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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
January 20, 2005
Date of Report
(Date of earliest event reported)
HARMONIC INC.
(Exact name of Registrant as specified in its charter)
| 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)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
| Item 2.02. Results of Operations and Financial Condition | ||||||||
| Item 9.01. Financial Statements and Exhibits | ||||||||
| SIGNATURES | ||||||||
| Exhibit Index | ||||||||
| EXHIBIT 99.1 | ||||||||
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Item 2.02. Results of Operations and Financial Condition
On January 20, 2005, Harmonic Inc. (“Harmonic”) issued a press release regarding its unaudited financial results for the quarter and year ended December 31, 2004. Harmonic also announced that it would be holding a conference call on Thursday, January 20, 2005, to discuss its financial results for the quarter and year ended December 31, 2004.
The information in this Current Report on Form 8-K is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section.
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.
Item 9.01. Financial Statements and Exhibits
| (c) | Exhibits. |
| Exhibit Number | Description | |
99.1
|
Press Release of Harmonic Inc., issued on January 20, 2005 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| HARMONIC INC. | ||||
Date:
|
January 20, 2005 | |||
By:
|
/s/Robin N. Dickson | |||
| Robin N. Dickson Chief Financial Officer |
||||
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Exhibit Index
| Exhibit Number | Description | |
99.1
|
Press Release of Harmonic Inc., issued on January 20, 2005 |
4
Exhibit 99.1 HARMONIC ANNOUNCES UNAUDITED FOURTH QUARTER AND YEAR-END RESULTS STRONG SALES, GROSS MARGIN AND EARNINGS GROWTH; ANNUAL REVENUE UP 36% SUNNYVALE, CALIF.--JANUARY 20, 2005--Harmonic Inc. (Nasdaq: HLIT) today announced its unaudited results for the quarter and year ended December 31, 2004. The results are in line with the Company's preliminary estimates for net sales announced on January 13, 2005. For the fourth quarter of 2004, the Company reported net sales of $85.6 million, up 69% from $50.6 million in the previous quarter and up 52% from $56.3 million in the fourth quarter of 2003. Shipments in the fourth quarter of 2004 included sales of approximately $8-10 million which were originally expected to be recorded as revenue in the third quarter of 2004. For the full year 2004, the Company reported net sales of $248.3 million, up 36% from $182.3 million in 2003. International sales represented 36% of total sales for the fourth quarter and 42% for the full year of 2004, up from 30% and 29%, respectively, for the corresponding periods in 2003. The CS division, which designs, manufactures and markets digital headend systems for a number of markets, had divisional net sales of $67.7 million in the fourth quarter, up from $34.6 million in the previous quarter. The BAN division, which designs, manufactures and markets fiber optic products for broadband cable networks, had divisional net sales of $17.9 million, up from $16.0 million in the previous quarter. As a result of the product mix, increased sales volume and cost reduction efforts, the Company achieved significant gross margin improvement for the fourth quarter and for the full year of 2004, compared to the same periods in 2003. For the fourth quarter of 2004, GAAP net income was $10.2 million, or $0.14 per diluted share, compared to $1.4 million, or $0.02 per diluted share, for the same period of 2003. For the full year 2004, GAAP net income was $1.6 million, or $0.02 per diluted share, compared to a net loss of $29.4 million, or $0.47 per share, in 2003. Excluding an inventory benefit relating to the sale of previously reserved inventory and the effects of non-cash accounting charges for the amortization of intangibles, non-GAAP net income for the fourth quarter of 2004 was $12.7 million, or $0.17 per diluted share, compared to $1.2 million, or $0.02 per diluted share, for the same period of 2003. For the full year 2004, non-GAAP net income was $11.4 million, or $0.16 per diluted share, compared to a net loss of $18.8 million, or $0.30 per share in 2003. At the end of the fourth quarter of 2004, the Company had cash, cash equivalents and short-term investments of $100.6 million, up from $89.4 million at the end of the previous quarter. "We are very pleased with our strong sales, gross margin and earnings growth for the fourth quarter and for the year," said Anthony J. Ley, Chairman, President