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TOTAL NUMBER OF PAGES 32
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INDEX TO EXHIBITS AT PAGE 32
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period ended
September 29, 2000
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period
from __________ to ___________
Commission File No. 0-25826
HARMONIC INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 77-0201147
(State of incorporation) (I.R.S. Employer Identification No.)
549 Baltic Way
Sunnyvale, CA 94089
(408) 542-2500
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
--------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
As of September 29, 2000 there were 57,777,217 shares of the Registrant's Common
Stock outstanding.
Page 1
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HARMONIC INC.
Index
PART I - FINANCIAL INFORMATION Page
----
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at September 29, 2000
and December 31, 1999......................................................................3
Condensed Consolidated Statements of Operations for the Three Months and Nine Months
Ended September 29, 2000 and October 1, 1999...............................................4
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 29, 2000 and October 1, 1999.....................................................5
Notes to Condensed Consolidated Financial Statements.......................................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................................14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings..................................................................29
Item 4. Submission of Matters to a Vote of Securities Holders..............................29
Item 5. Other Information..................................................................30
Item 6. Exhibits and Reports on Form 8-K...................................................30
Page 2
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PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
HARMONIC INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
SEPTEMBER 29, DECEMBER 31,
2000 1999
------------- -----------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 17,901 $ 24,822
Short-term investments 93,381 64,877
Accounts receivable, net 90,460 35,421
Inventories 81,979 35,310
Deferred income taxes 11,525 5,478
Prepaid expenses and other assets 12,902 3,792
---------- --------
Total current assets 308,148 169,700
Property and equipment, net 37,602 14,931
Intangibles and other assets 1,611,974 1,062
---------- --------
$1,957,724 $185,693
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 32,078 $ 18,946
Income taxes payable 7,456 2,265
Deferred income taxes 19,327 --
Accrued liabilities 43,345 19,073
---------- --------
Total current liabilities 102,206 40,284
---------- --------
Deferred income taxes 73,889 --
Other non-current liabilities 610 521
Stockholders' equity:
Preferred stock, $.001 par value, 5,000,000 shares
authorized; no shares issued or outstanding -- --
Common Stock, $.001 par value, 150,000,000 shares
authorized; 57,777,217 and 30,501,766 shares issued
and outstanding 58 31
Capital in excess of par value 1,952,455 148,551
Accumulated deficit (171,198) (3,792)
Accumulated other comprehensive income (loss) (296) 98
---------- --------
Total stockholders' equity 1,781,019 144,888
---------- --------
$1,957,724 $185,693
========== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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HARMONIC INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- -------------------------
SEPTEMBER 29, OCTOBER 1, SEPTEMBER 29, OCTOBER 1,
2000 1999 2000 1999
------------- ---------- ------------ ----------
Net sales $ 68,171 $52,624 $ 210,997 $120,789
Cost of sales 49,052 29,528 131,237 69,326
-------- ------- --------- --------
Gross profit 19,119 23,096 79,760 51,463
-------- ------- --------- --------
Operating expenses:
Research and development 16,036 4,798 34,005 11,971
Selling, general and administrative 20,059 8,897 45,854 23,743
Amortization of goodwill and 83,248 76 138,580 228
other intangibles
In-process research and development 1,100 -- 39,800 --
-------- ------- --------- --------
Total operating expenses 120,443 13,771 258,239 35,942
-------- ------- --------- --------
Income (loss) from operations (101,324) 9,325 (178,479) 15,521
Interest and other income, net 3,377 931 9,312 1,674
-------- ------- --------- --------
Income (loss) before income taxes (97,947) 10,256 (169,167) 17,195
Provision for (benefit from) income
taxes (8,277) 2,564 (1,761) 4,299
-------- ------- --------- --------
Net income (loss) $(89,670) $ 7,692 $(167,406) $ 12,896
======== ======= ========= ========
Net income (loss) per share
Basic $ (1.55) $ 0.25 $ (3.68) $ 0.47
======== ======= ========= ========
Diluted $ (1.55) $ 0.23 $ (3.68) $ 0.43
======== ======= ========= ========
Weighted average shares
Basic 57,724 30,179 45,474 27,592
======== ======= ========= ========
Diluted 57,724 32,836 45,474 30,264
======== ======= ========= ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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HARMONIC INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
-----------------------------
SEPTEMBER 29, OCTOBER 1,
2000 1999
------------- ----------
Cash flows from operating activities:
Net income (loss) $ (167,406) $ 12,896
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating activities:
Amortization of goodwill and other intangibles 146,508 228
In-process research and development 39,800 --
Depreciation 8,683 3,760
Changes in assets and liabilities:
Accounts receivable 2,943 (17,593)
Inventories (28,642) (8,103)
Prepaid expenses and other assets (6,265) (1,644)
Accounts payable (3,455) 7,541
Income taxes payable (324,275) --
Accrued and other liabilities (28,535) 7,720
---------- --------
Net cash provided by (used in) operating activities (360,644) 4,805
Cash flows from investing activities:
Acquisition of property and equipment (15,819) (6,141)
Net cash received from DiviCom acquisition 393,739 --
Proceeds from maturities of short-term investments 33,609 --
Purchases of short-term investments (62,163) (57,576)
---------- --------
Net cash provided by (used in) investing activities 349,366 (63,717)
---------- --------
Cash flows from financing activities:
Proceeds from issuance of Common Stock, net 5,124 68,214
Borrowings under bank line -- 840
Repayments under bank line and term loan -- (1,270)
---------- --------
Net cash provided by financing activities 5,124 67,784
Effect of exchange rate changes on cash
and cash equivalents (767) 113
---------- --------
Net increase (decrease) in cash and cash equivalents (6,921) 8,985
Cash and cash equivalents at beginning of period 24,822 9,178
---------- --------
Cash and cash equivalents at end of period $ 17,901 $ 18,163
========== ========
Supplemental disclosure of cash flow information:
Interest paid during the period $ 27 $ 99
Income taxes paid during the period $ 330,054 $ 49
Non-cash financing activities:
Issuance of Common Stock and assumption of options
for acquisitions $1,798,804 $ --
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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HARMONIC INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include
all adjustments (consisting only of normal recurring adjustments) which Harmonic
Inc. (the "Company") considers necessary for a fair presentation of the results
of operations for the unaudited interim periods covered and the consolidated
financial condition of the Company at the date of the balance sheets. The
quarterly financial information is unaudited. This Quarterly Report on Form 10-Q
should be read in conjunction with the Company's audited consolidated financial
statements contained in the Company's Annual Report on Form 10-K and Form 10-K/A
which were filed with the Securities and Exchange Commission on March 31, 2000
and May 15, 2000, respectively. The interim results presented herein are not
necessarily indicative of the results of operations that may be expected for the
full fiscal year ending December 31, 2000, or any other future period.
NOTE 2 - NEW ACCOUNTING PRONOUNCEMENTS
In June 2000 the Financial Accounting Standards Board ("FASB") issued SFAS No.
138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities," which amends SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 133 was previously amended by SFAS No. 137,
"Deferral of the Effective Date of SFAS No. 133," which deferred the effective
date of SFAS No. 133 to fiscal years commencing after June 15, 2000. The Company
will adopt SFAS Nos. 133 and 138 as of the beginning of fiscal 2001. The Company
is continuing to evaluate the impact of SFAS Nos. 133 and 138, but currently
does not expect the impact from the adoption of these standards to be material
to its financial position or results of operations at this time.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting principles ("GAAP") to revenue recognition. The Company is
required to adopt SAB 101 in the fourth quarter of fiscal 2000. The Company is
continuing to evaluate the impact of SAB 101, but currently does not expect any
material effects on its financial position or results of operations from the
implementation of this SAB.
NOTE 3 - INVENTORIES
SEPTEMBER 29, DECEMBER 31,
2000 1999
------------- ------------
IN THOUSANDS (UNAUDITED)
Raw materials $27,429 $10,649
Work-in-process 12,482 4,740
Finished goods 42,068 19,921
------- -------
$81,979 $35,310
======= =======
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NOTE 4 - CASH EQUIVALENTS AND INVESTMENTS
Cash equivalents are comprised of highly liquid investments with original
maturities of three months or less at time of acquisition. Investments are
comprised of U.S. government, state, municipal and county obligations and
corporate debt securities with lives ranging from three months to two years. The
Company classifies its investments as available for sale in accordance with
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," and states its investments at
estimated fair value, with material unrealized gains and losses reported in
other comprehensive income. The specific identification method is used to
determine the cost of securities disposed of, with realized gains and losses
reflected in other income and expense. Investments are anticipated to be used
for current operations and are, therefore, classified as current assets, even
though maturities may extend beyond one year.
At September 29, 2000, short-term investments of $53.0 million mature in less
than one year and $40.4 million mature between one and two years.
NOTE 5 - NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed by dividing net income available
to common stockholders (numerator) by the weighted average number of common
shares outstanding (denominator) during the period. Basic net income (loss) per
share excludes the dilutive effect of stock options and warrants. Diluted net
income (loss) per share gives effect to all dilutive potential common shares
outstanding during a period. In computing diluted net income (loss) per share,
the average price for the period is used in determining the number of shares
assumed to be purchased from exercise of stock options and warrants.
