Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
October 16, 2003
Date of Report
(Date of earliest event reported)
HARMONIC INC.
| Delaware | 0-25826 | 77-0201147 | ||
| (State or other jurisdiction of incorporation or organization) |
Commission File Number | (I.R.S. Employer Identification Number) |
||
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)
| Item 7. Financial Statements and Exhibits | ||||||||
| Item 12. Results of Operations and Financial Condition | ||||||||
| SIGNATURES | ||||||||
| Exhibit Index | ||||||||
| EXHIBIT 99.1 | ||||||||
Table of Contents
Item 7. Financial Statements and Exhibits
(c) Exhibits
| Exhibit Number | Description | |
| 99.1 | Press Release of Harmonic Inc., issued on October 16, 2003 |
Item 12. Results of Operations and Financial Condition
On October 16, 2003, Harmonic Inc. (“Harmonic”) is issuing a press release and holding a conference call regarding its financial results for the quarter ended September 26, 2003. A copy of the press release is furnished as Exhibit 99.1 to this report.
Use of Non-GAAP Financial Information
To supplement our consolidated financial statements presented in accordance with GAAP, Harmonic uses non-GAAP measures of operating income/loss, net income/loss and earnings/loss per share, which are adjusted from results based on GAAP to exclude certain costs and credits and gains and losses. These non-GAAP adjustments are provided to enhance the user’s overall understanding of our current financial performance and our prospects for the future. Specifically, we believe the non-GAAP results provide useful information to both management and investors by excluding certain items that we believe are not indicative of our core operating performance. In addition, since we have historically reported non-GAAP results to the investment community, we believe the inclusion of non-GAAP numbers provides consistency in our financial reporting. Further, these non-GAAP results are a primary indicator used by management for planning and forecasting in future periods. The presentation of this additional information is not intended to be considered in isolation or as a substitute for results prepared in accordance with accounting principles generally accepted in the United States, and is not necessarily comparable to non-GAAP results published by other companies. A table reconciling the non-GAAP results to GAAP results is included in the accompanying press release.
2
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| HARMONIC INC | ||||
| Date: | October 16, 2003 | |||
| By: | /s/ ROBIN N. DICKSON | |||
|
|
||||
| Robin N. Dickson | ||||
| Chief Financial Officer | ||||
3
Table of Contents
Exhibit Index
| Exhibit Number | Description | |
| 99.1 | Press Release of Harmonic Inc., issued on October 16, 2003 |
4
Exhibit 99.1
 |
 |
| FOR IMMEDIATE RELEASE | ||||
| CONTACTS: | Robin N. Dickson | Michael Newman | ||
| Chief Financial Officer | Investor Relations | |||
| Harmonic Inc. | StreetConnect | |||
| (408) 542-2500 | (408) 542-2760 | |||
Harmonic Announces Third Quarter Results
Continued Revenue Growth and Improvement in Operating Efficiencies
SUNNYVALE, Calif. — October 16, 2003 — Harmonic Inc. (Nasdaq: HLIT) today announced its results for the quarter ended September 26, 2003.
For the third quarter of 2003, Harmonic reported net sales of $47.3 million, up from $41.7 million in the previous quarter and from $37.0 million in the third quarter of 2002. Domestic sales represented 71% of total sales for the third quarter of 2003.
The CS division, which designs, manufactures and markets digital headend systems for a number of markets, had divisional net sales of $29.0 million, up from $27.1 million in the previous quarter and from $23.8 million in the third quarter of 2002. During the third quarter of 2003, the Company saw increased CS shipments to a number of its cable and satellite customers worldwide.
The BAN division, which designs, manufactures and markets fiber optic products for broadband cable networks, had divisional net sales of $18.3 million, up from $14.5 million in the previous quarter and from $13.2 million in the third quarter of 2002. The growth in BAN sales was due to increased shipments to a number of domestic and international cable operators.
“We are pleased to see a firmer industry capital spending environment, which we believe is having a positive impact on our business,” said Anthony J. Ley, Chairman, President and Chief Executive Officer. “We continue to see intensifying competition between cable and satellite operators to offer more channels of digital video and new interactive services such as video-on-demand (VOD), as well as the introduction of high-definition television (HDTV). A number of our cable customers are also deploying our fiber optic products to improve operational efficiency and configure their networks to support the new advanced services.”
