AST Research Reports Record First-Quarter Revenues; Sales Top $500 Million; Unit Shipments Up 111 Percent
IRVINE, Calif. — October 26, 1993 — Consistent with its efforts to capture additional market share and increased revenue and unit shipment levels during fiscal year 1994, AST Research Inc. (NASDAQ:ASTA) Tuesday announced record revenues of $514.4 million for the first quarter ended Oct. 2, 1993.
First-quarter revenues increased 80 percent over the comparable prior-year period and 26 percent over the immediately preceding quarter.
Fiscal year 1994 first quarter net income was $8.2 million vs. $7.6 million for the prior-year period. Earnings per share were 26 cents for the first quarter of fiscal year 1994 as compared with the prior-year first-quarter earnings per share of 24 cents.
"This quarter has been a period of significant change and momentum for the company," said Safi Qureshey, AST president and chief executive officer. "As we integrate the purchased assets of Tandy Corporation's PC manufacturing operations, we have continued to increase our revenues and market share position."
During the first quarter, AST completed the acquisition of Tandy Corp.'s PC operations — including the GRiD North American and the GRiD/Victor European sales divisions — and announced a final purchase price of $111.7 million, which was paid with $15 million in cash and a $96.7 million three-year promissory note.
Record Unit Shipments
AST also announced record PC shipments worldwide during the quarter of 332,000 units, representing a 111 percent increase over the prior year period and a 38 percent increase over the immediately preceding quarter. The quarter's total included more than 53,000 notebook systems, including the new value-line Bravo NB and Advantage! Explorer notebook computers which were introduced during the quarter.
Strong Domestic Sales Boosts Worldwide Total
Strong domestic performance led first quarter fiscal year 1994 revenues.
North American sales were $355.1 million, representing a 115 percent increase over first quarter fiscal year 1993 levels.
North American sales growth increases were strongest in the consumer retail channel during the quarter, reaching an all-time high of $146 million, which represented a 385 percent increase over the prior year period.
According to the most recent report from International Data Corp., AST's market share increased to 6.3 percent during the second calendar quarter of 1993, up from 5.9 percent in the first quarter of calendar year 1993. These figures include AST, Tandy and GRiD brands manufactured by AST.
Total international sales increased 31 percent to $159.3 million, with European revenues up 44 percent during the quarter. As the industry overall experiences slower growth in Europe, AST has seen an expanded base of customers due in part to the Tandy acquisition, coupled with strong sales in the United Kingdom and Nordic countries.
Balance Sheet Highlights
At Oct. 2, 1993, total cash and cash equivalents were $62.3 million, as compared with $121.6 million at July 3, 1993. Short-term borrowings totaled $82.4 million on Oct. 2, 1993, compared with $59.2 million at July 3, 1993. During the quarter, cash was used to fund increases in working capital, including inventory procurements. Total inventory was $396.2 million on Oct. 2, 1993, up from $342.3 million on July 3, 1993.
"We expect our investment in inventory, coupled with operational improvements, will allow us to increase our unit volume during the current quarter," said Qureshey.
AST recently signed a new $225 million line of credit facility provided through a consortium of 10 multinational banks. The line of credit replaces a previous $175 million facility and provides the company with additional financial flexibility to continue increasing its growing worldwide PC market share.
Accounts receivable totaled $300.1 million on Oct. 2, 1993, which represented 53 days sales outstanding, compared with 52 days reported on July 3, 1993.
Major Product Introductions, Industry Awards
Brisk new product introductions during the quarter transitioned a major portion of the company's product offerings in the Advantage!, Bravo, Premmia, Premium SE, GRiD and PowerExec brand lines.
New pre-configured consumer products introduced in the Advantage! family included the Advantage! Pro line of value-line mini-towers, the Advantage! Explorer value-line notebook and the Advantage! Adventure multimedia PC.
Other new product introductions during the quarter included value-line mini-towers, desktops and notebooks in the Bravo line; a new family of high-performance Premmia server models in mini-tower and full size configurations; the Pentium-based Premium SE server; the GRiD PalmPad SL with wireless radio communications; and the PowerExec 4/25SL Special Edition which is bundled with six end-user application software programs.
During the first quarter, AST received awards from prominent trade publications for product design and corporate performance. Product awards received during the quarter included "Editor's Choice" to the Manhattan SMP superserver from PC Magazine, UK Edition; "Best Buy" awards from PC World for the PowerExec 4/25SL Color Plus (July 1993) and Advantage! Plus 486DX2/66 (Sept. 1993); and "Best Buy" for the Advantage! Plus 486DX/33 mini tower and Advantage! Pro 486SX/33 from the editors of Consumer's Digest. VARBusiness magazine readers voted AST as the No. 1 PC/notebook supplier to value added resellers in the publication's Fifth Annual Report Card awards, while World Trade ranked the company No. 15 on its 1992 "Top 100" list of mid-sized multinational corporations.
