<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
----------------------------
OLICOM A/S
(Translation of registrant's name into English)
Nybrovej 114
DK-2800 Lyngby
Denmark
(Address of principal executive offices)
-----------------------------
[Indicate by check mark whether the registrant files or will
file annual reports under cover of Form 20-F or Form 40-F
Form 20-F [X] Form 40-F [ ]
[Indicate by check mark whether the registrant by finishing
the information contained in this Form is also thereby
furnishing the information to the
Commission pursuant to Rule 13g3-2(b) under the Securities
Exchange Act of 1934.
Yes [ ] No [X]
[If "Yes" is marked, indicate below the file number assigned to
the registrant in connection with Rule 13g3-2(b): Not Applicable
This Form 6-K shall be incorporated by reference
to the registrant's registration statement on Form
F-4 under the Securities Act of 1933, as amended,
registration no. 333-24655.
<PAGE> 2
OLICOM A/S
FORM 6-K
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ITEM 1. FINANCIAL INFORMATION
Consolidated Balance Sheets as of
December 31, 1998 and March 31, 1999 3
Consolidated Statements of Income
for the three months ended March 31, 1998
and March 31, 1999 4
Consolidated Statements of Shareholders' Equity
as of December 31, 1998 and March 31, 1999 5
Consolidated Statements of Cash Flows for the three months
ended March 31, 1998 and March 31, 1999 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 11
</TABLE>
ITEM 4. EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ---------- -----------
<S> <C> <C>
99.1 Press Release dated April 22, 1999 "Olicom 15
Reports First Quarter 1999 Results"
99.2 Press Release dated May 27, 1999 "Olicom 18
Reduces Expectations for Full Year 1999"
</TABLE>
Page 2 of 20
<PAGE> 3
OLICOM A/S
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1998 MARCH 31, 1999
----------------- --------------
(UNAUDITED)
ASSETS (IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 22,246 $ 12,231
Accounts receivable, less allowance of
$2,522 in 1998 and $2,406 in 1999 39,035 41,144
Inventories 36,950 35,536
Deferred income tax 4,335 4,335
Net assets of discontinued operations 4,044 0
Prepaid expenses and other 8,405 7,583
--------- ---------
Total current assets 115,015 100,829
Property and equipment 19,004 17,778
Purchased intangibles 7,169 6,425
Investment in affiliated companies 958 951
--------- ---------
Total assets $ 142,146 $ 125,983
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 22,027 $ 12,436
Accrued payroll and related expenses 6,051 4,083
Accrued product warranty expense 1,123 1,213
Accrued restructuring costs 4,935 3,367
Other accrued expenses 4,376 5,673
Deferred revenue 611 1,849
Income taxes payable 0 59
--------- ---------
Total current liabilities 39,123 28,680
Shareholders' equity:
Common shares, DKK 0.25 nominal value
authorized and issued -
18,594 in 1998, 18,594 in 1999 715 715
Additional paid - in capital 104,364 104,364
Retained earnings 15,789 10,007
Treasury stock - 731 in 1998 and 1999 (17,462) (17,462)
Unearned compensation (383) (321)
Other comprehensive income 0 0
--------- ---------
Total shareholders' equity 103,023 97,303
--------- ---------
Total liabilities and shareholders' equity $ 142,146 $ 125,983
========= =========
</TABLE>
See accompanying notes
Page 3 of 20
<PAGE> 4
OLICOM A/S
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1998 1999
-------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C>
Net Sales $ 59,720 $ 37,082
Cost of Sales 29,900 20,667
Special charges related to inventories 0 1,024
-------- --------
Gross profit 29,820 15,391
-------- --------
Operating expenses:
Sales and marketing 15,746 15,004
Research and development 4,947 4,780
General and administrative 3,132 3,554
-------- --------
Total operating expenses 23,825 23,338
-------- --------
Income (loss) from continuing operations 5,995 (7,947)
Interest income and other, net 633 761
-------- --------
Income (loss) from continuing operations before income taxes 6,628 (7,186)
Income taxes 1,915 4
-------- --------
Income (loss) from continuing operations 4,713 (7,190)
Income (loss) from discontinued operations (114) 0
Gain on sale of discontinued operations 0 1,408
-------- --------
Net income (loss) $ 4,599 $ (5,782)
======== ========
Net income (loss) per share (diluted EPS) $ 0.25 $ (0.32)
======== ========
Weighted average shares outstanding
Including common stock equivalents 18,627 17,863
======== ========
Net income (loss) per share (basic EPS) $ 0.26 $ (0.32)
