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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
April 28, 2011
 
Date of Report
(Date of earliest event reported)
HARMONIC INC.
 
(Exact name of Registrant as specified in its charter)
         
Delaware   000-25826   77-0201147
         
(State or other jurisdiction of   Commission File Number   (I.R.S. Employer
incorporation or organization)       Identification Number)
4300 North First Street
San Jose, CA 95134
(408) 542-2500
(Address, including zip code, and telephone number, including area code,
of Registrant’s principal executive offices)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 


TABLE OF CONTENTS

Item 2.02. Results of Operations and Financial Condition.
Item 9.01. Financial Statements and Exhibits.
SIGNATURES
EXHIBIT INDEX
EX-99.1


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Item 2.02. Results of Operations and Financial Condition.
On April 28, 2011, Harmonic Inc. (“Harmonic” or the “Company”) issued a press release regarding its unaudited financial results for the quarter ended April 1, 2011. In the press release, Harmonic also announced that it would be holding a conference call on April 28, 2011 to discuss its financial results for the quarter ended April 1, 2011. A copy of the press release is furnished as Exhibit 99.1 hereto, and the information in Exhibit 99.1 is incorporated herein by reference.
The information in this Current Report on Form 8-K and the exhibit attached hereto is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) or otherwise subject to the liabilities of that Section, and this Current Report on Form 8-K and the exhibit furnished herewith shall not be incorporated by reference into any filing by Harmonic under the Securities Act of 1933, as amended, or under the Exchange Act.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
     
Exhibit Number   Description
99.1
  Press release of Harmonic Inc., issued on April 28, 2011.

 


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
         
Date: April 28, 2011  HARMONIC INC.
 
 
  By:   /s/ Carolyn V. Aver    
    Carolyn V. Aver   
    Chief Financial Officer   

 


Table of Contents

         
EXHIBIT INDEX
     
Exhibit Number   Description
99.1
  Press release of Harmonic Inc., issued on April 28, 2011.

 

exv99w1
Exhibit 99.1
Harmonic Announces First Quarter 2011 Results
Strong Year-over-Year Growth in Revenue and Non-GAAP Earnings
SAN JOSE, Calif.¾April 28, 2011¾Harmonic Inc. (NASDAQ: HLIT), a global leader in video infrastructure solutions, today announced its preliminary and unaudited results for the quarter ended April 1, 2011. Results for the first quarter of 2011 included the contribution from Omneon Inc., acquired on September 15, 2010.
Net revenue for the first quarter of 2011 was $132.8 million, which excluded $2.1 million of certain deferred revenue that would otherwise have been recognized by Omneon had the acquisition not occurred, up from $84.8 million in the first quarter of 2010. Total bookings in the first quarter of 2011 were approximately $131.6 million, up from approximately $91.3 million for the first quarter of 2010.
The Company reported GAAP net income for the first quarter of 2011 of $0.5 million, or $0.00 per share, compared to net income of $5.3 million, or $0.05 per diluted share, for the first quarter of 2010. Non-GAAP net income for the first quarter of 2011 was $10.3 million, or $0.09 per diluted share, up from $5.8 million, or $0.06 per diluted share, for the same period of 2010. See “Use of Non-GAAP Financial Measures” and “GAAP to Non-GAAP Net Income Reconciliation” below.
For the first quarter of 2011, Harmonic had GAAP gross margins of 47% and GAAP operating margins of 0%, compared to 48% and 3%, respectively, for the same period of 2010. Non-GAAP gross margins were 51% and non-GAAP operating margins were 10% for the first quarter of both 2010 and 2011.
As of April 1, 2011, the Company had cash, cash equivalents and short-term investments of $117.3 million.
“Our first quarter results demonstrate that we continue to strengthen our leadership position in enabling the new video economy,” said Patrick Harshman, President and Chief Executive Officer. “Our success is being driven by growing worldwide investment in new video services, our industry-leading products and the continued broadening of our customer base as we further penetrate new markets and geographies. Moving into 2011, we continue to expand our global sales organization and extend the breadth of our innovative solutions for media companies and video service providers around the world.”
Business Outlook
Harmonic anticipates net revenue in a range of $137 million to $141 million for the second quarter of 2011. GAAP gross margins and operating expenses for the second quarter of 2011 are expected to be in the range of 46% to 48% and $61 to $63 million, respectively. Non-GAAP gross margins and operating expenses for the second quarter of 2011, which will exclude charges for stock-based compensation and the amortization of intangibles, are anticipated to be in the range of 50.5% to 52.5% and $54.5 to $55.5 million, respectively.
Conference Call Information
Harmonic will host a conference call today to discuss its financial results at 2:00 p.m. Pacific (5:00 p.m. Eastern). A listen-only broadcast of the conference call can be accessed on the Company’s website at www.harmonicinc.com or by calling +1.706.634.9047 (conference identification code 51969320). The replay will be available after 6:00 p.m. Pacific at the same website address or by calling +1.706.645.9291 (conference identification code 51969320).
Annual Meeting of Stockholders
Harmonic also announced that its 2011 Annual Meeting of Stockholders will be held on June 22, 2011, at 2:00 p.m. Pacific, at its principal offices, 4300 North First Street, San Jose, California 95134. The Company expects to file its Proxy Statement for the 2011 Annual Meeting of Stockholders on or about May 2, 2011.

