ATLANTA, Aug. 4 /PRNewswire/ --
Preferred Networks, Inc. (OTC Bulletin Board: PFNT) (PNI), a developer and
supplier of advanced communications networking products and a leading provider
of network services to the wireless industry, today reported its financial
results for the three and six months ended June 30, 2000.
PNI achieved a number of milestones during the second quarter, including
beginning shipments of its Platform1(TM) modular switch product and its iLink
TNPP Internet router product. Revenues associated with the shipments of
networking products in the second quarter were $189,000, up 172.6% from
$69,000 in the first quarter of 2000.
Total revenues were $3.8 million and $7.6 million for the three and six
months ended June 30, 2000, respectively, compared to $4.3 million and
$9.2 million, for the prior year periods, respectively. As PNI reported in
its year-end and first quarter results, the decrease in total revenues
resulted primarily from lower pager sales to network services customers.
PNI's airtime revenues were also affected by reduced pager purchases, because
many reseller customers rely on PNI for pager supply in order to add network
service units, and by industry trends of increased competition for reseller
service units and declining ARPU. However, PNI is experiencing growth in the
sales of its new networking products and continued reductions in operating
costs, which offset the revenue reduction in its network service business for
an overall bottom line improvement.
Total operating expenses decreased to $1.6 million and $3.2 million for
the three and six months ended June 30, 2000, respectively, compared to
$2.4 million and $5.0 million for prior year periods, respectively. The
decrease in total expenses is due to lower pager sales and lower selling,
general and administrative expenses resulting from continued efforts by PNI to
gain greater operating efficiencies.
Net loss from continuing operations before income tax benefit improved by
$858,000 or 32.0% to $1.8 million for the three months ended June 30, 2000,
compared to $2.7 million for the three months ended June 30, 1999. Net loss
from continuing operations before cumulative effect of change in accounting
principle and before income tax benefit improved by $1.9 million or 33.0% to
$3.8 million for the six months ended June 30, 2000, compared to $5.7 million
for the six months ended June 30, 1999. The cumulative effect of change in
accounting principle for the six months ended June 30, 1999 resulted from the
write-off of market start-up costs as required by SOP 98-5 was $1.8 million.
The net loss attributable to Common Stock was $ 2.7 million and
$5.6 million for the three and six months ended June 30, 2000, respectively,
compared to $2.7 million and $8.4 million for the prior year periods,
respectively. The net loss attributable to Common Stock for 2000 decreased
due to decreased operating losses and the cumulative effect of adopting the
new accounting principle for market entry costs in January 1999.
Mark Dunaway, CEO of PNI, said, "This was a very exciting quarter for PNI.
We made the commitment that we would begin to ship our Platform1(TM)
high-speed, intelligent switch product during the second quarter and I am
pleased that in addition to meeting this commitment, we also introduced a new
networking product, the iLink TNPP Internet router. We are receiving
additional orders for all of our new products, and we expect our future
shipments to continue to increase significantly." Dunaway added, "While our
traditional network services business has continued to experience market
pressure, particularly in the area of pager sales, we are pleased that growth
in our networking products business and continued operating cost reductions
are resulting in overall improvements in our bottom line performance. Our
stronger financial condition this year compared to 1999 has enabled us to
implement certain marketing initiatives to strengthen our traditional network
service business, which we feel confident will have a positive impact on the
future of this part of our business."
About PNI:
PNI is a developer and supplier of advanced networking hardware and
software products for companies that operate in the wireless, fixed network
and Internet marketplaces. These products provide companies with greater
processing efficiencies, cost savings, and an open platform to bring them
closer to their customers through unified service offerings. PNI also owns
and operates one-way wireless messaging networks in the Eastern United States
and provides unbranded, wholesale network services to companies. PNI's
address on the World Wide Web is: http://www.pniaccess.com .
Safe Harbor Statement:
Safe Harbor Statement Under the Private Securities Litigation Reform Act
of 1995: The statements contained in this release which are not historical
facts, are forward-looking statements that are subject to risks and
uncertainties, including those identified in PNI's 1999 Annual Report on Form
10-K, and actual results could differ materially from those anticipated in the
forwarding-looking statements. Certain information included in this release
contains statements that are or will be forward-looking. Such forward-looking
information involves important risks and uncertainties that could
significantly effect anticipated results in the future and, accordingly, such
results may differ from those expressed in any forward-looking statements made
by or on behalf of PNI. These risks and uncertainties include, but are not
limited to, risks related to technological change in the wireless industries;
risks associated with PNI's efforts to commercialize and market successfully
its networking products, such as the Platform1(TM) and iTerminal(TM) products;
the relatively unproven nature of PNI's networking products, which represent a
new product line for PNI; and challenges to PNI's technologies (such as
challenges to the validity of patents on PNI's switching technology). PNI
operates in a highly competitive marketplace and new product developments by
competitors can occur at any time, thereby diminishing the attractiveness of
PNI's products.