======== ========
Weighted average shares outstanding 17,563 17,863
======== ========
</TABLE>
See accompanying notes
Page 4 of 20
<PAGE> 5
OLICOM A/S
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
OTHER
ADDITIONAL UNEARNED COMPRE-
COMMON PAID-IN RETAINED TREASURY COMPEN- HENSIVE
STOCK CAPITAL EARNINGS STOCK SATION INCOME TOTAL
----- ---------- -------- --------- -------- -------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at Dec. 31, 1997 $ 712 $ 102,633 $ 38,728 $ (14,988) $ (1,594) $ 68 $ 125,559
Net (loss) for 1998 (22,939) (22,939)
Purchase of treasury stock -
400 common stock (10,358) (10,358)
Options exercised -
609 common stock (12) 7,884 7,872
Warrants exercised -
99 common stock 3 1,950 1,953
Change in unrealized gains (losses) (68) (68)
Amortization of unearned compensation (207) 1,211 1,004
----- --------- -------- --------- -------- ------- ---------
Balance at Dec. 31, 1998 $ 715 $ 104,364 $ 15,789 $ (17,462) $ (383) $ 0 $ 103,023
Net (loss) for 1st quarter 1999 (5,782) (5,782)
Amortization of unearned compensation 62 62
----- --------- -------- --------- -------- ------- ---------
Balance at March 31, 1999 $ 715 $ 104,364 $ 10,007 $ (17,462) $ (321) $ 0 $ 97,303
===== ========= ======== ========= ======== ======= ========
(unaudited)
</TABLE>
See accompanying notes
Page 5 of 20
<PAGE> 6
OLICOM A/S
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1998 1999
-------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Operating activities:
Net (loss) income $ 4,599 $ (5,782)
Less:Income (loss) from discontinued operations (114) 1,408
-------- --------
Income (loss) from continuing operations 4,713 (7,190)
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation 1,979 1,537
Amortization 444 444
Equity in net income of affiliate (111) 7
Non cash compensation 0 62
Deferred income taxes (594) 0
Change in operating assets and liabilities:
Accounts receivable (6,123) (2,109)
Inventories (2,211) 1,414
Prepaid expenses (3,171) 822
Accounts payable 105 (9,591)
Accrued payroll and related 264 (1,968)
expenses
Accrued product warranty expense 0 90
Restructuring charges 0 (1,067)
Other accrued liabilities (1,219) 688
Deferred revenue 0 1,238
Income taxes payable (34) 59
-------- --------
Net cash provided by (used in)
operating activities (5,958) (15,564)
Investing activities:
Capital expenditures (3,438) (506)
Proceeds from sale of property and 0 195
equipment
Proceeds from sale of discontinued 0 5,748
operations
Short-term investments (net) 236 0
-------- --------
Net cash provided by (used in)
investing activities (3,202) 5,437
Financing activities:
Proceeds from warrants/options exercised 1,932 0
Sale (purchase) of treasury stock (3,221) 0
-------- --------
Net cash used in financing activities (1,289) 0
Effect of exchange rate changes on cash (102) 112
-------- --------
Net increase (decrease) in cash and cash equivalents (10,551) (10,015)
Cash and cash equivalents at beginning of period 45,305 22,246
-------- --------
Cash and cash equivalents at end of period $ 34,754 $ 12,231
======== ========
Interest paid during the period $ 16 $ 6
======== ========
Tax paid during the period $ 2,847 $ 28
======== ========
</TABLE>
See accompanying notes
Page 6 of 20
<PAGE> 7
OLICOM A/S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements as of March 31, 1998 and 1999, are
unaudited. In the opinion of the management of Olicom A/S (the "Company"), such
unaudited financial statements include only such normally recurring adjustments
necessary for a fair presentation of the results of operations for the interim
periods presented and of the financial position of the Company at the date of
the interim balance sheet. The results for such interim periods are not
necessarily indicative of the results for the entire year.
It is recommended that this financial data be read in conjunction with the
audited consolidated financial statements and notes thereto included in the 1998
Annual Report.
1. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Olicom A/S and
its majority-owned subsidiaries. The Company's investments in 20-50% owned
companies are accounted for by the equity method of accounting
2. REPORTING CURRENCY
Although the Company and its subsidiaries maintain their books and records
in local currencies, as required by law, the Consolidated Financial
Statements have been prepared in U.S. dollars because the U.S. dollar is the
currency of the primary economic environment in which the Company and its
subsidiaries conduct their operations.
