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THIRD PROSPECTUS SUPPLEMENT RULES 424(b)(3) and 424(c)
TO PROSPECTUS DATED FEBRUARY 6,1998 REGISTRATION NO. 333-36413
2,020,000 SHARES
YURIE SYSTEMS, INC.
COMMON STOCK
Yurie Systems, Inc. (the "Company" or "Yurie"), has prepared this
Third Prospectus Supplement to update the Company's Prospectus dated November 4,
1997 (the "Prospectus"), covering 2,020,000 shares of the Company's common
stock, par value $.01 per share (the "Common Stock") to be sold by certain
Selling Stockholders of the Company. This Prospectus Supplement should be read
in conjunction with the Prospectus, and is qualified by reference to the
Prospectus, except to the extent that the information herein contained
supersedes the information contained in the Prospectus. Capitalized terms used
in this Prospectus Supplement and not otherwise defined herein have the
meanings specified in the Prospectus.
The Prospectus, together with the First Prospectus Supplement, the
Second Prospectus Supplement and this Third Prospectus Supplement, constitutes
the prospectus required to be delivered by Section 5(b) of the Securities Act
with respect to offers and sales of the shares of Common Stock by Selling
Stockholders. All references in the Prospectus to "this Prospectus" are hereby
amended to read "this Prospectus (as supplemented and amended)."
PRO FORMA FINANCIAL INFORMATION. On February 5, 1998, the Company
announced that its revenue, calculated on a pro forma basis excluding Data Labs,
Inc., ("Data Labs"), the Company's subsidiary acquired on December 1, 1997, and
related acquisition costs, for the fourth quarter of 1997 was $17.6 million,
representing a 168% increase over the $6.6 million reported in the fourth
quarter of 1996 and a 25% sequential increase over the $14.1 million reported in
third quarter of 1997. For the full year 1997, the Company's pro forma revenue
totaled $51.0 million, a 136% increase over the $21.6 million reported for 1996.
Pro forma net income for the fourth quarter of 1997 was $3.3 million, or $0.12
per share, a 696% increase over the $413,000 in net income, or $0.02 per share,
reported in the fourth quarter of 1996, and a 39% sequential increase over the
$2.4 million in net income, or $0.09 per share, reported in the third quarter of
1997. For the year 1997, net income was $8.3 million or $0.31 per share, a 162%
increase over the $3.2 million in net income, or $0.14 per share, reported for
1996. The Company's pro forma Statements of Operations, excluding Data Labs, for
the quarters ended and the years ended December 31, 1996 and 1997 have been
attached to this Prospectus Supplement.
COMBINED FINANCIAL RESULTS AND END OF QUARTER FINANCIAL INFORMATION. On
February 5, 1998, the Company announced that its revenue, calculated on a
consolidated basis including Data Labs and related acquisition costs, was $17.6
million for the fourth quarter of 1997, representing a 168% increase over $6.6
million for the fourth quarter of 1996 and a 25% sequential increase over $14.1
million for the third quarter of 1997. For the year 1997, the Company's
consolidated revenue totaled $51.1 million, a 136% increase over $21.7 million
for the year 1996. Net income on a consolidated basis for the fourth quarter of
1997 was $2.4 million, or $0.09 per share, compared to $82,000 in net income for
the fourth quarter of 1996,
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and a 33% sequential increase over the $1.8 million in net income, or $0.06 per
share for the third quarter of 1997. For the year 1997, net income on a
consolidated basis was $6.1 million, or $0.23 per share, a 153% increase over
$2.4 million in net income, or $0.11 per share, reported for the year 1996.
Consolidated results for both the fourth quarter of 1997 and the full year 1997
include a one-time pre-tax charge of $1.0 million or $0.02 per share after tax
for expenses related to the acquisition of Data Labs. The Company's unaudited
consolidated balance sheets as of December 31, 1997 and 1996, and the unaudited
consolidated statements of operations for the quarters ended and the years ended
December 31, 1997 and 1996 have been attached to this Prospectus Supplement.
ERICSSON AGREEMENT. On February 2, 1998, the Company announced the
signing of a three-year private-label partner agreement with Ericsson, Inc.
("Ericsson"), the U.S. subsidiary of Telefonaktiebolaget LM Ericsson. Under this
agreement, Yurie granted Ericsson a non-exclusive license to resell Yurie's LDR
products worldwide under the Ericsson name. Ericsson anticipates that it will
provide systems integration and equipment management services related to Yurie's
products to the Internet service providers to whom Ericsson will sell Yurie's
equipment. There are no minimum purchase guarantees under this agreement.
SPLITROCK RELATIONSHIP. The Company's sales to Splitrock Services, Inc.