The following table presents a reconciliation of the numerators and denominators
of the Basic and Diluted net income (loss) per share computations for the
periods presented below:
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- -----------------------------
SEPTEMBER 29, OCTOBER 1, SEPTEMBER 29 OCTOBER 1,
2000 1999 2000 1999
------------- ---------- ------------ ----------
IN THOUSANDS (UNAUDITED)
Net income (loss) - (numerator) $(89,670) $ 7,692 $(167,406) $12,896
======== ======= ========= =======
Shares calculation - (denominator):
Average shares outstanding - basic 57,724 30,179 45,474 27,592
Effect of Dilutive Securities:
Potential Common Stock relating
to stock options and warrants -- 2,657 -- 2,672
-------- ------- --------- -------
Average shares outstanding -
diluted 57,724 32,836 45,474 30,264
======== ======= ========= =======
Net income (loss) per share -
basic $ (1.55) $ 0.25 $ (3.68) $ 0.47
======== ======= ========= =======
Net income (loss) per share -
diluted $ (1.55) $ 0.23 $ (3.68) $ 0.43
======== ======= ========= =======
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Options to purchase 8.6 million shares of common stock were outstanding during
the three and nine month periods ended September 29, 2000, but were not included
in the computation of diluted net income (loss) per share because either the
options' exercise prices were greater than the average market price of the
common stock or inclusion of such options would have been antidilutive. There
were no significant options and warrants outstanding during the three and nine
month periods ended October 1, 1999 that were not included in the computation of
diluted net income per share because the options' exercise prices were greater
than the average market price of the common stock. The exercise price ranges of
these options were from $0.15 to $121.68 per share for the three and nine month
periods ended September 29, 2000.
NOTE 6 - COMPREHENSIVE INCOME
The Company's total comprehensive income (loss) was as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- -------------------------
SEPTEMBER 29, OCTOBER 1, SEPTEMBER 29, OCTOBER 1,
IN THOUSANDS (UNAUDITED) 2000 1999 2000 1999
------------- ---------- ------------- ----------
Net income (loss) $(89,670) $7,692 $(167,406) $12,896
Change in unrealized income
on investments 138 -- 123 --
Currency translation (1,077) (14) (517) 122
-------- ------ --------- -------
Total comprehensive income
(loss) $(90,609) $7,678 $(167,800) $13,018
======== ====== ========= =======
NOTE 7 - ACQUISITION OF COGENT TECHNOLOGY, INC.
On July 1, 2000, Harmonic completed the acquisition of privately-held Cogent
Technology, Inc. ("Cogent") of Santa Cruz, California, a developer of advanced
MPEG-2 technology for the migration from analog to digital television on PCI
based platforms. Harmonic issued approximately 286,000 shares of common stock at
an average market price per share of $23.78 to the shareholders of Cogent in the
stock-for-stock transaction, which was accounted for as a purchase. The average
market price per share was based on the average closing price for a four day
period through the closing of the acquisition. The purchase price of $7.9
million was allocated to the acquired assets, in-process research and
development, goodwill and other intangible assets. A one-time charge of $1.1
million was recorded in the third quarter of 2000 for in-process research and
development acquired. Goodwill and other intangibles of $9.1 million are being
amortized on a straight-line basis over the estimated useful life of five years.
A deferred tax liability of $2.8 million was recorded and is being recognized as
the underlying non-goodwill intangibles are amortized over the estimated useful
life of five years. The acquisition is not expected to have a material impact on
earnings for the remainder of 2000. Cogent's products and eight employees have
been integrated into Harmonic's Convergent Systems division.
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NOTE 8 - ACQUISITION OF DIVICOM BUSINESS
On May 3, 2000, Harmonic completed its merger with C-Cube Microsystems Inc.
("C-Cube") pursuant to the terms of an Agreement and Plan of Merger and
Reorganization (the "Merger Agreement") dated October 27, 1999. Under the terms
of the Merger Agreement, C-Cube spun off its semiconductor business as a
separate publicly traded company prior to the closing. C-Cube then merged into
Harmonic and Harmonic therefore acquired C-Cube's DiviCom business. The merger
was structured as a tax-free exchange of stock and was accounted for under the
purchase method of accounting.
The purchase price of $1.8 billion includes $1.6 billion of issued stock, $155
million in Harmonic stock option costs, and expenses of the transaction of $9.6
million. The issued stock reflects the conversion of C-Cube common stock into
0.5427 shares of Harmonic stock, totaling 26.4 million shares of Harmonic common
stock, at an average market price per share of Harmonic common stock of $62.00.
The average market price per share was based on the average closing price for a
period three days before and after the October 27, 1999 announcement of the
merger.
Following is a table of the total purchase price, purchase price allocation and
annual amortization of the intangible assets acquired (in thousands):
Annual
Amortization
------------
Purchase price allocation:
Net assets of DiviCom business $ 138,400 --
Fair value adjustments:
Accounts receivable (10,800) --
Inventory 4,700 --
Accrued liabilities (17,600) --
---------- --------
Total fair value of tangible net
assets acquired 114,700 --
Intangible assets acquired:
Customer base 112,700 $ 22,540
Developed technology 78,300 15,660
Trademark and tradename 13,900 2,780
Assembled workforce 22,700 4,540
Supply agreement 8,100 1,620
---------- --------
Total intangibles (excluding goodwill) 235,700 47,140
In-process research and development 38,700 --
Goodwill 1,509,100 301,820
Deferred tax liabilities (96,600) --
---------- --------
Total purchase price allocation $1,801,600 $348,960
========== ========
The tangible net assets acquired represent the historical net assets of the
DiviCom business as of May 2, 2000, adjusted to eliminate intangibles of $3.8
million arising from C-Cube's acquisition of the DiviCom business in 1996, plus
additional cash of $60 million received as a result of the merger. In addition,
under the terms of the Merger Agreement, the Company is liable for all of C-Cube
Microsystems' liabilities consisting principally of tax liabilities related to
the spin-off of C-Cube's semiconductor business. The net assets acquired
included $333.7 million of cash and other consideration sufficient to pay these
liabilities. As required under purchase accounting, the assets and liabilities
have been adjusted to fair value.
A customer base represents established relationships with businesses that
repeatedly order from a company. The income approach was used to estimate the
value of the DiviCom business' customer base by determining the present value of
future cash flows generated by existing customers. Key assumptions used in the
calculation included an attrition rate of 20%, discount rate of 20% and
estimates of revenue growth, cost of sales, operating expenses and tax rate
provided by management of the DiviCom business.
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In estimating the value of the trademark and tradename, the relief from royalty
method was employed. The relief from royalty method is based on the assumption
that in lieu of ownership, a firm would be willing to pay a royalty in order to
exploit the related benefits of the assets. Therefore, a portion of the
company's earnings, equal to the after-tax royalty that would have been paid for
the use of the trademark and tradename, can be attributed to the company's
possession of the trademark and tradename. The trademark and tradename are each
being amortized on a straight-line basis over its estimated useful life of five
years.
The value of the assembled workforce was derived by estimating the costs to
replace the existing employees, including recruiting, hiring and training costs
for each category of employee. The value of the assembled workforce is being
amortized on a straight-line basis over its estimated useful life of five years.
Harmonic and C-Cube Semiconductor entered into a Supply, License and Development
Agreement (Supply Agreement) concurrent with the merger agreement. This separate
agreement covers the supply, licensing and development of two encoder chips for
Harmonic by the spun-off semiconductor business. The value of the Supply
Agreement was derived by using the income approach and is being amortized on a
straight line basis over its estimated useful life of five years.
A portion of the purchase price has been allocated to developed technology and
in-process research and development ("IPR&D"). Developed technology and IPR&D
were identified and valued through extensive interviews, analysis of data
provided by the DiviCom business concerning development projects, their stage of
development, the time and resources needed to complete them, if applicable,
their expected income generating ability and associated risks. The income
approach, which includes an analysis of the cash flows, and risks associated
with achieving such cash flows, was the primary technique utilized in valuing
the developed technology and IPR&D.
Where development projects had reached technological feasibility, they were
classified as developed technology and the value assigned to developed
technology was capitalized. The developed technology is being amortized on a
straight-line basis over its estimated useful life of five years.
Where the development projects had not reached technological feasibility and had
no future alternative uses, they were classified as IPR&D, which was expensed
upon the consummation of the merger. The value was determined by estimating the
expected cash flows from the projects once commercially viable, discounting the
net cash flows back to their present value and then applying a percentage of
completion to the calculated value as defined below.
- - Net cash flows. The net cash flows from the identified projects were based
on estimates of revenue, cost of sales, research and development costs,
selling, general and administrative costs and income taxes from those
projects. These estimates were based on the assumptions mentioned below. The
research and development costs included in the model reflected costs to
sustain projects, but excluded costs to bring in-process projects to
technological feasibility.
The estimated revenue was based on projections of the DiviCom business for
each in-process project. These projections were based on its estimates of
market size and growth, expected trends in technology and the nature and
expected timing of new product introductions by the DiviCom business and its
competitors.
