Exhibit 99.1
For additional information contact:
Steve Goggiano CoSine Communications
President & CEO 1200 Bridge Parkway
(650) 637-4777 Redwood City, CA 94065
Web Site: www.cosinecom.com
Terry Gibson Phone: 650.637.4777
Executive Vice President Fax: 650.628.4200
and CFO E-mail:
650.637.4777 investorrelations@cosinecom.com
COSINE COMMUNICATIONS ANNOUNCES THIRD QUARTER
FISCAL 2004 FINANCIAL RESULTS
REDWOOD CITY, CALIF., October 28, 2004 -- CoSine Communications, Inc. (Nasdaq:
COSN - News), a provider of managed, network-based IP and Broadband Services
Delivery Platforms, today announced revenue for the quarter ended September 30,
2004 of $1.1 million and a net loss of $14.6 million, or $1.47 per share, as
compared to revenue of $4.0 million and a net loss of $ 8.2 million or $0.84 per
share for the quarter ended September 30, 2003. The company ended the quarter
with $33.6 million in cash and short-term investments and no long-term debt.
CoSine and its investment advisors continue to explore strategic alternatives,
which could include a sale of the company or its assets or a winding-down of the
business and liquidation.
The company completed the layoff of most of its employees in the quarter ended
September 30, 2004 and has retained a transition team to provide customer
support and handle matters related to the ongoing exploration of strategic
alternatives. The company recorded a charge of $6.8 million in the quarter ended
September 30, 2004 including $2.9 million for the costs related to the employee
layoffs, $3.5 million to write inventory down to estimated net realizable value
and $375,000 to terminate various supply agreements.
On October 22, 2004, the company signed an agreement for early termination of
the lease of its headquarters facility in Redwood City, California. Pursuant to
the agreement, the lease will be terminated on December 31, 2004, as compared to
the prior termination date of December 31, 2011, resulting in a $16,576,358
reduction in future rental obligations. The company has paid an early
termination fee of $4,130,464, which includes prepaid rent through December 31,
2004 and compensation for costs to restore the premises. In addition, the
company has waived its rights to recover a lease deposit of $420,941 and has
tendered certain furniture and office equipment with an estimated value of less
than $50,000. The company will take a charge in the quarter ending December 31,
2004 for this early termination of its lease.
There can be no assurance that any transaction or other corporate action will
result from the company's exploration of strategic alternatives. Further, there
can be no assurance concerning the type, form, structure, nature, results,
timing or terms and conditions of any such potential action, even if such an
action does result from this exploration. CoSine does not intend to make any
additional comments regarding such exploration unless and until developments
warrant further disclosure.
ABOUT COSINE COMMUNICATIONS
CoSine Communications is a global telecommunications equipment supplier founded
in 1998 to empower service providers to deliver a compelling portfolio of
managed, network-based IP and Broadband services to consumers and business
customers. From the edge of the network, several of the world's largest carriers
use the CoSine platform to deliver customized and profitable network-based
services to consumers and enterprises. For more information about CoSine
Communications, visit the company's Web site at: www.cosinecom.com.
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"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of
1995: This release contains forward-looking statements, which include, among
others, statements concerning CoSine's expected financial performance,
exploration of strategic alternatives, and business outlook, expected
performance and developments. The company uses words such as "anticipate,"
"believe," "plan," "expect," "future," "intend" and similar expressions to
identify forward-looking statements. These forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those reflected in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
CoSine's ability to identify and effectuate desirable strategic alternatives,
the time and costs required to explore and investigate possible transactions and
other corporate actions, management and board interest in and distraction due to
exploring and investigating strategic alternatives, the reactions, either
positive or negative, of investors, competitors, customers, employees and others
to CoSine exploring possible strategic alternatives and opportunities and to any
specific strategic alternative or opportunity selected by CoSine, the ability of
CoSine to negotiate and finalize the termination of its existing real estate
leases, and the continued downturn in the telecommunications industry and slow
development of the market for network-based IP services, , all as may be
discussed in more detail on pages 29 through 35 of our Annual Report on Form
10-K for the fiscal year ending December 31, 2003 and on pages 20 through 30 of
our Quarterly Report on Form 10-Q for the quarter ending June 30, 2004. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which reflect management's opinions only as of the date hereof. CoSine
undertakes no obligation to revise or publicly release the results of any
revision to these forward-looking statements.
CoSine Communications, Inc.
CONSOLIDATED STATEMENT OF OPERATIONS
(In conformity with generally accepted accounting principles)
(in thousands, except per share data)
Nine months ended
September 30,
--------------------------------------------------
2004 2003 2004 2003
-------- -------- -------- --------
(unaudited)
Revenue $ 1,088 $ 4,024 $ 8,111 $ 12,244
Cost of sales (1) 4,441 1,798 7,373 5,335
-------- -------- -------- --------
Gross profit (3,353) 2,226 738 6,909
Operating expenses:
Research and development 3,709 5,485 13,316 15,920
Sales and marketing 3,056 3,191 9,594 10,310
General and administrative 1,721 1,817 4,626 5,643
Restructuring and impairment charges 2,871 14 5,214 351
-------- -------- -------- --------
Total operating expenses 11,357 10,507 32,750 32,224
-------- -------- -------- --------
Loss from operations (14,710) (8,281) (32,012) (25,315)
Interest income and expense and other, net 82 112 304 637
-------- -------- -------- --------
Loss before income tax (benefits) provision (14,628) (8,169) (31,708) (24,678)
Income tax (benefits) provision (9) 15 2 86
-------- -------- -------- --------
Net loss $(14,619) $ (8,184) $(31,710) $(24,764)
======== ======== ======== ========
Basic and diluted net loss per share $ (1.47) $ (0.84) $ (3.17) $ (2.54)
Shares used in computing basic and diluted net
loss per share 9,945 9,797 9,998 9,753
- -----------------
(1) Includes inventory write-down of $3,466, settlement with contract
manufacturers of $375 and prepaid write-off of $75 in the three months and
nine months ended September 30, 2004.
CoSine Communications, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In conformity with generally accepted accounting principles)
(in thousands)
September 30, December 31,
2004 2003(1)
--------- -------
(unaudited)
ASSETS
Current assets:
Cash, cash equivalents and short-term investments $33,623 $57,752
Accounts receivable, trade 675 4,962
Accounts receivable, other 589 494
Inventory 20 4,003
Prepaid expenses and other current assets 3,752 2,668
--------- -------
Total current assets 38,659 69,879
Property and equipment, net -- 2,900
Long-term deposits 157 647
--------- -------
$38,816 $73,426
========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $7,049.70 $ 6,502
Deferred revenue 950 3,543
Current portion of long-term debt -- 129
--------- -------
Total current liabilities 8,000 10,174
Accrued rent 2,049 2,078
Stockholders' equity 28,767 61,174
--------- -------
$38,816 $73,426
========= =======
- ---------------------
(1) Amounts are derived from the December 31, 2003 audited financial
statements.