UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 2, 2004
Commission file number: 000-28562
VERILINK CORPORATION
(Exact name of registrant as specified in its charter)
|
Delaware |
|
94-2857548 |
|
(State of incorporation) |
|
(I.R.S. Employer Identification No.) |
127 Jetplex Circle, Madison, Alabama 35758
(Address of principal executive offices, including zip code)
(256) 327-2001
(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 outstanding of the issuer’s common stock as of January 30, 2004 was 14,758,133.
INDEX
VERILINK CORPORATION
FORM 10-Q
|
|
|
Page |
|
|
|
|
|
PART I. |
|
|
|
|
|
|
|
Item 1. |
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
Condensed Consolidated Balance Sheets as of January 2, 2004 and June 27, 2003 |
4 |
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
11 |
|
|
|
|
|
Item 3. |
17 |
|
|
|
|
|
|
Item 4. |
17 |
|
|
|
|
|
|
PART II. |
|
|
|
|
|
|
|
Item 4. |
17 |
|
|
|
|
|
|
Item 6. |
18 |
|
|
|
|
|
|
|
19 |
2
VERILINK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
|
|
|
Three months ended |
|
Six months ended |
|
||||||||
|
|
|
|
|
|
|
||||||||
|
|
|
January 2, 2004 |
|
December 27, 2002 |
|
January 2, 2004 |
|
December 27, 2002 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
9,089 |
|
$ |
6,145 |
|
$ |
18,684 |
|
$ |
14,858 |
|
|
Cost of sales |
|
|
4,888 |
|
|
2,953 |
|
|
9,359 |
|
|
7,151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
4,201 |
|
|
3,192 |
|
|
9,325 |
|
|
7,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
1,448 |
|
|
706 |
|
|
2,832 |
|
|
1,554 |
|
|
Selling, general and administrative |
|
|
2,690 |
|
|
1,956 |
|
|
4,936 |
|
|
4,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
4,138 |
|
|
2,662 |
|
|
7,768 |
|
|
5,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
63 |
|
|
530 |
|
|
1,557 |
|
|
1,964 |
|
|
Interest and other income, net |
|
|
236 |
|
|
122 |
|
|
416 |
|
|
224 |
|
|
Interest expense |
|
|
(35 |
) |
|
(47 |
) |
|
(73 |
) |
|
(100 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes |
|
|
264 |
|
|
605 |
|
|
1,900 |
|
|
2,088 |
|
|
Provision for income taxes |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before cumulative change in accounting principle, relating to goodwill |
|
|
264 |
|
|
605 |
|
|
1,900 |
|
|
2,088 |
|
|
Cumulative effect of change in accounting principle, relating to goodwill |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,233 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
264 |
|
$ |
605 |
|
$ |
1,900 |
|
$ |
855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before cumulative change in accounting principle, relating to goodwill |
|
$ |
0.02 |
|
$ |
0.04 |
|
$ |
0.13 |
|
$ |
0.14 |
|
|
Less: Cumulative effect of change in accounting principle, relating to goodwill |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.08 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.02 |
|
$ |
0.04 |
|
$ |
0.13 |
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before cumulative change in accounting principle, relating to goodwill |
|
$ |
0.02 |
|
$ |
0.04 |
|
$ |
0.12 |
|
$ |
0.14 |
|
|
Less: Cumulative effect of change in accounting principle, relating to goodwill |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.08 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.02 |
|
$ |
0.04 |
|
$ |
0.12 |
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
14,768 |
|
|
14,966 |
|
|
14,751 |
|
|
14,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
16,385 |
|
|
15,378 |
|
|
16,193 |
|
|
15,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
VERILINK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)
|
|
|
January 2, |
|
June 27, |
|
||
|
|
|
|
|
|
|
||
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
10,445 |
|
$ |
8,503 |
|
|
Short-term investments |
|
|
127 |
|
|
101 |
|
|
Accounts receivable, net |
|
|
3,719 |
|
|
3,621 |
|
|
Inventories, net |
|
|
3,690 |
|
|
2,296 |
|
|
Other current assets |
|
|
330 |
|
|
319 |
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
18,311 |
|
|
14,840 |
|
|
Property held for lease, net |
|
|
6,365 |
|
|
6,462 |
|
|
Property, plant and equipment, net |
|
|
1,389 |
|
|
1,350 |
|
|
Restricted cash |
|
|
1,000 |
|
|
1,000 |
|
|
Other intangible assets, net |
|
|
2,563 |
|
|
2,132 |
|
|
Other assets |
|
|
448 |
|
|
525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
30,076 |
|
$ |
26,309 |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Current portion of long-term debt and capital lease obligations |
|
$ |
733 |
|
$ |
730 |
|
|
Accounts payable |
|
|
2,390 |
|
|
1,558 |
|
|
Accrued expenses |
|
|
4,635 |
|
|
4,373 |
|
|
Accrued purchase consideration |
|
|
1,853 |
|
|
1,800 |
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
9,611 |
|
|
8,461 |
|
|
Long-term debt and capital lease obligations |
|
|
3,381 |
|
|
3,749 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
12,992 |
|
|
12,210 |
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Preferred Stock, $0.01 par value, 1,000,000 shares authorized; no shares issued and outstanding |
|
|
— |
|
|
— |
|
|
Common Stock, $0.01 par value; 40,000,000 shares authorized; 14,728,974 and 14,670,525 shares outstanding |
|
|
147 |
|
|
147 |
|
|
Additional paid-in capital |
|
|
49,845 |
|
|
51,100 |
|
|
Note receivable from stockholder |
|
|
— |
|
|
(2,375 |
) |
|
Deferred compensation related to stock options |
|
|
(33 |
) |
|
— |
|
|
Accumulated other comprehensive loss |
|
|
(34 |
) |
|
(32 |
) |
|
Accumulated deficit |
|
|
(32,841 |
) |
|
(34,741 |
) |
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity |
|
|
17,084 |
|
|
14,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
30,076 |
|
$ |
26,309 |
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
VERILINK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
|
|
Six Months Ended |
|
||||
|
|
|
|
|
||||
|
|
|
January 2, |
|
December 27, |
|
||
|
|
|
|
|
|
|
||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,900 |
|
$ |
855 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
922 |
|
|
562 |
|
|
Amortization of deferred compensation |
|
|
39 |
|
|
— |
|
|
Accrued interest on note receivable from stockholder, net of reserve |
|
|
(193 |
) |
|
(88 |
) |
|
Loss on retirement of property, plant and equipment |
|
|
6 |
|
|
— |
|
|
Cumulative effect of change in accounting principle, relating to goodwill |
|
|
— |
|
|
1,233 |
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
(98 |
) |
|
2,466 |
|
|
Inventories, net |
|
|
(1,394 |
) |
|
(627 |
) |