Enterasys Networks reports first quarter FY2002 results

Enterasys Networks today reported its financial results for its first quarter ended 30 March 2002. Revenue for the first quarter of fiscal 2002 was $120.8 million, compared with revenue of $181.7 million for the first quarter of transition year 2001, and $140.9 million for the fourth quarter of transition year 2001.

Net loss available to common shareholders for the first quarter of fiscal 2002, which includes a net tax benefit of $61 million related primarily to tax loss carryback benefits associated with the passage of the Job Creation and Worker Assistance Act of 2002, was $13.7 million, or $0.07 per share, compared with net loss available to common shareholders of $2.9 million, or $0.02 per share for the first quarter of transition year 2001, and a net loss available to common shareholders of $318.3 million, or $1.61 per share, for the fourth quarter of transition year 2001.

While the first quarter loss from operations shows significant improvement over the loss sustained in the fourth quarter, it does not reflect the full benefit of the initiatives that new management has implemented over the course of the past nine months, stated William K O`Brien, Chief Executive Officer of Enterasys Networks. We expect that our results for the subsequent quarters of fiscal 2002 will reflect continued improvement in our operations and provide better visibility into our current operating model. As previously reported, Enterasys` continuing operations have generated estimated quarterly revenues of $120 million or more during each of the three fiscal quarters through 28 September 2002 and have significantly reduced the company`s net usage of cash.

The company ended the first quarter of fiscal 2002 with approximately $255 million of cash and marketable securities, including $23.6 million of restricted cash, compared with $254 million for the prior period, as cash used by operations in the first quarter was offset by funds transferred from a former operating subsidiary accounted for as discontinued operations. As of 28 September 2002 the company had approximately $270 million in cash and marketable securities. The company reiterated that its cash and marketable securities position is currently expected to be sufficient to meet the company`s cash needs for the foreseeable future.

The company`s gross margin for the first quarter of fiscal 2002 was 40%, an improvement of 35 percentage points from the fourth quarter of transition year 2001. Operating expenses were $94.4 million, a 28% reduction from the fourth quarter of transition year 2001, excluding impairment of intangible assets. This reduction in operating expenses reflects the impact of headcount and other cost reduction programs which began in the fourth quarter of transition year 2001.

The company expects to file its Form 10-Q for the first quarter of fiscal 2002 within seven to ten days and expects to file Form 10-Qs for the second and third quarters of fiscal 2002 sequentially thereafter. The Company also expects to file its Form 10-K for the fiscal year ended 28 December 2002 on a timely basis.

Separately, the company announced that in accordance with his recent public announcement, Governor-elect Craig Benson has notified the company of his intent to resign from the Enterasys board of directors, effective upon his inauguration. The company has benefited immensely from Craig Benson`s many years of service, said William O`Brien. We wish him well as he turns his attention to his new duties as Governor of New Hampshire.