EXHIBIT 99.1
Extreme Networks Reports Sequential Growth for Revenue and Pro Forma Net Income
SANTA CLARA, Calif., April 17 /PRNewswire-FirstCall/—Extreme Networks, Inc., (Nasdaq:EXTR-news), a leader in Ethernet networking, today reported its third quarter results for the period ending March 31, 2002.
Net revenue for the third quarter of fiscal 2002 was $111.1 million, compared to $109.1 million for the second quarter of fiscal 2002. On a pro forma basis Extreme Networks earned net income of $2.6 million, or $0.02 per share for the third quarter of fiscal 2002, compared with $2.0 million, or $0.02 per share for the second quarter of fiscal 2002.
Actual net loss for the third quarter on a GAAP basis, which includes charges for impairment of acquired intangible assets, amortization of goodwill and intangible assets and deferred compensation, restructuring and one-time charges was $139.8 million or $(1.23) per share, compared to a loss of $10.7 million or $(0.09) per share for the second quarter of fiscal 2002. (See financial tables for reconciliation of GAAP and pro forma results.)
Pre-tax charges for the quarter of $162.2 million were primarily related to a reduction in goodwill of $90.0 million and charges related to real estate of $64.4 million. The remaining charges related to fixed assets that were impaired, a write down of minority equity investments, partially offset by a benefit for excess inventory allowance no longer needed. Of these charges, $136.8 million will have no impact on Extreme’s cash position and the remaining $25.4 million will have a cash impact spread over a number of years.
“We are on track for achieving our strategic and operational financial goals, even during these challenging economic times,’’ said Gordon Stitt, president and CEO, Extreme Networks. “During the quarter, we continued to add new key global accounts and expand our worldwide service capabilities, increasing our status as an established networking leader. We also improved our key financial metrics, including revenue, gross margin, operating profit, working capital and our cash position.”
“While visibility is uncertain, we are in a solid position to continue to move forward and address our customer’s needs while focusing on operational excellence,” said Stitt.
Conference Call
Extreme Networks will host a conference call to discuss these results at 2 p.m. PT; the call may include additional forward-looking statements. For more information visitwww.extremenetworks.com.
About Extreme Networks
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Extreme Networks, Inc. delivers the most effective applications and services infrastructure by creating networks that are faster, simpler and more cost-effective than conventional solutions. Headquartered in Santa Clara, Calif., Extreme Networks markets its network switching solutions in more than 50 countries. For more information, visitwww.extremenetworks.com.
This announcement contains forward-looking statements that involve risks and uncertainties, including statements about achieving our strategic and financial goals, and other statements that include the words “expect’’, “anticipate” or similar words. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including, but not limited to: (i) our rapid growth and potential risks associated with this growth, and a limited operating history and limited history of profitability that make it more difficult to predict results; (ii) current economic trends in worldwide geographic markets; (iii) fluctuations in demand for our products and services; (iv) a highly competitive business environment for network switching equipment; and (v) the possibility that we might experience delays in the development of new technology and products. More information about potential factors that could affect our business and financial results is included in our Annual Report on Form 10-K for the year ended June 30, 2001, and in our quarterly report on Form 10-Q for the period ended December 31, 2001, including, without limitation, under the captions: “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Risk Factors,” which are on file with the Securities and Exchange Commission (http://www.sec.gov).
