Telecommunications equipment maker Network Equipment Technologies,
Inc. (NYSE: NWK) today reported its results for the second quarter
of fiscal 2009.
Total revenue in the second quarter was $18.5 million, up 19%
from the prior quarter and down 32% from the second quarter of the
prior fiscal year. Government revenues increased to $13.5 million
in the second quarter, up 34% sequentially.
Net loss in the second quarter was $47.5 million or $1.66 per
share, resulting primarily from the impairment of goodwill and
other intangible assets totaling $43.9 million, as well as from
operating losses and charges for inventory reserves. In the prior
quarter, net loss was $9.8 million, or $0.34 per share, and in the
second quarter of the prior year, the company had net income of
$1.6 million, or $0.06 per share.
On a non-GAAP basis, net loss in the second quarter was $8.1
million or $0.28 per share, compared to net loss of $11.2 million
or $0.39 per share in the prior quarter, and net income of $2.5
million, or $0.09 per share in the second quarter of fiscal 2008.
Non-GAAP net income and loss were calculated by excluding the
impairment of goodwill and other intangible assets, non-cash
stock-based compensation expense, amortization of intangible assets
from our acquisition of Quintum, accretion and other restructure
charges resulting from severance and vacating our former
manufacturing facility; offset by a gain on the extinguishment of
debt by the repurchase of senior notes. Refer to the table below
for reconciliation of GAAP to non-GAAP net income and loss.
Cash and investment balances at the end of the quarter were
$131.6 million, down $19.3 million from at the end of the prior
quarter. The company used approximately $10.5 million for the
buyback of its senior notes and made deposits of $3.8 million for
inventory held by the company's contract manufacturer for greater
than 90 days.
"This past quarter was difficult for the telecommunications
sector and the economy as a whole, and NET was no exception.
Despite this, our revenue improved over the prior quarter; we saw a
stabilization of our government business; and we made progress on
our unified communications programs, which now represent our growth
strategy," said President and CEO C. Nicholas Keating, Jr. "We are
executing on our milestones and strategic opportunities. Going
forward, we are further focusing our efforts and streamlining our
operations to align costs with current revenue. We will continue to
make adjustments to ensure that we return to cash flow
generation."
Conference Call Information:
The company will be hosting a conference call today to discuss
these results at 4:30 p.m. ET. Please dial (800) 561-2731 or (617)
614-3528 and provide conference ID# 11701086 to access the call.
The conference call will also be broadcast from the company's
website.
A recording of the conference call will be provided by telephone
and the Internet beginning two hours after completion of the call.
The replay may be accessed by telephone through midnight on
November 4, 2008; please dial (888) 286-8010 or (617) 801-6888 and
enter conference ID# 74077568. A digital recording will be
available on the company's website for one year.
About Network Equipment Technologies, Inc.
For a quarter of a century, Network Equipment Technologies, Inc.
has provided voice and data communications equipment for
multi-service networks requiring high degrees of versatility,
interoperability, security and performance. NET's broad family of
products are purpose-built for mixed-service, multi-protocol
networks; bandwidth-sensitive site communications; high
performance, security-sensitive transmissions; and converged
communications. The company's NX Series for network exchange
solutions and VX Series for voice exchange solutions enable
interoperability and integration with existing networks for
seamless migration to secure IP-based voice and data
communications. In addition, Quintum, a subsidiary of NET, delivers
VoIP access solutions that bring the reliability and voice clarity
of public telephone networks to Internet telephony.
Visit www.net.com for more information.
Use of Non-GAAP Financial Information
To supplement the company's condensed consolidated financial
statements presented in accordance with GAAP, NET has provided
certain non-GAAP net income (loss) financial measures that adjust
for the company's impairment charge for goodwill and other
intangible assets, non-cash stock-based compensation expense,
amortization of intangible assets from our acquisition of Quintum,
accretion and other restructure charges resulting from severance
and vacating our former manufacturing facility, and the gain on
extinguishment of debt. These non-GAAP measures may include net
income (loss) and net income (loss) per share data that are
adjusted from results based on GAAP to exclude certain expenses,
gains and losses. These non-GAAP measures are provided to enhance
investors' overall understanding of the company's current financial
performance and the company's prospects for the future. NET
believes the non-GAAP measures provide useful information to both
management and investors by excluding certain expenses that may not
be indicative of its core operating results and reflect NET's
ongoing business in a manner that allows meaningful
period-to-period comparisons. These measures should be considered
in addition to results prepared in accordance with GAAP, but should
not be considered a substitute for, or superior to, GAAP results.
The non-GAAP measures included in this press release have been
reconciled to the GAAP results in the attached tables.
Forward Looking Statements
This press release contains forward-looking statements (within
the meaning of the safe harbor provisions of Section 21E of the
Securities Exchange Act of 1934) relating to possible future
operating results, including operating expenses and cash flows.
Investors are cautioned that such statements are based on current
expectations, forecasts and assumptions that involve risks and
uncertainty that may cause actual results to differ materially from
those expressed or implied in the forward-looking statements.
Factors that could affect such results include federal government
budget matters and procurement decisions, our ability to develop
and commercialize new products and product enhancements, relations
with and performance by third-party technology providers, the
volume and timing of orders and revenue, as well as the factors
identified in Network Equipment Technologies' most recent Annual
Report on Form 10-K and subsequent reports filed with the
Securities and Exchange Commission. Network Equipment Technologies
disclaims any intention or obligation to update or revise any
forward looking statements, whether as a result of new information,
future events or otherwise.
