Wednesday, January 22, 2003 10:06:32 AM
SAN JOSE, Calif.--(BUSINESS WIRE)--Jan. 21, 2003--Echelon Corporation (Nasdaq:ELON - News) today announced financial results for the fourth quarter ended December 31, 2002, exceeding analysts' expectations.
"This has been an outstanding year for Echelon, and this quarter was no exception; we are very pleased to have again exceeded both our own and analysts' expectations," said M. Kenneth Oshman, Echelon's chairman and chief executive officer. "Our project with Enel to replace the 27 million electric meters in its service territory with LonWorks® enabled meters has reached its full production pace and continues to go very well. However, we do face challenges as Enel provides for the transition from the current metering kit to the PL 3120® Power Line Smart Transceiver. This transition should result in improved margins for Echelon but any transition 'hiccups' could cause temporary revenue reductions. Ultimately, we do not believe that these challenges will have any impact on the overall program. Also, Finmek, one of Enel's meter manufacturers, may not be able to extend an existing standby letter of credit in Echelon's favor in a timely manner, which could delay production of meters for the Enel project and ultimately adversely affect Echelon's revenues. In our non-Enel business, economic conditions across the globe remain tight, and we do not yet see signs of sustained improvement. Despite this continued economic weakness, based on the market reception of new products we recently released and our expectations for those planned to be released this year, we believe that 2003 will be a year of solid execution and growth for Echelon's non-Enel business."
Revenues for the quarter ended December 31, 2002 were $30.6 million, a decrease of 5% over revenues of $32.1 million for the same period in 2001. Net income for the quarter ended December 31, 2002 was $3.6 million, or 9 cents per share on a fully diluted basis, based on a weighted average of 40,556,000 common shares outstanding, compared to net income of $5.2 million, or 13 cents per share on a fully diluted basis, based on a weighted average of 40,612,000 common shares outstanding for the fourth quarter of 2001.
Revenues for the year ended December 31, 2002 were $122.8 million, an increase of 60% over revenues of $76.6 million for the year ended December 31, 2001. Net income for the year ended December 31, 2002 was $16.8 million, or 41 cents per share on a fully diluted basis, based on a weighted average of 40,725,000 common shares outstanding, compared to net income of $6.0 million, or 15 cents per share on a fully diluted basis, based on a weighted average of 41,141,000 common shares outstanding for the year ended December 31, 2001.
Gross margin for the quarter ended December 31, 2002 was 50.3% compared to 47.4% for the same period in 2001. Gross margin for the year ended December 31, 2002 was 51.2% compared to 51.4% for the year ended December 31, 2001. Total operating expenses for the quarter ended December 31, 2002 were $12.3 million compared to total operating expenses of $10.8 million for the same period in 2001. Total operating expenses for the year ended December 31, 2002 were $48.5 million, compared to $39.8 million for the year ended December 31, 2001.
There were a number of significant events and announcements during the fourth quarter, which are highlighted below:
At the LonWorld(TM) 2002 Exhibition and Conference held in Toronto, Canada, Mr. Shirou Yokota, Executive Officer and General Manager of Information Systems Division, Fuji Electric Co, Ltd talked about Fuji Electric's extensive commitment to the LonWorks platform as an Echelon Open Systems Alliance Logo Master Program member. Scott Burroughs, worldwide Commercial Segment Manager for Device Solutions for IBM's Pervasive Computing Division also gave a keynote address presenting IBM's vision of the eBusiness to Smart Devices initiative.
Echelon introduced the new, second generation LPT-11 Link Power Twisted Pair transceiver at the LonWorld event. The LPT-11 transceiver sends both power and control data over low-cost, twisted pair wiring making it very well suited for use in lighting, fire/life safety, security, access control, HVAC, and factory control markets, as well as a wide variety of custom home, building, and industrial automation applications. The LPT-11 transceiver eliminates the need for expensive local power supplies at the device by distributing power from a central power supply using the same wires as those used for network signaling. As previously announced, Echelon expects the LPT-11 transceiver to start shipping in volume this quarter.
Also at the LonWorld event, Echelon announced its support in establishing PLUG, the Polish LonUsers® Group, bringing the total count of European LonUsers International groups to 13. PLUG was formed in response to growing momentum and support for the LonWorks platform in the region.
