UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
| x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
for the quarterly period ended March 31, 2003
or
| ¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
for the transition period from to
Commission File Number 0-25996
TRANSWITCH CORPORATION
(Exact name of Registrant as Specified in its Charter)
| Delaware |
06-1236189 | |
| (State of Incorporation) |
(I.R.S. Employer Identification Number) |
3 Enterprise Drive
Shelton, Connecticut 06484
(Address of Principal Executive Offices)
Telephone (203) 929-8810
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ¨ No x
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share, outstanding at April 30, 2003; 90,136,031
Series A Junior Participating Preferred Stock Purchase Rights
4½% Convertible Notes due 2005 outstanding at April 30, 2003; $114,113,000
TranSwitch Corporation And Subsidiaries
FORM 10-Q
For the Quarterly Period Ended March 31, 2003
| Page | ||||
| PART I. FINANCIAL INFORMATION |
||||
| Item 1. |
Financial Statements (unaudited) |
|||
| Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002 |
3 | |||
| Consolidated Statements of Operations for the Three Month periods ended March 31, 2003 and 2002 |
4 | |||
| Consolidated Statements of Cash Flows for the Three Month periods ended March 31, 2003 and 2002 |
5 | |||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
13 | ||
| Item 3. |
35 | |||
| Item 4. |
35 | |||
| PART II. OTHER INFORMATION |
||||
| Item 6. |
36 | |||
| 37 | ||||
| 38 | ||||
2
TRANSWITCH CORPORATION AND SUBSIDIARIES
(in thousands, except share and per share amounts)
| March 31, 2003 (unaudited) |
December 31, 2002 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
148,365 |
|
$ |
150,548 |
| ||
| Short-term investments |
|
26,661 |
|
|
33,099 |
| ||
| Accounts receivable, net |
|
1,893 |
|
|
2,228 |
| ||
| Inventories |
|
4,284 |
|
|
4,658 |
| ||
| Prepaid expenses and other current assets |
|
4,358 |
|
|
5,480 |
| ||
| Total current assets |
|
185,561 |
|
|
196,013 |
| ||
| Long-term marketable securities |
|
16,609 |
|
|
21,819 |
| ||
| Property and equipment, net |
|
13,481 |
|
|
17,219 |
| ||
| Patents, net of accumulated amortization |
|
1,360 |
|
|
1,655 |
| ||
| Investments in non-publicly traded companies |
|
1,032 |
|
|
1,988 |
| ||
| Deferred financing costs, net |
|
1,990 |
|
|
2,193 |
| ||
| Other assets |
|
1,243 |
|
|
2,466 |
| ||
| Total assets |
$ |
221,276 |
|
$ |
243,353 |
| ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ |
1,728 |
|
$ |
2,044 |
| ||
| Accrued expenses and other current liabilities |
|
6,695 |
|
|
8,992 |
| ||
| Accrued compensation and benefits |
|
1,617 |
|
|
1,961 |
| ||
| Accrued sales returns, allowances and stock rotation |
|
1,126 |
|
|
1,479 |
| ||
| Accrued interest |
|
262 |
|
|
1,546 |
| ||
| Restructuring liabilities |
|
2,140 |
|
|
1,708 |
| ||
| Total current liabilities |
|
13,568 |
|
|
17,730 |
| ||
| Restructuring liabilities – long term |
|
25,140 |
|
|
25,849 |
| ||
| 4½% Convertible Notes due 2005 |
|
114,113 |
|
|
114,113 |
| ||
| Total liabilities |
|
152,821 |
|
|
157,692 |
| ||
| Stockholders’ equity: |
||||||||
| Common stock $.001 par value; authorized 300,000,000 shares; issued and outstanding, 90,155,673 shares at March 31, 2003 and 90,131,672 shares at December 31, 2002 |
|
90 |
|
|
90 |
| ||
| Additional paid-in capital |
|
290,064 |
|
|
290,007 |
| ||
| Accumulated other comprehensive income |
|
351 |
|