Projected gross margins and operating expenses approximated the DiviCom
business' recent historical levels.
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- - Discount rate. Discounting the net cash flows back to their present value
was based on the industry weighted average cost of capital ("WACC"). The
industry WACC was approximately 17%. The discount rate used in discounting
the net cash flows from IPR&D was 25%, an 800 basis point increase from the
industry WACC.
This discount rate was higher than the industry WACC due to inherent
uncertainties surrounding the successful development of the IPR&D, market
acceptance of the technology, the useful life of such technology and the
uncertainty of technological advances which could potentially impact the
estimates described above.
- - Percentage of completion. The percentage of completion for each project was
determined using costs incurred to date on each project as compared to the
remaining research and development to be completed to bring each project to
technological feasibility. The percentage of completion varied by individual
project ranging from 10% to 80%.
If the projects discussed above are not successfully developed, the sales and
profitability of the combined company may be adversely affected in future
periods.
The following unaudited pro forma summary presents the combined statement of
operations as if the merger had been completed on January 1, 1999 and does not
purport to be indicative of what would have occurred had the merger actually
been completed on such date or of results which may occur in the future.
NINE MONTHS ENDED
--------------------------------
SEPTEMBER 29, OCTOBER 1,
2000 1999
------------- ----------
Net sales $ 250,400 $ 254,600
Net loss (276,541) (264,300)
Net loss per share
Basic and diluted $ (4.79) $ (4.90)
Weighted average shares
Basic and diluted 57,724 53,992
Adjustments made in arriving at the pro forma unaudited results of operations
include amortization of goodwill and other intangibles and related tax
adjustments. No effect has been given to cost savings or operating synergies
that may be realized as a result of the merger.
Based on the finalization of the valuation, purchase price allocation,
integration plans and other factors, the effects of the merger may change from
those included in the above pro forma summary. A change in the value assigned to
long-term tangible and intangible assets and liabilities could result in a
reallocation of the purchase price and a change in the adjustments. The
statement of operations effect of these changes will depend on the nature and
amount of the assets or liabilities adjusted.
NOTE 9 - SEGMENT REPORTING
Operating segments are defined as components of an enterprise that engage in
business activities for which separate financial information is available and
evaluated by the chief operating decision maker. Prior to the acquisition of the
DiviCom business, Harmonic was organized as one operating segment. On
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May 3, 2000, Harmonic completed the acquisition of the DiviCom business, thus
changing its organizational structure. The merged company has been organized
into two operating segments: Broadband Access Networks ("BAN") for fiber optic
systems, and Convergent Systems ("CS") for digital headend systems. These
segments do not correspond to the pre-merger companies in significant ways. For
example, Harmonic's TRANsend and CyberStream product lines are part of the CS
segment. Each of these operating segments require their own development and
marketing strategies and therefore have separate management teams, however, a
worldwide sales, sales support and systems integration group supports both
operating segments.
The results of the reportable segments are derived directly from the Company's
management reporting system. These results reported below are based on
Harmonic's method of internal reporting and are not necessarily in conformity
with generally accepted accounting principles. Subsequent to the acquisition of
DiviCom, management commenced measuring the performance of each segment based on
several metrics, including revenue, and income or loss from operations. These
results are used, in part, to evaluate the performance of, and allocate
resources to each of the segments. Revenue for the prior periods has been
reclassified to reflect the new organizational structure. The reclassified
revenue for the prior periods reflects only Harmonic's revenue, and not the
historical revenue of the DiviCom business. However, income or loss from
operations is not available and is impractical to prepare for the periods prior
to the quarter ended June 30, 2000, and accordingly, has not been presented. Net
income or loss, and assets and liabilities are not internally reported by
business segment.
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------ -----------------------------
SEPTEMBER 29, OCTOBER 1, SEPTEMBER 29, OCTOBER 1,
2000 1999 2000 1999
------------- ---------- ------------- ----------
Net Sales:
Broadband Access Networks $ 40,335 $50,284 $149,337 $114,010
Convergent Systems 27,836 2,340 61,660 6,779
-------- ------- -------- --------
Total net sales $ 68,171 $52,624 $210,997 $120,789
======== ======= ======== ========
Income (loss) from operations:
Broadband Access Networks $ (128)
Convergent Systems (7,404)
--------
Total segment loss from
operations (7,532)
--------
Amortization of goodwill and other
intangibles (87,998)
In-process research and development (1,100)
Interest and other income, net 3,377
Corporate and unallocated costs,
and eliminations (4,694)
--------
Loss before income taxes $(97,947)
========
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NOTE 10 - LEGAL PROCEEDINGS
Securities Litigation
Between June 28 and August 25, 2000, twelve actions were filed in the United
States District Court for the Northern District of California against the
Company and certain of its officers and directors. The actions were brought on
behalf of a purported class of persons who purchased the Company's publicly
traded securities between March 27 and June 26, 2000. The complaints allege
that, by making statements regarding the Company's prospects and customers and
its acquisition of C-Cube, the defendants violated sections 10(b) and 20(A) of
the Securities Exchange Act of 1934. In addition, one complaint alleges that the
defendants violated section 11 of the Securities Act of 1933 by filing a false
or misleading registration statement in connection with the C-Cube acquisition.
On June 29, 2000, another action alleging a violation of section 11 was filed on
behalf of the same purported class in the Superior Court of the State of
California for the County of Santa Clara. On July 26, 2000, the defendants
removed the action to federal court. The Court has entered orders relating and
consolidating all of the securities class actions and permitting plaintiffs to
file a consolidated amended complaint.
A derivative action purporting to be on behalf of the Company was filed against
its directors in the Superior Court for the County of Santa Clara on September
5, 2000. The Company also was named as a nominal defendant. The complaint is
based on allegations similar to those found in the securities class actions and
claims that the defendants breached their fiduciary duties by, among other
things, causing the Company to violate federal securities laws. The derivative
action was removed to the United States District Court for the Northern District
of California on September 20, 2000. On September 29, 2000, the Court issued an
order finding that the derivative action is not related to the securities class
actions. On October 11, 2000, the parties agreed to a forty-five day extension
of the time for defendants to respond to the complaint.
Based on its review of the complaints filed to date, the Company believes that
it has meritorious defenses to the securities class actions and the derivative
action and intends to defend them vigorously. There can be no assurance,
however, that the Company will prevail. An unfavorable outcome of this
litigation could have a material adverse effect on the Company's consolidated
financial position, liquidity or results of operations.
NOTE 11 - SUBSEQUENT EVENT
On November 10, the Company concluded an agreement with a domestic customer of
its Broadband Access Networks division to accept the return of up to $4.1
million of products. The customer recently informed the Company of a decision to
reduce significantly the scope and delay the timing of certain network
construction projects. To maintain its ongoing relationship with the customer,
Harmonic agreed to the return of products. Because this agreement was reached
after the Company's announcement of third quarter results on October 18 but
before filing of its Form 10-Q for the third quarter, the Company has recorded a
return provision as a reduction of net sales in its Condensed Consolidated
Statements of Operations for the quarter ended September 29, 2000. The effect of
this provision was to increase the net loss for the quarter ended September 29,
2000, and to reduce net income for the nine months ended September 29, 2000, by
$941,000.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Quarterly Report on Form 10-Q 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 regarding future revenue,
gross margins, and expense levels, future capital expenditures, future cash
flows, future borrowing capability and the merger with C-Cube Microsystems, Inc.
("C-Cube") and the reorganization of our business organization. Actual results
could differ materially from those projected in the forward-looking statements
as a result of a number of factors, including those set forth under "Factors
That May Affect Future Results of Operations" below and elsewhere in this Form
10-Q.
OVERVIEW
Harmonic Inc. ("Harmonic" or the "Company") designs, manufactures and markets
digital and fiber optic systems for delivering video, voice and data services
over cable, satellite and wireless networks. Historically, almost all of our
sales were derived directly or indirectly from sales of fiber optic transmission
systems to cable television operators. With the introduction of our TRANsend
digital headend products in 1997 and the subsequent purchase of New Media
Communication Ltd., which changed its name to Harmonic Data Systems Ltd., we
broadened our product offering to enable delivery of digital video, voice and
data over satellite and wireless networks and cable systems.
In order to further expand our digital systems capability, the Company entered
into an Agreement and Plan of Merger and Reorganization with C-Cube on October
27, 1999, pursuant to which C-Cube merged into Harmonic (the "Merger
Agreement"). Under the terms of the Merger Agreement, C-Cube spun off its
semiconductor business as a separate publicly traded company. C-Cube then merged
into Harmonic and Harmonic therefore acquired C-Cube's DiviCom business, which
provides MPEG-2 encoding products and systems for digital television. The merger
was structured as a tax-free exchange of stock and has been accounted for under
the purchase method of accounting. In the merger, each share of common stock of
C-Cube was converted into 0.5427 shares of Harmonic common stock. The purchase
price, including merger-related costs, was approximately $1.8 billion.
