First Quarter Report 1999
Fellow Stockholders: April 29, 1999
Frequent readers of these missives may experience a sense of deja vu while
reading this letter, as the company's first-quarter performance continued
the trends of revenue and earnings growth typical of the past several years.
No one is complaining - there's no lack of joy here simply because it's a
familiar story.
Revenue in the quarter amounted to $469.7 million, a record high for first-
quarter sales and a 43.4 percent increase over revenue of $327.5 million in
the first quarter a year ago. As usual, sales of the TITAN(r) family of
digital cross-connect systems led the way, increasing by 49 percent over
sales in the first quarter of 1998. Echo canceller sales were up 42 percent
during the quarter, bolstered in large part by the successful integration of
the former Coherent company. Sales of the MartisDXX(tm) system increased
21.2 percent, and we should note that our CABLESPAN(r) product met its sales
plan for the quarter. With all the activity in the cable industry these
days, perhaps this quarter's activity won't be a one-time event.
Net earnings for the quarter amounted to almost $104 million, 52 percent
above earnings in the first quarter a year ago. Earnings per share on a
diluted basis were 52 cents this quarter and 37 cents last year.
As noted, TITAN system sales were strong throughout the quarter, both for
the wideband TITAN 5500 system and the narrowband TITAN 532L system. The
announcement during the quarter of the Feature Package 6.0 enhancement for
the TITAN 5500 cross-connect doubles the size of that system and gives us
the largest digital cross connect system in captivity. The introduction of a
new TITAN element, the TITAN 4500GS Global Services Delivery platform, was
another milestone during this first quarter. This extension of the TITAN
product family addresses the needs of the global carriers of telecom traffic
by accommodating both North American and European transport protocols.
At our April 21 Annual Meeting of Stockholders, current Tellabs Directors
Brian J. Jackman, Stephanie Pace Marshall and William F. Souders were
re-elected to new three-year terms on the company's Board of Directors. To
the delight of most and, I suspect, the surprise of very few, Tellabs
announced a two-for-one split of its common shares. At the same time,
we talked in fuller detail about a stretch objective that goes by the
moniker "X3 by '03." This goal calls for Tellabs to triple annual sales by
the year 2003. As those of you who have been with us for a while will recall,
in October 1995 Tellabs people embraced a "$2B by 2K" objective to achieve
$2 billion in annual revenue by the year 2000. As it looks that we will
achieve that objective one year early, it's only appropriate that we set our
sights on the next target -- $6 billion in revenue by 2003.
Aside from the financial goals, there are a few other objectives we've set
for ourselves that are admittedly harder to measure but probably more
consequential in the long run. These include being better able to please our
customers, get products to market with speed, and collect on the results of
those efforts. Reducing days sales outstanding (DSO) is another of our
objectives - one on which good progress was made during the quarter. Customer
satisfaction, always near the top of our agenda, is our top priority,
something that we're taking on with a little more vengeance now. John Vaughan,
in a relatively new role as president of Tellabs Global Sales and Service,
will champion that cause. Reducing time-to-market, the interval between
product conceptualization and actual appearance in the marketplace, is an
issue that bedevils a lot of companies. Brian Jackman, Tellabs President of
Global Systems and Technology, is leading that effort for us. We'll keep you
informed as these initiatives continue to unfold.
Looking forward, we continue to be optimistic about the balance of the year.
The improving economic situation internationally and the robust economy in the
United States, evidenced by the continuing demand for such things as Internet
transport, Internet access and wireless services, augurs well for the
continuing growth of the telecom infrastructure. We think we've got the right
products to address that growth.
Sincerely,
/s Michael J. Birck
Michael J. Birck
President and
Chief Executive Officer
First Quarter Earnings Release (website link to this information which is
attached hereto as Exhibit 99.2)
Results of Operations
Condensed Consolidated Balance Sheet
Common Stock Market Data
Tellabs' common stock is listed on The Nasdaq Stock Market under the symbol
TLAB and appears in most daily newspaper stock tables as Telabs. At
February 15, 1999, there were approximately 4,371 stockholders of record.
Tellabs is a component of the Nasdaq-100 Index and the Standard & Poor's 500
Index.
10-K Report
Stockholders may obtain without charge a copy of the Tellabs 1998 Form 10-K
as filed with the Securities and Exchange Commission upon request to:
Secretary
Tellabs, Inc.
4951 Indiana Avenue
Lisle, Illinois 60532 U.S.A.
Edgar Archives
For Tellabs investor relations contact:
Tom Scottino
+1.630.378.7504
tom.scottino@tellabs.com
Except for historical information, the matters discussed or incorporated by
reference in this document are forward-looking statements that involve risks
and uncertainties associated with competition, market growth, customer
acceptance and timely availability of products and features, as well as other
risks that may be detailed from time to time in the company's filings with
the Securities and Exchange Commission. Tellabs' actual future results could
differ materially from those discussed here. The company undertakes no
obligation to revise or update these forward-looking statements to reflect
events or circumstances or to reflect the occurrence of unanticipated events.
APPENDIX A
DESCRIPTION OF GRAPHIC AND IMAGE MATERIAL
- -----------------------------------------
Bar Graph of Gross Profit Margin (In Percentages)
Data Points: 1995-54.8%, 1996-57.3%, 1997-59.3%, 1998-58.6%, 1999-58.7%
Results for 1999 are as of 4/02/99.
Bar Graph of Book Value per Share (Restated for Stock Splits in 1996
and 1995)
Data Points: 1995-$2.44, 1996-$3.29, 1997-$5.14, 1998-$7.08, 1999-$7.54
Results for 1999 are as of 4/02/99.
Bar Graph of Return on Equity (In Percentages)
Data Points: 1995-31.9%, 1996-23.0%, 1997-34.6%, 1998-34.5%, 1999-34.6%
Results for 1999 are as of 4/02/99.