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 September 30, 2004
| ¨ | 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 | 75-2658219 | |
| (State or other jurisdiction of incorporation or organization) |
(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 ¨
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 outstanding at November 5, 2004, the latest practicable date, was 46,453,192
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| SEPTEMBER 30, 2004 |
DECEMBER 31, 2003 |
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| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 44,601 | $ | 46,775 | ||||
| Accounts receivable less allowance for doubtful accounts of $1,130 and $1,346 at September 30, 2004 and December 31, 2003, respectively |
13,592 | 7,119 | ||||||
| Inventories |
17,427 | 16,419 | ||||||
| Prepaid expenses and other current assets |
1,849 | 1,578 | ||||||
| Total current assets |
77,469 | 71,891 | ||||||
| Property, plant and equipment, net |
3,962 | 5,595 | ||||||
| Intangible assets, net |
7,675 | 4,869 | ||||||
| Other assets |
481 | 87 | ||||||
| Total assets |
$ | 89,587 | $ | 82,442 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 5,771 | $ | 5,486 | ||||
| Payroll and benefit related liabilities |
2,768 | 2,636 | ||||||
| Other current liabilities |
7,348 | 4,745 | ||||||
| Total current liabilities |
15,887 | 12,867 | ||||||
| Total liabilities |
$ | 15,887 | $ | 12,867 | ||||
| Stockholders’ equity: |
||||||||
| Preferred stock, par value $.001; 5,000,000 shares authorized, none issued |
— | — | ||||||
| Common stock, par value $.001; 80,000,000 shares authorized, 46,323,634 and 44,486,373 shares issued and outstanding as of September 30, 2004 and December 31, 2003, respectively |
46 | 44 | ||||||
| Additional paid-in capital |
148,458 | 141,912 | ||||||
| Accumulated deficit |
(75,196 | ) | (72,560 | ) | ||||
| Notes receivable for common stock |
(16 | ) | (16 | ) | ||||
| Other equity adjustments |
408 | 195 | ||||||
| Total stockholders’ equity |
73,700 | 69,575 | ||||||
| Total liabilities and stockholders’ equity |
$ | 89,587 | $ | 82,442 | ||||
See accompanying Notes to Condensed Unaudited Consolidated Financial Statements
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| THREE MONTHS ENDED SEPTEMBER 30, |
NINE MONTHS ENDED SEPTEMBER 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Sales |
$ | 25,724 | $ | 18,288 | $ | 69,296 | $ | 52,988 | ||||||||
| Services |
1,455 | 2,007 | 4,426 | 5,320 | ||||||||||||
| Royalties |
— | — | — | 800 | ||||||||||||
| Total revenues |
27,179 | 20,295 | 73,722 | 59,108 | ||||||||||||
| Total cost of sales |
16,303 | 11,632 | 43,629 | 31,360 | ||||||||||||
| Gross margin |
10,876 | 8,663 | 30,093 | 27,748 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development (includes $927 of purchased in-process R&D in August 2004) |
5,009 | 3,785 | 12,469 | 14,991 | ||||||||||||
| Selling, general & administrative |
6,959 | 6,720 | 18,132 | 20,665 | ||||||||||||
| Amortization of intangible assets and deferred stock compensation |
480 | 361 | 1,165 | 1,158 | ||||||||||||
| Business restructuring charges |
1,065 | 158 | 1,334 | 1,900 | ||||||||||||
| Total operating expenses |
$ | 13,513 | $ | 11,024 | $ | 33,100 | $ | 38,714 | ||||||||
| Operating loss |
(2,637 | ) | (2,361 | ) | (3,007 | ) | (10,966 | ) | ||||||||
| Other (income) expenses: |
||||||||||||||||
| Interest, net |
(178 | ) | (150 | ) | (440 | ) | (466 | ) | ||||||||
| Other, net |
70 | (17 | ) | 69 | 124 | |||||||||||
| Loss before provision for income taxes |
(2,529 | ) | (2,194 | ) | (2,636 | ) | (10,624 | ) | ||||||||
| Net loss |
$ | (2,529 | ) | $ | (2,194 | ) | $ | (2,636 | ) | $ | (10,624 | ) | ||||
| Weighted average number of common shares outstanding |
||||||||||||||||
| Basic |
45,999 | 43,377 | 45,332 | 43,120 | ||||||||||||
| Diluted |
45,999 | 43,377 | 45,332 | 43,120 | ||||||||||||
| Loss per common share |
||||||||||||||||
| Basic |
$ | (0.05 | ) | $ | (0.05 | ) | $ | (0.06 | ) | $ | (0.25 | ) | ||||
| Diluted |
(0.05 | ) | (0.05 | ) | (0.06 | ) | (0.25 | ) | ||||||||
| Consolidated Statements of Comprehensive Loss |
||||||||||||||||
| Net loss |
(2,529 | ) | (2,194 | ) | (2,636 | ) | (10,624 | ) | ||||||||
| Translation adjustments |
163 | 18 | 105 | 323 | ||||||||||||
| Comprehensive loss |
$ | (2,366 | ) | $ | (2,176 | ) | $ | (2,531 | ) | $ | (10,301 | ) | ||||
See accompanying Notes to Condensed Unaudited Consolidated Financial Statements
2
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
| NINE MONTHS ENDED SEPTEMBER 30, |
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| 2004 |
2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | (2,636 | ) | $ | (10,624 | ) | ||
| Adjustments to reconcile net loss to cash provided by (used in) operating activities: |
||||||||
| Income from reversal of reserves due to sale of inventory |
— | (2,431 | ) | |||||
| Loss on sale of assets |
(5 | ) | 297 | |||||
| Decrease in allowance for bad debts |
(306 | ) | (643 | ) | ||||
| Depreciation and amortization |
3,716 | 5,274 | ||||||
| Purchased in-process research and development |
927 | — | ||||||
| (Increase) decrease in assets, net of effects of acquisition: |
||||||||
| Receivables |
(4,937 | ) | 4,853 | |||||
| Inventories |
1,254 | 1,723 | ||||||
| Other assets |
(349 | ) | 1,564 | |||||
| Increase (decrease) in liabilities, net of effects of acquisition: |
||||||||
| Accounts payable |
(515 | ) | (1,350 | ) | ||||
| Payroll and related liabilities |
(268 | ) | (1,282 | ) | ||||
| Other current liabilities |
1,457 | (2,619 | ) | |||||
| Net cash used in operating activities |
$ | (1,662 | ) | $ | (5,238 | ) | ||
| CASH FLOWS USED IN INVESTING ACTIVITIES: |
||||||||
| Cash used to acquire net assets |
(3,273 | ) | — | |||||
| Capital expenditures |
(471 | ) | (559 | ) | ||||
| Proceeds from sale of property, plant and equipment |
16 | 18 | ||||||
| Net cash used in investing activities |
$ | (3,728 | ) | $ | (541 | ) | ||
| CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: |
||||||||
| Net proceeds from stock transactions |
3,111 | 817 | ||||||
| Repayments under other debt obligations |
— | (359 | ) | |||||
| Net cash provided by financing activities |
3,111 | 458 | ||||||
| Effect of foreign exchange rate changes on cash |
105 | 323 | ||||||
| Net increase (decrease) in cash and cash equivalents |
(2,174 | ) | (4,998 | ) | ||||
| Cash and cash equivalents at beginning of period |
46,775 | 47,706 | ||||||
| Cash and cash equivalents at end of period |
$ | 44,601 | $ | 42,708 | ||||