The majority of the Company's sales are billed and collected in U.S.
dollars, and the majority of the Company's purchases of raw materials and
finished goods inventories are invoiced and paid in U.S. dollars.
3. RESEARCH AND DEVELOPMENT COSTS
Research and development costs, including costs of developing software
products, are expensed as incurred. Application of Statement of Financial
Accounting Standards No. 86, "Accounting for the Costs of Computer Software
to Be Sold, Leased, or Otherwise Marketed", has not had any material effect
on the Company's consolidated financial position or results of operations.
4. SPECIAL CHARGES RELATED TO INVENTORIES
The Company has recorded special charges related to a Danish customs claim
of approximately $1 million. The Company is disputing the claim, which
relates to the classification, for custom purposes, of finished goods
received from 1996 through 1998.
5. RECLASSIFICATION
The prior year and interim period amounts have been reclassified to conform
to the current interim period presentation.
6. INVENTORIES
Inventories are stated at the lower of cost or market with cost determined
on the basis of the first in, first out method. Raw materials inventories
are sold at the Company's cost to subcontractors who assemble products to
the Company's specifications. Finished goods inventories include completed
products purchased from subcontractors. Inventories consist of:
Page 7 of 20
<PAGE> 8
OLICOM A/S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1998 MARCH 31, 1999
----------------- --------------
<S> <C> <C>
(UNAUDITED)
(In thousands)
Finished goods $ 29,345 $ 28,050
Raw materials 7,605 7,486
--------- ---------
Total inventories $ 36,950 $ 35,536
========= =========
</TABLE>
7. LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Leasehold improvements and equipment are carried at cost. Depreciation is
charged on a straight-line basis to costs and expenses over the expected
useful lives of the assets. Equipment is depreciated over four years, and
leasehold improvements are amortized over the shorter of their estimated
lives or non-cancelable term of the lease. Leasehold improvements and
equipment consist of:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 MARCH 31, 1999
----------------- --------------
(UNAUDITED)
(In thousands)
<S> <C> <C>
Leasehold improvements $ 4,269 $ 4,267
Equipment 33,900 37,262
-------- --------
38,169 41,529
Accumulated depreciation (19,165) (23,751)
-------- --------
Total property and equipment $ 19,004 $ 17,778
======== ========
</TABLE>
8. DISCONTINUED OPERATIONS
As part of its new strategy announced November 30, 1998, the Company decided
to divest its 75% holding in Lasat A/S ("Lasat"), a provider of PC modems.
On January 15, 1999, the Company's 75% holding in Lasat was sold to a
consortium of Lasat management, employees and two Denmark-based venture
funds.
The gain on sale of Lasat has been reported separately as income from
discontinued operations, net of tax, in the Consolidated Statement of
Income. The prior period Consolidated Statement of Income has been restated
accordingly.
The Consolidated Balance Sheet as of December 31, 1998 has been restated to
segregate the Company's investment in Lasat A/S. On the Consolidated
Statements of Cash Flows, the Company's share of income of Lasat A/S is
reported as income from discontinued operations.
9. SPECIAL CHARGES AND RESTRUCTURING CHARGES
The total restructuring charges and special charges remaining from the
restructuring plan announced November 30, 1998 are specified as follows:
Page 8 of 20
<PAGE> 9
OLICOM A/S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Accrued
Total expenses March 31, 1999
--------------- ---------------
(In thousands)
(UNAUDITED)
<S> <C> <C>
Employee expenses $ 3,939 $ 413
Other expenses 3,388 1,426
--------------- ---------------
Restructuring charges 7,327 1,839
Special charges related to inventories 3,463 1,528
--------------- ---------------
$ 10,790 $ 3,367
=============== ===============
</TABLE>
10. SEGMENT INFORMATION
The Company currently operates in the data networking industry, primarily
within the following technologies: Asynchronous Transfer Mode, Token-Ring
and Fast Ethernet. The Company considers its products being one group of
similar products.
The Company manages its business primarily in two separate geographical
areas: Americas, incorporating North and South America, and International,
incorporating Europe and Asia Pacific.
