Harmonic Announces Fourth Quarter and Year End Results; Continued Success Introducing Cutting-Edge Products into New Broadband Markets
SUNNYVALE, Calif.--(BUSINESS WIRE)--Jan. 23, 2002--Harmonic Inc. (Nasdaq: HLIT) today announced its results for the quarter and year ended December 31, 2001.
For the fourth quarter of 2001, Harmonic reported net sales of $56.7 million, up from $52.0 million for the fourth quarter of 2000. For the full year 2001, the Company had net sales of $203.8 million, compared to $263.0 million for 2000. Domestic sales represented 53% of total sales for the fourth quarter of 2001 and 60% for the year.
The Convergent Systems (CS) division, which designs, manufactures and markets digital headend systems for a variety of networks, had net sales of $39.3 million, up 49% from divisional net sales of $26.3 million in the fourth quarter of 2000. During the quarter, the Company made significant shipments of its MV50 encoder to North American and international satellite television operators, and to new telco and broadcasting customers for digital video services. Harmonic also continued to deliver its NSG product to cable operators as they initiate trials and launch video-on-demand services.
The Broadband Access Networks (BAN) division, which designs, manufactures and markets fiber optic products for broadband cable networks, had net sales of $17.4 million for the fourth quarter of 2001, compared to divisional net sales of $25.7 million in the fourth quarter of 2000. The decline in BAN sales reflected protracted weak capital spending on transmission upgrades in the cable industry during 2001. Harmonic continued to roll out exciting new BAN products in anticipation of improving market conditions during 2002. For example, in the fourth quarter, Harmonic began shipping GIGALight, a DWDM Gigabit Ethernet transport solution, which enables cable operators to cost-effectively manage growing amounts of digital traffic. The Company also introduced the industry's first tunable DWDM return transmitter, which substantially increases upstream capacity on a fiber and reduces operating costs of a cable network.
"Our revenue was being driven by new service launches by our major customers, the success of our new products and our continued penetration into new markets," said Anthony J. Ley, Chairman, President and Chief Executive Officer. "In the fourth quarter, we saw substantial sales to enable local channel initiatives in the domestic satellite market, new video-on-demand rollouts by major cable operators, and video-over-DSL systems for telcos in Canada."
"In the face of challenging worldwide market conditions in 2001, we took the necessary actions to reduce our operating losses and conserve our cash resources, while maintaining our technological leadership and expanding our customer base into new markets. Looking ahead, we believe Harmonic is well-positioned to capitalize on the intensifying competition between a variety of broadband operators who must continue to increase capacity and offer new services," continued Ley.
As previously announced, Harmonic recorded severance costs related to workforce reductions of approximately $600,000 for the fourth quarter. The Company also announced the resignation of Michael Moone, formerly its Chief Operating Officer, who will remain in a consulting capacity with Harmonic. "Mike played a key role in strengthening our operational capabilities, and leaves Harmonic well-equipped for the challenges and opportunities ahead," said Mr. Ley, who will assume Mr. Moone's responsibilities.
Excluding the effects of non-cash purchase accounting adjustments for amortization of goodwill and other intangibles and the severance charges, the net loss for the fourth quarter of 2001 was $8.3 million or $0.14 per share on 59,040,000 basic weighted average shares outstanding. This compares to a net loss of $13.2 million or $0.23 per share on 57,835,000 basic weighted average shares outstanding for the same period of 2000, excluding special inventory provisions and amortization and impairment of goodwill and other intangibles. Including the amortization of goodwill and other intangibles and the severance charges, the net loss was $14.8 million or $0.25 per share for the fourth quarter of 2001.
A listen-only Internet broadcast of Harmonic's conference call regarding its fourth quarter and 2001 results will be available today (2:00 P.M. Pacific/5:00 P.M. Eastern) at www.harmonicinc.com under "Investor Relations" or by calling 800-633-8741, reservation number 17636776. A replay will also be available for 48 hours either at www.harmonicinc.com or by calling 800-633-8284 or +1858-812-6440 (reservation number: 17636776).
About Harmonic Inc.
