EX-99 3 e15468ex99.txt PRESS RELEASE Exhibit 99 SRS Labs Reports 2003 Second Quarter Results Company Reports Consolidated Revenue Growth of 12% Over Same Period in 2002; Licensing and Semiconductor Revenue Rose 36% and 4% Respectively SANTA ANA, Calif., Aug. 12 /PRNewswire-FirstCall/ -- SRS Labs, Inc. (Nasdaq: SRSL), a leading provider of audio, voice and semiconductor technology solutions, today reported financial results for its second quarter and six months ended June 30, 2003. For the three months ended June 30, 2003, the company reported consolidated revenue of $4,525,846, a 12 percent increase over consolidated revenue of $4,028,360, for the same quarter in 2002. For the quarter ended June 30, 2003, the company reported a net loss of $33,882, or $0.00 earnings per share, compared to a net income of $204,553, or $0.02 earnings per share, for the same period last year. The company reported a pretax income of $292,632 and incurred taxes of $326,514, which resulted in a net loss for the current quarter. Income tax expense consists of taxes on profits generated from Hong Kong operations and foreign taxes withheld and paid on licensing revenue earned. Foreign taxes on licensing revenue are paid regardless of the financial performance of the company. As a result, the total mix of incurred taxes can be higher than reported consolidated pretax income. SRS Labs reported a revenue increase of 36 percent over the same quarter last year from its technology licensing business. The company's Hong Kong-based Valence semiconductor group reported revenue growth of 4 percent over the same period in 2002. Consolidated gross margin was 80 percent, compared to last year's second quarter gross margin of 72 percent. For the six months ended June 30, 2003, the company reported consolidated revenue of $8,996,220 with a net income of $8,652, or $0.00 per share, compared to the same prior year period of $7,583,740 in revenues and a net loss of $486,177, or a $0.04 loss per share. The company's cash and investments position remained strong at $22.2 million on June 30, 2003. Key financial highlights for the six months ended June 30, 2003 are: * Licensing revenue grew by 42% over the same period last year; * Semiconductor revenue improved by 9% over the same period last year; * Consolidated gross margin was 83% compared to 75% in the same period last year; * Operating income grew by $760,000 over the same period last year; and * Positive cash flow from operations of $214,762. Janet Biski, CFO of SRS Labs, said: "For the second quarter, we reported a loss of $34,000 due primarily to foreign tax withholding, a lower than expected rate of sales growth in our semiconductor business, and increased operating expenses. While our licensing business grew 36 percent, our semiconductor business grew only 4 percent." Biski continued, "Although it is difficult to quantify the impact of SARS on our business, we believe that, based in part upon our discussions with customers, the slower growth in our semiconductor business was attributable to restricted business travel and reduced order rate during the period of economic uncertainty caused by SARS. Increased operating expenses were due in part to investment in promotion of our technologies in new markets and higher public company costs. Although we reported a small net loss, we achieved operating profit for the quarter and our business fundamentals remain strong." Thomas C. K. Yuen, SRS Labs chairman and CEO, said, "Due to the compounded impact of slower semiconductor sales growth and increased expenses, we missed profitability for Q2 of 2003. While our licensing business remained strong, we recognize licensing revenue one quarter in arrears and expect that any effect from SARS on our licensing customers in Q2 would be reflected in our Q3 results. Consequently, our third quarter remains challenging." "On the positive side, as the outbreak of SARS has abated and travel restrictions have lifted, we expect that business in the affected regions will return to a normal pace," Yuen continued. "Our sales force has reported an increase in sales activities, ongoing interest in licensing our technologies, and strong interest in our new IC offerings from Valence that incorporate SRS Labs' audio technologies. Additionally, during the first half of the year, we have achieved an increase in design wins, newly signed license agreements and product certifications for our licensees, which we believe will start to be reflected in our fourth quarter performance." In conjunction with SRS Labs' (Nasdaq: SRSL) second quarter results, investors will have the opportunity to listen to the conference call live online through the investor section of the SRS website or through the following links: http://www.firstcallevents.com/service/ajwz385945385gf12.html or http://www.vcall.com/CEpage.asp?ID=84287 today, August 12, 2003 at 3pm EDT or link to the conference from the Investor section of SRS Labs' website at www.srslabs.com. About SRS Labs, Inc. Celebrating a decade in audio technology innovation, SRS Labs has become a recognized leader in the advancement of audio and voice technology. The company works with the world's top manufacturers to provide a richer entertainment experience through patented sound techniques. SRS technologies can be heard through products ranging from televisions, DVD