Exhibit 99.1
HARMONIC ANNOUNCES SECOND QUARTER RESULTS
INCREASING SALES AND NEW OPTICAL AND DIGITAL PRODUCTS
SUNNYVALE, CALIF.--JULY 22, 2004--Harmonic Inc. (Nasdaq: HLIT) today announced
its results for the quarter ended July 2, 2004.
For the second quarter of 2004, the Company reported net sales of $57.0 million,
up from $55.1 million in the previous quarter and up from $41.7 million in the
second quarter of 2003. The revenue growth reflects increased shipments to cable
and satellite customers worldwide. International sales represented 44% of total
sales for the second quarter of 2004, up from 33% in the previous quarter, due
principally to the completion of initial customer acceptance testing for a large
international project.
The Company's CS division, which designs, manufactures and markets digital
headend systems for a number of markets, had divisional net sales of $33.3
million in the second quarter of 2004, up from $27.1 million in the same period
of 2003. The BAN division, which designs, manufactures and markets fiber optic
products primarily for broadband cable networks, had divisional net sales of
$23.7 million in the second quarter of 2004, up from $14.6 million in the same
period of 2003.
"We are pleased with our sales growth, our improved results from operations and
our introduction of exciting new products in the second quarter," said Anthony
J. Ley, Chairman, President and Chief Executive Officer. "We saw increasing
demand from our international and domestic cable customers who continue to
deploy more equipment to offer video-on-demand, high-definition (HD)
programming, new digital channels, cable telephony and IP services. We continued
to extend our technology leadership with the introduction of new digital
encoders and optical transmission systems, including the initial deployments of
our new Commercial Services Solution to enable cable operators to provide
broadband services to businesses, schools and government offices."
"Our satellite customers continue to expand the number of HD and digital
channels, and a number of telephone companies are exploring different approaches
to offer competitive digital video services. Across our different markets, we
are helping customers in their plans to migrate to next-generation network
transmission and video compression technologies. While the timing of customer
deployments remains difficult to predict, we expect that intensifying
competition among our customers, along with the ever-increasing bandwidth and
technical requirements for new services, will continue to drive growing demand
for our fiber optic and digital products in the second half of 2004 and beyond."
The GAAP net loss for the second quarter of 2004 was $1.8 million, or $0.02 per
share, compared to a net loss of $11.7 million, or $0.19 per share, for the same
period of 2003. The GAAP results for the second quarter include a credit
relating to the sale of previously reserved inventory of $1.2 million. Excluding
the inventory benefit described above and the effects of non-cash accounting
charges for the amortization of intangibles, the non-GAAP net income for the
second quarter of 2004 was $0.5 million, or $0.01 per share. This compares to a
non-GAAP net loss of $6.6 million, or $0.11 per share, for the same period of
2003.
At the end of the second quarter of 2004, the Company had cash, cash equivalents
and short-term investments of $92.2 million, compared to $108.4 million at the
end of the first quarter. The decline in the cash position primarily reflected
increases in working capital requirements, particularly in receivables, as well
as approximately $4.8 million paid under a tax-sharing agreement from an
acquisition completed in 2000.
Harmonic's conference call regarding its second quarter 2004 results will be
held today, July 22, 2004, 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 +1-415-908-4707 (Reservation No.
21180559). The replay will be available after 5:00 p.m. on July 22 at the same
website address or by calling +1-402-977-9140 (Reservation No. 21180559).
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 NEW
COMMERCIAL SERVICES SOLUTIONS' ABILITY TO ENABLE CABLE OPERATORS TO PROVIDE
BROADBAND SERVICES TO BUSINESSES, SCHOOLS AND GOVERNMENT OFFICES; CUSTOMER
PLANS TO MIGRATE TO NEXT-GENERATION NETWORK TRANSMISSION AND VIDEO
COMPRESSION TECHNOLOGIES; OUR EXPECTATION THAT INTENSIFYING COMPETITION
AMONG OUR CUSTOMERS, ALONG WITH EVER-INCREASING BANDWIDTH AND TECHNICAL
REQUIREMENTS FOR NEW SERVICES, WILL CONTINUE TO DRIVE GROWING DEMAND FOR
OUR FIBER OPTIC AND DIGITAL PRODUCTS IN THE SECOND HALF OF 2004 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 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.