Information about the Company's continuing operations by reportable segments
is as follows:
<TABLE>
<CAPTION>
INTER- ELIMI- CONSO-
NATIONAL AMERICAS NATIONS LIDATED
------------ ------------ ------------ ------------
(In thousands)
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1999
<S> <C> <C> <C> <C>
Net sales:
External customers $ 20,253 $ 16,829 $ 0 $ 37,082
Intercompany 11,880 2,586 (14,466) 0
------------ ------------ ------------ ------------
Total $ 32,133 $ 19,415 $ (14,466) $ 37,082
============ ============ ============ ============
Depreciation and amortization $ 1,472 $ 509 $ 0 $ 1,981
============ ============ ============ ============
Operating income (loss) $ (6,018) $ (1,729) $ (200) $ (7,947)
============ ============ ============ ============
Investments in affiliated companies $ 951 $ 0 $ 0 $ 951
============ ============ ============ ============
Total assets $ 54,971 $ 79,650 $ (33,792) $ 100,829
============ ============ ============ ============
Long-lived assets $ 11,629 $ 6,149 $ 0 $ 17,778
============ ============ ============ ============
</TABLE>
Page 9 of 20
<PAGE> 10
OLICOM A/S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
<S> <C> <C> <C> <C>
Net sales:
External customers $ 28,637 $ 31,083 $ 0 $ 59,720
Intercompany 12,935 1,378 (14,313) 0
---------- ---------- ---------- ----------
Total $ 41,572 $ 32,461 $ (14,313) $ 59,720
========== ========== ========== ==========
Depreciation and amortization $ 1,591 $ 516 $ 0 $ 2,107
========== ========== ========== ==========
Operating income (loss) $ 2,982 $ 3,079 $ (66) $ 5,995
========== ========== ========== ==========
Investments in affiliated companies $ 844 $ 0 $ 0 $ 844
========== ========== ========== ==========
Total assets $ 104,748 $ 80,270 $ (51,690) $ 133,328
========== ========== ========== ==========
Long-lived assets $ 11,964 $ 3,485 $ 0 $ 16,994
========== ========== ========== ==========
</TABLE>
Page 10 of 20
<PAGE> 11
OLICOM A/S
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999.
Certain statements included in this Report include trend analysis and are
forward-looking statements (within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended), including, without limitation, statements containing the words
"believes", "anticipates", "expects", "plans", "may", "will", "should",
"objective", "target", "goal", "strategy" or "continue" or the negative of such
words or other words of similar import. Such forward-looking statements relate
to future events, the future financial performance of the Company, and involve
known and unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievements of the Company or industry results
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Prospective investors
should specifically consider the various factors identified in this Report that
could cause actual results to differ, including, without limitation, those
discussed in the following section, as well as in the Company's Annual Report on
Form 20-F. The Company is under no duty to update any such factors or to update
any of the forward-looking statements after the date of this Report to conform
such statements to actual results.
The following discussion should be read in conjunction with the information
contained in the Company's Annual Report on Form 20-F for the fiscal year ended
December 31, 1998, and the consolidated financial statements and related notes
included elsewhere herein.
RESULTS OF OPERATIONS
International sales amounted to $20.3 million or 54.8 percent of total sales for
the quarter, while sales in North and South America (the "Americas") were $16.8
million, corresponding to 45.2 percent of sales. Continued price pressure and a
softening of the Token-Ring market affected sales in the first quarter. Also,
the Company's action to reduce channel inventory levels, which was completed in
the first quarter, had a negative impact on sales. Sales to end users during the
quarter were largely unchanged from levels experienced during the fourth quarter
of 1998.
Desktop Network Interface products generated revenue of $16.1 million for the
quarter, a 49.2 percent decrease compared to the first quarter of 1998 (but a
48.5 percent increase compared to the fourth quarter of 1998). Notebook
Connectivity products generated $7.7 million in revenue, a 12.1 percent increase
compared to the first quarter of 1998 (and a 103.9 percent increase, compared to
the fourth quarter of 1998). Network Systems products, which primarily comprise
the Company's switching products, generated revenue of $12.2 million, a 34.1
percent decrease compared to the first quarter of 1998 (but a 58.8 percent
increase sequentially). Network Services revenue, which primarily comprise
royalty payments, amounted to $1.1 million, a 61.0 percent decrease compared to
the first quarter of 1998 (but a 52.9 percent increase sequentially).
Gross margin for the first quarter of 1999 was 41.5 percent, including a $1
million non-recurring charge relating to a Danish customs claim. The Company is
disputing the claim, which relates to the classification, for customs purposes,
of finished goods received from 1996 through 1998. Excluding this charge, gross
margin was 44.3 percent, in line with the Company's business model, compared to
a gross margin of 49.9 percent for the first quarter of 1998.
Sales and Marketing expenses decreased by 4.7 percent to $15 million, compared
with $15.7 million for the first quarter of 1998 (sequentially, sales and
marketing expenses decreased 16.9 percent). The decrease was primarily due to
lower personnel expenses resulting from the reduction in headcount associated
with the Company's restructuring announced November 30, 1998. As the Company's
new marketing model, which incorporates variable spending tied to channel
programs, became operational, sales promotion expenses increased.