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EXTREME NETWORKS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (i)
(In thousands, except per-share amounts)
(Unaudited)
| | | Three Months Ended
| | | Nine Months Ended
| |
| | | March 31, 2002
| | | March 31, 2001
| | | March 31, 2002
| | | March 31, 2001
| |
| Net revenue | | $ | 111,132 | | | $ | 112,106 | | | $ | 328,487 | | | $ | 376,163 | |
| Costs and expenses: | | | | | | | | | | | | | | | | |
| Cost of revenue | | | 47,219 | | | | 97,864 | | | | 181,981 | | | | 225,728 | |
| Research and development | | | 15,396 | | | | 16,497 | | | | 46,411 | | | | 41,193 | |
| Sales, marketing and service | | | 34,281 | | | | 41,578 | | | | 106,969 | | | | 117,192 | |
| General and administrative | | | 6,294 | | | | 11,284 | | | | 20,381 | | | | 20,442 | |
| Impairment of acquired intangible assets | | | 89,752 | | | | — | | | | 89,752 | | | | — | |
| Amortization of goodwill, purchased intangible assets and deferred stock compensation | | | 15,123 | | | | 8,239 | | | | 45,084 | | | | 22,101 | |
| Restructuring and one-time charges | | | 73,570 | | | | 34,020 | | | | 73,570 | | | | 34,020 | |
| Total costs and expenses | | | 281,635 | | | | 209,482 | | | | 564,148 | | | | 460,676 | |
| Operating loss | | | (170,503 | ) | | | (97,376 | ) | | | (235,661 | ) | | | (84,513 | ) |
| Other income, net | | | (2,856 | ) | | | 2,005 | | | | (4,733 | ) | | | 8,519 | |
| Loss before income taxes | | | (173,359 | ) | | | (95,371 | ) | | | (240,394 | ) | | | (75,994 | ) |
| Benefit for income taxes | | | (33,560 | ) | | | (25,256 | ) | | | (53,935 | ) | | | (18,474 | ) |
| Net loss | | $ | (139,799 | ) | | $ | (70,115 | ) | | $ | (186,459 | ) | | $ | (57,520 | ) |
| Net loss per share—basic | | $ | (1.23 | ) | | $ | (0.64 | ) | | $ | (1.66 | ) | | $ | (0.54 | ) |
| Net loss per share—diluted | | $ | (1.23 | ) | | $ | (0.64 | ) | | $ | (1.66 | ) | | $ | (0.54 | ) |
| Shares used in per share calculation—basic | | | 113,281 | | | | 109,028 | | | | 112,638 | | | | 107,433 | |
| Shares used in per share calculation—diluted | | | 113,281 | | | | 109,028 | | | | 112,638 | | | | 107,433 | |
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EXTREME NETWORKS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (i)
(In thousands, except per-share amounts)
| | | Three Months Ended
| | | Nine Months Ended
|
| | | March 31, 2002
| | March 31, 2001
| | | March 31, 2002
| | March 31, 2001
|
| Net revenue | | $ | 111,132 | | $ | 112,106 | | | $ | 328,487 | | $ | 376,163 |
| Costs and expenses: | | | | | | | | | | | | | |
| Cost of revenue | | | 51,995 | | | 57,534 | | | | 155,307 | | | 185,398 |
| Research and development | | | 15,396 | | | 16,497 | | | | 46,411 | | | 41,193 |
| Sales, marketing and service | | | 34,281 | | | 41,578 | | | | 106,969 | | | 117,192 |
| General and administrative | | | 6,294 | | | 10,284 | | | | 17,681 | | | 19,442 |
| Total costs and expenses | | | 107,966 | | | 125,893 | | | | 326,368 | | | 363,225 |
| Operating income (loss) | | | 3,166 | | | (13,787 | ) | | | 2,119 | | | 12,938 |
| Other income, net | | | 801 | | | 2,864 | | | | 4,924 | | | 9,378 |
| Income (loss) before income taxes | | | 3,967 | | | (10,923 | ) | | | 7,043 | | | 22,316 |
| Provision (benefit) for income taxes | | | 1,388 | | | (3,823 | ) | | | 2,465 | | | 7,782 |
| Net income (loss) | | $ | 2,579 | | $ | (7,100 | ) | | $ | 4,578 | | $ | 14,534 |
