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EXHIBIT 99.3
[TELCO SYSTEMS LOGO]
NEWS RELEASE
TELCO SYSTEMS ANNOUNCES AUDITED FOURTH
QUARTER AND FISCAL YEAR RESULTS
NOVEMBER 4, 1998, NORWOOD, MA -- Telco Systems, Inc. (NASDAQ: TELC)
announced today audited fourth quarter and fiscal year 1998 (ended August 30,
1998) results, which have been revised upward from initial earnings reported by
the Company on September 17, 1998. These revisions are the result of the
recently completed audit that was required by the Securities and Exchange
Commission ("SEC") in relation to Telco Systems' pending merger with World
Access, Inc. (NASDAQ: WAXS). The Company will file a Form 8-K reflecting audited
results with the SEC today.
For the fourth quarter of fiscal year 1998, revenue of $31,673,000 and
gross margins remained unchanged. Net income before special charges was
$2,875,000 or $.26 per share (basic and diluted), versus the initial report of
$2,450,000 or $.22 per share, due to lower actual operating expenses partially
offset by higher income tax expense. Special charges and inventory reserves
remained unchanged. After special charges, the Company's net loss for the fourth
quarter was ($375,000) or ($.03), per share versus the initial report of
($800,000) or ($.07) per share.
For the 1998 fiscal year, revenue of $113,230,000 and gross margins
remained unchanged. Net income for the year before special charges was
$5,134,000 or $.47 per share ($.46 per share, diluted), versus the initial
report of $4,709,000 or $.43 per share ($.42 per share, diluted). Special
charges, which included a one-time charge of $5,135,000 or $.47 per share for
the write-off of purchased research and development associated with the
Company's January 1998 acquisition of Jupiter Technology, Inc., and
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inventory reserves remained unchanged. Including this one-time charge and the
other charges mentioned above, the net loss for the year was ($3,251,000) or
($.30) per share versus the initial report of ($3,676,000) or ($.34) per share.
In conjunction with the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, this press release contains
forward-looking statements that are subject to risks and uncertainties which
could cause actual results to differ materially from these forward-looking
statements. A list of these risk factors is included in the documents that the
company files from time to time with the Securities and Exchange Commission
(SEC), including Forms 10-Q and 10-K. Such risks and uncertainties include, but
are not limited to, the following: general economic conditions; risks associated
with competition and competitive pricing pressures; the competition for skilled
employees; incoming order levels and timing of orders; shipment volumes and
delivery schedules; and the company's ability to develop, produce and market new
and innovative products and services in an industry subject to rapid
technological change.
ABOUT TELCO SYSTEMS
Telco Systems' integrated access solutions - that are deployed at the network
edge -- provide organizations with a flexible, cost-effective means of
transmitting voice, data and video traffic over public and private networks.
These products are used in a wide variety of applications by network service
providers, such as interexchange carriers, local exchange carriers, government
agencies, utilities and wireless providers, as well as by corporations around
the world.
# # #
For more information, Telco Systems' World Wide Web site is www.telco.com,
or contact Investor Relations @ 781-255-2151
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CONSOLIDATED STATEMENTS OF OPERATIONS TELCO SYSTEMS, INC.
For the periods ended August 30, 1998 and August 31, 1997
Dollars in thousands except per share amounts
Three Months Ended Twelve Months Ended
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1998 1997 1998 1997
------- ------- -------- --------
Sales $31,673 $31,302 $113,230 $117,843
Cost of sales(a) 21,210 20,730 71,194 74,985
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Gross profit 10,463 10,572 42,036 42,858
Percent of sales 33.0% 33.8% 37.1% 36.4%
Expenses:
Research and development 4,223 4,019 15,485 15,355
Sales, marketing and administration(b) 6,416 6,142 24,300 29,652
Purchased research and development -- -- 5,135 --
(Gain) on sale of investment -- -- -- (1,070)
Amortization of intangible assets 222 168 795 669
Interest (income) (223) (166) (728) (670)
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31,848 30,893 116,181 118,921
Pretax (loss) income (175) 409 (2,951) (1,078)
Income tax provision 200 -- 300 --
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Net (loss) income $ (375) $ 409 $ (3,251) $ (1,078)
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Shares used in computing net (loss) income
per share:
Basic 11,037 10,786 10,966 10,701
Diluted 11,037 10,859 10,966 10,701
(Loss) earnings per share:
Basic $ (0.03) $ 0.04 $ (0.30) $ (0.10)
Diluted $ (0.03) $ 0.04 $ (0.30) $ (0.10)
(a) Includes a $2,500 inventory reserve principally associated with legacy
products in the Fiscal 1998 periods
(b) Includes $750 of merger related expenses in the Fiscal 1998 periods
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CONSOLIDATED BALANCE SHEETS TELCO SYSTEMS, INC.
Dollars in thousands
August 30, 1998 August 31, 1997
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Assets
Current assets:
Cash and marketable securities $20,987 $12,708
Accounts receivable, net 24,336 19,663
Inventories, net 12,016 28,370
Other current assets 3,756 985
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Total Current Assets 61,095 61,726
Plant and equipment, net 8,325 9,689
Intangible and other assets, net 8,403 7,184
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$77,823 $78,599
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Liabilities & Shareholders' Equity
Current liabilities:
Accounts payable $ 7,368 $ 7,292
Other accrued liabilities 14,044 14,020
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Total Current Liabilities 21,412 21,312
Long-term liabilities 911 1,531
Total shareholders' equity 55,500 55,756
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$77,823 $78,599
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