The merger closed on May 3, 2000, and Harmonic has consolidated the results of
the DiviCom business in its financial statements from that date forward. The
merged company has been organized into two operating segments, Broadband Access
Networks ("BAN") for fiber optic systems and Convergent Systems ("CS") for
digital headend systems. While the two segments have been organized generally
around the pre-merger Harmonic fiber optics systems and the DiviCom digital
headend systems, respectively, these segments do not correspond to the
pre-merger companies in significant ways. For example, Harmonic's TRANsend and
CyberStream product lines are now part of the CS segment. Each of these segments
has its own separate management team, with a worldwide sales, sales support and
systems integration group supporting both segments.
RESULTS OF OPERATIONS
NET SALES
The Company's net sales increased 30% from $52.6 million in the third quarter of
1999 to $68.2 million in the third quarter of 2000. For the nine month periods,
net sales increased 75% from $120.8 million in the first nine months of 1999 to
$211.0 million in the first nine months of 2000. The increases in net sales for
both periods primarily reflected the inclusion of sales from the DiviCom
business, offset in part by decreased net sales in the third quarter of 2000 in
the BAN segment.
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While the Company's sales increased significantly in the third quarter of 2000
compared to the third quarter of 1999, sales were below the Company's
expectations due to lower sales within the BAN segment. BAN sales for the third
quarter of 2000 declined by 20% as compared to the third quarter of 1999,
primarily due to significantly reduced sales to AT&T. For the first nine months
of 2000, BAN sales increased by 31% compared to the first nine months of 1999
due to increased customer acceptance of the Company's products, particularly
PWRBlazer Scaleable Optical Nodes and optical transmitters. CS sales increased
modestly during the third quarter compared to the second quarter of 2000 due to
the inclusion of three months of DiviCom sales in the third quarter compared to
approximately two months in the second quarter. International sales represented
43% of net sales in the third quarter of 2000 compared to 26% in the third
quarter of 1999 due to unusually high domestic sales in the third quarter of
1999 and the CS division's slightly higher percentage of international sales.
GROSS PROFIT
Gross profit decreased from $23.1 million (44% of net sales) in the third
quarter of 1999 to $19.1 million (28% of net sales) in the third quarter of
2000. The decrease was due primarily to low margins within CS resulting from
high fixed costs associated with the manufacturing and systems integration
groups, amortization of intangibles related to the C-Cube and Cogent
acquisitions of $4.8 million, and a less favorable product mix in BAN which
included a lower percentage of transmitters. For the nine month periods, gross
profit increased from $51.5 million (43% of net sales) in the first nine months
of 1999 to $79.8 million (38% of net sales) in the first nine months of 2000.
The increase in gross profit for the nine month period of 2000 was due
principally to higher sales volume resulting from inclusion of DiviCom and
increased sales within BAN, partially offset by amortization of intangibles
related to the C-Cube and Cogent acquisitions of $7.7 million and high fixed
costs within CS. The amortization of intangibles reduced the gross margin
percentage by 7% and 4% for the three and nine month periods of 2000.
RESEARCH AND DEVELOPMENT
Research and development expenses increased from $4.8 million (9% of net sales)
in the third quarter of 1999 to $16.0 million (24% of net sales) in the third
quarter of 2000. For the nine month periods, research and development expenses
increased from $12.0 million (10% of net sales) in 1999 to $34.0 million (16% of
net sales) in 2000. The increases in absolute dollars were principally
attributable to the inclusion of DiviCom, which historically has spent a higher
percentage of sales on research and development than has Harmonic, and higher
payroll and prototype expenses. Harmonic anticipates that research and
development expenses will continue to increase in absolute dollars, although
they may vary as a percentage of net sales.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased from $8.9 million (17% of
net sales) in the third quarter of 1999 to $20.1 million (29% of net sales) in
the third quarter of 2000. For the nine month periods, selling, general and
administrative expenses increased from $23.7 million (20% of net sales) in 1999
to $45.9 million (22% of net sales) in 2000. The increases in absolute expenses
were primarily due to inclusion of DiviCom, as well as higher payroll and
recruiting expenses, principally for the expansion of the sales and marketing
organizations to provide greater customer focus and support for sales of new
products. In addition, higher promotional expenses also contributed to the
increase. The increases in selling, general and administrative expenses as a
percentage of net sales were principally attributable to decreased net sales.
Harmonic anticipates that selling, general and administrative expenses will
continue to increase in absolute dollars, although such expenses may vary as a
percentage of net sales.
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AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangible assets of approximately $1.8 billion were recorded
in connection with the C-Cube merger and Cogent acquisition, resulting in
amortization of $83.3 million for the third quarter of 2000. See Notes 7 and 8
to the unaudited Condensed Consolidated Financial Statements for the three and
nine month periods ended September 29, 2000. Goodwill and intangibles are being
amortized over 5 years, and such amortization is expected to result in
substantial net losses over the amortization period.
IN-PROCESS RESEARCH AND DEVELOPMENT
The Company recorded one-time charges of $1.1 million and $38.7 million to
operations during the three and nine months ended September 29, 2000 for
acquired in-process technology in connection with the Cogent acquisition and
C-Cube merger. See Notes 7 and 8 to the unaudited Condensed Consolidated
Financial Statements for the three and nine month periods ended September 29,
2000. These amounts were expensed on the acquisition dates in accordance with
generally accepted accounting principles because the acquired technology had not
yet reached technological feasibility and had no future alternative uses.
INTEREST AND OTHER INCOME, NET
Interest and other income, net, increased from $0.9 million in the third quarter
of 1999 to $3.4 million in the third quarter of 2000 and from $1.7 million for
the nine month period of 1999 to $9.3 million for the nine month period of 2000.
The increases were due primarily to interest earned on cash received in the
merger, and to a lesser extent, interest earned on cash proceeds resulting from
the Company's public offering of common stock in April 1999. On August 15, 2000,
the majority of the cash received in the merger was used to pay taxes incurred
on the spin-off of C-Cube's semiconductor business. The Company expects
interest income to decrease in future periods.
INCOME TAXES
The provisions for income taxes for both periods of 1999 and 2000 were based on
estimated tax rates of 25% and 38%, respectively. The increase in the effective
rate reflects the full utilization of remaining net operating loss carryovers
and research and development credit carryovers in 1999. The Company expects to
have an effective annual rate that approximates statutory rates in year 2000 and
beyond on income before amortization of goodwill, other intangibles and related
tax effects thereon, and acquired in-process research and development.
LIQUIDITY AND CAPITAL RESOURCES
As of September 29, 2000, cash and cash equivalents and short term investments
totaled $111.3 million, of which $60 million was received under the terms of the
Merger Agreement. Harmonic received additional cash of approximately $320
million in connection with the merger for the estimated tax liability related to
the spin off of C-Cube's semiconductor business, which the Company paid on
August 15, 2000. In addition, the Company completed a public offering of its
common stock in April 1999, raising approximately $58.3 million, net of
underwriting discounts and offering expenses. The Company also received $4.0
million from exercise of a warrant in connection with the public offering.
Cash used in operations was $360.6 million in the first nine months of 2000
compared to cash provided by operations of $4.8 million in the first nine months
of 1999. The increase in cash used in operations in the first nine months of
2000 was primarily due to the payment of the spin off tax assumed in the merger,
and an increase in inventory and a decrease in accrued and other liabilities.
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The Company has a bank line of credit facility, which provides for borrowings up
to $10.0 million with a $3.0 million equipment term loan sub-limit and expires
December 31, 2000. Borrowings pursuant to the line bear interest at the bank's
prime rate (prime rate plus 0.5% under the term loan) and are payable monthly.
There were no outstanding borrowings at September 29, 2000 under the line. The
Company has letters of credit issued under the line of $1.2 million.
Additions to property, plant and equipment were approximately $6.1 million and
$15.8 million in the first nine months of 1999 and 2000, respectively. The
increase in 2000 was due principally to higher expenditures for manufacturing
and test equipment associated with expansion of production capacity, leasehold
improvements, which allowed the Company to expand into space during the first
quarter of 2000 that had been previously subleased, and initial expenditures for
an enterprise resource planning (ERP) software system. In connection with the
merger, Harmonic has entered into lease agreements to relocate employees from
certain existing facilities and expects to incur significant costs associated
with leasehold improvements commencing in the fourth quarter of 2000. Costs
incurred to date on the Company's new ERP system are included in property, plant
and equipment for which depreciation will commence when the software
implementation is completed, currently scheduled for the second quarter of 2001.
The Company believes that its existing liquidity sources, including $60 million
of cash received pursuant to the merger, its bank line of credit facility, and
anticipated funds from operations will satisfy its cash requirements for at
least the next twelve months.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact the financial position,
results of operations or cash flows of Harmonic due to adverse changes in market
prices and rates. Harmonic is exposed to market risk because of changes in
interest rates and foreign currency exchange rates as measured against the U.S.
Dollar and currencies of Harmonic's subsidiaries.
Harmonic has a number of international subsidiaries each of whose sales are
generally denominated in U.S. dollars. In addition, the Company has various
international branch offices which provide sales support and systems integration
services. While Harmonic does not anticipate that near-term changes in exchange
rates will have a material impact on future operating results, fair values or
cash flows, Harmonic cannot assure you that a sudden and significant change in
the value of local currencies would not harm Harmonic's financial condition and
results of operations.