In November, Echelon appointed Michael E. Lehman, the former Executive Vice President, Corporate Resources and Chief Financial Officer of Sun Microsystems, Inc., to its Board of Directors.
In December, Echelon announced that the Building Control Solutions business of Honeywell has incorporated Echelon's LNS® software platform and network operating system into its flagship product line for building automation and controls. Honeywell released its new LNS based CARE(TM) 4.0 network configuration and engineering software. Additionally, Honeywell's Excel® 10, Excel 50, and Excel 500 products all include LonWorks networking. Honeywell has also created LNS device plug-ins for the Excel 10 devices within the EXCEL 5000 OPEN(TM) System enabling the company to offer an open, LNS and LonWorks based building automation backbone.
As discussed in Echelon's December 3rd mid-quarter analyst call, last quarter Echelon began shipments of the i.LON(TM) 100 Internet Server, the latest extension to the i.LON family of Internet connection products. Where the i.LON 1000 Server provides extremely high performance device to device communications routing over the Internet or any IP channel and the i.LON 10 Ethernet adaptor is well suited for low cost and small installations requiring a direct Ethernet connection to LNS based service centers, the i.LON 100 adds low cost system level applications and the ability to connect any LonWorks network to industry standard web services or other XML aware software.
For those interested in further discussion regarding this release, Echelon's management will participate in a conference call tomorrow, January 22, at 2:00 pm PST. To access the conference call, dial 1-800-388-8975 (callers outside the US please use +1-973-694-2225) no earlier than 10 minutes prior to the start of the call; however, due to a limited number of available phone lines, the company asks that only those persons without Web access call this number. The call will be available live tomorrow, and for playback on the Investor Relations section of Echelon's web site (www.echelon.com) through January 28, 2003.
About Echelon Corporation
Echelon Corporation is the creator of the LonWorks platform, the world's most widely used standard for connecting everyday devices such as appliances, thermostats, air conditioners, electric meters, and lighting systems to each other and to the Internet. Echelon's hardware and software products enable manufacturers and integrators to create smart devices and systems that lower cost, increase convenience, improve service, and enhance productivity, quality, and safety. Thousands of companies have developed and installed LonWorks products and more than 24 million LonWorks enabled processors have been shipped for use in homes, buildings, factories, trains, and other systems worldwide.
The protocol underlying LonWorks networks and the signaling technology used by Echelon's power line and free topology transceivers have been adopted as standards by the American National Standards Institute (ANSI). Echelon is also a founding member of the LonMark Interoperability Association, an open industry forum of hundreds of leading manufacturers, integrators, and users dedicated to promoting the use of interoperable LonWorks devices. More information is available at http://www.lonmark.org. Further information regarding Echelon can be found at http://www.echelon.com.
Note to Editors: Echelon, LonWorks, LonUsers, LNS, and the Echelon logo are trademarks of Echelon Corporation registered in the United States and other countries. LonWorld and i.LON are trademarks of Echelon Corporation. Other marks belong to their respective holders.
This press release may contain statements relating to future plans, events or performance. These statements include statements related to the expected pace of the Enel project, including the timetable for transition to the PL 3120 Power Line Smart Transceiver by Enel and Finmek's ability to extend its standby letter of credit in favor of Echelon; the performance of non-Enel business; Echelon's overall performance and execution for 2003; and the timing of LPT-11 transceiver shipments. Such statements may involve risks and uncertainties, including risks associated with uncertainties pertaining to the timing and level of customer orders, demand for products and services, risks that the R&D activities or subsequent product deployment activities with Enel are not successful, do not meet their target dates, or are terminated, or that the contemplated transactions are challenged by third parties, risks that our development projects with other parties are not successful, risks relating to the development and growth of markets for Echelon's products and services and the ability of those products and services to meet customer and consumer expectations, and other risks identified in Echelon's SEC filings. Actual results, events and performance may differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Echelon undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
The financial statements that follow should be read in conjunction with the notes set forth in Echelon's Form 10-K when filed with the Securities and Exchange Commission.
-0-
The best weapon against "fear" is "facts"!!
