UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
| EXCHANGE ACT OF 1934 |
For the quarter ended December 29, 2002 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 000-25711
EXTREME NETWORKS, INC.
(Exact name of Registrant as specified in its charter)
| Delaware |
77-0430270 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 3585 Monroe Street Santa Clara, California |
95051 | |
| (Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (408) 579-2800
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 Exchange Act).
| Yes x |
No ¨ |
The number of shares of the Registrant’s Common Stock, $.001 par value, outstanding at
February 3, 2003 was 115,967,177.
FORM 10-Q
QUARTERLY PERIOD ENDED DECEMBER 31, 2002
INDEX
| PAGE | ||
| 3 | ||
| Item 1. Condensed Consolidated Financial Statements (Unaudited): |
3 | |
| Condensed Consolidated Balance Sheets December 31, 2002 and June 30, 2002 |
3 | |
| 4 | ||
| 5 | ||
| 6 | ||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
35 | |
| 37 | ||
| 37 | ||
| Not Applicable | ||
| Not Applicable | ||
| 37 | ||
| Not Applicable | ||
| 37 | ||
| 38 | ||
| 39 |
2
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| December 31, 2002 |
June 30, 2002 |
|||||||
| (Unaudited) |
(Note 2) |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
35,477 |
|
$ |
71,830 |
| ||
| Short-term investments |
|
159,443 |
|
|
164,667 |
| ||
| Accounts receivable, net |
|
21,729 |
|
|
51,344 |
| ||
| Inventories, net |
|
28,039 |
|
|
24,627 |
| ||
| Deferred income taxes |
|
42,882 |
|
|
42,882 |
| ||
| Prepaid expenses and other current assets |
|
12,446 |
|
|
13,126 |
| ||
| Total current assets |
|
300,016 |
|
|
368,476 |
| ||
| Property and equipment, net |
|
82,282 |
|
|
99,551 |
| ||
| Marketable securities |
|
210,990 |
|
|
163,560 |
| ||
| Deferred income taxes |
|
105,817 |
|
|
90,617 |
| ||
| Other assets |
|
16,042 |
|
|
13,547 |
| ||
| TOTAL ASSETS |
$ |
715,147 |
|
$ |
735,751 |
| ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ |
22,331 |
|
$ |
29,215 |
| ||
| Accrued compensation and benefits |
|
14,001 |
|
|
12,082 |
| ||
| Restructuring liabilities |
|
5,293 |
|
|
3,525 |
| ||
| Accrued commitments |
|
4,519 |
|
|
8,063 |
| ||
| Accrued warranty |
|
10,211 |
|
|
9,055 |
| ||
| Deferred revenue |
|
43,493 |
|
|
40,772 |
| ||
| Other accrued liabilities |
|
19,522 |
|
|
23,913 |
| ||
| Total current liabilities |
|
119,370 |
|
|
126,625 |
| ||
| Long-term deposit |
|
272 |
|
|
272 |
| ||
| Restructuring liabilities, less current portion |
|
23,968 |
|
|
19,896 |
| ||
| Convertible subordinated notes |
|
200,000 |
|
|
200,000 |
| ||
| Total liabilities |
|
343,610 |
|
|
346,793 |
| ||
| Commitments and contingencies (Note 5) |
||||||||
| Stockholders’ equity: |
||||||||
| Common stock and capital in excess of par value |
|
655,572 |
|
|
653,547 |
| ||
| Deferred stock compensation |
|
(6,383 |
) |
|
(10,167 |
) | ||
| Accumulated other comprehensive income |
|
3,091 |
|
|
1,851 |
| ||
| Accumulated deficit |
|
(280,743 |
) |
|
(256,273 |
) | ||
| Total stockholders’ equity |
|
371,537 |
|
|
388,958 |
| ||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ |
715,147 |
|
$ |
735,751 |
| ||
See accompanying notes to the unaudited condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended |
Six Months Ended |
|||||||||||||||
| December 31, 2002 |
December 31, 2001 |
December 31, 2002 |
December 31, 2001 |
|||||||||||||
| Net revenue |
$ |
90,216 |
|
$ |
109,066 |
|
$ |
190,785 |
|
$ |
217,355 |
| ||||
| Costs and expenses: |
||||||||||||||||
| Cost of revenue |
|
44,926 |
|
|
51,450 |
|
|
96,425 |
|
|
134,762 |
| ||||
| Sales, marketing and service |
|
30,397 |
|
|
35,703 |
|
|
63,650 |
|
|
72,688 |
| ||||
| Research and development |
|
13,418 |
|
|
14,604 |
|
|
27,927 |
|
|
31,015 |
| ||||
| General and administrative |
|
6,729 |
|
|
5,974 |
|
|
13,664 |
|
|
14,087 |
| ||||
| Amortization of deferred stock compensation |
|
1,783 |
|
|
2,655 |
|
|
3,784 |
|
|
5,528 |
| ||||
| Amortization of goodwill |
|
— |
|
|
11,364 |
|
|
— |
|
|
22,010 |
| ||||
| Amortization of purchased intangible assets |
|
— |
|
|
1,216 |
|
|
— |
|
|
2,423 |
| ||||
| Restructuring charge |
|
14,187 |
|
|
— |
|
|
14,187 |
|
|
— |
| ||||
| Property and equipment write-off |
|
12,678 |
|
|
— |
|
|
12,678 |
|
|
— |
| ||||
| Total costs and expenses |
|
124,118 |
|
|
122,966 |
|
|
232,315 |
|
|
282,513 |
| ||||
| Operating loss |
|
(33,902 |
) |
|
(13,900 |
) |
|
(41,530 |
) |
|
(65,158 |
) | ||||
| Loss on investments |
|
— |
|
|
— |
|
|
— |
|
|
(6,000 |
) | ||||
| Other income, net |
|
990 |
|
|
1,701 |
|
|
1,870 |
|
|
4,123 |
| ||||
| Loss before income taxes |
|
(32,912 |
) |
|
(12,199 |
) |
|
(39,660 |
) |
|
(67,035 |
) | ||||
| Benefit for income taxes |
|
(13,173 |
) |
|
(1,547 |
) |
|
(15,190 |
) |
|
(20,375 |
) | ||||
| Net loss |
$ |
(19,739 |
) |
$ |
(10,652 |
) |
$ |
(24,470 |
) |
$ |
(46,660 |
) | ||||
| Net loss per share—basic and diluted |
$ |
(0.17 |
) |
$ |
(0.09 |
) |
$ |
(0.22 |
) |
$ |
(0.42 |
) | ||||