Harmonic's exposure to market risk for changes in interest rates relate
primarily to its investment portfolio of marketable debt securities of various
issuers, types and maturities. Harmonic does not use derivative instruments in
its investment portfolio, and its investment portfolio only includes highly
liquid instruments with an original maturity of less than two years. These
investments are classified as available for sale and are carried at estimated
fair value, with material unrealized gains and losses reported in other
comprehensive income. There is risk that losses could be incurred if the Company
were to sell any of its securities prior to stated maturity.
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
Our Operating Results Are Likely To Fluctuate Significantly And May Fail To Meet
Or Exceed The Expectations Of Securities Analysts Or Investors, Causing Our
Stock Price To Decline
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Our operating results have fluctuated in the past and are likely to continue to
fluctuate in the future, on an annual and a quarterly basis, as a result of
several factors, many of which are outside of our control. Some of the factors
that may cause these fluctuations include:
- - the level and timing of capital spending of our customers, both in the U.S.
and in foreign markets;
- - changes in market demand;
- - the timing and amount of customer orders;
- - the timing of revenue from systems contracts which may span several
quarters;
- - competitive market conditions;
- - our unpredictable sales cycles;
- - our ability to integrate the acquired DiviCom business into Harmonic's
operations;
- - new product introductions by our competitors or by us;
- - changes in domestic and international regulatory environments;
- - market acceptance of new or existing products;
- - the cost and availability of components, subassemblies and modules;
- - the mix of our customer base and sales channels;
- - the mix of our products sold;
- - our development of custom products and software;
- - the level of international sales; and
- - economic conditions specific to the cable and satellite industries, and
general economic conditions.
In addition, we often recognize a substantial portion of our revenues in the
last month of the quarter. We establish our expenditure levels for product
development and other operating expenses based on projected sales levels, and
expenses are relatively fixed in the short term. Accordingly, variations in
timing of sales can cause significant fluctuations in operating results. In
addition, because a significant portion of our business is derived from orders
placed by a limited number of large customers, the timing of such orders can
also cause significant fluctuations in our operating results. Our expenses for
any given quarter are typically based on expected sales and if sales are below
expectations in any given quarter, the adverse impact of the shortfall on our
operating results may be magnified by our inability to adjust spending to
compensate for the shortfall. As a result of all these factors, our operating
results in one or more future periods may fail to meet or exceed the
expectations of securities analysts or investors. In that event, the trading
price of our common stock would likely decline. In this regard, due to lower
than expected sales to AT&T and lower than expected sales in the CS segment
during the second quarter, and lower than expected sales in the BAN segment in
the third quarter, we failed to meet our internal expectations, as well as the
expectations of securities analysts and investors during the second and third
quarters of 2000, and the price of our common stock declined significantly.
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We Depend On Cable and Satellite Industry Capital Spending For A Substantial
Portion Of Our Revenue And Any Decrease Or Delay In Capital Spending In These
Industries Would Negatively Impact Our Resources, Operating Results And
Financial Condition.
Prior to the merger with C-Cube, almost all of Harmonic's historic sales had
been derived from sales to cable television operators and broadcasters, and it
expects these sales to constitute a substantial majority for the foreseeable
future. Almost all of the DiviCom business' historic sales have been derived
from sales to satellite operators, telephone companies and cable operators.
Demand for the combined company's products in the future will depend on the
magnitude and timing of capital spending by cable television operators,
broadcasters, satellite operators and telephone companies for constructing and
upgrading of their systems.
These capital spending patterns are dependent on a variety of factors,
including:
- - access to financing;
- - annual budget cycles;
- - the status of federal, local and foreign government regulation of
telecommunications and television broadcasting;
- - overall demand for communication services and the acceptance of new video,
voice and data services;
- - evolving industry standards and network architectures;
- - competitive pressures;
- - discretionary customer spending patterns;
- - general economic conditions.
In the past, specific factors contributing to reduced capital spending have
included:
- - uncertainty related to development of digital video and cable modem
industry standards;
- - delays associated with the evaluation of new services and system
architectures by many cable television operators;
- - emphasis on marketing and customer service strategies by cable television
operators instead of construction of networks; and
- - general economic conditions in international markets.
In addition to the above factors, the timing of deployment of our equipment by
our customers can be subject to a number of risks, including the availability of
skilled engineering and technical personnel, the availability of other equipment
such as fiber optic cable, and the need for local zoning and licensing
approvals. We believe that changes in our customers' deployment plans have in
recent quarters delayed, and may in the future delay, the receipt of new orders
or the release of existing backlog. Since the majority of our sales have been to
relatively few customers, a delay in equipment deployment at any one customer
could have a material adverse effect on our sales in a particular quarter.
Although the Company's sales increased in the third quarter of 2000 compared to
the third quarter of 1999 due to the inclusion of DiviCom, sales were lower than
in the second quarter of 2000 and were below our expectations in the BAN
segment.
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BAN sales in the third quarter of 2000 were below the levels achieved in the
third quarter of 1999 due to reduced sales to AT&T. In addition, BAN sales in
the third quarter of 2000 were lower than the second quarter due to slower sales
across the Company's base of cable customers. Moreover, BAN sales in the third
quarter of 2000 were lower than announced in the Company's October 18, 2000
press release because of an agreement the Company reached on November 10, 2000
with a customer of the Company's BAN division to accept the return of up to $4.1
million of products. The customer recently informed the Company of a decision to
reduce significantly the scope and delay the timing of certain network
construction projects. To maintain its ongoing relationship with the customer,
the Company agreed to the return of the products. The Company has recorded a
provision for the return in its financial statements for the quarter ended
September 29, 2000. For a more detailed discussion regarding risks related to
AT&T and other major customers, see "Our Customer Base Is Concentrated And The
Loss Of One Or More Of Our Key Customers Would Harm Our Business. The Loss Of
AT&T Or Any Other Key Customer Would Have A Negative Effect On Our Business"
below. The lower than expected CS sales in the second quarter of 2000 were due
in part to slower spending by satellite operators and to the impact of
organizational changes resulting from the C-Cube merger. While CS sales
increased modestly in the third quarter of 2000 compared to the second quarter
of 2000, the increase was due to the inclusion of three months of DiviCom sales
in the third quarter compared to approximately two months in the second quarter,
CS sales generally remained weak. The Company is unable to predict when BAN
sales will increase. Further, cable television capital spending can be subject
to the effects of seasonality, with fewer construction and upgrade projects
typically occurring in winter months and otherwise being affected by inclement
weather.
Our Customer Base Is Concentrated And The Loss Of One Or More Of Our Key
Customers Would Harm Our Business. The Loss Of AT&T Or Any Other Key Customer
Would Have A Negative Effect On Our Business.
Historically, a significant majority of our sales and sales of DiviCom have been
to relatively few customers. Sales to Harmonic's ten largest customers in 1998,
1999 and the first nine months of 2000 accounted for approximately 66%, 75% and
57% of net sales, respectively. Due in part to the consolidation of ownership of
domestic cable television and direct broadcast satellite systems, we expect that
sales to relatively few customers will continue to account for a significant
percentage of net sales of the combined company for the foreseeable future.
Sales to two customers accounted for 14% and 11% of our net sales in the third
quarter of 2000, and sales to two customers accounted for 12% and 10% of our net
sales in the prior quarter. In the third quarter of 1999, sales to AT&T
accounted for 52% of our net sales and have declined as a percentage of net
sales in each quarter since the third quarter of 1999. We cannot assure you that
sales to other customers will compensate for any further reduction in sales to
AT&T nor can we predict the impact of the proposed breakup of AT&T on our future
sales to AT&T. Almost all of our sales are made on a purchase order or system
contract basis, and none of our customers has entered into a long-term agreement
requiring it to purchase our products. The loss of, or any reduction in orders
from, a significant customer would harm our business.
We Have Experienced Difficulties Integrating The DiviCom Business Of C-Cube.
In addition to the risks generally associated with acquisitions, there are a
number of significant risks directly associated with our merger with DiviCom. In
particular, the successful combination of Harmonic and DiviCom requires
substantial attention from management. The anticipated benefits of the merger
will not be achieved unless the operations of DiviCom are successfully combined
with those of Harmonic in a timely manner. To date, we have had difficulty in
assimilating and integrating disparate information systems and personnel into a
combined corporation. These difficulties are increased due to our limited
personnel, management and other resources. The successful combination of the two
companies requires integration of the companies' product offerings and the
coordination of their research and development and sales and marketing efforts.
The diversion of the attention of management from the day-to-day operations of
the combined company, or difficulties encountered in the transition and
integration process, could materially and adversely affect our business,
financial condition and operating results. The process of combining the two
organizations has caused interruption of, and a loss of momentum in, the
activities of both of the organizations' businesses, and we believe that this
diversion may have caused certain customers to defer purchasing decisions. In
addition, our success depends, in part, on the retention and integration of key
management, technical, marketing, sales and customer support personnel of the
DiviCom business, and, in particular, the retention of these key employees
during the transitional period following the merger. We have experienced the
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loss of certain key employees since the merger, principally due to intense
competition for qualified technical and other personnel in the San Francisco Bay
Area. The loss of key employees and managers has adversely affected the acquired
DiviCom business and could continue to adversely affect our business and
operating results.