"This has been an outstanding year for Echelon, and this quarter was no exception; we are very pleased to have again exceeded both our own and analysts' expectations," said M. Kenneth Oshman, Echelon's chairman and chief executive officer. "Our project with Enel to replace the 27 million electric meters in its service territory with LonWorks® enabled meters has reached its full production pace and continues to go very well. However, we do face challenges as Enel provides for the transition from the current metering kit to the PL 3120® Power Line Smart Transceiver. This transition should result in improved margins for Echelon but any transition 'hiccups' could cause temporary revenue reductions. Ultimately, we do not believe that these challenges will have any impact on the overall program. Also, Finmek, one of Enel's meter manufacturers, may not be able to extend an existing standby letter of credit in Echelon's favor in a timely manner, which could delay production of meters for the Enel project and ultimately adversely affect Echelon's revenues. In our non-Enel business, economic conditions across the globe remain tight, and we do not yet see signs of sustained improvement. Despite this continued economic weakness, based on the market reception of new products we recently released and our expectations for those planned to be released this year, we believe that 2003 will be a year of solid execution and growth for Echelon's non-Enel business."
Revenues for the quarter ended December 31, 2002 were $30.6 million, a decrease of 5% over revenues of $32.1 million for the same period in 2001. Net income for the quarter ended December 31, 2002 was $3.6 million, or 9 cents per share on a fully diluted basis, based on a weighted average of 40,556,000 common shares outstanding, compared to net income of $5.2 million, or 13 cents per share on a fully diluted basis, based on a weighted average of 40,612,000 common shares outstanding for the fourth quarter of 2001.
Revenues for the year ended December 31, 2002 were $122.8 million, an increase of 60% over revenues of $76.6 million for the year ended December 31, 2001. Net income for the year ended December 31, 2002 was $16.8 million, or 41 cents per share on a fully diluted basis, based on a weighted average of 40,725,000 common shares outstanding, compared to net income of $6.0 million, or 15 cents per share on a fully diluted basis, based on a weighted average of 41,141,000 common shares outstanding for the year ended December 31, 2001.
Gross margin for the quarter ended December 31, 2002 was 50.3% compared to 47.4% for the same period in 2001. Gross margin for the year ended December 31, 2002 was 51.2% compared to 51.4% for the year ended December 31, 2001. Total operating expenses for the quarter ended December 31, 2002 were $12.3 million compared to total operating expenses of $10.8 million for the same period in 2001. Total operating expenses for the year ended December 31, 2002 were $48.5 million, compared to $39.8 million for the year ended December 31, 2001.
There were a number of significant events and announcements during the fourth quarter, which are highlighted below:
At the LonWorld(TM) 2002 Exhibition and Conference held in Toronto, Canada, Mr. Shirou Yokota, Executive Officer and General Manager of Information Systems Division, Fuji Electric Co, Ltd talked about Fuji Electric's extensive commitment to the LonWorks platform as an Echelon Open Systems Alliance Logo Master Program member. Scott Burroughs, worldwide Commercial Segment Manager for Device Solutions for IBM's Pervasive Computing Division also gave a keynote address presenting IBM's vision of the eBusiness to Smart Devices initiative.
Echelon introduced the new, second generation LPT-11 Link Power Twisted Pair transceiver at the LonWorld event. The LPT-11 transceiver sends both power and control data over low-cost, twisted pair wiring making it very well suited for use in lighting, fire/life safety, security, access control, HVAC, and factory control markets, as well as a wide variety of custom home, building, and industrial automation applications. The LPT-11 transceiver eliminates the need for expensive local power supplies at the device by distributing power from a central power supply using the same wires as those used for network signaling. As previously announced, Echelon expects the LPT-11 transceiver to start shipping in volume this quarter.
Also at the LonWorld event, Echelon announced its support in establishing PLUG, the Polish LonUsers® Group, bringing the total count of European LonUsers International groups to 13. PLUG was formed in response to growing momentum and support for the LonWorks platform in the region.
In November, Echelon appointed Michael E. Lehman, the former Executive Vice President, Corporate Resources and Chief Financial Officer of Sun Microsystems, Inc., to its Board of Directors.