players, cell phones, car audio systems and computers. The company also offers hardware and software tools to professionals and consumers for the production and broadcast of content featuring SRS technologies. SRS Labs' wholly owned subsidiary, ValenceTech, is located in Hong Kong and provides custom ASICs and standard ICs to leading manufacturers worldwide. Based in Santa Ana, Calif., the company also has licensing representation in Hong Kong, Japan, Europe, and Korea. For more information about SRS Labs, Inc. please visit www.srslabs.com. The information on the above-referenced websites is not incorporated by reference into this press release. For further information please contact: investors, Tami Yanito of SRS Labs, Inc., +1-949-442-1070, ext. 3093, tami@srslabs.com. Except for historical information contained in this release, statements in this release, including those of Mr. Yuen and Ms. Biski, are forward-looking statements and projections (which include statements concerning plans and objectives of management for future operations) that are based on management's belief, as well as assumptions made by, and information currently available to, management. While the Company believes that its expectations are based upon reasonable assumptions, there can be no assurances that the Company's goals and strategy will be realized. Numerous factors (including risks and uncertainties) may affect the Company's actual results and may cause results to differ materially from those expressed in forward-looking statements made by or on behalf of the Company. Some of these factors include the general market conditions concerning the semiconductor business including the potential adverse impact in Asia and elsewhere from the spread of SARS, the acceptance of new SRS Labs' products and technologies, the impact of competitive products and pricing, the timely development and release of technologies by the Company, general business and economic conditions, especially in Asia, and other factors detailed in the Company's Form 10-K and other periodic reports filed with the SEC. SRS Labs specifically disclaims any obligation to update or revise any forward-looking statement whether as a result of new information, future developments or otherwise. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2003 2002 2003 2002 Revenues: Licensing $1,958,279 $1,435,841 $4,586,590 $3,231,563 Semiconductor 2,466,941 2,365,298 4,178,760 3,836,440 Other 100,626 227,221 230,870 515,737 Total revenues 4,525,846 4,028,360 8,996,220 7,583,740 Cost of sales 900,565 1,114,815 1,570,133 1,908,160 Gross margin 3,625,281 2,913,545 7,426,087 5,675,580 Operating expenses: Sales and marketing 1,271,097 923,460 2,623,587 2,193,219 Research and development 970,123 937,521 2,051,338 1,902,597 General and administrative 1,210,033 889,500 2,524,643 2,113,706 Total operating expenses 3,451,253 2,750,481 7,199,568 6,209,522 Income (loss) from operations 174,028 163,064 226,519 (533,942) Other income, net 118,604 228,586 282,730 316,550 Minority interest -- 20,282 5,430 40,030 Income (loss) before income tax expense 292,632 411,932 514,679 (177,362) Income tax expense 326,514 207,379 506,027 308,815 Net income (loss) $(33,882) $204,553 $8,652 $(486,177) Net income (loss) per common share: Basic $0.00 $0.02 $0.00 $(0.04) Diluted $0.00 $0.02 $0.00 $(0.04) Weighted average shares used in the calculation of net income (loss) per common share: Basic 12,993,305 12,682,449 12,896,338 12,675,928 Diluted 12,993,305 12,746,527 13,142,519 12,675,928 CONDENSED CONSOLIDATED BALANCE SHEETS June 30, December 31, 2003 2002 (Unaudited) ASSETS Current Assets Cash and cash equivalents $16,787,436 $15,720,860 Accounts receivable, net 930,480 1,074,421 Inventories, net 872,794 807,382 Prepaid expenses and other current assets 426,659 462,442 Deferred income taxes 36,147 36,147 Total Current Assets 19,053,516 18,101,252 Investments available for sale 5,429,545 6,630,771 Furniture, fixtures & equipment, net 1,780,691 1,935,424 Goodwill, net 1,173,102 533,031 Intangible assets, net 1,859,311 1,957,359 Deferred income taxes 160,267 149,498 Total Assets $29,456,432 $29,307,335 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $1,002,052 $1,011,032 Accrued liabilities 1,757,487 2,347,702 Income taxes payable 450,371 341,172 Total Current Liabilities 3,209,910 3,699,906 Minority interest -- 325,371 Commitments and contingencies Stockholders' Equity Preferred stock - $.001 par value; 2,000,000 shares authorized; no shares issued or outstanding -- -- Common stock - $.001 par value; 56,000,000 shares authorized; 13,237,830 and 12,876,314 shares issued; and 13,012,530 and 12,651,014 shares outstanding at June 30, 2003 and December 31, 2002, respectively 13,238 12,877 Additional paid in capital 57,014,858 55,966,589 Accumulated other comprehensive loss (181,382) (88,564) Accumulated deficit (29,881,591) (29,890,243) Treasury stock at cost, 225,300 shares at June 30, 2003 and at December 31, 2002 (718,601) (718,601) Total Stockholders' Equity 26,246,522 25,282,058 Total Liabilities and Stockholders' Equity $29,456,432 $29,307,335 SOURCE SRS Labs, Inc. -0- 08/12/2003 /CONTACT: investors, Tami Yanito of SRS Labs, Inc., +1-949-442-1070, ext. 3093, tami@srslabs.com/ /Web site: http://www.vcall.com/CEpage.asp?ID=84287 / /Web site: http://www.srslabs.com / (SRSL)