HARMONIC INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JULY 2 DECEMBER 31,
2004 2003
----------- -----------
(UNAUDITED)
Assets
Current assets:
Cash and cash equivalents $ 15,353 $ 41,877
Short-term investments 76,847 70,720
Accounts receivable, net 39,103 38,528
Inventories 30,359 22,425
Prepaid expenses and other assets 7,765 6,196
----------- -----------
Total current assets 169,427 179,746
Property and equipment, net 21,131 23,458
Intangibles and other assets 14,559 21,522
----------- -----------
$ 205,117 $ 224,726
=========== ===========
Liabilities and stockholders' equity Current liabilities:
Current portion of long-term debt $ 957 $ 1,027
Accounts payable 13,037 14,863
Income taxes payable 6,884 6,935
Deferred revenue 4,991 11,712
Accrued liabilities 42,152 49,820
----------- -----------
Total current liabilities 68,021 84,357
----------- -----------
Long-term debt, less current portion 915 629
Accrued excess facilities costs 26,191 28,627
Other non-current liabilities 5,469 4,952
----------- -----------
Total liabilities 100,596 118,565
----------- -----------
Stockholders' equity:
Common stock 2,039,596 2,036,593
Accumulated deficit (1,934,903) (1,930,558)
Accumulated other comprehensive income (172) 126
----------- -----------
Total stockholders' equity 104,521 106,161
----------- -----------
$ 205,117 $ 224,726
=========== ===========
HARMONIC INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------- ---------------------
JULY 2, JUNE 27, JULY 2, JUNE 27,
2004 2003 2004 2003
--------- --------- --------- ---------
Net sales $ 57,011 $ 41,653 $ 112,117 $ 78,694
Cost of sales 34,715 28,901 67,933 55,195
--------- --------- --------- ---------
Gross profit 22,296 12,752 44,184 23,499
--------- --------- --------- ---------
Operating expenses:
Research and development 8,311 8,431 17,161 16,934
Selling, general and administrative 13,529 14,408 27,524 26,471
Amortization of intangibles 1,933 1,933 3,866 3,866
--------- --------- --------- ---------
Total operating expenses 23,773 24,772 48,551 47,271
--------- --------- --------- ---------
Loss from operations (1,477) (12,020) (4,367) (23,772)
Interest and other income/(expense) (191) 438 222 623
--------- --------- --------- ---------
Loss before income taxes (1,668) (11,582) (4,145) (23,149)
Provision for income taxes 100 100 200 200
--------- --------- --------- ---------
Net loss $ (1,768) $ (11,682) $ (4,345) $ (23,349)
========= ========= ========= =========
Net loss per share
Basic $ (0.02) $ (0.19) $ (0.06) $ (0.39)
========= ========= ========= =========
Diluted $ (0.02) $ (0.19) $ (0.06) $ (0.39)
========= ========= ========= =========
Weighted average shares
Basic 71,832 60,462 71,772 60,457
========= ========= ========= =========
Diluted 71,832 60,462 71,772 60,457
========= ========= ========= =========
HARMONIC INC.
NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- -------------------
JULY 2, JUNE 27, JULY 2, JUNE 27,
2004 2003 2004 2003
-------- -------- -------- --------
Net sales $ 57,011 $ 41,653 $112,117 $ 78,694
Cost of sales 34,359 28,406 66,704 54,217
-------- -------- -------- --------
Gross profit 22,652 13,247 45,413 24,477
-------- -------- -------- --------
Operating expenses:
Research and development 8,311 8,431 17,161 16,934
Selling, general and administrative 13,529 11,738 27,524 23,801
-------- -------- -------- --------
Total operating expenses 21,840 20,169 44,685 40,735
-------- -------- -------- --------
Non-GAAP income/(loss) from operations 812 (6,922) 728 (16,258)
Interest and other income/(expense) (191) 438 222 623
-------- -------- -------- --------
Non-GAAP income/(loss) before income taxes 621 (6,484) 950 (15,635)
Provision for income taxes 100 100 200 200
-------- -------- -------- --------
Non-GAAP net income/(loss) $ 521 $ (6,584) $ 750 $(15,835)
======== ======== ======== ========
Net loss per share
Basic $ 0.01 $ (0.11) $ 0.01 $ (0.26)
======== ======== ======== ========
Diluted $ 0.01 $ (0.11) $ 0.01 $ (0.26)
======== ======== ======== ========
Weighted average shares
Basic 71,832 60,462 71,772 60,457
======== ======== ======== ========
Diluted 72,690 60,462 72,903 60,457
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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 income/(loss) to the GAAP net loss follows below.
HARMONIC INC.
NON-GAAP TO GAAP LOSS RECONCILIATION
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- --------------------
JULY 2, JUNE 27, JULY 2, JUNE 27,
2004 2003 2004 2003
-------- -------- -------- --------
Non-GAAP net income/(loss) $ 521 $ (6,584) $ 750 $(15,835)
Items charged to cost of sales:
Amortization of intangibles (1,540) (1,540) (3,080) (3,080)
Realized margin on reserved product sold 1,184 1,045 1,851 2,102
-------- -------- -------- --------
Total of charges to cost of sales (356) (495) (1,229) (978)
-------- -------- -------- --------
Items charged to operating expenses:
Amortization of intangibles (1,933) (1,933) (3,866) (3,866)
Loss on litigation settlement -- (2,670) -- (2,670)
-------- -------- -------- --------
Total of charges to operating expenses (1,933) (4,603) (3,866) (6,536)
-------- -------- -------- --------
GAAP net loss $ (1,768) $(11,682) $ (4,345) $(23,349)
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