In December, Echelon announced that the Building Control Solutions business of Honeywell has incorporated Echelon's LNS® software platform and network operating system into its flagship product line for building automation and controls. Honeywell released its new LNS based CARE(TM) 4.0 network configuration and engineering software. Additionally, Honeywell's Excel® 10, Excel 50, and Excel 500 products all include LonWorks networking. Honeywell has also created LNS device plug-ins for the Excel 10 devices within the EXCEL 5000 OPEN(TM) System enabling the company to offer an open, LNS and LonWorks based building automation backbone.
As discussed in Echelon's December 3rd mid-quarter analyst call, last quarter Echelon began shipments of the i.LON(TM) 100 Internet Server, the latest extension to the i.LON family of Internet connection products. Where the i.LON 1000 Server provides extremely high performance device to device communications routing over the Internet or any IP channel and the i.LON 10 Ethernet adaptor is well suited for low cost and small installations requiring a direct Ethernet connection to LNS based service centers, the i.LON 100 adds low cost system level applications and the ability to connect any LonWorks network to industry standard web services or other XML aware software.
For those interested in further discussion regarding this release, Echelon's management will participate in a conference call tomorrow, January 22, at 2:00 pm PST. To access the conference call, dial 1-800-388-8975 (callers outside the US please use +1-973-694-2225) no earlier than 10 minutes prior to the start of the call; however, due to a limited number of available phone lines, the company asks that only those persons without Web access call this number. The call will be available live tomorrow, and for playback on the Investor Relations section of Echelon's web site (www.echelon.com) through January 28, 2003.
About Echelon Corporation
Echelon Corporation is the creator of the LonWorks platform, the world's most widely used standard for connecting everyday devices such as appliances, thermostats, air conditioners, electric meters, and lighting systems to each other and to the Internet. Echelon's hardware and software products enable manufacturers and integrators to create smart devices and systems that lower cost, increase convenience, improve service, and enhance productivity, quality, and safety. Thousands of companies have developed and installed LonWorks products and more than 24 million LonWorks enabled processors have been shipped for use in homes, buildings, factories, trains, and other systems worldwide.
The protocol underlying LonWorks networks and the signaling technology used by Echelon's power line and free topology transceivers have been adopted as standards by the American National Standards Institute (ANSI). Echelon is also a founding member of the LonMark Interoperability Association, an open industry forum of hundreds of leading manufacturers, integrators, and users dedicated to promoting the use of interoperable LonWorks devices. More information is available at http://www.lonmark.org. Further information regarding Echelon can be found at http://www.echelon.com.
Note to Editors: Echelon, LonWorks, LonUsers, LNS, and the Echelon logo are trademarks of Echelon Corporation registered in the United States and other countries. LonWorld and i.LON are trademarks of Echelon Corporation. Other marks belong to their respective holders.
This press release may contain statements relating to future plans, events or performance. These statements include statements related to the expected pace of the Enel project, including the timetable for transition to the PL 3120 Power Line Smart Transceiver by Enel and Finmek's ability to extend its standby letter of credit in favor of Echelon; the performance of non-Enel business; Echelon's overall performance and execution for 2003; and the timing of LPT-11 transceiver shipments. Such statements may involve risks and uncertainties, including risks associated with uncertainties pertaining to the timing and level of customer orders, demand for products and services, risks that the R&D activities or subsequent product deployment activities with Enel are not successful, do not meet their target dates, or are terminated, or that the contemplated transactions are challenged by third parties, risks that our development projects with other parties are not successful, risks relating to the development and growth of markets for Echelon's products and services and the ability of those products and services to meet customer and consumer expectations, and other risks identified in Echelon's SEC filings. Actual results, events and performance may differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Echelon undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
The financial statements that follow should be read in conjunction with the notes set forth in Echelon's Form 10-K when filed with the Securities and Exchange Commission.