Summary Financial Information
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Revenues
Network services $2,712,071 $3,365,419 $5,648,672 $6,671,573
Pager sales 791,190 852,806 1,610,025 2,442,641
Networking products 189,409 -- 258,900 --
Other services 66,907 48,871 104,665 102,719
Total revenues 3,759,577 4,267,096 7,622,262 9,216,933
Costs of revenues
Network services 1,839,401 2,019,139 3,818,421 4,144,502
Pager sales 664,350 819,965 1,383,972 2,327,803
Networking products 112,070 -- 209,528 --
Other services 133 1,196 1,252 3,763
Total costs of
revenues 2,615,954 2,840,300 5,413,173 6,476,068
Gross margin 1,143,623 1,426,796 2,209,089 2,740,865
Selling, general and
administrative
expenses 1,616,159 2,424,849 3,218,105 5,046,616
Depreciation and
amortization 1,261,599 1,135,816 2,561,501 2,362,100
Operating loss (1,734,135) (2,133,869) (3,570,517) (4,667,851)
Interest expense (162,333) (489,856) (325,506) (973,606)
Interest income 75,111 19,166 101,128 56,327
Gain/(loss) on asset
disposal -- (74,520) -- (74,520)
Loss from continuing
operations before income taxes
and cumulative effect of
change in accounting
principle (1,821,357) (2,679,079) (3,794,895) (5,659,650)
Income tax benefit -- 280,000 -- 280,000
Net loss from continuing
operations before cumulative
effect of change in
accounting
principle (1,821,357) (2,399,079) (3,794,895) (5,379,650)
Discontinued operations(1):
Net income from
discontinued operations,
net of income tax -- (45,491) -- (105,333)
Gain on sale of PTS,
net of income tax -- 644,922 -- 644,922
Net income from
discontinued operations -- 599,431 -- 539,589
Cumulative effect of change
in accounting principle(2) -- -- -- (1,832,398)
Net loss (1,821,357) (1,799,648) (3,794,895) (6,672,459)
Accretion of Redeemable
Preferred Stock (155,653) (155,632) (311,284) (311,283)
Redeemable Preferred Stock
dividend requirements (719,989) (715,083) (1,444,717) (1,390,083)
Net loss attributable
to Common Stock $(2,696,999) (2,670,363) $(5,550,896) $(8,373,825)
Net income (loss) per
share of Common Stock from:
Continuing operations
before cumulative effect
of change in accounting
principle (.16) (.20) (.34) (.43)
Discontinued operations,
net of income tax -- .04 -- .03
Cumulative effect of change
in accounting principle -- -- -- (.11)
Net loss per share
of Common Stock (.16) (.16) (.34) (.51)
Weighted average number
of common shares used in
calculating net loss
per share of
Common Stock 16,544,417 16,304,639 16,472,917 16,287,665
Summary Balance Sheet Data
June 30, 2000 December 31, 1999
Cash $3,802,999 $5,489,898
Total assets 34,294,377 39,142,754
Total debt 5,608,104 6,068,587
Redeemable Preferred Stock 29,186,588 27,430,576
Stockholders' equity (3,125,362) 2,100,944
Notes to Summary Financial Data
(1) On May 28, 1999, PNI sold substantially all of the assets of its
wholly-owned subsidiary, Preferred Technical Services, a provider of
wireless network equipment installation, maintenance and engineering
services. On December 10, 1999, PNI sold its wholly-owned subsidiary
EPS Wireless, Inc., a provider of paging and cellular product repair
services, sales of new, used, and refurbished paging and cellular
products and inventory management services. Operating results for
these subsidiaries for 1999 have been reclassified and reported as
discontinued operations in accordance with Accounting Principles Board
Opinion No. 30.
(2) Effective January 1, 1999, PNI adopted the Accounting Standards
Executive Committee issued Statement of Position 98-5, which required
it to write-off any previously capitalized start-up or organizational
costs, to be reported as a cumulative effect of a change in accounting
principle. PNI wrote off the unamortized amount of its market entry
costs in the amount of $1,832,398.
SOURCE Preferred Networks, Inc.
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Related links:
http://www.pni.net
Company News On-Call:
http://www.prnewswire.com/comp/109794.html or fax,
800-758-5804, ext. 109794
CONTACT:
Kathryn Loev Putnam, Senior Vice President
and Chief Financial Officer of Preferred Networks, Inc.,
770-582-3507
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