 


 

About Harmonic Inc.
Harmonic Inc. (NASDAQ: HLIT) provides infrastructure that powers the video economy. The company enables content and service providers to efficiently create, prepare, and deliver differentiated video services for television and new media platforms. More information is available at www.harmonicinc.com.
Legal Notice Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements related to our expectations: regarding our final results for the first quarter ended April 1, 2011; that we continue to strengthen our leadership position in enabling the new video economy; of a growing worldwide investment in new video services; concerning the continuing broadening of our customer base; that we will continue to expand our global sales organization; that we will continue to extend the breadth of our solutions; and regarding net revenue, GAAP gross margins, GAAP operating expenses, non-GAAP gross margins and non-GAAP operating expenses for the second quarter of 2011. Our expectations regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include the possibility, in no particular order, that: we will not be able to integrate Omneon into our business as effectively or efficiently as expected; Omneon does not provide Harmonic with the benefits that we expect from the acquisition; the trends toward more high-definition, on-demand and anytime, anywhere video will not continue to develop at its current pace, or at all; the possibility that our products will not generate sales that are commensurate with our expectations; the mix of products and services sold in various geographies and the effect it has on gross margins; delays or decreases in capital spending in the cable, satellite and telco and broadcast and media industries; customer concentration and consolidation; the impact of general economic conditions, including recent turmoil in the global financial markets, particularly on international sales and operations; market acceptance of new or existing Harmonic products; losses of one or more key customers; risks associated with Harmonic’s international operations; inventory management; the lack of timely availability of parts or raw materials necessary to produce our products; the impact of increases in the prices of raw materials and oil; the effect of competition; difficulties associated with rapid technological changes in Harmonic’s markets; the need to introduce new and enhanced products and the risk that our product development is not timely or does not result in expected benefits or market acceptance; risks associated with unpredictable sales cycles; our dependence on contract manufacturers; and the risks that our international sales and support center will not provide the operational or tax benefits that we anticipate or that its expenses exceed our plans. The forward-looking statements contained in this press release are also subject to other risks and uncertainties, including those more fully described in Harmonic’s filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2010 and our Current Reports on Form 8-K. The forward-looking statements in this press release are based on information available to the Company as of the date hereof, and Harmonic disclaims any obligation to update any forward-looking statements.
EDITOR’S NOTE — Product and company names used herein are trademarks or registered trademarks of their respective owners.
     
CONTACTS:
   
Carolyn V. Aver
  Michael Newman
Chief Financial Officer
  Investor Relations
Harmonic Inc.
  StreetConnect
(408) 542-2500
  (408) 542-2760

 


 

Harmonic Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
                 
    April 1, 2011     December 31, 2010  
    (In thousands)  
ASSETS
               
Current assets:
               
Cash and cash equivalents
  $ 59,672     $ 96,533  
Short-term investments
    57,614       23,838  
Accounts receivable, net
    111,929       101,652  
Inventories
    58,817       58,065  
Deferred income taxes
    39,849       39,849  
Prepaid expenses and other current assets
    28,218       28,614  
 
           
Total current assets
    356,099       348,551  
 
               
Property and equipment, net
    39,597       39,825  
Goodwill, intangibles and other assets
    324,902       332,010  
 
           
Total assets
  $ 720,598     $ 720,386  
 
           
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Accounts payable
  $ 22,197     $ 26,300  
Income taxes payable
    781       6,791  
Deferred revenue
    49,815       46,279  
Accrued liabilities
    39,379       51,283  
 
           
Total current liabilities
    112,172       130,653  
 
               
Income taxes payable, long-term
    48,139       48,883  
Deferred income taxes, long-term
    15,635       14,849  
Other non-current liabilities
    7,900       5,798  
 
           
Total liabilities
    183,846       200,183  
 
           
 
               
Stockholders’ equity:
               
Common stock
    2,413,373       2,397,783  
Accumulated deficit
    (1,876,352 )     (1,876,868 )
Accumulated other comprehensive loss
    (269 )     (712 )
 
           
Total stockholders’ equity
    536,752       520,203  
 
           
Total liabilities and stockholders’ equity
  $ 720,598     $ 720,386  
 
           

 


 