and Chief Executive Officer. "During the quarter, we received significant orders from cable customers for our digital headend systems for simulcasting. This permits the transmission of high quality digital TV channels and helps reclaim bandwidth for more HD channels, video on demand and IP services. "We continued to strengthen our business in the satellite segment, with major MPEG-2 installations for both standard and high-definition channels. At the same time, we were working with our key satellite customers on new technology for both advanced codecs and new IP applications. In the telco market, we shipped more of our next generation encoders for video-over-DSL deployments, including MPEG-4 for a European customer, and we made our first volume shipments of fiber optic products for fiber-to-the-premises applications." "During 2004, we made significant progress toward our long-term objective of diversifying our business across different markets, driven by the intensifying competition among cable, satellite and telco operators. We are also encouraged by our stronger international business in a number of regions, especially in Europe. While the timing and scale of new telco projects remains difficult to predict from quarter to quarter, we are optimistic about our prospects in 2005 and beyond." For the first quarter of 2005, the Company expects net sales in the range of $70 million to $75 million, with GAAP net income in the range of $0.02 to $0.06 per share and non-GAAP net income, excluding the amortization of intangibles, of $0.07 to $0.11 per share. For the first six months of 2005, the Company expects net sales of approximately $150 million. 1
Harmonic will host a conference call today to discuss its financial results at 2:00 p.m. Pacific (5:00 p.m. Eastern). A broadcast of the conference call can be accessed on the Company's website at www.harmonicinc.com or by calling +1-617-786-2961 (participant code 80352909). The replay will be available after 5:00 p.m. on January 20 at the same website address or by calling +1-617-801-6888 (participant code 80352909). 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 unaudited financial results for the fourth quarter and year ended December 31, 2004; our expected net sales, GAAP net income per share and non-GAAP net income per share for the first quarter of 2005; our expected net sales for the first six months of 2005; our expectations regarding diversifying our business across different markets to take advantage of intensifying competition among cable, satellite and telco operators; and our optimism about our prospects in 2005 and beyond. 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 risks that actual results could vary perhaps materially following completion of the audit of our 2004 operating results by our registered public accountants, delays or decreases in capital spending in the cable and satellite industry, customer concentration and consolidation, general economic conditions, market acceptance of new or existing Harmonic products, losses of one or more key customers, risks associated with Harmonic's international operations, inventory management problems, the effect of competition, difficulties associated with rapid technological changes in Harmonic's markets, the need to introduce new and enhanced products, and 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, 2003, its quarterly reports on Form 10-Q and its 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. 2
HARMONIC INC. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED) DECEMBER 31, 2004 DECEMBER 31, 2003 ----------------- ----------------- Assets Current assets: Cash and cash equivalents $ 26,603 $ 41,877 Short-term investments 74,004 70,720 Accounts receivable, net 64,148 37,909 Inventories 41,763 22,425 Prepaid expenses and other current assets 8,504 6,815 ----------- ----------- Total current assets 215,022 179,746 Property and equipment, net 19,611 23,458 Intangibles and other assets 7,723 21,522 ----------- ----------- $ 242,356 $ 224,726 =========== =========== Liabilities and stockholders' equity Current liabilities: Current portion of long-term debt $ 1,067 $ 1,027 Accounts payable 22,381 14,863 Income taxes payable 7,099 6,935 Accrued liabilities 67,363 61,532 ----------- ----------- Total current liabilities 97,910 84,357 ----------- ----------- Long-term debt, less current portion 1,272 629 Accrued excess facilities costs 24,085 28,627 Other non-current liabilities 8,532 4,952 ----------- ----------- Total liabilities 131,799 118,565 =========== =========== Stockholders' equity: Common stock 2,039,810 2,036,593 Accumulated deficit (1,928,984) (1,930,558) Accumulated other comprehensive income (269) 126 ----------- ----------- Total stockholders' equity 110,557 106,161 ----------- ----------- $ 242,356 $ 224,726 =========== =========== 3