Page 11 of 20
<PAGE> 12
Research and Development expenses were $4.8 million in the first quarter of
1999, a 3.4 percent decrease compared with the first quarter of 1998 (and a 17.3
percent decrease sequentially). This decrease was largely a result of savings on
travel and other discretionary spending. General and Administrative expenses
increased by 13.5 percent, compared with the first quarter of 1998 (but a 3.9
percent decrease sequentially), primarily due to non-recurring expenses.
Following recent staff reductions and the sale of the Company's shareholding in
Lasat A/S ("Lasat"), Olicom's headcount at March 31, 1999 was 608 compared to
886 at the end of the first quarter of 1998 (640 at December 31, 1998).
On January 15, 1999, the Company closed the divestiture of its shareholding in
Lasat. The Consolidated Statement of Income for the three months ended March 31,
1998 includes the results of operations of Lasat through March 31, 1998, under
the caption "Income from discontinued operations". Accordingly, the Consolidated
Statements of Income do not consolidate Lasat's operations with the Company's
other operations during such period. The Consolidated Balance Sheet as of
December 31, 1998, has been restated to segregate the Company's investment in
Lasat under the caption "Net assets discontinued operations". The Consolidated
Statement of Cash Flows for the three months ended March 31, 1997, similarly has
been restated to reflect the results of operations of Lasat under the caption
"Income (loss) from discontinued operations". The gain from the divestiture
amounted to approximately $1.4 million.
The loss per share in the first quarter of 1999 was $0.32 on 17.9 million shares
outstanding, compared with a gain of $0.25 per share reported for the first
quarter of 1998 on 18.6 million shares outstanding, and a loss of $1.68 in the
fourth quarter of 1998 on 17.9 million shares outstanding.
On April 20, 1999, Olicom acquired an additional 31.9 percent of the shares in
Digianswer A/S, a provider of state-of-the-art technology for wireless
communications. With this transaction, Olicom controls 66.9 percent of the
shares in Digianswer A/S with the option to acquire the remaining shares now
owned by that company's founder.
LIQUIDITY AND CAPITAL RESOURCES
On March 31, 1999, the Company had cash and cash equivalents of $12.2 million, a
decrease of 45.0% from that recorded at December 31, 1998. This decrease was
primarily a result of the loss from the operating activities recorded during the
period, and an increase in receivables and inventories.
The Company has established a committed credit facility for an aggregate amount
of $10 million to support its future operations. This facility was unused as of
March 31, 1999. Repayments of advances under this credit facility are secured by
liens granted in accounts receivable and inventories of Olicom, Inc., the
Company's United States subsidiary as well as in the Company's shareholding in
Olicom Ventures A/S. In addition, the Company's continued utilization of the
credit facility is subject to its continuing compliance with certain financial
covenants relating to achieving designated levels of operating profit,
maintaining a specified ratio of equity to total assets, and maintaining levels
of inventory that do not exceed agreed thresholds.
On March 31, 1999, the Company's inventory levels had decreased by $1.4 million,
or 3.8% from that recorded at December 31, 1998.
Trade accounts receivable at March 31, 1999, increased 5.4% to $41.1 million,
from that recorded at December 31, 1998. This increase was primarily due to
higher sales revenue compared with the fourth quarter of 1998.
BUSINESS ENVIRONMENT AND RISK FACTORS
The Company's future operating results may be affected by various trends and
factors, which the Company must successfully manage in order to achieve
favorable operating results. In addition, there are trends and factors that are
beyond the Company's control that may affect its operations.