Harmonic Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
                 
    Three months ended  
    April 1, 2011     April 2, 2010  
    (In thousands, except per share  
    amounts)  
 
               
Net revenue
  $ 132,835     $ 84,822  
Cost of revenue
    70,980       44,016  
 
           
Gross profit
    61,855       40,806  
 
               
Operating expenses:
               
Research and development
    26,149       16,966  
Selling, general and administrative
    33,564       20,845  
Amortization of intangibles
    2,229       534  
 
           
Total operating expenses
    61,942       38,345  
 
           
Income (loss) from operations
    (87 )     2,461  
 
               
Interest and other income (expense), net
    (15 )     13  
 
           
Income (loss) before income taxes
    (102 )     2,474  
Benefit from income taxes
    (618 )     (2,845 )
 
           
Net income
  $ 516     $ 5,319  
 
           
 
               
Net income per share:
               
Basic
  $ 0.00     $ 0.06  
 
           
Diluted
  $ 0.00     $ 0.05  
 
           
Weighted average shares:
               
Basic
    113,836       96,684  
Diluted
    116,109       97,344  

 


 

Harmonic Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
                 
    Three months ended  
    April 1, 2011     April 2, 2010  
    (In thousands)  
Cash flows from operating activities:
               
Net income
  $ 516     $ 5,319  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Amortization of intangibles
    7,371       2,616  
Depreciation
    3,403       2,333  
Stock-based compensation
    6,002       3,243  
Net loss on disposal of fixed assets
    61       19  
Deferred income taxes
    76       (1,422 )
Other non-cash adjustments, net
    121       567  
Changes in assets and liabilities:
               
Accounts receivable, net
    (10,277 )     (5,204 )
Inventories
    (732 )     (4,512 )
Prepaid expenses and other assets
    998       (1,101 )
Accounts payable
    (3,616 )     (3,356 )
Deferred revenue
    4,430       6,445  
Income taxes payable
    (6,748 )     (1,616 )
Accrued excess facility costs
    46       (1,697 )
Accrued and other liabilities
    (9,334 )     (4,613 )
 
           
Net cash used in operating activities
    (7,683 )     (2,979 )
 
           
 
               
Cash flows from investing activities:
               
Purchases of investments
    (41,813 )     (35,367 )
Proceeds from sales and maturities of investments
    7,899       41,292  
Acquisition of property and equipment
    (4,957 )     (1,153 )
 
           
Net cash provided by (used in) investing activities
    (38,871 )     4,772  
 
           
 
               
Cash flows from financing activities:
               
Proceeds from issuance of common stock, net
    9,570       1,736  
 
           
Net cash provided by financing activities
    9,570       1,736  
 
           
Effect of exchange rate changes on cash and cash equivalents
    123       (46 )
 
           
Net increase (decrease) in cash and cash equivalents
    (36,861 )     3,483  
Cash and cash equivalents at beginning of period
    96,533       152,477  
 
           
Cash and cash equivalents at end of period
  $ 59,672     $ 155,960  
 
           

 


 

Harmonic Inc.
Revenue Information
(Unaudited)
                                 
    Three months ended  
    April 1, 2011     April 2, 2010  
    (In thousands, except percentages)  
Product
                               
Video Processing
  $ 63,758       48 %   $ 38,890       46 %
Production and Playout
    20,933       16 %           0 %
Edge and Access
    31,176       23 %     35,544       42 %
Services and Support
    16,968       13 %     10,388       12 %
 
                       
Total
  $ 132,835       100 %   $ 84,822       100 %
 
                           
 
                               
Geography
                               
United States
  $ 58,954       44 %   $ 42,592       50 %
International
    73,881       56 %     42,230       50 %
 
                       
Total
  $ 132,835       100 %   $ 84,822       100 %
 
                           
 
                               
Market
                               
Cable
  $ 55,920       42 %   $ 56,017       66 %
Satellite and Telco
    35,152       27 %     19,798       23 %
Broadcast and Media
    41,763       31 %     9,007       11 %
 
                       
Total
  $ 132,835       100 %   $ 84,822       100 %
 
                           
Note: We have revised our market categories to combine the Telco revenue with the Satellite category. The data for prior periods has been revised to conform with this presentation.

 


 

Use of Non-GAAP Financial Measures
In establishing operating budgets, managing its business performance, and setting internal measurement targets, the Company excludes a number of items required by GAAP. Management believes that these accounting charges and credits, most of which are non-cash or non-recurring in nature, are not useful in managing its operations and business. Historically, the Company has also publicly presented these supplemental non-GAAP measures in order to assist the investment community to see the Company “through the eyes of management,” and thereby enhance understanding of its operating performance. The non-GAAP measures presented here are gross margins, operating expense, net income and net income per share. The presentation of non-GAAP information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP, and is not necessarily comparable to non-GAAP results published by other companies. A reconciliation of the historical non-GAAP financial measures discussed in this press release to the most directly comparable historical GAAP financial measures is included with the financial statements contained in this presentation. The non-GAAP adjustments described below have historically been excluded from our GAAP financial measures. These adjustments are excess facilities charges and non-cash items, such as stock-based compensation expense, amortization of intangibles, and benefits from income taxes.

