Crossroads Systems Reports Third Quarter Results; Reduced IT Spending Impacts Results, While Compaq Win, Increased Cash Position Signal Improved Long-Term Outlook.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)--Aug. 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 results for the fiscal third quarter ended July July: see month. 31, 2001, and announced a new agreement with 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/. . In a separate press release, Crossroads announced that 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 operating officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. , will succeed Brian The name Brian (sometimes spelled Bryan) comes from an Irish backround. It is of Celtic origin and its meaning may be "hill" or "strong, noble, and high"[1]. R. Smith as chief executive officer on Nov. 1, 2001. Smith will remain Crossroads chairman of the board, focused on the company's technology direction. Under the agreement with 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 , the two companies will develop a range of solutions for protecting data in networked storage environments with the first delivery in early 2002. "Our re-engagement with Compaq is a significant achievement for Crossroads," said Brian R. Smith, Crossroads chairman and chief executive officer. "It reaffirms our leadership position in SAN technology." Total revenues for the third quarter of fiscal 2001 were $8.4 million compared with $10.2 million for the second quarter of fiscal 2001 and $4.8 million in the third 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 third quarter of fiscal 2001 was $7.1 million, or $0.26 per share. 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 $28.7 million. These non-cash charges include stock-based compensation, 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. , and a $25.0 million write down of intangible assets. Pro forma net loss for the second quarter of fiscal 2001 was $5.9 million, or $0.21 per share, and a pro forma net loss for the third quarter of fiscal 2000 was $8.0 million, or $0.30 per share. Actual net loss for the third quarter of fiscal 2001 was $20.8 million, or $0.75 per share. Actual net loss for the second quarter of fiscal 2001 was $11.6 million, or $0.42 per share, and actual net loss for the third quarter of fiscal 2000 was $17.8 million, or $0.67 per share. "The continued economic slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. and the related reduction in IT spending adversely affected our revenue during the third quarter and will likely do so through the remainder of our fiscal year," said Larry Sanders, Crossroads president and chief operating officer. "We believe that the Compaq win, combined with our recent expense actions and the $15 million patent litigation settlement, make us a stronger company going forward." Recent highlights include: -- Patent Portfolio Victory: Crossroads received a $15 million cash payment, which represents past damages and a pre-paid royalty from Pathlight Technology Inc. Pathlight, a wholly owned subsidiary of Advanced Digital Information Corporation (ADIC), admitted both the validity and infringement of one of the Crossroads patents. -- Crossroads 8000 Launch: The company launched the Crossroads 8000 storage router and management software, the Crossroads Visual Manager(tm) that increases intelligence on the SAN. The 8000 is the first in a new line of multi-protocol storage routers designed to connect storage devices into Fibre Channel and iSCSI storage networks, and InfiniBand fabrics. -- Expanded StorageTek Partnership: Crossroads expanded its relationship with StorageTek with the integration of storage routers for the StorageTek L20/L40/L80 Series of Tape Libraries. -- Interoperability Successes: During the quarter, EMC qualified the Crossroads 4x50 line as E-Lab Tested; Crossroads received Brocade Fabric Aware(tm) Program status for 4x50 interoperability; and Crossroads and Gadzoox signed a collaborative agreement to complete interoperability testing and certification, and exchange technical information to support mutual customers. NOTE: Crossroads will hold a conference call (630/395-0447); password A secret word or code used to serve as a security measure against unauthorized access to data. It is normally managed by the operating system or DBMS. However, the computer can only verify the legitimacy of the password, not the legitimacy of the user. See NCSC. 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. Crossroads issued a separate press release announcing its executive transition. 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: ; 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 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; 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 Polaris (pōlâr`ĭs) or North Star, star nearest the north celestial pole (see equatorial coordinate system). Communications and any subsequent acquisition or strategic relationship; 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 --
Crossroads Systems Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
(In Thousands)
April 30, July 31,
2001 2001
------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 49,412 $ 50,719
