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.
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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.
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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
=========== ===========
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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
========= ========= ========= =========
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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)
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