“To meet demand for these new services, we recently introduced important new digital video products. Our Narrowcast Services Gateway 9000 increases the performance of our VOD system; our MV450 is a more advanced HD encoder than our existing encoder products; and our MV100 is a versatile encoder platform, capable of further increasing the compression efficiency of MPEG-2 and supporting the next-generation encoding standards, H.264 and Windows Media 9. In the fourth quarter, we expect continued
revenue growth and margin improvement, while we continue to focus on expense control.” The GAAP net loss for the third quarter of 2003 was $7.5 million or $0.12 per share, compared to a GAAP net loss of $38.0 million or $0.63 per share for the same period of 2002. The GAAP net loss for the third quarter of 2003 includes a non-cash charge for the amortization of intangibles of $3.5 million, a facilities related charge of $0.9 million, and a credit relating to the sale of previously reserved inventory of $1.1 million. Excluding the above charges and credit, the non-GAAP loss for the quarter was $4.2 million, or $0.07 per share, compared to a non-GAAP loss of $13.3 million or $0.22 per share for the third quarter of 2002. The reconciliation between GAAP and non-GAAP net loss is provided in the accompanying tables.
The Company will host a conference call to discuss its third quarter financial results today at 2:00 p.m. Pacific (5:00 p.m. Eastern). A listen-only broadcast of the conference call can be accessed on the Company’s website at www.harmonicinc.com or by calling +1-212-748-2800 (Reservation No. 21090933). The replay will be available at the same website address or by calling +1-402-977-9140 (Reservation No. 21090933).
About Harmonic Inc.
Harmonic Inc. is a leading provider of digital video, broadband optical networking and IP delivery systems to cable, satellite, telecom and broadcast network operators. Harmonic’s open standards-based solutions for the headend through the last mile enable customers to develop new revenue sources and a competitive advantage by offering powerful interactive video, voice and data services such as video-on-demand, high definition digital television, telephony and Internet access.
Harmonic (Nasdaq: HLIT) is headquartered in Sunnyvale, California with R&D, sales and system integration centers worldwide. The Company’s customers, including many of the world’s largest communications providers, deliver services in virtually every country. Visit www.harmonicinc.com for more information.
THIS PRESS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27(A) OF THE SECURITIES ACT OF 1933 AND SECTION 21(E) OF THE SECURITIES EXCHANGE ACT OF 1934, INCLUDING STATEMENTS RELATED TO: OUR COMPETITIVE POSITION IN THE WORLDWIDE CABLE AND SATELLITE MARKETS; OUR BELIEF THAT WE WILL CONTINUE TO SEE INTENSIFYING COMPETITION BETWEEN CABLE AND SATELLITE OPERATORS WORLDWIDE TO PROVIDE MORE CHANNELS OF DIGITAL VIDEO AND NEW INTERACTIVE SERVICES SUCH AS VIDEO-ON-DEMAND AND HIGH-DEFINITION TELEVISION; OUR BELIEF THAT OUR CABLE, SATELLITE AND TELCO CUSTOMERS WILL CONTINUE TO UPGRADE OR RECONFIGURE THEIR NETWORKS TO IMPROVE OPERATIONAL EFFICIENCY AND SUPPORT THESE ADVANCED SERVICES; OUR EXPECTATION THAT WE WILL SEE CONTINUED REVENUE GROWTH AND MARGIN IMPROVEMENT IN THE FOURTH QUARTER WHILE WE CONTINUE TO FOCUS ON CONTROLLING EXPENSES. OUR EXPECTATIONS AND BELIEFS REGARDING THESE MATTERS MAY NOT MATERIALIZE, AND ACTUAL RESULTS IN FUTURE PERIODS ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED. THESE RISKS INCLUDE DELAYS OR DECREASES IN CAPITAL SPENDING IN THE CABLE AND SATELLITE INDUSTRY, CUSTOMER CONCENTRATION AND CONSOLIDATION, GENERAL ECONOMIC CONDITIONS, OUR ABILITY TO SECURE ADDITIONAL FINANCING, MARKET ACCEPTANCE OF NEW OR EXISTING HARMONIC PRODUCTS SUCH AS THE NARROWCAST SERVICES GATEWAY 9000 AND THE MV450 AND MV100 ENCODERS, OUR NEED TO MEET OUR CUSTOMERS’ REQUIREMENTS IF DEMAND INCREASES, LOSSES OF ONE OR MORE KEY CUSTOMERS, RISKS ASSOCIATED WITH HARMONIC’S INTERNATIONAL OPERATIONS, INVENTORY MANAGEMENT PROBLEMS, DISRUPTIONS IN SCHEDULED PAYMENTS OF LITIGATION SETTLEMENT AMOUNTS, THE EFFECT OF COMPETITION, DIFFICULTIES ASSOCIATED WITH RAPID TECHNOLOGICAL CHANGES IN HARMONIC’S MARKETS, THE NEED TO INTRODUCE NEW AND ENHANCED PRODUCTS, AND
2
RISKS ASSOCIATED WITH A CYCLICAL AND UNPREDICTABLE SALES CYCLE. THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PRESS RELEASE ARE ALSO SUBJECT TO OTHER RISKS AND UNCERTAINTIES, INCLUDING THOSE MORE FULLY DESCRIBED IN HARMONIC’S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION INCLUDING ITS ANNUAL REPORT FILED ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2002 AND ITS SUBSEQUENT QUARTERLY REPORTS ON FORM 10-Q AND CURRENT REPORTS ON FORM 8-K. HARMONIC DOES NOT UNDERTAKE TO UPDATE ANY FORWARD-LOOKING STATEMENTS.