NOTE TO EDITORS: Financial tables follow
NETWORK EQUIPMENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited ? in thousands, except per share amounts)
Quarter Ended Six Months Ended
--------------------- --------------------
September September September September
26, 2008 28, 2007 26, 2008 28, 2007
--------- ---------- --------- ---------
Revenue:
Product $ 14,658 $ 23,953 $ 26,697 $ 46,944
Service 3,857 3,379 7,392 6,729
--------- ---------- --------- ---------
Total revenue 18,515 27,332 34,089 53,673
--------- ---------- --------- ---------
Costs of revenue:
Cost of product revenue (1) 19,333 9,881 28,689 19,389
Cost of service revenue 3,804 2,976 7,477 5,881
--------- ---------- --------- ---------
Total cost of revenue 23,137 12,857 36,166 25,270
--------- ---------- --------- ---------
Gross margin (4,622) 14,475 (2,077) 28,403
Operating expenses:
Sales and marketing 5,692 4,667 11,440 9,203
Research and development 5,821 5,918 12,128 11,968
General and administrative 3,222 2,835 7,013 5,526
Restructure and other costs 152 51 394 52
Impairment of goodwill and
long-lived assets 34,197 -- 34,197 --
--------- ---------- --------- ---------
Total operating expenses 49,084 13,471 65,172 26,749
--------- ---------- --------- ---------
Income (loss) from
operations (53,706) 1,004 (67,249) 1,654
Other income (expense), net (136) 14 (22) (7)
Interest (expense) income, net (142) 675 (247) 1,367
Gain on extinguishment of debt 6,437 -- 10,150 --
--------- ---------- --------- ---------
Income (loss) before
taxes (47,547) 1,693 (57,368) 3,014
Income tax provision (benefit) (63) 101 (46) 159
--------- ---------- --------- ---------
Net income (loss) $ (47,484) $ 1,592 $ (57,322) $ 2,855
========= ========== ========= =========
Per share amounts:
Net income (loss):
Basic $ (1.66) $ 0.06 $ (1.99) $ 0.11
========= ========== ========= =========
Diluted $ (1.66) $ 0.06 $ (1.99) $ 0.10
========= ========== ========= =========
Common and common equivalent
shares:
Basic 28,674 26,752 28,861 26,511
========= ========== ========= =========
Diluted 28,674 27,777 28,861 27,558
========= ========== ========= =========
(1) Includes charges for the impairment of goodwill and long-lived assets
of $9.7 million for the quarter and six months ended September 26, 2008.
NETWORK EQUIPMENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September March
26, 2008 28, 2008
(unaudited) (1)
----------- -----------
Current assets:
Cash and investments $ 131,625 $ 165,658
Accounts receivable, net 11,577 23,174
Inventories 8,266 9,986
Prepaid expenses and other assets 14,244 8,031
----------- -----------
Total current assets 165,712 206,849
Property and equipment, net 8,044 9,459
Goodwill and purchased intangibles, net -- 41,317
Other assets 6,335 11,708
----------- -----------
Total assets $ 180,091 $ 269,333
=========== ===========
Liabilities and Stockholders? Equity:
Accounts payable $ 7,407 $ 9,968
Other current liabilities 20,406 17,821
----------- -----------
Total current liabilities 27,813 27,789
Long-term liabilities 4,727 6,295
3 3/4% convertible senior notes 55,200 85,000
7 1/4% redeemable convertible subordinated
debentures 24,706 24,706
Stockholders? equity 67,645 125,543
----------- -----------
Total liabilities and stockholders? equity $ 180,091 $ 269,333
=========== ===========
(1) Derived from audited consolidated financial statements as of March 28,
2008.
NETWORK EQUIPMENT TECHNOLOGIES, INC.
GAAP TO NON-GAAP NET INCOME (LOSS) RECONCILIATION
(unaudited ? in thousands, except per share data)
Quarter Ended Six Months Ended
-------------------- --------------------
September September September September
26, 2008 28, 2007 26, 2008 28, 2007
--------- --------- --------- ---------
GAAP net income (loss) $ (47,484) $ 1,592 $ (57,322) $ 2,855
Stock based compensation
expense:
Cost of product revenue 55 41 150 69
Cost of service revenue 76 32 144 60
Sales and marketing 334 169 638 282
Research and development 273 102 547 179
General and administrative 415 494 893 702
Acquisition related
amortization of acquired
intangibles:
Cost of product revenue 237 -- 592 --
Sales and marketing 265 -- 663 --
General and administrative 35 -- 88 --
Impairment of goodwill and
long-lived assets:
Cost of product revenue 9,741 -- 9,741 --
Operating expenses 34,197 -- 34,197 --
Restructure related:
General and administrative,
accretion of discount on
future cash flows from
subleases 35 78 77 157
Restructure and other:
Costs to vacate former
manufacturing facility -- 46 -- 31
Other, primarily
severance 141 5 382 21
Other income/(expense) gain
on extinguishment of debt (6,437) -- (10,150) --
Income tax benefit:
Income tax effect of above
items -- (24) -- (45)
--------- --------- --------- ---------
Non-GAAP net income (loss) $ (8,117) $ 2,535 $ (19,360) $ 4,311
========= ========= ========= =========
Non-GAAP net income (loss) per
share data:
Basic $ (0.28) $ 0.09 $ (0.67) $ 0.16
========= ========= ========= =========
Diluted $ (0.28) $ 0.09 $ (0.67) $ 0.16
========= ========= ========= =========
Common and common
equivalent shares:
Basic 28,674 26,752 28,861 26,511
========= ========= ========= =========
Diluted 28,674 27,777 28,861 27,558
========= ========= ========= =========
Company Contact: Network Equipment Technologies, Inc. Leigh
Salvo (510) 647-8870 Email Contact
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