We Depend On Our International Sales And Are Subject To The Risks Associated
With International Operations, Which May Negatively Affect Our Profitability.
Sales to customers outside of the United States in 1998, 1999 and the first nine
months of 2000 represented 43%, 30% and 37% of net sales, respectively, and we
expect that international sales will continue to represent a substantial portion
of our net sales for the foreseeable future. Our international operations are
subject to a number of risks, including:
- - changes in foreign government regulations and telecommunications standards;
- - import and export license requirements, tariffs, taxes and other trade
barriers;
- - fluctuations in currency exchange rates;
- - difficulty in collecting accounts receivable;
- - the burden of complying with a wide variety of foreign laws, treaties and
technical standards;
- - difficulty in staffing and managing foreign operations; and
- - political and economic instability.
While our international sales are typically denominated in U.S. dollars,
fluctuations in currency exchange rates could cause our products to become
relatively more expensive to customers in a particular country, leading to a
reduction in sales or profitability in that country. Gains and losses on the
conversion to U.S. dollars of accounts receivable, accounts payable and other
monetary assets and liabilities arising from international operations may
contribute to fluctuations in operating results. Furthermore, payment cycles for
international customers are typically longer than those for customers in the
United States. Unpredictable sales cycles could cause us to fail to meet or
exceed the expectations of security analysts and investors for any given period.
Further, foreign markets may not continue to develop.
We Must Be Able To Manage Expenses And Inventory Risks Associated With Meeting
The Demand Of Our Customers.
From time to time, we receive indications from our customers as to their future
plans and requirements to ensure that we will be prepared to meet their demand
for our products. In the past, however, we have received such indications but,
on occasion, we did not ultimately receive purchase orders for our products. We
must be able to effectively manage expenses and inventory risks associated with
meeting potential demand for our products. In addition, if we fail to meet
customers' supply expectations, we may lose business from such customers. If we
expend resources and purchase materials to manufacture products and such
products are not purchased, our business and operating results could suffer.
The Markets In Which We Operate Are Intensely Competitive And Many Of Our
Competitors Are Larger And More Established.
The markets for cable television fiber optics systems and digital video
broadcasting systems are extremely competitive and have been characterized by
rapid technological change and declining average selling prices.
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Harmonic's competitors in the cable television fiber optics systems business
include significantly larger corporations such as ADC Telecommunications, ANTEC
(a company owned in part by AT&T), Motorola, Philips and Scientific-Atlanta.
Additional competition could come from new entrants in these markets, such as
Lucent Technologies and Cisco Systems.
In the digital and video broadcasting systems business, we compete with
vertically integrated system suppliers including Motorola, Scientific-Atlanta,
Tandberg, Thomson Broadcast Systems and Philips, as well as more specialized
suppliers including SkyStream and Terayon.
Most of our competitors are substantially larger and have greater financial,
technical, marketing and other resources than Harmonic. Many of these large
organizations are in a better position to withstand any significant reduction in
capital spending by customers in these markets. They often have broader product
lines and market focus and will therefore not be as susceptible to downturns in
a particular market. In addition, many of our competitors have been in operation
longer than we have and therefore have more long standing and established
relationships with domestic and foreign customers. We may not be able to compete
successfully in the future and competition may harm our business.
If any of our competitors' products or technologies were to become the industry
standard, our business could be seriously harmed. For example, U.S. cable
operators have to date mostly purchased proprietary digital systems from
Motorola and Scientific-Atlanta. While certain operators have made limited
purchases of the "open" systems provided by Harmonic, we cannot assure you that
our digital products will find broad market acceptance with U.S. cable
operators. In addition, companies that have historically not had a large
presence in the broadband communications equipment market have begun recently to
expand their market share through mergers and acquisitions. The continued
consolidation of our competitors could have a significant negative impact on us.
Further, our competitors, particularly competitors of our digital and video
broadcasting systems' business, may bundle their products or incorporate
functionality into existing products in a manner that discourages users from
purchasing our products or which may require us to lower our selling prices
resulting in lower gross margins.
Broadband Communications Markets Are Relatively Immature And Characterized By
Rapid Technological Change.
Broadband communications markets are relatively immature, making it difficult to
accurately predict the markets' future growth rates, sizes or technological
directions. In view of the evolving nature of these markets, it is possible that
cable television operators, telephone companies or other suppliers of broadband
wireless and satellite services will decide to adopt alternative architectures
or technologies that are incompatible with our current or future products. If we
are unable to design, develop, manufacture and sell products that incorporate or
are compatible with these new architectures or technologies, our business will
suffer.
We Need To Develop And Introduce New And Enhanced Products In A Timely Manner To
Remain Competitive.
Broadband communications markets are characterized by continuing technological
advancement, changes in customer requirements and evolving industry standards.
To compete successfully, we must design, develop, manufacture and sell new or
enhanced products that provide increasingly higher levels of performance and
reliability. However, we may not be able to successfully develop or introduce
these products, if our products:
- - are not cost effective,
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- - are not brought to market in a timely manner,
- - are not in accordance with evolving industry standards and architectures, or
- - fail to achieve market acceptance.
In addition, to successfully develop and market our planned products for digital
applications, we will be required to retain and attract new personnel with
experience and expertise in the digital arena. Competition for qualified
personnel is intense. We may not be successful in retaining and attracting
qualified personnel.
Also, to successfully develop and market certain of our planned products for
digital applications, we may be required to enter into technology development or
licensing agreements with third parties. We cannot assure you that we will be
able to enter into any necessary technology development or licensing agreement
on terms acceptable to us, or at all. The failure to enter into technology
development or licensing agreements when necessary could limit our ability to
develop and market new products and, accordingly, could materially and adversely
affect our business and operating results.
We Need To Effectively Manage Our Growth.
The growth in our business has placed, and is expected to continue to place, a
significant strain on our personnel, management and other resources. This strain
has been exacerbated by the acquisition of DiviCom and the subsequent loss of
numerous DiviCom employees. Our ability to manage any future growth effectively
will require us to attract, train, motivate and manage new employees
successfully, to integrate new employees into our overall operations, to retain
key employees and to continue to improve our operational, financial and
management systems. If we fail to manage our future growth effectively, our
business could suffer.
Competition For Qualified Personnel Is Intense, And We May Not Be Successful In
Attracting And Retaining Personnel.
Our future success will depend, to a significant extent, on the ability of our
management to operate effectively, both individually and as a group. We are
dependent on our ability to retain and motivate high caliber personnel, in
addition to attracting new personnel. Competition for qualified technical and
other personnel is intense, particularly in the San Francisco Bay Area and
Israel, and we may not be successful in attracting and retaining such personnel.
Competitors and others have in the past and may in the future attempt to recruit
our employees. While our employees are required to sign standard agreements
concerning confidentiality and ownership of inventions, we generally do not have
employment contracts or noncompetition agreements with any of our personnel. The
loss of the services of any of our key personnel, the inability to attract or
retain qualified personnel in the future or delays in hiring required personnel,
particularly engineers and other technical personnel, could negatively affect
our business.
The C-Cube Merger And Cogent Acquisition Have Resulted In The Recording Of
Substantial Goodwill And Other Intangible Assets And Reporting Of Substantial
Net Losses Without Any Corresponding Tax Deduction.
Goodwill and other intangible assets of approximately $1.7 billion were recorded
in connection with the C-Cube merger and Cogent acquisition as disclosed in
Notes 7 and 8 to the unaudited Condensed Consolidated Financial Statements for
the three and nine month periods ended September 29, 2000. Goodwill and
intangibles are being amortized over 5 years, and this amortization is expected
to result in substantial net losses over the amortization period. The
amortization of goodwill and intangibles are not deductible for tax purposes
which will result in a provision for income taxes despite a substantial reported
net loss.
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24
We Are Liable For C-Cube's Pre-Merger Tax Liabilities, Including Tax Liabilities
Resulting From The Spin-Off Of Its Semiconductor Business.
The spin-off of C-Cube's semiconductor business gave rise to a significant tax
liability of approximately $320 million based on a valuation of the
semiconductor business of $1.1 billion. The estimated liability was paid on
August 15, 2000. C-Cube determined the valuation by using the volume weighted
average price on May 3, 2000, the first trading day following the spin-off,
which resulted in a share price of $21.74. Under state law, Harmonic generally
is liable for all of C-Cube's debts, including C-Cube's liability for taxes
resulting from the spin-off. C-Cube retained and transferred to Harmonic in the
merger an amount of cash and other consideration sufficient to pay this
liability as well as all other tax liabilities of C-Cube and its subsidiaries
for periods prior to the merger. The merger agreement stipulates that Harmonic
will be indemnified by the spun-off semiconductor business if the cash reserves
are not sufficient to satisfy all of C-Cube's tax liabilities for periods prior
to the merger. If for any reason, the spun-off semiconductor business does not
have sufficient cash to pay such taxes, or if there are additional taxes due
with respect to the non-semiconductor business and Harmonic cannot be
indemnified by C-Cube, Harmonic generally will remain liable, and such liability
could have a material adverse effect on Harmonic.
