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
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File No. 000-26485
Paradyne Networks, Inc.
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) |
75-2658219 (IRS Employer Identification No.) |
8545 126th Avenue North
Largo, Florida 33773
(Address of principal executive offices, zip code)
(727) 530-2000
(Registrant’s telephone number,
including area code)
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 o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
The number of shares of the registrant’s common stock outstanding at April 30, 2003, the latest practicable date, was 42,862,443.
INDEX
| PART I |
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FINANCIAL INFORMATION |
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Item 1. |
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Financial Statements |
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Condensed Unaudited Consolidated Balance Sheets at March 31, 2003 and December 31, 2002 |
1 |
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Condensed Unaudited Consolidated Statements of Operations for the Three Months Ended March 31, 2003 and March 31, 2002 |
2 |
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Condensed Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and March 31, 2002 |
3 |
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Notes to Condensed Unaudited Consolidated Financial Statements |
4 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
9 |
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Item 3. |
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13 | |
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Item 4. |
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14 | |
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| PART II |
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OTHER INFORMATION |
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Item 1. |
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14 | |
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Item 2. |
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15 | |
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Item 6. |
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15 | |
| 16 | |
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| 17 |
ITEM 1.
FINANCIAL STATEMENTS
PARADYNE NETWORKS, INC.
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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MARCH 31, |
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DECEMBER 31, |
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| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
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$ |
46,540 |
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$ |
47,706 |
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| Accounts receivable less allowance for doubtful accounts of $1,959 and $2,227 at March 31, 2003 and December 31, 2002, respectively |
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9,033 |
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13,072 |
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| Inventories |
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15,997 |
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16,661 |
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| Prepaid expenses and other current assets |
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1,854 |
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2,896 |
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| Total current assets |
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73,424 |
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80,335 |
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| Property, plant and equipment, net |
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9,039 |
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10,396 |
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| Intangible assets, net |
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5,786 |
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6,092 |
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| Other assets |
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412 |
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433 |
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| Total assets |
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$ |
88,661 |
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$ |
97,256 |
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| LIABILITIES AND STOCKHOLDERS’ EQUITY |
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| Current liabilities: |
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| Accounts payable |
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$ |
4,425 |
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$ |
6,333 |
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| Current portion of debt |
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230 |
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396 |
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| Payroll and benefit related liabilities |
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2,195 |
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3,445 |
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| Other current liabilities |
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7,020 |
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9,087 |
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| Total current liabilities |
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13,870 |
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19,261 |
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| Total liabilities |
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$ |
13,870 |
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$ |
19,261 |
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| Commitments and contingencies (See Note 8) |
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| Stockholders’ equity: |
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| Preferred stock, par value $.001; 5,000,000 shares authorized, none issued or outstanding |
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— |
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— |
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| Common stock, par value $.001; 80,000,000 shares authorized, 42,862,443 and 42,862,443 shares issued and outstanding as of March 31, 2003 and December 31, 2002, respectively |
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43 |
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43 |
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| Additional paid-in capital |
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139,506 |
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139,482 |
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| Accumulated deficit |
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(64,018 |
) |
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(60,530 |
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| Notes receivable for common stock |
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(114 |
) |
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(114 |
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| Other equity adjustments |
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(626 |
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(886 |
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| Total stockholders’ equity |
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74,791 |
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77,995 |
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| Total liabilities and stockholders’ equity |
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$ |
88,661 |
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$ |
97,256 |
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See accompanying Notes to Condensed Unaudited Consolidated Financial Statements
1
PARADYNE NETWORKS, INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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THREE MONTHS ENDED |
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2003 |
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2002 |
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| Revenues: |
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| Sales |
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$ |
17,734 |
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$ |
37,023 |
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| Services |
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1,564 |
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1,029 |
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| Royalties |
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— |
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506 |
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| Total revenues |
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19,298 |
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38,558 |
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| Total cost of sales |
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9,565 |
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21,369 |
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| Gross margin |
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9,733 |
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17,189 |
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| Operating expenses: |
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| Research and development (includes $2,830 of purchased in process R&D in March 2002) |
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5,609 |
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8,144 |
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| Selling, general & administrative |
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7,250 |
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7,872 |
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| Amortization of intangible assets and deferred stock compensation |
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423 |
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187 |
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| Business restructuring charges |
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— |
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1,011 |
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| Total operating expenses |
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$ |
13,282 |
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$ |
17,214 |
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| Operating loss |
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(3,549 |
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(25 |
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| Other (income) expenses: |
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| Interest, net |
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(154 |
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(150 |
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| Other, net |
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93 |
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61 |
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| Income (loss) before provision for income taxes |
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(3,488 |
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64 |
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| Benefit for income taxes |
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— |
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(859 |
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| Net income (loss) |
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$ |
(3,488 |
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$ |
923 |
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| Weighted average number of common shares outstanding |
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| Basic |
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42,862 |
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36,159 |
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| Diluted |
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42,862 |
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39,696 |
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| Earnings (loss) per common share |
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| Basic |
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$ |
(0.08 |
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$ |
0.03 |
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| Diluted |
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(0.08 |
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0.02 |
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| Consolidated Statements of Comprehensive Income (Loss) |
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| Net income (loss) |
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(3,488 |
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923 |
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| Translation adjustments |
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143 |
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22 |
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| Comprehensive income (loss) |
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$ |
(3,345 |
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$ |
945 |
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See accompanying Notes to Condensed Unaudited Consolidated Financial Statements
2
PARADYNE NETWORKS, INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
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THREE MONTHS ENDED |
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2003 |
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2002 |
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| CASH FLOWS FROM OPERATING ACTIVITIES: |
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| Net income (loss) |
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$ |
(3,488 |
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$ |
923 |
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| Adjustments to reconcile net loss to cash provided by (used in) operating activities: |
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| Reserve for (income from reversal of) inventory |
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(762 |
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(1,236 |
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| Loss on sale of assets |
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— |
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166 |
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| Decrease in allowance for bad debts |
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(268 |
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(30 |
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| Depreciation and amortization |
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1,959 |
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1,847 |
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| Purchased in-process research and development |
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— |
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2,830 |
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| Decrease in assets, net of effects of acquisition: |
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| Receivables |
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4,307 |
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797 |
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| Restricted cash committed for inventory purchases |
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— |
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5,067 |
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| Inventories |
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1,426 |
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4,266 |
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| Other assets |
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1,063 |
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8 |
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| Increase (decrease) in liabilities, net of effects of acquisition: |
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| Accounts payable |
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(1,908 |
) |
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(6,986 |
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| Payroll and related liabilities |
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(1,250 |
) |
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(4,336 |
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| Other current liabilities |
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(2,067 |
) |
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71 |
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| Net cash (used in) provided by operating activities |
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$ |
(988 |
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$ |
3,387 |
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| CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: |
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| Cash acquired in business acquisition, net of transaction costs |
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— |
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8,814 |
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