Harmonic is a leading provider of innovative broadband solutions that deliver video, voice and data to communications providers around the world. Harmonic's technically advanced fiber optic, digital video and IP data delivery systems enable network operators to provide a range of interactive and advanced digital services that include high-speed Internet access, telephony, digital video, HDTV, video & audio streaming, and video-on-demand.
Harmonic (Nasdaq: HLIT) is headquartered in Sunnyvale, California with R&D, sales, and system integration centers worldwide. The Company has customers in over 40 countries on six continents, including many of the world's largest communications providers. For more information, visit www.harmonicinc.com.
This press release contains forward-looking statements within the meaning of Section 27(a) of the Securities Act of 1933 and Section 21(e) of the Securities Exchange Act of 1934, including statements concerning anticipated growing demand and deployment of new products and penetration into new markets, opportunities with satellite operators worldwide, the potential of video-over-DSL, and the ability to emerge well-positioned from the current economic downturn. These forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those projected. These risks include general economic trends, competitive conditions, market acceptance of new or existing products, risks associated with the development and deployment of new products, the risk that expected market opportunities do not develop, our ability to reduce operating costs, unpredictable sales cycles, and cable, satellite and telco industry capital spending. Additional risks are detailed in the Company's filings with the Securities and Exchange Commission, including its 2000 Annual Report on Form 10-K and Form 10-K/A and its Reports on Form 10-Q for the quarters ended March 30, June 29, and September 28, 2001. The Company may, from time to time, make additional written and oral forward-looking statements, including statements contained in the Company's filings with the Securities and Exchange Commission and its reports to shareholders. The Company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the Company.
Editor's Note: Product and company names used here are trademarks or registered trademarks of their respective companies.
Harmonic Inc.
Pro Forma Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
---------------------- ----------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2001 2000 2001 2000
--------- --------- --------- ---------
Net sales $ 56,733 $ 52,049 $ 203,810 $ 263,046
Cost of sales 38,280 51,887 194,197 175,410
--------- --------- --------- ---------
Gross profit 18,453 162 9,613 87,636
--------- --------- --------- ---------
Operating expenses:
Research and
development 9,872 15,310 51,319 49,315
Selling, general
and administrative 17,262 21,182 76,240 67,036
Excess facility
costs -- -- 30,100 --
--------- --------- --------- ---------
Total operating
expenses 27,134 36,492 157,659 116,351
--------- --------- --------- ---------
Loss from operations (8,681) (36,330) (148,046) (28,715)
Interest and other
income, net 272 1,144 1,574 10,456
--------- --------- --------- ---------
Loss before
income taxes (8,409) (35,186) (146,472) (18,259)
Provision for
(benefit from)
income taxes 500 (11,977) 2,000 (5,544)
--------- --------- --------- ---------
Net loss $ (8,909) $ (23,209) $(148,472) $ (12,715)
========= ========= ========= =========
Net loss per share
Basic and diluted $ (0.15) $ (0.40) $ (2.54) $ (0.26)
========= ========= ========= =========
Weighted average shares
Basic and diluted 59,040 57,835 58,540 48,564
========= ========= ========= =========
Notes to the unaudited Pro Forma Condensed Consolidated Statements of
Operations:
1. The above unaudited Pro Forma Condensed Consolidated Statements of
Operations are not presented in accordance with generally accepted
accounting principles due to the exclusion of amortization and
impairment of goodwill and intangibles and the related tax effects.
2. In addition, the unaudited Pro Forma Condensed Consolidated
Statements of Operations for the three months ended December 31,
2001 include certain special charges as follows:
- Severance costs were recorded during the last quarter of 2001
totaling $0.6 million, of which $0.2 million was charged to cost
of sales and $0.4 million was charged to operating expenses.
Excluding these costs from the unaudited Pro Forma Condensed
Consolidated Statements of Operations for the three months ended
December 31, 2001 would result in a net loss per share of $0.14.
3. In addition, the unaudited Pro Forma Condensed Consolidated
Statements of Operations for the year ended December 31, 2001
include certain special charges as follows:
- Excess facility costs of $30.1 million were recorded during the
year ended December 31, 2001, to accrue for real estate
commitments in excess of projected needs.