("Splitrock") in the fourth quarter totaled approximately $5.9 million including
product that Splitrock is expected to purchase or lease from Ericsson.
Splitrock's purchases and/or leases from Ericsson will be credited against its
minimum purchase guarantee in the Splitrock Agreement signed with the Company.
On February 2, 1998 the Company announced that Ericsson and Splitrock had signed
a Letter of Intent in which Ericsson agreed to provide Splitrock with certain
services as well as LDR products that Ericsson has or will purchase from Yurie.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Date of this Prospectus Supplement is February 6, 1998
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YURIE SYSTMES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS
Excluding Data Labs, Inc. and Related Merger Costs
(unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Quarter Ended Year Ended
December 31, December 31,
---------------------- -----------------------
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Revenue:
Product revenue $16,539 $ 5,705 $46,976 $18,729
Service revenue 1,090 868 4,004 2,490
Other revenue - - - 392
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Total revenue 17,629 6,573 50,980 21,611
Cost of revenue:
Cost of product revenue 5,650 2,247 16.673 6,784
Cost of service revenue 873 541 3,026 1,635
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Total cost of revenue 6,523 2,788 19,699 8,419
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Gross profit 11,106 3,785 31,281 13,192
Operating expenses:
Research and development 2,370 1,467 7,709 3,847
Sales and marketing 2,214 757 5,901 1,547
General and administrative 1,522 966 5,644 2,700
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Total operating expenses 6,106 3,190 19,254 8,094
Income from operations 5,000 595 12,027 5,098
Other income 393 21 1,524 83
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Income before income taxes 5,393 616 13,551 5,181
Provision for income taxes 2,104 203 5,290 2,029
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Net income $ 3,289 $ 413 $ 8,261 $ 3,152
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Basic earning per share $ 0.13 $ 0.02 $ 0.34 $ 0.16
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Basic weighted average shares outstanding 24,939 $20,448 24.377 20,269
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Diluted earnings per share $ 0.12 $ 0.02 $ 0.31 $ 0.14
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Diluted weighted average shares outstanding 27,248 21,990 26,310 21,811
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YURIE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
December 31, December 31,
ASSETS 1997 1996
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,142 $ 5,245
Restricted cash 1,000 -
Short-term investments 35,917 -
Accounts receivable 13,314 4,993
Tax receivable 993 -
Interest receivable 402 -
Inventory 5,467 2,574
Deferred tax asset - st 1,246 475
Other current assets 228 1,321
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Total current assets 66,709 14,608
Net property and equipment 6,990 2,241
Long-term deferred tax asset 1,028 -
Other assets 675 58
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Total Assets $75,402 $16,907
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,137 $ 2,014
Accrued liabilities 7,471 3,250
Short-term notes payable 17 -
Unearned revenue 38 -
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Total current liabilities 9,663 5,264
Accrued rent 585 15
Deferred income taxes - 19
Capital lease obligations 20 38
Stockholders' equity:
Common Stock 253 210
Treasury stock (23) -
Additional paid-in capital 56,701 8,046
Translation adjustment (648) -
Retained earnings 8,851 3,315
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Total stockholders' equity 65,134 11,571
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Total Liabilities and Stockholders' Equity $75,402 $16,907
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</TABLE>
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YURIE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Quarter Ended Year Ended
December 31, December 31,
------------------- -------------------
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Revenue:
Product revenue $16,532 $ 5,713 $47,064 $18,737
Service revenue 1,090 868 4,005 2,528
Other revenue - - - 392
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Total revenue 17,622 6,581 51,069 21,657
Cost of revenue:
Cost of product revenue 5,659 2,270 16,670 6,806
Cost of service revenue 873 552 3,026 1,666
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Total cost of revenue 6,532 2,822 19,696 8,472
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Gross profit 11,090 3,759 31,373 13,185
Operating expenses:
Research and development 2,583 1,724 8,691 4,428
Sales and marketing 2,350 960 6,787 1,880
General and administrative 2,645 1,025 7,373 2,980
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Total operating expenses 7,578 3,709 22,851 9,288
Income from operations 3,512 50 8,522 3,897
Other income 384 24 1,544 90
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Income before income taxes 3,896 74 10,066 3,987
Provision for income taxes 1,520 (8) 3,930 1,563
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Net income $ 2,376 $ 82 $ 6,136 $ 2,424
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Basic earnings per share $ 0.09 $ - $ 0.25 $ 0.12
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Basic weighted average shares outstanding 25,276 20,785 24,714 20,606
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Diluted earnings per share $ 0.09 $ - $ 0.23 $ 0.11
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Diluted weighted average shares outstanding 27,599 22,348 26,660 22,158
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