HARMONIC INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) THREE MONTHS ENDED YEAR ENDED ---------------------------- ---------------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2004 2003 ---------- ------------ ---------- ------------ Net sales $ 85,579 $ 56,329 $ 248,306 $ 182,276 Cost of sales 45,806 33,885 143,811 121,673 --------- --------- --------- --------- Gross profit 39,773 22,444 104,495 60,603 --------- --------- --------- --------- Operating expenses: Research and development 10,076 8,962 35,585 35,107 Selling, general and administrative 17,800 10,711 59,742 48,309 Amortization of intangibles 1,933 1,933 7,732 7,732 --------- --------- --------- --------- Total operating expenses 29,809 21,606 103,059 91,148 --------- --------- --------- --------- Income/(loss) from operations 9,964 838 1,436 (30,545) Interest and other income, net 483 532 727 1,412 --------- --------- --------- --------- Income/(loss) before income taxes 10,447 1,370 2,163 (29,133) Provision for income taxes 289 -- 589 300 --------- --------- --------- --------- Net income/(loss) $ 10,158 $ 1,370 1,574 $ (29,433) ========= ========= ========= ========= Net income (loss) per share Basic $ 0.14 $ 0.02 $ 0.02 $ (0.47) ========= ========= ========= ========= Diluted $ 0.14 $ 0.02 $ 0.02 $ (0.47) ========= ========= ========= ========= Weighted average shares Basic 72,275 67,090 72,015 62,288 ========= ========= ========= ========= Diluted 73,221 68,123 73,043 62,288 ========= ========= ========= ========= 4
HARMONIC INC. NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1) (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) THREE MONTHS ENDED YEAR ENDED ------------------------------ ------------------------------ DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2004 2003 ----------- ----------- ----------- ----------- Net sales $ 85,579 $ 56,329 $ 248,306 $ 182,276 Cost of sales 45,228 33,780 141,687 118,947 ----------- ----------- ----------- ----------- Gross profit 40,351 22,549 106,619 63,329 ----------- ----------- ----------- ----------- Operating expenses: Research and development 10,076 8,962 35,585 34,587 Selling, general and administrative 17,800 12,881 59,742 48,697 ----------- ----------- ----------- ----------- Total operating expenses 27,876 21,843 95,327 83,284 ----------- ----------- ----------- ----------- Non-GAAP income/(loss) from operations 12,475 706 11,292 (19,955) Interest and other income, net 483 532 727 1,412 ----------- ----------- ----------- ----------- Non-GAAP income/(loss) before income taxes 12,958 1,238 12,019 (18,543) Provision for income taxes 289 -- 589 300 ----------- ----------- ----------- ----------- Non-GAAP net income/(loss) $ 12,669 $ 1,238 $ 11,430 $ (18,843) =========== =========== =========== =========== Non-GAAP net income(loss) per share Basic $ 0.18 $ 0.02 $ 0.16 $ (0.30) =========== =========== =========== =========== Diluted $ 0.17 $ 0.02 $ 0.16 $ (0.30) =========== =========== =========== =========== Weighted average shares Basic 72,275 67,090 72,015 62,288 =========== =========== =========== =========== Diluted 73,221 68,123 73,043 62,288 =========== =========== =========== =========== 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 --------------------------------------- -------------------------------------- DECEMBER 31, 2004 DECEMBER 31, 2003 DECEMBER 31, 2004 DECEMBER 31, 2003 ----------------- ----------------- ----------------- ----------------- Non-GAAP net income (loss) $ 12,669 $ 1,238 $ 11,430 $(18,843) Items charged to cost of sales: Amortization of intangibles (1,540) (1,540) (6,161) (6,161) Realized margin on reserved product sold 962 1,435 4,037 4,670 Facilities, severance and other adjustments (1,235) -------- -------- -------- -------- Total of charges to cost of sales (578) (105) (2,124) (2,726) -------- -------- -------- -------- Items charged to operating expenses: Amortization of intangibles (1,933) (1,933) (7,732) (7,732) Loss on litigation settlement (2,670) Sale of Adelphia account receivables 2,170 2,170 Facilities, severance and other adjustments 368 -------- -------- -------- -------- Total of charges to operating expenses (1,933) 237 (7,732) (7,864) -------- -------- -------- -------- GAAP net income (loss) $ 10,158 $ 1,370 $ 1,574 $(29,433) ======== ======== ======== ======== 5