- Inventory and fixed asset provisions of $42.5 million were
recorded for the year ended December 31, 2001 to provide for
excess, obsolete and discontinued products. For the year,
$40.1 million was charged to cost of sales, $2.3 million to
operating expenses, and $0.1 million to other income and expense.
- Severance and other costs were recorded during the year ended
December 31, 2001 totaling $3.0 million, of which $0.9 million
was charged to cost of sales, $1.6 million was charged to
operating expenses and $0.5 million was charged to other income
and expense.
Excluding these costs from the unaudited Pro Forma Condensed
Consolidated Statements of Operations for year ended December 31,
2001 would result in a net loss per share of $1.24.
4. DiviCom's results of operations were included from the date of
acquisition, May 3, 2000.
Harmonic Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended Year Ended
---------------------- ----------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2001 2000 2001 2000
--------- --------- --------- ---------
(Unaudited) (Unaudited) (Unaudited)
Net sales $ 56,733 $ 52,049 $ 203,810 $ 263,046
Cost of sales 40,293 56,638 202,255 187,875
--------- --------- --------- ---------
Gross profit (loss) 16,440 (4,589) 1,555 75,171
--------- --------- --------- ---------
Operating expenses:
Research and
development 9,872 15,310 51,319 49,315
Selling, general
and administrative 17,262 21,182 106,340 67,036
Impairment of
goodwill and
other intangibles -- 1,380,328 -- 1,380,328
Amortization of
goodwill and
other intangibles 3,019 83,147 12,683 221,727
Acquired in-process
technology -- -- -- 39,800
--------- --------- --------- ---------
Total operating
expenses 30,153 1,499,967 170,342 1,758,206
--------- --------- --------- ---------
Loss from operations (13,713) (1,504,556) (168,787) (1,683,035)
Interest income and
other income, net 272 1,144 1,574 10,456
--------- --------- --------- ---------
Loss before
income taxes (13,441) (1,503,412) (167,213) (1,672,579)
Provision for (benefit
from) income taxes 1,368 (16,810) (806) (18,571)
--------- --------- --------- ---------
Net loss $ (14,809) $(1,486,602) $(166,407) $(1,654,008)
========= ========= ========= =========
Net loss per share
Basic and Diluted $ (0.25) $ (25.70) $ (2.84) $ (34.06)
========= ========= ========= =========
Weighted average shares
Basic and Diluted 59,040 57,835 58,540 48,564
========= ========= ========= =========
These Condensed Consolidated Statements of Operations include the
results of operations of DiviCom from May 3, 2000.
Harmonic Inc.
Condensed Consolidated Balance Sheets
(In thousands)
December 31, December 31,
2001 2000
--------- ---------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 36,005 $ 13,505
Short-term investments 18,272 86,164
Accounts receivable, net 34,402 67,726
Inventories 30,944 80,191
Deferred income taxes 9,065 30,506
Prepaid expenses and other assets 9,775 10,961
--------- ---------
Total current assets 138,463 289,053
Property and equipment, net 45,755 47,366
Intangibles and other assets 53,838 89,525
--------- ---------
$ 238,056 $ 425,944
========= =========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 10,296 $ 32,783
Current portion of long-term debt 1,281 --
Income taxes payable 28,103 1,109
Accrued liabilities 32,175 60,543
--------- ---------
Total current liabilities 71,855 94,435
--------- ---------
Long-term debt, less current portion 1,465 --
Deferred income taxes 9,065 35,215
Accrued excess facility costs 19,563 --
Other non-current liabilities 1,054 592
--------- ---------
Total liabilities 103,002 130,242
--------- ---------
Stockholders' equity:
Common stock 1,959,102 1,952,842
Accumulated deficit (1,824,207) (1,657,800)
Accumulated other comprehensive income 159 660
--------- ---------
Total stockholders' equity 135,054 295,702
--------- ---------
$ 238,056 $ 425,944
========= =========
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| CONTACT: | Harmonic Inc. |
|---|---|
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| or | |
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| Michael Newman, 408/542-2760 (Investor Relations) | |