networked storage environment with the first delivery expected in early 2002. -- Increased Quality. Crossroads increased product quality and reduced the ratio of support calls to its installed base, while growing the installed base by 58 percent. -- Multi-Protocol Connectivity. This fall, Crossroads launched the Crossroads 8000 with the Crossroads Visual Manager(tm) software as the first in a series of multi-protocol routers. As part of the launch, Crossroads also debuted its common code base, the Crossroads O/S, which will be used in all future products, simplifying and making more cost-effective multi-protocol connectivity solutions. The company's next generation multi-protocol router is expected to begin shipping in the second fiscal quarter 2002. -- Patent Victories. In August, a jury and judge validated a Crossroads patent against Chaparral Network Storage, Inc.'s RAID and router products using LUN zoning. The judge ordered Chaparral to stop shipping all products that contained the Crossroads technology. In June 2001, Pathlight Technology, a wholly owned subsidiary of Advanced Digital Information Corp., admitted both the validity and infringement of the same Crossroads patent in a $15 million settlement. -- ISCSI, InfiniBand Demonstrations. In industry forums, Crossroads demonstrated continued interoperability and multi-protocol connectivity with industry leaders and showed how customers can protect their critical data using leading technologies. In October, Crossroads unveiled its Internet SCSI (iSCSI) for storage networking during Storage Networking World. The demonstration showcased the combined technology and interoperability of Crossroads, Compaq, Intel, Microsoft, StorageTek, and VERITAS. In November, Crossroads introduced its SCSI RDMA Protocol (SRP), showcasing its continued interoperability and multi-protocol connectivity with StorageTek into InfiniBand fabrics. NOTE: Crossroads will hold a conference call (630/395-0447; passcode: 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 See HP. Hewlett-Packard - (HP) Hewlett-Packard designs, manufactures and services electronic products and systems for measurement, computation and communications. The company's products and services are used in industry, business, engineering, science, medicine and , 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 (Storage Technology Corporation, Louisville, CO) Acquired by Sun in 2005, StorageTek had been a leading provider of disk and tape storage solutions and services that was founded in 1969. , 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/Adexis, 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: ; Crossroads ability to develop new products and the uncertainty of market reception for such products, including the recently announced 5th generation product or any delays in the introduction of products; the deteriorating de·te·ri·o·rate v. de·te·ri·o·rat·ed, de·te·ri·o·rat·ing, de·te·ri·o·rates v.tr. To diminish or impair in quality, character, or value: economic environment, including in particular related expense reductions by organizations affecting their IT spending and budget; 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 ADIC and 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/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. to realize the benefit of the new agreement with Compaq; the uncertainty regarding the relationship with Compaq if its acquisition by Hewlett-Packard is consummated con·sum·mate tr.v. con·sum·mat·ed, con·sum·mat·ing, con·sum·mates 1. a. To bring to completion or fruition; conclude: consummate a business transaction. b. ; Crossroads' ability to retain and recruit key personnel to manage its business successfully; and that Crossroads' stock price could be volatile With regard to computer memory, it means "temporary" and not "highly changeable," which is the usual meaning of the word. See volatile memory. 1. (programming) volatile - volatile variable. 2. (storage) volatile - See non-volatile storage. 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 - -0-
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
July 31, Oct. 31,
2001 2001
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 50,719 $ 43,686
Short-term investments 10,000 10,000
--------- ---------
Total cash, cash equivalents
and short-term investments 60,719 53,686
Accounts receivable, net 4,206 3,768
Inventories, net 3,023 3,080
Prepaids and other current assets 1,539 1,894
--------- ---------
Total current assets 69,487 62,428
Notes receivable from related party, net 195 244
Property and equipment, net 11,395 11,021
Intangibles, net 1,067 997
Other assets 745 713
--------- ---------
Total assets $ 82,889 $ 75,403
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,607 $ 7,070
Accrued expenses 2,283 2,744
Accrued warranty costs 574 597
Deferred revenue 924 746
--------- ---------
Total current liabilities 10,388 11,157
Stockholders' equity:
Common stock 28 28
Additional paid-in capital 185,453 184,042
Deferred stock-based compensation (4,969) (3,914)
Notes receivable from stockholders (166) (118)
Accumulated deficit (107,588) (115,535)
Treasury stock at cost (257) (257)
--------- ---------
Total stockholders' equity 72,501 64,246
--------- ---------
Total liabilities and stockholders'
equity $ 82,889 $ 75,403
========= =========
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands, Except Share and Per Share Data)
Three Months Ended Fiscal Year Ended
October 31, October 31,
------------------- --------------------
2000 2001 2000 2001
------- ------- -------- --------
Revenue:
Product revenue $ 8,176 $ 8,455 $ 32,486 $ 35,896
Other revenue 177 257 562 1,434
------- ------- -------- --------
Total revenue 8,353 8,712 33,048 37,330
Cost of revenue 4,527 5,760 19,104 22,013
------- ------- -------- --------
Gross profit 3,826 2,952 13,944 15,317
------- ------- -------- --------
Operating expenses (a):
Sales and marketing 3,124 2,957 16,007 15,202
Research and development 3,821 5,182 13,143 18,118
General and
administrative 4,976 3,186 31,242 16,043
Amortization of
intangibles 3,596 70 8,808 9,680
Write-down of intangibles -- -- -- 25,007
Litigation settlement -- -- -- (15,000)
------- ------- -------- --------
Total operating
expenses 15,517 11,395 69,200 69,050
------- ------- -------- --------
Loss from operations (11,691) (8,443) (55,256) (53,733)
Other income, net 1,047 496 4,228 2,776
------- ------- -------- --------
Net loss before cumulative
effect of accounting
change (10,644) (7,947) (51,028) (50,957)
Cumulative effect of
accounting change (b) -- -- -- (130)
------- ------- -------- --------
Net loss $ (10,644) $(7,947) $(51,028) $(51,087)
======= ======= ======== ========
Basic and diluted net loss per share:
Before cumulative effect
of accounting change $ (0.39) $ (0.29) $ (1.93) $ (1.85)
Cumulative effect of
accounting change (b) -- -- -- (0.01)
------- ------- -------- --------
Basic and diluted
net loss per share $ (0.39) $ (0.29) $ (1.93) $ (1.86)
======= ======= ======== ========
Shares used in computing
basic and diluted net
loss per share 26,958,395 27,431,706 26,466,601 27,414,078
========== ========== ========== ==========
---------------------------------------------------------
(a) During the fiscal year ended October 31, 2001, the Company
allocated stock-based compensation to specific line items within
the statement of operations based on the classification of the
employees who received the benefit. Stock-based compensation for
prior periods has been reclassified to conform to the October 31,
2001 presentation. Stock-based compensation for the periods
indicated was allocated as follows:
Three Months Fiscal Year
Ended Ended
October 31, October 31,
-------------- ---------------
2000 2001 2000 2001
------ ------ ------ ------
Cost of revenue $ 46 $ 23 $ 288 $ 123
Sales and marketing 69 26 4,373 215
Research and development 84 41 528 440
General and administrative 2,084 965 22,501 6,283
------ ------ ------ ------
Total stock-based compensation $ 2,283 $ 1,055 $27,690 $ 7,061
======= ======= ======= =======
(b) 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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