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 APRIL 26, 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 000-27273
SYCAMORE NETWORKS, INC.
(Exact name of registrant as specified in its charter)
| Delaware |
04-3410558 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
220 Mill Road Chelmsford, MA 01824
(Address of principal executive offices) (Zip code)
(978) 250-2900
(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 ¨.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x.
The number of shares outstanding of the Registrant’s Common Stock as of May 23, 2003 was 271,916,034.
Sycamore Networks, Inc.
Part I. Financial Information
| Page No. | ||||
| Item 1. Financial Statements (Unaudited) |
||||
| Consolidated Balance Sheets as of April 26, 2003 and July 31, 2002 |
3 | |||
| 4 | ||||
| Consolidated Statements of Cash Flows for the nine months ended April 26, 2003 and April 27, 2002 |
5 | |||
| 6 | ||||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 | |||
| Item 3. Quantitative and Qualitative Disclosure About Market Risk |
37 | |||
| 37 | ||||
| 38 | ||||
| 38 | ||||
| 39 | ||||
| 40 | ||||
| 41 | ||||
| 43 | ||||
2
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
(in thousands, except par value)
(unaudited)
| April 26, 2003 |
July 31, 2002 |
|||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
237,444 |
|
$ |
172,658 |
| ||
| Short-term investments |
|
320,762 |
|
|
509,350 |
| ||
| Accounts receivable, net of allowance for doubtful accounts of $4,684 at April 26, 2003 and July 31, 2002 |
|
11,275 |
|
|
18,187 |
| ||
| Inventories |
|
6,928 |
|
|
12,940 |
| ||
| Prepaids and other current assets |
|
4,567 |
|
|
3,447 |
| ||
| Total current assets |
|
580,976 |
|
|
716,582 |
| ||
| Property and equipment, net |
|
17,025 |
|
|
32,696 |
| ||
| Long-term investments |
|
446,791 |
|
|
361,537 |
| ||
| Other assets |
|
3,331 |
|
|
7,760 |
| ||
| Total assets |
$ |
1,048,123 |
|
$ |
1,118,575 |
| ||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ |
3,172 |
|
$ |
6,104 |
| ||
| Accrued compensation |
|
2,512 |
|
|
3,896 |
| ||
| Accrued warranty |
|
4,864 |
|
|
5,499 |
| ||
| Accrued expenses |
|
4,478 |
|
|
7,649 |
| ||
| Accrued restructuring costs |
|
24,905 |
|
|
48,167 |
| ||
| Deferred revenue |
|
3,988 |
|
|
4,978 |
| ||
| Other current liabilities |
|
3,114 |
|
|
3,759 |
| ||
| Total current liabilities |
|
47,033 |
|
|
80,052 |
| ||
| Stockholders’ equity: |
||||||||
| Preferred stock, $.01 par value, 5,000 shares authorized; none issued or outstanding |
|
— |
|
|
— |
| ||
| Common stock, $.001 par value; 2,500,000 shares authorized; 271,606 and 273,681 shares issued at April 26, 2003 and July 31, 2002, respectively |
|
272 |
|
|
274 |
| ||
| Additional paid-in capital |
|
1,733,768 |
|
|
1,732,846 |
| ||
| Accumulated deficit |
|
(726,459 |
) |
|
(681,086 |
) | ||
| Deferred compensation |
|
(10,608 |
) |
|
(17,910 |
) | ||
| Treasury stock, at cost, 150 and 1,933 shares held at April 26, 2003 and July 31, 2002, respectively |
|
(9 |
) |
|
(158 |
) | ||
| Accumulated other comprehensive income |
|
4,126 |
|
|
4,557 |
| ||
| Total stockholders’ equity |
|
1,001,090 |
|
|
1,038,523 |
| ||
| Total liabilities and stockholders’ equity |
$ |
1,048,123 |
|
$ |
1,118,575 |
| ||
The accompanying notes are an integral part of the consolidated financial statements.
3
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| April 26, 2003 |
April 27, 2002 |
April 26, 2003 |
April 27, 2002 |
|||||||||||||
| Revenue: |
||||||||||||||||
| Product |
$ |
7,696 |
|
$ |
6,929 |
|
$ |
17,997 |
|
$ |
39,826 |
| ||||
| Service |
|
2,905 |
|
|
6,653 |
|
|
9,367 |
|
|
16,799 |
| ||||
| Total revenue |
|
10,601 |
|
|
13,582 |
|
|
27,364 |
|
|
56,625 |
| ||||
| Cost of revenue: |
||||||||||||||||
| Product (exclusive of non-cash stock-based compensation expense of $170, $220, $508 and $727) |
|
6,071 |
|
|
(2,587 |
) |
|
16,786 |
|
|
124,221 |
| ||||
| Service (exclusive of non-cash stock-based compensation expense of $171, $220, $546 and $666) |
|
2,631 |
|
|
5,639 |
|
|
9,646 |
|
|
20,848 |
| ||||
| Stock-based compensation |
|
341 |
|
|
440 |
|
|
1,054 |
|
|
1,393 |
| ||||
| Total cost of revenue |
|
9,043 |
|
|
3,492 |
|
|
27,486 |
|
|
146,462 |
| ||||
| Gross profit (loss) |
|
1,558 |
|
|
10,090 |
|
|
(122 |
) |
|
(89,837 |
) | ||||
| Operating expenses: |
||||||||||||||||
| Research and development (exclusive of non-cash stock-based compensation expense of $844, $2,395, $2,562 and $7,460) |
|
12,679 |
|
|
25,541 |
|
|
40,038 |
|
|
88,041 |
| ||||
| Sales and marketing (exclusive of non-cash stock-based compensation expense of $425, $2,205, $1,553 and $8,771) |
|
4,884 |
|
|
8,870 |
|
|
14,896 |
|
|
33,953 |
| ||||
| General and administrative (exclusive of non-cash stock-based compensation expense of $387, $501, $1,305 and $1,778) |
|
1,852 |
|
|
2,186 |
|
|
5,261 |
|
|
7,990 |
| ||||
| Stock-based compensation |
|
1,656 |
|
|
5,101 |
|
|
5,420 |
|
|
18,009 |
| ||||
| Restructuring charges and related asset impairments |
|
(2,193 |
) |
|
— |
|
|
(2,193 |
) |
|
77,306 |
| ||||
| Total operating expenses |
|
18,878 |
|
|
41,698 |
|
|
63,422 |
|
|
225,299 |
| ||||
| Loss from operations |
|
(17,320 |
) |
|
(31,608 |
) |
|
(63,544 |
) |
|
(315,136 |
) | ||||
| Losses on investments |
|
— |
|
|
— |
|
|
— |
|
|
(22,737 |
) | ||||
| Interest and other income, net |
|
5,426 |
|
|
8,765 |
|
|
18,171 |
|
|
31,746 |
| ||||
| Loss before income taxes |
|
(11,894 |
) |
|
(22,843 |
) |
|
(45,373 |
) |
|
(306,127 |
) | ||||
| Provision for income taxes |
|
— |
|
|
— |
|
|
— |
|
|
— |
| ||||
| Net loss |
$ |
(11,894 |
) |
$ |
(22,843 |
) |
$ |
(45,373 |
||||||||