Page 12 of 20
<PAGE> 13
Such trends and factors include, without limitation, the following: conditions
within the networking industry, and economic conditions generally; rapid
technological change, frequent product introductions, changes in customer needs
and evolving industry standards, which require that the Company continue to add
engineering refinements to its existing products and develop and introduce new
products which achieve market acceptance; difficulties or delays in the
development, production and marketing of products, including, without
limitation, any failure to ship new products and technologies when anticipated
and a failure of manufacturing economies to develop when planned; fluctuations
in the Company's revenues and operating results from quarter to quarter, due to
a variety of factors, including, among others, the timing of significant orders,
the timing of product introductions by the Company or its competitors,
variations in net revenues by product and distribution channel, increased price
and other competition, and decisions by distributors and OEMs as to the quantity
of the Company's products to be maintained in inventories; the failure by the
Company to timely and successfully execute material aspects of its revised
business strategy; pricing, purchasing, operational and promotional decisions by
distributors, value added resellers and OEMs, which could affect their supply
of, or end-user demand for, the Company's products; the absence of long-term
obligations on the part of distributors and OEMs to purchase products from the
Company (and the implicit risk of any unanticipated declines in sales to any of
the Company's material customers for competitive reasons or because of the
internalization of production of products purchased from the Company on an OEM
basis); the Company's shipment of products shortly after receipt of a purchase
order, with the result that a substantial portion of the Company's revenues for
any quarter results from orders received during such quarter, and minor shifts
in the timing of purchase orders can have a significant effect on net sales for
any quarter; the Company's failure to accurately anticipate the demand for its
products, due to, among other things, the fact that the Company's expectations
of future net sales as well as its expenditures are based largely on its own
estimate of future demand and not on firm customer orders; the effect that
consolidation in the LAN industry may have on the competitive position of the
Company and its revenues and operating results; the acquisition of assets and
businesses and the making or incurring of any expenditures and expenses in
connection therewith, including, without limitation, any research and
development expenses relating thereto; the ability of the Company to reduce
product and other costs; the activities of any parties with whom the Company has
an agreement or understanding, including, without limitation, issues affecting
joint development projects in which the Company is a participant; unexpected
changes in regulatory requirements, tariffs and other trade barriers, longer
accounts receivable payment cycles and other risks associated with international
operations; the ability or inability of the Company to hedge against foreign
currency, exchange rates and fluctuations in such rates; and a change in the
value of the U.S. dollar (the Company's functional currency) relative to other
currencies.
In light of the foregoing factors, as well as other factors affecting the
Company's operating results, past trends should not be used by investors or
others to anticipate future trends, and prior operating performance may not be
an accurate indicator of future performance.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
With the exception of historical information, certain of the matters discussed
in this report and the press release included herewith are forward-looking
statements that involve risks and uncertainties, including, without limitation,
the risks and uncertainties described above under the caption "Business
Environment and Risk Factors", together with such risks and uncertainties as are
described in registration statements, reports and other documents filed by the
Company from time to time with the Securities and Exchange Commission pursuant
to the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended. Such risks and uncertainties could cause the Company's actual
consolidated results for 1998 and beyond to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, the
Company.
Page 13 of 20
<PAGE> 14
SIGNATURES
The registrant certifies that it meets all of the requirements for filing and
has duly caused this form to be signed on its behalf by the undersigned,
thereunto duly authorized.
Olicom A/S
Date: July 6, 1999 By: /s/ Lars Larsen
----------------------------------
Lars Larsen
Chief Financial Officer
Page 14 of 20
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
99.1 Press Release dated April 22, 1999 "Olicom Reports First
Quarter 1999 Results"
99.2 Press Release dated May 27, 1999 "Olicom Reduces
Expectations for Full Year 1999"
</TABLE>
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<PAGE> 1
EXHIBIT 99.1
OLICOM REPORTS FIRST QUARTER 1999 RESULTS
COPENHAGEN, DENMARK AND DALLAS, USA, APRIL 22, 1999 - Olicom A/S (Nasdaq NMS:
OLCMF), today reported preliminary financial results for the first quarter ended
March 31, 1999.
o First quarter net sales were $37.1 million, down 37.9 percent compared to
$59.7 million in 1998 (up 60.7 percent sequentially).
o Net loss for the first quarter was $5.8 million, compared to $4.6 million
in net income reported for the first quarter of 1998. Net loss for the
fourth quarter of 1998 was $29.9 million.
o Gross margin for the first quarter of 1999 was 41.5 percent, including a $1
million non-recurring charge relating to a customs claim. Excluding this
charge, gross margin was 44.3 percent compared to 49.9 percent for the
first quarter of 1998.
o The loss per share in the first quarter of 1999 was $0.32 on 17.9 million
shares outstanding, compared with a gain of $0.25 per share reported for
the first quarter of 1998 on 18.6 million shares outstanding, and a loss of
$1.68 in the fourth quarter of 1998 on 17.9 million shares outstanding.
o Olicom has acquired a majority holding in Digianswer A/S, a provider of
state-of-the-art technology for local wireless communication.
o Suite of Fast Ethernet switching products announced on schedule.
International sales amounted to $20.3 million or 54.8 percent of total sales for
the quarter, while sales in the Americas were $16.8 million corresponding to
45.2 percent of sales. Continued price pressure and a softening of the
Token-Ring market affected sales in the first quarter. Also, the Company's
action to bring channel inventory levels back to normal, which was completed in
the first quarter, had a negative impact on sales. Sales to end users were
largely unchanged sequentially.