| Net income (loss) per share—basic | | $ | 0.02 | | $ | (0.07 | ) | | $ | 0.04 | | $ | 0.14 |
| Net income (loss) per share—diluted | | $ | 0.02 | | $ | (0.07 | ) | | $ | 0.04 | | $ | 0.12 |
| Shares used in per share calculation—basic | | | 113,281 | | | 109,028 | | | | 112,638 | | | 107,433 |
| Shares used in per share calculation—diluted | | | 117,411 | | | 109,028 | | | | 117,655 | | | 118,091 |
| (i) | | This statement of operations information for the three and nine months ended March 31, 2001 and 2002 is for illustrative purposes only and is not prepared in accordance with generally accepted accounting principles.The following table reconciles our GAAP net loss from Table A to our pro forma net income in Table B: |
| | | Three Months Ended
| | | Nine Months Ended
| |
| | | March 31, 2002
| | | March 31, 2001
| | | March 31, 2002
| | | March 31, 2001
| |
| GAAP net loss | | $ | (139,799 | ) | | $ | (70,115 | ) | | $ | (186,459 | ) | | $ | (57,520 | ) |
| Pro forma adjustments: | | | | | | | | | | | | | | | | |
| Charges related to contract manufacturers and other costs associated with carrying value of inventory | | | (4,776 | ) | | | 40,330 | | | | 26,674 | | | | 40,330 | |
| Impairment of acquired intangible assets | | | 89,752 | | | | — | | | | 89,752 | | | | — | |
| Amortization of goodwill, purchased intangible assets and deferred stock compensation | | | 15,123 | | | | 8,239 | | | | 45,084 | | | | 22,101 | |
| In-process research and development | | | — | | | | 30,142 | | | | — | | | | 30,142 | |
| Restructuring and one-time | | | | | | | | | | | | | | | | |
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| charges | | | 77,227 | | | | 5,737 | | | | 85,927 | | | | 5,737 | |
| Income tax benefit | | | (34,948 | ) | | | (21,433 | ) | | | (56,400 | ) | | | (26,256 | ) |
| Pro forma net income (loss) | | $ | 2,579 | | | $ | (7,100 | ) | | $ | 4,578 | | | $ | 14,534 | |
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EXTREME NETWORK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| | | March 31, 2002
| | June 30, 2001
|
ASSETS | | | | | | |
| Current assets: | | | | | | |
| Cash, cash equivalents and investments | | $ | 218,225 | | $ | 157,096 |
| Accounts receivable, net | | | 55,765 | | | 63,211 |
| Inventories, net | | | 35,889 | | | 60,529 |
| Deferred taxes | | | 34,458 | | | 35,855 |
| Other current assets | | | 11,813 | | | 12,061 |
| | |
|
| |
|
|
| Total current assets | | | 356,150 | | | 328,752 |
|
| Property and equipment, net | | | 54,807 | | | 57,251 |
| Restricted investments | | | 80,000 | | | 80,000 |
| Marketable securities | | | 179,212 | | | 34,406 |
| Goodwill and purchased intangible assets, net | | | 1,090 | | | 113,886 |
| Deferred taxes | | | 97,347 | | | 40,028 |
| Other assets | | | 12,830 | | | 12,025 |
| | |
|
| |
|
|
| Total assets | | $ | 781,436 | | $ | 666,348 |
| | |
|
| |
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | |
| Current liabilities: | | | | | | |
| Accounts payable | | $ | 36,740 | | $ | 35,890 |
| Deferred revenue | | | 41,412 | | | 25,537 |
| Other accrued liabilities | | | 124,899 | | | 55,893 |
| | |
|
| |
|
|
| Total current liabilities | | | 203,051 | | | 117,320 |
| Convertible subordinated notes and other long-term deposit | | | 200,333 | | | 266 |
| Total stockholders' equity | | | 378,052 | | | 548,762 |
| | |
|
| |
|
|
| Total liabilities and stockholders' equity | | $ | 781,436 | | $ | 666,348 |
| | |
|
| |
|
|
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