-0-
ECHELON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December December
31, 31,
2002 2001
ASSETS
Current Assets:
Cash, cash equivalents and short-term
investments $ 134,489 $ 111,653
Accounts receivable, net 22,930 29,113
Inventories 7,991 10,316
Other current assets 3,217 11,556
---------- ----------
Total current assets 168,627 162,638
Property and equipment, net 16,677 16,480
Other long-term assets 22,188 6,536
---------- ----------
$ 207,492 $ 185,654
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 5,993 $ 7,409
Accrued liabilities 3,773 2,426
Current portion of deferred revenues 2,541 1,055
---------- ----------
Total current liabilities 12,307 10,890
---------- ----------
Deferred rent 167 47
Total stockholders' equity 195,018 174,717
---------- ----------
$ 207,492 $ 185,654
========== ==========
ECHELON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Three Months Twelve Months
Ended Ended
December 31, December 31,
(unaudited)
2002 2001 2002 2001
REVENUES:
Product $ 30,295 $ 31,763 $121,454 $ 74,777
Service 286 338 1,380 1,812
--------- --------- --------- ---------
Total revenues 30,581 32,101 122,834 76,589
--------- --------- --------- ---------
COST OF REVENUES:
Cost of product 14,483 16,292 57,059 34,842
Cost of service 730 606 2,880 2,347
--------- --------- --------- ---------
Total cost of revenues 15,213 16,898 59,939 37,189
--------- --------- --------- ---------
Gross profit 15,368 15,203 62,895 39,400
--------- --------- --------- ---------
OPERATING EXPENSES:
Product development 5,055 4,820 21,456 17,028
Sales and marketing 4,358 4,316 17,291 15,787
General and administrative 2,839 1,703 9,711 6,942
--------- --------- --------- ---------
Total operating expenses 12,252 10,839 48,458 39,757
--------- --------- --------- ---------
Income/(loss) from operations 3,116 4,364 14,437 (357)
--------- --------- --------- ---------
Interest and other income, net 844 1,083 3,777 6,655
--------- --------- --------- ---------
Income before provision
for income taxes 3,960 5,447 18,214 6,298
Provision for income taxes 317 218 1,457 252
--------- --------- --------- ---------
NET INCOME $ 3,643 $ 5,229 $ 16,757 $ 6,046
========= ========= ========= =========
NET INCOME PER SHARE:
Basic $ 0.09 $ 0.14 $ 0.42 $ 0.16
========= ========= ========= =========
Diluted $ 0.09 $ 0.13 $ 0.41 $ 0.15
========= ========= ========= =========
SHARES USED IN COMPUTING
NET INCOME PER SHARE:
Basic 39,685 38,502 39,468 38,443
========= ========= ========= =========
Diluted 40,556 40,612 40,725 41,141
========= ========= ========= =========
ECHELON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Twelve Months
Ended
December 31,
2002 2001
Cash flows provided by (used in)
operating activities:
Net income $16,757 $ 6,046
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 4,062 2,322
In-process research and development 400 --
Provision for doubtful accounts 55 210
Deferred compensation expense 31 184
Loss on disposal of fixed assets 7 74
Change in operating assets and liabilities:
Accounts receivable 6,161 (19,775)
Inventories 2,325 (4,571)
Other current assets 8,354 (6,353)
Accounts payable (2,183) 3,209
Accrued liabilities 1,194 820
Deferred revenues 1,445 (51)
Deferred rent 120 44
-------- --------
Net cash provided by (used in)
operating activities 38,728 (17,841)
-------- --------
Cash flows used in investing activities:
Purchase of available-for-sale short-term
investments (86,647) (79,454)
Proceeds from maturities and sales of
available-for-sale short-term investments 75,520 24,162
Unrealized gains (losses) on securities (178) 695
Purchase of BeAtHome.com, Inc. (5,811) --
Purchase of restricted investments (10,526) --
Change in other long-term assets 358 (5,769)
Capital expenditures (3,425) (15,256)
-------- --------
Net cash used in investing activities (30,709) (75,622)
-------- --------
Cash flows provided by (used in) financing activities:
Proceeds from issuance of common stock 3,106 2,549
Repurchase of common stock -- (3,191)
-------- --------
Net cash provided by (used in) financing activities 3,106 (642)
-------- --------
Effect of exchange rates on cash: 584 (327)
-------- --------
Net increase in cash and cash equivalents 11,709 (94,432)
Cash and cash equivalents:
Beginning of period 23,232 117,664
-------- --------
End of period $34,941 $23,232
======== ========
--------------------------------------------------------------------------------
Contact:
Echelon Corporation
Steve Nguyen, 408/938-5272
qnguyen@echelon.com
Chris Stanfield, 408/938-5243
cstanfield@echelon.com
The best weapon against "fear" is "facts"!!
The best weapon against "fear" is "facts"!!
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