Desktop Network Interface products showed revenue of $16.1 million for the
quarter, down 49.2 percent compared to the first quarter of 1998 (up 48.5
percent on the fourth quarter of 1998). Notebook Connectivity products generated
$7.7 million in revenue, up 12.1 percent compared to the first quarter of 1998
(up 103.9 percent sequentially). Network Systems products, which primarily
comprise the Company's switching products, showed revenue of $12.2 million, down
34.1 percent compared to the first quarter of 1998 (up 58.8 percent
sequentially). Network Services, which primarily comprise royalty payments,
amounted to $1.1 million, down 61.0 percent compared to the first quarter of
1998 (up 52.9 percent sequentially).
Gross margin for the first quarter of 1999 was 41.5 percent, including a $1
million non-recurring charge relating to a Danish customs claim. The Company is
disputing the claim, which relates to the classification, for customs purposes,
of finished goods received from 1996 through 1998. Excluding this charge, gross
margin was 44.3 percent, in line with the Company's business model, compared to
49.9 percent for the first quarter of 1998.
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S&M expenses decreased by 4.7 percent to $15 million compared with $15.7 million
for the first quarter of 1998 (sequentially, sales and marketing expenses
decreased 16.9 percent). The decrease was primarily due to lower personnel
expenses resulting from the reduction in headcount associated with the Company's
restructuring announced November 30, 1998. As the Company's new marketing model,
which incorporates variable spending tied to channel programs became
operational, sales promotion expenses increased. R&D expenses were $4.8 million
in the first quarter of 1999, down 3.4 percent compared with the first quarter
of 1998 (down 17.3 percent sequentially). This development was largely a result
of savings on travel and other discretionary spending. G&A expenses increased by
13.5 percent compared with the first quarter of 1998 (down 3.9 percent
sequentially), primarily due to non-recurring expenses.
Following recent staff reductions and the sale of Lasat, Olicom's headcount at
March 31, 1999 was 608 compared to 886 at the end of the first quarter of 1998
(640 at December 31, 1998).
The loss per share in the first quarter of 1999 was $0.32 on 17.9 million shares
outstanding, compared with a gain of $0.25 per share reported for the first
quarter of 1998, on 18.6 million shares outstanding, and a loss of $1.68 in the
fourth quarter of 1998 on 17.9 million shares outstanding.
Niels Christian Furu, Olicom's chief executive officer, commented: "The results
for the first quarter, although disappointing on revenue, incorporate several
encouraging developments. Our expense base has been significantly reduced and we
have implemented strict controls on spending, as evidenced by the sequential
decline in expenses. Further, as predicted in our last earnings release, channel
inventory is now back in line. Our focus is now on reducing our own inventories,
and we have already implemented a plan to reduce purchase orders to a more
conservative level."
"In line with our strategy release on November 30, 1998, Olicom announced during
the first quarter a suite of Fast Ethernet switching products, specifically
designed to address the needs of customers migrating from Token-Ring to Fast
Ethernet. We are encouraged by initial customer orders and the very positive
reception for our Token-Ring to Fast Ethernet translational switch."
Olicom has acquired an additional 31.9 percent of the shares in Digianswer A/S,
a provider of state-of-the-art technology for local wireless communication. With
this transaction, Olicom controls 66.9 percent of Digianswer, and has the option
to purchase the remaining shares owned by that Company's founder. Amongst
Digianswer's core competencies are the design and development of products and
technologies for mobile communications, hands-free telephony, voice recognition
and software code for digital signal processing of voice. Digianswer is at the
forefront of the development and implementation of the new "Bluetooth"
technology for local wireless communication. "Bluetooth" technology is supported
by major players in the converging telecom and data networking industries.
Digianswer employs approximately 35 people, mainly comprising R&D engineers.
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Niels Christian Furu continued: "We remain fully committed to our strategy of
maintaining leadership in Token-Ring, a stepwise entry into the Fast Ethernet
market and a determined effort to develop strategic alliances and partnerships.
Our marketing alliance with Cabletron, announced in February this year, has
already produced additional revenue, and we expect more from this and similar
alliances in the future, as well as from the acquisition of the majority holding
in Digianswer."
If the Token-Ring market continues to weaken, and with the disappointing first
quarter revenue, achievement of Olicom's financial targets for full year 1999
will be more difficult. Olicom's financial goals are predicated on the Company's
penetration of the Fast Ethernet switching market, the successful establishment
of strategic alliances, and its continued leadership in Token-Ring.