| EDITOR’S NOTE: | PRODUCT AND COMPANY NAMES USED HERE ARE TRADEMARKS OR REGISTERED TRADEMARKS OF THEIR RESPECTIVE COMPANIES. |
3
Harmonic Inc.
Condensed Consolidated Balance Sheets
| September 26, | December 31, | ||||||||
| (In thousands) | 2003 | 2002 | |||||||
| (Unaudited) | |||||||||
Assets |
|||||||||
Current assets: |
|||||||||
Cash and cash equivalents |
$ | 15,380 | $ | 21,542 | |||||
Restricted cash |
6,554 | — | |||||||
Short-term investments |
11,938 | 27,616 | |||||||
Accounts receivable, net |
32,150 | 25,380 | |||||||
Inventories |
21,205 | 25,904 | |||||||
Prepaid expenses and other assets |
4,667 | 5,494 | |||||||
Total current assets |
91,894 | 105,936 | |||||||
Property and equipment, net |
25,159 | 32,456 | |||||||
Restricted cash, noncurrent |
468 | — | |||||||
Intangibles and other assets |
24,881 | 35,362 | |||||||
| $ | 142,402 | $ | 173,754 | ||||||
Liabilities and stockholders’ equity |
|||||||||
Current liabilities: |
|||||||||
Current portion of long-term debt |
$ | 1,342 | $ | 1,862 | |||||
Accounts payable |
12,511 | 7,258 | |||||||
Income taxes payable |
7,120 | 6,900 | |||||||
Accrued liabilities |
53,096 | 58,670 | |||||||
Total current liabilities |
74,069 | 74,690 | |||||||
Long-term debt, less current portion |
468 | 710 | |||||||
Accrued excess facilities costs |
30,106 | 34,754 | |||||||
Other non-current liabilities |
4,598 | 1,417 | |||||||
Total liabilities |
109,241 | 111,571 | |||||||
Stockholders’ equity: |
|||||||||
Common stock |
1,965,017 | 1,963,294 | |||||||
Accumulated deficit |
(1,931,928 | ) | (1,901,125 | ) | |||||
Accumulated other comprehensive income |
72 | 14 | |||||||
Total stockholders’ equity |
33,161 | 62,183 | |||||||
| $ | 142,402 | $ | 173,754 | ||||||
4
Harmonic Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| (In thousands, except per share data) | Three Months Ended | Nine Months Ended | |||||||||||||||
| September 26, | September 27, | September 26, | September 27, | ||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
Net sales |
$ | 47,253 | $ | 37,019 | $ | 125,947 | $ | 147,360 | |||||||||
Cost of sales |
32,593 | 27,091 | 87,788 | 102,434 | |||||||||||||
Gross profit |
14,660 | 9,928 | 38,159 | 44,926 | |||||||||||||
Operating expenses: |
|||||||||||||||||
Research and development |
9,211 | 9,737 | 26,145 | 31,651 | |||||||||||||
Selling, general and
administrative |
11,127 | 36,694 | 37,598 | 69,041 | |||||||||||||
Amortization of intangibles |
1,933 | 1,933 | 5,799 | 7,589 | |||||||||||||
Total operating expenses |
22,271 | 48,364 | 69,542 | 108,281 | |||||||||||||
Loss from operations |
(7,611 | ) | (38,436 | ) | (31,383 | ) | (63,355 | ) | |||||||||
Interest and other income |
257 | 406 | 880 | 689 | |||||||||||||
Loss before income taxes |
(7,354 | ) | (38,030 | ) | (30,503 | ) | (62,666 | ) | |||||||||
Provision for income taxes |
100 | — | 300 | 500 | |||||||||||||
Net loss |
$ | (7,454 | ) | $ | (38,030 | ) | $ | (30,803 | ) | $ | (63,166 | ) | |||||
Net loss per share |
|||||||||||||||||
Basic and diluted |
$ | (0.12 | ) | $ | (0.63 | ) | $ | (0.51 | ) | $ | (1.06 | ) | |||||
Weighted average shares |
|||||||||||||||||
Basic and diluted |
60,813 | 60,023 | 60,572 | 59,683 | |||||||||||||
5
Harmonic Inc.