Due To The Structure Of The Merger Transaction, Harmonic Is Liable For C-Cube's
General Pre-Merger Liabilities And Any Liabilities Relating To C-Cube's
Semiconductor Business For Which The Spun-off Semiconductor Business Is Unable
To Indemnify Harmonic.
The merger of C-Cube into Harmonic, with Harmonic as the surviving entity,
resulted in our assuming all of the liabilities of C-Cube at the time of the
merger. Pursuant to the merger agreement, Harmonic is indemnified by the
spun-off semiconductor business for liabilities associated with C-Cube's
historic semiconductor business. However, if the spun-off semiconductor business
is unable to fulfill its indemnification obligations to Harmonic or if general
liability claims not specifically associated with C-Cube's historic
semiconductor business are asserted, we would have to assume such obligations.
Those obligations could have a material adverse effect on us.
We May Be Subject To Risks Associated With Other Acquisitions.
We have made and may make investments in complementary companies, products or
technologies. If we make acquisitions, we could have difficulty assimilating or
retaining the acquired companies' personnel and operations or integrating the
acquired technology or products into ours. These difficulties could disrupt our
ongoing business, distract our management and employees and increase our
expenses. Moreover, our profitability may suffer because of acquisition-related
costs or amortization costs for acquired goodwill and other intangible assets.
Furthermore, we may have to incur debt or issue equity securities to pay for any
future acquisitions, the issuance of which could be dilutive to our existing
shareholders. If we are unable to successfully address any of these risks, our
business, financial condition and operating results could be harmed.
Difficulties In The Development And Production Of Video Encoding Chips By
C-Cube's Spun-off Semiconductor Business May Adversely Impact Us.
The DiviCom business and C-Cube semiconductor business collaborated on the
production and development of two video encoding microelectronic chips prior to
the merger. In connection with the merger, Harmonic and the spun-off
semiconductor business entered into a contractual relationship under which
Harmonic will have access to certain of the spun-off semiconductor business
technologies and products which the DiviCom business previously depended on for
its product and service offerings.
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25
However, under the contractual relationships between Harmonic and the spun-off
semiconductor business, the semiconductor business does not have a firm
commitment to continue the development of video encoding microelectronic chips.
As a result, the semiconductor business may choose not to continue future
development of the chips for any reason. The semiconductor business may also
encounter in the future technological difficulties in the production and
development of the chips. If the spun-off semiconductor business is not able to
or does not sustain its development and production efforts in this area, we may
not be able to fully recognize the benefits of the acquisition. See "Supply,
License and Development Agreement" at page 60 of the joint proxy statement filed
with the Securities and Exchange Commission on March 23, 2000, for further
details of Harmonic's business relationship with the spun-off semiconductor
business after the merger.
If Sales Forecasted For A Particular Period Are Not Realized In That Period Due
To The Unpredictable Sales Cycles Of Our Products, Our Operating Results For
That Period Will Be Harmed.
The sales cycles of many of our products, particularly our newer products and
products sold internationally, are typically unpredictable and usually involve:
- - a significant technical evaluation;
- - a commitment of capital and other resources by cable, satellite, and other
network operators;
- - delays associated with cable, satellite, and other network operators'
internal procedures to approve large capital expenditures;
- - time required to engineer the deployment of new technologies or services
within broadband networks; and
- - testing and acceptance of new technologies that affect key operations.
For these and other reasons, our sales cycles generally last three to six
months, but can last up to 12 months. If orders forecasted for a specific
customer for a particular quarter do not occur in that quarter, our operating
results for that quarter could be substantially lower than anticipated.
As a result of the merger, a significant portion of our revenue will be derived
from systems contracts. A substantial portion of DiviCom's revenues are from
systems contracts which include a combination of product sales as well as
installation and integration services. Revenue forecasts are based on estimated
timing of the systems installation and integration. Because the systems
contracts on the average span three quarters, the timing of revenue is difficult
to predict and could result in lower than expected revenue in any particular
quarter.
Our Failure To Adequately Protect Our Proprietary Rights May Adversely
Affect Us.
We currently hold 23 issued United States patents and 9 issued foreign patents,
and have a number of patent applications pending. Although we attempt to protect
our intellectual property rights through patents, trademarks, copyrights,
licensing arrangements, maintaining certain technology as trade secrets and
other measures, we cannot assure you that any patent, trademark, copyright or
other intellectual property rights owned by us will not be invalidated,
circumvented or challenged, that such intellectual property rights will provide
competitive advantages to us or that any of our pending or future patent
applications will be issued with the scope of the claims sought by us, if at
all. We cannot assure you that others will not develop technologies that are
similar or superior to our technology, duplicate our technology or design around
the patents that we own. In addition, effective patent, copyright and trade
Page 25
26
secret protection may be unavailable or limited in certain foreign countries in
which we do business or may do business in the future.
We believe that the future success of our business will depend on our ability to
translate the technological expertise and innovation of our personnel into new
and enhanced products. We generally enter into confidentiality or license
agreements with our employees, consultants, vendors and customers as needed, and
generally limit access to and distribution of our proprietary information.
Nevertheless, we cannot assure you that the steps taken by us will prevent
misappropriation of our technology. In addition, we have taken in the past, and
may take in the future, legal action to enforce our patents and other
intellectual property rights, to protect our trade secrets, to determine the
validity and scope of the proprietary rights of others, or to defend against
claims of infringement or invalidity. Such litigation could result in
substantial costs and diversion of resources and could harm our business and
operating results.
In order to successfully develop and market certain of our planned products for
digital applications, we may be required to enter into technology development or
licensing agreements with third parties. Although many companies are often
willing to enter into such technology development or licensing agreements, we
cannot assure you that such agreements will be negotiated on terms acceptable to
us, or at all. The failure to enter into technology development or licensing
agreements, when necessary, could limit our ability to develop and market new
products and could cause our business to suffer.
As is common in our industry, we have from time to time received notification
from other companies of intellectual property rights held by those companies
upon which our products may infringe. Any claim or litigation, with or without
merit, could be costly, time consuming and could result in a diversion of
management's attention, which could harm our business. If we were found to be
infringing on the intellectual property rights of any third party, we could be
subject to liabilities for such infringement, which could be material, and could
be required to seek licenses from other companies or to refrain from using,
manufacturing or selling certain products or using certain processes. Although
holders of patents and other intellectual property rights often offer licenses
to their patent or other intellectual property rights, we cannot assure you that
licenses would be offered, that the terms of any offered license would be
acceptable to us or that failure to obtain a license would not cause our
operating results to suffer.
We Purchase Several Key Components, Subassemblies And Modules Used In The
Manufacture Or Integration Of Our Products From Sole Or Limited Sources, And We
Are Increasingly Dependent On Contract Manufacturers.
Many components, subassemblies and modules necessary for the manufacture or
integration of our products are obtained from a sole supplier or a limited group
of suppliers. Our reliance on sole or limited suppliers, particularly foreign
suppliers, and our increasing reliance on subcontractors involves several risks,
including a potential inability to obtain an adequate supply of required
components, subassemblies or modules and reduced control over pricing, quality
and timely delivery of components, subassemblies or modules. In particular,
certain optical components have been recently in short supply and are available
only from a small number of suppliers, including sole source suppliers. While we
expend considerable efforts to qualify additional optical component sources,
consolidation of suppliers in the industry (including the acquisition of Etek
Dynamics and the proposed acquisition of SDL Inc. by JDS Uniphase) and the small
number of viable alternatives have limited the results of these efforts. Certain
key elements of our digital headend products are provided by a sole foreign
supplier. We do not generally maintain long-term agreements with any of our
suppliers or subcontractors. An inability to obtain adequate deliveries or any
other circumstance that would require us to seek alternative sources of supply
could affect our ability to ship our products on a timely basis, which could
damage relationships with current and prospective customers and harm our
business. We attempt to limit this risk by maintaining safety stocks of these
components, subassemblies and modules. As a result of this investment in
inventories, we may be subject to an increasing risk of inventory obsolescence
in the future, which could harm our business.
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27
We May Need Additional Capital In The Future And May Not Be Able To Secure
Adequate Funds On Terms Acceptable To Us.
We currently anticipate that our existing cash balances including cash received
pursuant to the merger, and our available line of credit and cash flow expected
to be generated from future operations will be sufficient to meet our liquidity
needs for at least the next twelve months. However, we may need to raise
additional funds if our estimates change or prove inaccurate or in order for us
to respond to unforeseen technological or marketing hurdles or to take advantage
of unanticipated opportunities.
In addition, we expect to review other potential acquisitions that would
complement our existing product offerings or enhance our technical capabilities.
While we have no other current agreements or negotiations underway with respect
to any potential acquisition, any future transaction of this nature could
require potentially significant amounts of capital. Funds may not be available
at the time or times needed, or available on terms acceptable to us. If adequate
funds are not available, or are not available on acceptable terms, we may not be
able to take advantage of market opportunities, to develop new products or to
otherwise respond to competitive pressures.
We Face Risks Associated With Having Important Facilities And Resources Located
In Israel.