 


 

Harmonic Inc.
GAAP to Non-GAAP Net Income Reconciliation
(Unaudited)
                                                 
    Three months ended  
    April 1, 2011     April 2, 2010  
    Gross Profit     Operating Expense     Net Income     Gross Profit     Operating Expense     Net Income  
            (In thousands, except per share amounts)                  
GAAP
  $ 61,855     $ 61,942     $ 516     $ 40,806     $ 38,345     $ 5,319  
 
                                               
Cost of revenue related to stock-based compensation expense
    747             747       478             478  
Research and development expense related to stock-based compensation expense
          (1,836 )     1,836             (1,109 )     1,109  
Selling, general and administrative expense related to stock-based compensation expense
          (3,419 )     3,419             (1,656 )     1,656  
Selling, general and administrative expense related to excess facility costs and other non-recurring expenses
          (409 )     409                    
Amortization of intangibles
    5,142       (2,229 )     7,371       2,082       (534 )     2,616  
Discrete tax items and adjustments
                (4,038 )                 (5,345 )
         
Non-GAAP
  $ 67,744     $ 54,049     $ 10,260     $ 43,366     $ 35,046     $ 5,833  
         
 
                                               
GAAP net income per share — basic
                  $ 0.00                     $ 0.06  
 
                                           
GAAP net income per share — diluted
                  $ 0.00                     $ 0.05  
 
                                           
Non-GAAP net income per share — basic
                  $ 0.09                     $ 0.06  
 
                                           
Non-GAAP net income per share — diluted
                  $ 0.09                     $ 0.06  
 
                                           
Shares used in per share calculation — basic
                    113,836                       96,684  
 
                                           
Shares used in per share calculation — diluted
                    116,109                       97,344  
 
                                           

 


 

Harmonic Inc.
Proforma Revenue Information
(Unaudited)
                                                                                                 
    Three months ended   Year ended   Three months ended
    April 2, 2010   July 2, 2010   October 1, 2010   December 31, 2010   December 31, 2010   April 1, 2011
 
                                                                                               
Product
                                                                                               
Video Processing
  $ 38,890       34 %   $ 49,998       39 %   $ 51,005       39 %   $ 63,005       45 %   $ 202,898       40 %   $ 63,758       47 %
Production and Playout
    24,828       22 %     26,589       21 %     26,024       20 %     27,699       20 %     105,140       21 %     22,408       17 %
Edge and Access
    35,544       32 %     34,263       27 %     34,712       27 %     30,787       22 %     135,306       26 %     31,176       23 %
Services and Support
    13,777       12 %     16,623       13 %     17,760       14 %     17,514       13 %     65,674       13 %     17,566       13 %
 
                                                                       
Total
  $ 113,039       100 %   $ 127,473       100 %   $ 129,501       100 %   $ 139,005       100 %   $ 509,018       100 %   $ 134,908       100 %
 
                                                                                   
 
                                                                                               
Geography
                                                                                               
United States
  $ 49,632       44 %   $ 65,456       51 %   $ 62,415       48 %   $ 64,230       46 %   $ 241,733       47 %   $ 60,608       45 %
International
    63,407       56 %     62,017       49 %     67,086       52 %     74,775       54 %     267,285       53 %     74,300       55 %
 
                                                                       
Total
  $ 113,039       100 %   $ 127,473       100 %   $ 129,501       100 %   $ 139,005       100 %   $ 509,018       100 %   $ 134,908       100 %
 
                                                                                   
 
                                                                                               
Market
                                                                                               
Cable
  $ 56,441       50 %   $ 53,555       42 %   $ 63,419       49 %   $ 65,817       47 %   $ 239,232       47 %   $ 55,950       42 %
Satellite and Telco
    25,030       22 %     36,218       28 %     28,212       22 %     28,455       21 %     117,915       23 %     35,388       26 %
Broadcast and Media
    31,568       28 %     37,700       30 %     37,870       29 %     44,733       32 %     151,871       30 %     43,570       32 %
 
                                                                       
Total
  $ 113,039       100 %   $ 127,473       100 %   $ 129,501       100 %   $ 139,005       100 %   $ 509,018       100 %   $ 134,908       100 %
 
                                                                                   
NOTE:     Data includes a full quarter proforma revenue for Omneon for the periods shown, including certain deferred revenue excluded in reported results. We have revised our market categories to combine the Telco revenue with the Satellite category. The data for prior periods has been revised to conform with this presentation.