|
174 |
| ||
| Accumulated deficit |
|
(222,050 |
) |
|
(204,610 |
) | ||
| Total stockholders’ equity |
|
68,455 |
|
|
85,661 |
| ||
| Total liabilities and stockholders’ equity |
$ |
221,276 |
|
$ |
243,353 |
| ||
See accompanying notes to unaudited consolidated financial statements
3
TRANSWITCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
| Three Months Ended |
||||||||
| March 31, |
||||||||
| 2003 |
2002(1) |
|||||||
| Net revenues: |
||||||||
| Product revenues |
$ |
3,931 |
|
$ |
4,529 |
| ||
| Service revenues |
|
167 |
|
|
333 |
| ||
| Total net revenues |
|
4,098 |
|
|
4,862 |
| ||
| Cost of revenues: |
||||||||
| Cost of product revenues |
|
1,238 |
|
|
1,584 |
| ||
| Cost of service revenues |
|
102 |
|
|
234 |
| ||
| Total cost of revenues |
|
1,340 |
|
|
1,818 |
| ||
| Gross profit |
|
2,758 |
|
|
3,044 |
| ||
| Operating expenses: |
||||||||
| Research and development |
|
10,230 |
|
|
13,326 |
| ||
| Marketing and sales |
|
2,682 |
|
|
3,736 |
| ||
| General and administrative |
|
1,472 |
|
|
2,322 |
| ||
| Restructuring charge and asset impairments |
|
3,787 |
|
|
— |
| ||
| Purchased in-process research and development |
|
— |
|
|
2,000 |
| ||
| Total operating expenses |
|
18,171 |
|
|
21,384 |
| ||
| Operating loss |
|
(15,413 |
) |
|
(18,340 |
) | ||
| Other (expense) income: |
||||||||
| Impairment of investments in non-publicly traded companies |
|
(50 |
) |
|
— |
| ||
| Equity in net losses of affiliates |
|
(315 |
) |
|
(583 |
) | ||
| Gain from repurchase of 4.5% Convertible Notes due 2005 |
|
— |
|
|
51,976 |
| ||
| Interest (expense) income: |
||||||||
| Interest income |
|
847 |
|
|
2,342 |
| ||
| Interest expense |
|
(1,552 |
) |
|
(3,813 |
) | ||
| Interest expense, net |
|
(705 |
) |
|
(1,471 |
) | ||
| Total other (expense) income |
|
(1,070 |
) |
|
49,922 |
| ||
| (Loss) income before income taxes |
|
(16,483 |
) |
|
31,582 |
| ||
| Income tax expense |
|
69 |
|
|
12,947 |
| ||
| (Loss) income before extraordinary loss and cumulative effect of a change in accounting principle |
|
(16,552 |
) |
|
18,635 |
| ||
| Extraordinary loss upon consolidation of TeraOp (USA), Inc. |
|
(83 |
) |
|
— |
| ||
| Cumulative effect on prior years of retroactive application of new depreciation method |
|
(805 |
) |
|
— |
| ||
| Net (loss) income |
$ |
(17,440 |
) |
$ |
18,635 |
| ||
| Basic and diluted (loss) earnings per common share: |
||||||||
| (Loss) income before extraordinary loss and cumulative effect of a change in accounting principle |
$ |
(0.18 |
) |
$ |
0.21 |
| ||
| Extraordinary loss upon consolidation of TeraOp (USA), Inc. |
|
— |
|
|
— |
| ||
| Cumulative effect on prior years of retroactive application of new depreciation method |
|
(0.01 |
) |
|
— |
| ||
| Net (loss) income |
$ |
(0.19 |
) |
$ |
0.21 |
| ||
| Basic average shares outstanding |
|
90,164 |
|
|
89,947 |
| ||
| Diluted average shares outstanding |
|
90,164 |
|
|
90,599 |
| ||
| (1) | The 2002 figures have been adjusted for the effect of the change in the investment in OptiX Networks, Inc. from the cost to the equity method of accounting, which occurred in the quarter ended September 30, 2002. Also, the gain on debt extinguishment, previously classified as extraordinary, has been reclassified to continuing operations in accordance with SFAS No. 145. |
See accompanying notes to unaudited consolidated financial statements.
4
TRANSWITCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
| Three Months Ended | |||||||