Harmonic maintains two facilities in the State of Israel with a total of
approximately 90 employees. The personnel at these facilities represent a
significant portion of our research and development operations. Accordingly, we
are directly influenced by the political, economic and military conditions
affecting Israel, and any major hostilities involving Israel or the interruption
or curtailment of trade between Israel and its present trading partners could
significantly harm our business. We cannot assure you that the protraction or
escalation of current tensions in the Middle East will not adversely affect our
business.
In addition, most of our employees in Israel are currently obligated to perform
annual reserve duty in the Israel Defense Forces and are subject to being called
for active military duty at any time. We cannot predict the effect of these
obligations on Harmonic in the future.
Securities Class Action Claims
Between June 28 and August 25, 2000, twelve actions were filed in the United
States District Court for the Northern District of California against the
Company and certain of its officers and directors. The actions were brought on
behalf of a purported class of persons who purchased the Company's publicly
traded securities between March 27 and June 26, 2000. The complaints allege
that, by making statements regarding the Company's prospects and customers and
its acquisition of C-Cube, the defendants violated sections 10(b) and 20(A) of
the Securities Exchange Act of 1934. In addition, one complaint alleges that the
defendants violated section 11 of the Securities Act of 1933 by filing a false
or misleading registration statement in connection with the C-Cube acquisition.
On June 29, 2000, another action alleging a violation of section 11 was filed on
behalf of the same purported class in the Superior Court of the State of
California for the County of Santa Clara. On July 26, 2000, the defendants
removed the action to federal court. The Court has entered orders relating and
consolidating all of the securities class actions and permitting plaintiffs to
file a consolidated amended complaint.
A derivative action purporting to be on behalf of the Company was filed against
its directors in the Superior Court for the County of Santa Clara on September
5, 2000. The Company also was named as a nominal defendant. The complaint is
based on allegations similar to those found in the securities class actions and
claims that the defendants breached their fiduciary duties by, among other
things, causing the Company to violate federal securities laws.
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28
The derivative action was removed to the United States District Court for the
Northern District of California on September 20, 2000. On September 29, 2000,
the Court issued an order finding that the derivative action is not related to
the securities class actions. On October 11, 2000, the parties agreed to a
forty-five day extension of the time for defendants to respond to the complaint.
Based on its review of the complaints filed to date, the Company believes that
it has meritorious defenses to the securities class actions and the derivative
action and intends to defend them vigorously. There can be no assurance,
however, that the Company will prevail. An unfavorable outcome of this
litigation could have a material adverse effect on the Company's consolidated
financial position, liquidity or results of operations.
Our Stock Price May Be Volatile.
The market price of our common stock has fluctuated in the past and is likely to
fluctuate in the future. In addition, the securities markets have experienced
significant price and volume fluctuations and the market prices of the
securities of technology companies have been especially volatile. Investors may
be unable to resell their shares of our common stock at or above their purchase
price. In the past, companies that have experienced volatility in the market
price of their stock have been the object of securities class action litigation.
We are currently the objects of securities class actions and derivative action
litigation, and this could result in substantial costs and a diversion of
management's attention and resources.
Based on its review of the complaints filed to date, the Company believes that
it has meritorious defenses to the securities class actions and the derivative
action and intends to defend them vigorously. There can be no assurance,
however, that the Company will prevail. An unfavorable outcome of this
litigation could have a material adverse effect on the Company's consolidated
financial position, liquidity or results of operations.
Our Certificate Of Incorporation And Bylaws And Delaware Law Contain Provisions
That Could Discourage A Takeover.
Provisions of our Amended and Restated Certificate of Incorporation, Bylaws, and
Delaware law could make it more difficult for a third party to acquire us, even
if doing so would be beneficial to our stockholders.
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29
PART II
ITEM 1. LEGAL PROCEEDINGS
Between June 28 and August 25, 2000, twelve actions were filed in the United
States District Court for the Northern District of California against the
Company and certain of its officers and directors. The actions were brought on
behalf of a purported class of persons who purchased the Company's publicly
traded securities between March 27 and June 26, 2000. The complaints allege
that, by making statements regarding the Company's prospects and customers and
its acquisition of C-Cube, the defendants violated sections 10(b) and 20(A) of
the Securities Exchange Act of 1934. In addition, one complaint alleges that the
defendants violated section 11 of the Securities Act of 1933 by filing a false
or misleading registration statement in connection with the C-Cube acquisition.
On June 29, 2000, another action alleging a violation of section 11 was filed on
behalf of the same purported class in the Superior Court of the State of
California for the County of Santa Clara. On July 26, 2000, the defendants
removed the action to federal court. The Court has entered orders relating and
consolidating all of the securities class actions and permitting plaintiffs to
file a consolidated amended complaint.
A derivative action purporting to be on behalf of the Company was filed against
its directors in the Superior Court for the County of Santa Clara on September
5, 2000. The Company also was named as a nominal defendant. The complaint is
based on allegations similar to those found in the securities class actions and
claims that the defendants breached their fiduciary duties by, among other
things, causing the Company to violate federal securities laws. The derivative
action was removed to the United States District Court for the Northern District
of California on September 20, 2000. On September 29, 2000, the Court issued an
order finding that the derivative action is not related to the securities class
actions. On October 11, 2000, the parties agreed to a forty-five day extension
of the time for defendants to respond to the complaint.
Based on its review of the complaints filed to date, the Company believes that
it has meritorious defenses to the securities class actions and the derivative
action and intends to defend them vigorously. There can be no assurance,
however, that the Company will prevail. An unfavorable outcome of this
litigation could have a material adverse effect on the Company's consolidated
financial position, liquidity or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS
At the Annual Meeting of Stockholders of the Company, held on July 13, 2000, the
following matters were acted upon by the stockholders of the Company:
1. The election of Anthony J. Ley, Moshe Nazarathy, Baryn S. Futa, E. Floyd
Kvamme, David A. Lane, Barry D. Lemieux and Michel L. Vaillaud as directors
of the Company, each to hold office for a one-year term or until a successor
is elected and qualified;
2. The approval of an amendment to the 1995 Stock Purchase Plan to increase
the number of shares of Common Stock reserved for issuance thereunder by
1,600,000 shares;
3. The ratification of the appointment of PricewaterhouseCoopers, LLP as the
independent accountants of the Company for the fiscal year ending December
31, 2000.
The number of shares of Common Stock outstanding and entitled to vote at the
Annual Meeting was 57,078,599 and 49,332,719 shares were represented in person
or by proxy. The results of the voting on each of the matters presented to
stockholders at the Annual Meeting are set forth below:
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30
VOTES BROKER
VOTES FOR AGAINST ABSTENTIONS NON-VOTE
--------- ------- ----------- --------
1. Election of Directors
a. Anthony J. Ley 48,522,753 809,966
b. Moshe Nazarathy 48,892,504 440,215
c. Baryn S. Futa 48,581,155 751,564
d. E. Floyd Kvamme 48,580,229 752,490
e. David A. Lane 48,942,426 390,293
f. Barry D. Lemieux 48,940,633 392,086
g. Michel L. Vaillaud 48,579,050 753,669
2. Amendment to Company's 1995 Stock 47,617,083 1,621,910 93,726
Purchase Plan
3. Ratification of Independent Accountants 49,148,392 150,777 33,550
ITEM 5. OTHER INFORMATION
Pursuant to Rule 14a-4 (c) (1) under the Securities Exchange Act of 1934, the
proxies provided to management shall confer on management discretionary
authority to vote with respect to any non Rule 14a-8 stockholder proposals
raised at the Company's annual meeting of stockholders, without any discussion
of the matter in the proxy statement, unless a stockholder has notified the
Company of such a proposal at least 45 days prior to the month and day on which
the Company mailed its prior year's proxy statement. Since the Company mailed
its proxy statement for the 2000 annual meeting of stockholders on June 13,
2000, the deadline for receipt of any such stockholder proposal for the 2001
annual meeting of stockholders is April 28, 2001.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Exhibit # Description of Document
- - 27.1 Financial Data Schedule
B. Reports on Form 8-K
Amended Current Report on Forms 8-K and 8-K/A filed on May 2, 2000 and July 17,
2000, respectively, relating to the merger of C-Cube Microsystems Inc. with and
into Harmonic.
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31
SIGNATURE
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, thereunto duly authorized.
Dated: November 13, 2000
HARMONIC INC.
(Registrant)
By: /s/ Robin N. Dickson
----------------------------------
Robin N. Dickson
Chief Financial Officer
(Principal Financial and Accounting
Officer)
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32
HARMONIC INC.
INDEX TO EXHIBITS
EXHIBIT # DESCRIPTION OF DOCUMENT
- - 27.1 Financial Data Schedule
5
1,000
9-MOS
DEC-31-2000
JAN-01-2000
SEP-29-2000
17,901
93,381
95,804
5,344
81,979
308,148
81,541
43,939
1,957,724
102,206
0
0
0
1,952,513
(296)
1,957,724
210,997
210,997
131,237
131,237
0
0
(9,312)
(169,167)
(1,761)
0
0
0
0
(167,406)
(3.68)
(3.68)