Note
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which is
required to be adopted in years beginning after June 15, 1999. Olicom has chosen
to follow this standard as of the beginning of 1999. The net effect of this is a
reclassification of a hedging gain of $100,000 from "Interest income and other,
net" to the respective items above "Income (loss) from continuing operations".
OLICOM BACKGROUND
Olicom, a leading global supplier of high-performance data networking solutions,
designs, develops, manufactures, and markets its products for large,
geographically dispersed enterprises. It specializes in providing campus network
connectivity solutions, advanced technical support services and ClearStepSM
evolution strategies for networks in transition. The Company's products are
distributed worldwide by a network of strategic partners and resellers. More
information on Olicom is available from the Company's SEC filings or by
contacting the Company directly. See Olicom news, product, and service
information on its Web site at http://www.olicom.com.
Olicom is a registered trademark. ClearStep is a service mark of Olicom A/S. All
other brand and product names are registered trademarks of their respective
holders.
Except for historical information contained herein, the matters discussed in
this news release may contain forward-looking statements, involving risks and
uncertainties that may cause actual results to differ materially. Among the
factors that could cause results to differ are uncertain market conditions,
overall demand levels for networking solution products, the timely development
of new products, intense competition in the networking industry and the
Company's ability to execute strategies efficiently and effectively. Further
information may be found in Olicom's periodic filings with the US Securities and
Exchange Commission (SEC), including the most recent reports on Form 20-F and
6-K, which identify important risk factors related to the Company's business
that could cause actual results to materially differ from those contained in the
forward-looking statements.
###
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EXHIBIT 99.2
OLICOM REDUCES EXPECTATIONS FOR FULL YEAR 1999
COPENHAGEN, DENMARK AND DALLAS, USA, MAY 27, 1999 - Olicom A/S (Nasdaq NMS:
OLCMF), reduces expectations for full year 1999.
Based on the continuing weakening of the Token-Ring market, which particularly
in the North America has been significantly worse than previously expected by
the Company and market analysts, it is now considered unlikely that Olicom will
be able to achieve its previously announced financial targets for 1999.
Achievement of these goals were predicated, in addition to a more stable
development of the Token-Ring market, on the Company's ability to penetrate the
Fast Ethernet switching market, the successful establishment of strategic
alliances, and on Olicom's continued leadership in Token-Ring. At this stage, it
is premature to comment on the Company's ability to penetrate the Fast Ethernet
market in 1999, since Olicom's suite of Fast Ethernet products, which was
introduced in March, is not expected to impact revenue before the second half of
1999.
On this basis, Olicom has further intensified its efforts to establish strategic
alliances and partnerships. With the previously announced acquisition of a
majority holding in Digianswer, the Company's strategic position has been
significantly strengthened. Amongst Digianswer's core competencies are the
development and implementation of the new Bluetooth technology for wireless
communication, which is regarded as a future growth opportunity.
For full year 1999, the Company now expects that revenue will be below that
reported for 1998. As a consequence of the uncertainty regarding the development
of the Token-Ring market and the other above-mentioned factors, Olicom is
presently unable to provide further details on its financial outlook for the
current year.
- more -
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OLICOM BACKGROUND
Olicom, a leading global supplier of high-performance data networking solutions,
designs, develops, manufactures, and markets its products for large,
geographically dispersed enterprises. It specializes in providing campus network
connectivity solutions, advanced technical support services and ClearStepSM
evolution strategies for networks in transition. The Company's products are
distributed worldwide by a network of strategic partners and resellers. More
information on Olicom is available from the Company's SEC filings or by
contacting the Company directly. See Olicom news, product, and service
information on its Web site at http://www.olicom.com.
Olicom is a registered trademark. ClearStep is a service mark of Olicom A/S. All
other brand and product names are registered trademarks of their respective
holders.
Except for historical information contained herein, the matters discussed in
this news release may contain forward-looking statements, involving risks and
uncertainties that may cause actual results to differ materially. Among the
factors that could cause results to differ are uncertain market conditions,
overall demand levels for networking solution products, the timely development
of new products, intense competition in the networking industry and the
Company's ability to execute strategies efficiently and effectively. Further
information may be found in Olicom's periodic filings with the US Securities and
Exchange Commission (SEC), including the most recent reports on Form 20-F and
6-K, which identify important risk factors related to the Company's business
that could cause actual results to materially differ from those contained in the
forward-looking statements.
###
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