Short-term investments 1,967 10,000
------------- --------------
Total cash, cash equivalents
and short-term investments 51,379 60,719
Accounts receivable, net 5,133 4,206
Inventories, net 3,991 3,023
Prepaids and other current assets 1,556 1,539
------------- --------------
Total current assets 62,059 69,487
Notes receivable from related
party, net 165 195
Property and equipment, net 10,938 11,395
Intangibles, net 28,492 1,067
Other assets 552 745
------------- --------------
Total assets $ 102,206 $ 82,889
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,709 $ 6,607
Accrued expenses 2,505 2,283
Accrued warranty costs 538 574
Deferred revenue 844 924
------------- --------------
Total current liabilities 10,596 10,388
Stockholders' equity:
Common stock 28 28
Additional paid-in capital 185,048 185,453
Deferred stock-based compensation (6,240) (4,969)
Notes receivable from stockholders (163) (166)
Accumulated deficit (86,806) (107,588)
Treasury stock at cost (257) (257)
------------- --------------
Total stockholders' equity 91,610 72,501
------------- --------------
Total liabilities and
stockholders' equity $ 102,206 $ 82,889
============= ==============
CROSSROADS SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In Thousands, Except Share and Per Share Data)
Three Months Ended
July 31,
--------------------------
2000 2001
---- ----
Revenue:
Product revenue $ 4,630 $ 7,731
Other revenue 149 699
------------ ------------
Total revenue 4,779 8,430
Cost of revenue 4,189 5,240
------------ ------------
Gross profit 590 3,190
------------ ------------
Operating expenses (1):
Sales and marketing 7,270 3,751
Research and development 4,187 4,572
General and administrative 4,367 3,806
Amortization of intangibles 3,596 2,418
Write-down of intangibles -- 25,007
Litigation settlement -- (15,000)
------------ ------------
Total operating expenses 19,420 24,554
------------ ------------
Loss from operations (18,830) (21,364)
Other income (expense):
Interest and dividend income 1,003 583
Interest expense (2) --
Other income (expense) (1) (1)
------------ ------------
Other income, net 1,000 582
------------ ------------
Net loss before cumulative effect of
accounting change (17,830) (20,782)
Cumulative effect of accounting change
(2) -- --
------------ ------------
Net loss $ (17,830) $ (20,782)
============ ============
Basic and diluted net loss per share:
Before cumulative effect of
accounting change $ (0.67) $ (0.75)
Cumulative effect of accounting
change (2) -- --
------------ ------------
Basic and diluted net loss per
share $ (0.67) $ (0.75)
============ ============
Shares used in computing basic and
diluted net loss per share 26,677,275 27,535,887
============ ============
Nine Months Ended
July 31,
--------------------------
2000 2001
---- ----
Revenue:
Product revenue $ 24,309 $ 27,441
Other revenue 386 1,177
------------ ------------
Total revenue 24,695 28,618
Cost of revenue 14,578 16,253
------------ ------------
Gross profit 10,117 12,365
------------ ------------
Operating expenses (1):
Sales and marketing 12,882 12,245
Research and development 9,322 12,936
General and administrative 26,267 12,857
Amortization of intangibles 5,212 9,610
Write-down of intangibles -- 25,007
Litigation settlement -- (15,000)
------------ ------------
Total operating expenses 53,683 57,655
------------ ------------
Loss from operations (43,566) (45,290)
Other income (expense):
Interest and dividend income 3,302 2,265
Interest expense (33) --
Other income (expense) (87) 15
------------ ------------
Other income, net 3,182 2,280
------------ ------------
Net loss before cumulative effect of
accounting change (40,384) (43,010)
Cumulative effect of accounting change
(2) -- (130)
------------ ------------
Net loss $ (40,384) $ (43,140)
============ ============
Basic and diluted net loss per share:
Before cumulative effect of
accounting change $ (1.55) $ (1.56)
Cumulative effect of accounting
change (2) -- (0.01)
------------ ------------
Basic and diluted net loss per
share $ (1.55) $ (1.57)
============ ============
Shares used in computing basic and
diluted net loss per share 26,134,537 27,408,137
============ ============
(1) During the fiscal quarter ended July 31, 2001, the Company allocated stock-based compensation to specific line items within the statement of operations See Income statement. based on the classification of the employees who received the benefit. Stock-based compensation for prior periods has been reclassified to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the July 31, 2001 presentation. Stock-based compensation for the periods indicated was allocated as follows:
Three Months Ended Nine Months Ended
July 31, July 31,
-------------------- -------------------
2000 2001 2000 2001
---- ---- ---- ----
Cost of revenue $ 73 $ 28 $ 242 $ 100
Sales and marketing 3,926 54 4,305 189
Research and development 131 52 444 399
General and administrative 2,154 1,145 20,417 5,318
-------- -------- -------- --------
Total stock-based
compensation $ 6,284 $ 1,279 $ 25,408 $ 6,006
======== ======== ======== ========
(2) Effective Nov. 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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