Non-GAAP Condensed Consolidated Statements of Operations (1)
(Unaudited)
| (In thousands, except per share data) | Three Months Ended | Nine Months Ended | |||||||||||||||
| September 26, | September 27, | September 26, | September 27, | ||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
Net sales |
$ | 47,253 | $ | 37,019 | $ | 125,947 | $ | 147,360 | |||||||||
Cost of sales |
30,951 | 27,294 | 85,167 | 99,292 | |||||||||||||
Gross profit |
16,302 | 9,725 | 40,780 | 48,068 | |||||||||||||
Operating expenses: |
|||||||||||||||||
Research and development |
8,691 | 9,737 | 25,625 | 31,651 | |||||||||||||
Selling, general and administrative |
12,014 | 13,720 | 35,816 | 43,319 | |||||||||||||
Total operating expenses |
20,705 | 23,457 | 61,441 | 74,970 | |||||||||||||
Loss from operations |
(4,403 | ) | (13,732 | ) | (20,661 | ) | (26,902 | ) | |||||||||
Interest and other income |
257 | 406 | 880 | 689 | |||||||||||||
Loss before income taxes |
(4,146 | ) | (13,326 | ) | (19,781 | ) | (26,213 | ) | |||||||||
Provision for income taxes |
100 | — | 300 | 500 | |||||||||||||
Net loss |
$ | (4,246 | ) | $ | (13,326 | ) | $ | (20,081 | ) | $ | (26,713 | ) | |||||
Net loss per share |
|||||||||||||||||
Basic and diluted |
$ | (0.07 | ) | $ | (0.22 | ) | $ | (0.33 | ) | $ | (0.45 | ) | |||||
Weighted average shares |
|||||||||||||||||
Basic and diluted |
60,813 | 60,023 | 60,572 | 59,683 | |||||||||||||
| (1) | These Non-GAAP Condensed Consolidated Statements of Operations are provided to enhance overall understanding of our current financial performance and our prospects for the future. The presentation of this Non-GAAP information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP and is not necessarily comparable to Non-GAAP results published by other companies. A table reconciling the Non-GAAP net loss to the GAAP net loss follows below. |
Harmonic Inc.
Non-GAAP to GAAP Loss Reconciliation
(Unaudited)
| (In thousands) | Three Months Ended | Nine Months Ended | ||||||||||||||||
| September 26, | September 27, | September 26, | September 27, | |||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||
Non-GAAP net loss |
$ | (4,246 | ) | $ | (13,326 | ) | $ | (20,081 | ) | $ | (26,713 | ) | ||||||
Items charged to cost of sales: |
||||||||||||||||||
Amortization of intangibles |
(1,541 | ) | (1,541 | ) | (4,621 | ) | (7,585 | ) | ||||||||||
Realized margin on reserved product sold |
1,133 | 2,085 | 3,235 | 4,985 | ||||||||||||||
Provision for probable losses on Adelphia
deferred cost of sales |
— | — | — | (201 | ) | |||||||||||||
Facilities, severance and other adjustments |
(1,235 | ) | (341 | ) | (1,235 | ) | (341 | ) | ||||||||||
Total of charges to cost of sales |
(1,643 | ) | 203 | (2,621 | ) | (3,142 | ) | |||||||||||
Items charged to operating expenses: |
||||||||||||||||||
Amortization of intangibles |
(1,933 | ) | (1,933 | ) | (5,799 | ) | (7,589 | ) | ||||||||||
Loss on litigation settlement |
— | — | (2,670 | ) | — | |||||||||||||
Provision for probable losses on Adelphia
account receivables |
— | (2,748 | ) | |||||||||||||||
Facilities, severance and other adjustments |
368 | (22,974 | ) | 368 | (22,974 | ) | ||||||||||||
Total of charges to operating expenses |
(1,565 | ) | (24,907 | ) | (8,101 | ) | (33,311 | ) | ||||||||||
GAAP net loss |
$ | (7,454 | ) | $ | (38,030 | ) | $ | (30,803 | ) | $ | (63,166 | ) | ||||||
6