Worldwide Expansion
During the quarter, AST continued to increase its presence in Europe, as well as in emerging markets. The company opened new subsidiaries in Norway, Denmark and Malaysia, and also significantly expanded the facility at its Middle East subsidiary in the United Arab Emirates. In addition, new sales offices were opened in Shanghai and Chengdu, China, to complement its existing Beijing location.
To enhance the company's No. 1 market share position in the People's Republic of China, AST signed a joint-venture agreement with the Chinese government to develop new manufacturing, distribution, sales and service operations in Tianjin.
Groundbreaking on the new facility will begin this quarter. Earlier in the quarter, the company completed the largest PC contract ever negotiated in China — an $80 million deal with Legend Technology involving an estimated 40,000 PCs.
Outlook
"AST will continue to pursue its worldwide market share expansion strategy during fiscal year 1994," said Qureshey. "Our focus remains on successfully integrating the acquired Tandy business units into our high-volume/low-cost manufacturing model, while maintaining high levels of customer satisfaction. We are continuing to experience strong demand and backlog levels for our products, as the trend of customer preference towards products from brand-name PC suppliers progresses.
"We are also working to leverage our additional manufacturing capacity, volume purchasing strength and new product technologies to strengthen our position as a Tier One PC manufacturer."
Company Background
AST Research, ranked No. 367 on the 1992 Fortune 500 list of America's largest industrial companies, develops personal computer products ranging from hand-held portable computers to superservers under the Advantage!, Bravo, Premmia, Manhattan SMP, PowerExec, GRiD, Victor and PenRight! brand names.
The company reported record sales of $1.412 billion and record volume shipment increases of 69 percent for fiscal year ended July 3, 1993.
In July 1993, AST acquired Tandy Corp.'s PC manufacturing business. The acquisition makes AST the No. 4 U.S. and No. 6 worldwide personal computer company, according to the calendar year 1992 unit volume shipment data from International Data Corp. These figures include AST, Tandy and GRiD brands manufactured by AST.
The company is represented in 100 countries and operates 41 subsidiaries and sales offices worldwide. AST's corporate headquarters is located at 16215 Alton Parkway, Irvine, Calif., 92718. Telephone: 714/727-4141, 800/876-4278. Fax: 714/727-9355.
AST RESEARCH INC.
Consolidated Condensed Balance Sheets
(In thousands)
Oct. 2, July 3,
1993 1993
(Unaudited)
Assets:
Cash and short-term investments $ 62,306 $121,600
Accounts receivable, net 300,078 236,020
Inventories 396,176 342,307
Other current assets 61,796 61,288
Total current assets 820,356 761,215
Property and equipment, net 97,664 94,922
Other assets 29,977 30,022
Total assets $947,997 $886,159
Liabilities and shareholders' equity:
Current liabilities $503,421 $460,169
Long-term debt 101,134 92,258
Deferred income taxes and
other non-current liabilities 14,858 14,926
Total liabilities 619,413 567,353
Common stock and additional capital 131,646 130,100
Retained earnings 196,938 188,706
Total shareholders' equity 328,584 318,806
Total liabilities and
shareholders' equity $947,997 $886,159
AST RESEARCH INC.
Consolidated Statements of Income
(In thousands, except per-share amounts)
Quarter Ended
(Unaudited)
Oct. 2, Oct. 3,
1993 1992
Net sales $514,409 $286,353
Cost of sales 428,509 221,338
Gross profit 85,900 65,015
Selling and marketing 42,071 34,061
General and administrative 17,590 11,735
Engineering and development 10,244 8,064
Operating income 15,995 11,155
Other expense, net (3,522) (1)
Income before taxes 12,473 11,154
Provision for taxes 4,241 3,513
Net income $8,232 $7,641
Net income per share $0.26 $0.24
Weighted average common and common
equivalent shares outstanding 32,002 31,558
AST RESEARCH INC.
Computation of Net Income per Share
(In thousands, except per-share amounts)
Quarter Ended
(Unaudited)
Oct. 2, Oct. 3,
1993 1992
Shares used in computing primary
earnings per share:
Weighted average shares of
common stock outstanding 31,590 30,943
Effect of stock options treated as
common stock equivalents under
the treasury stock method 412 615
Weighted average common and common
equivalent shares outstanding 32,002 31,558
Net income $8,232 $7,641
Net income per share – primary (a) $0.26 $0.24
(a) Fully diluted per share information is not presented as
such amounts are anti-dilutive or do not differ
materially from the primary amounts.
CONTACT:
AST Research Inc., Irvine
Emory Epperson, 714/727-7958 (media)
Al Melrose, 714/727-7780 (analysts)
Misty Ohmart, 714/727-7728