-- Net sales of $12.7 million
-- Fourth quarter guidance of $12 million to $16 million
net sales
SAN JOSE, Calif., Oct. 26 /PRNewswire-FirstCall/ -- Sunrise Telecom
Incorporated (Nasdaq: SRTI), a leading provider of service verification
equipment for the telecommunications and cable broadband industries, today
announced that revenue for the third quarter of 2004 was $12.7 million, up 3%
from year-ago third quarter revenue of $12.3 million and down 15% from the
prior quarter revenue of $15.0 million.
GAAP net loss was $(2.2) million, or $(0.04) per share, for the third
quarter of 2004, compared with a GAAP net loss of $(1.3) million, or $(0.03)
per share, for the third quarter of 2003 and GAAP net income of $0.8 million,
or $0.02 per share, for the second quarter of 2004. Excluding amortization of
acquisition-related intangible assets and stock-based compensation expense,
both of which are non-cash expenses, non-GAAP net loss was $(1.8) million, or
$(0.03) per share, compared with a non-GAAP net loss of $(0.5) million, or
$(0.01) per share, in the third quarter of 2003 and non-GAAP net income of
$1.2 million, or $0.02 per share, in the second quarter of 2004. Refer to the
"Reconciliation of Non-GAAP Adjustments" in the financial tables section of
this release for a detailed presentation of the differences between GAAP and
non-GAAP financial measures.
Sunrise Telecom President and CEO, Paul Chang, said, "Our third quarter
operating results are in the guidance range we provided last quarter. The
sequential decline in revenues primarily reflects the timing of several large
orders that were received later in the quarter than originally anticipated.
The receipt of these orders late in the quarter pushed shipments and
associated revenue recognition into the fourth quarter. Our backlog carried
into the fourth quarter includes a large Italian order for a 3G wireless
monitoring system and an order for a high-end spectrum analyzer for cable
broadband networks with a first-tier North American operator."
Financial Results Summary
(In thousands, except per share and percentage data, unaudited)
For the For the
Three Months Ended Nine Months Ended
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2004 2004 2003 2004 2003
GAAP Financial Results:
Net sales $12,725 $15,004 $12,338 $41,530 $34,505
Income (loss)
from operations $(2,042) $576 $(2,026) $(1,286) $(10,042)
Net income (loss) $(2,155) $813 $(1,276) $(8,628) $(5,844)
EPS $(0.04) $0.02 $(0.03) $(0.17) $(0.12)
Shares used
in computation 50,504 51,265 49,819 50,365 49,665
Gross profit percentage 68.5% 74.3% 63.9% 71.6% 62.4%
Non-GAAP Financial Results:
Income (loss)
from operations $(1,387) $1,289 $(798) $1,071 $(6,043)
Net income (loss) $(1,762) $1,241 $(527) $135 $(3,405)
EPS $(0.03) $0.02 $(0.01) $0.00 $(0.07)
Shares used
in computation 50,504 51,265 49,819 51,284 49,665
Backlog,
at end of quarter $5,727 $4,789 $7,471
Refer to the "Reconciliation of GAAP to Non-GAAP Financial Measures" in
the financial tables section of this release for a reconciliation of the
non-GAAP financial measures to the most comparable GAAP financial measures.
Products
Said Paul Chang, "This quarter we saw strong interest for our products in
the key growth areas for testing equipment, including FTTx, metro build-outs,
and deployment of converged services over IP. Sunrise has advanced testing
solutions designed to offer unique advantages for each of these areas."
In the third quarter, the cable broadband group was the main beneficiary
of the converged services roll-out by carriers. For example, the CM1000
product family, which has historically targeted installation and field testing
needs of cable operators, started to gain traction with Sunrise's telecom
customers who are introducing video transmission capabilities. Also, during
the third quarter, Sunrise added advanced VoIP testing features to the CM1000,
resulting in a strong stream of revenue-producing shipments to MSOs starting
initial deployment of VoIP services.
Another strong performer this quarter was Sunrise's protocol analyzer for
next generation VoIP networks, NeTracker. Service providers were ordering
NeTracker for their labs where they conduct pre-deployment validation of VoIP
networking equipment, as well as for their central offices for post-deployment
network monitoring.
Continued Paul Chang, "This month's FCC ruling that fiber-optic networks
will not be subject to network-sharing rules is expected to further accelerate
FTTx build-outs and deployment of triple play services over IP. The strong
traction of our products in these growth areas is offsetting the limited
expansion prospects in our legacy wireline access business and the maturation
of the market for DSL field testing. Over time we expect the sales of our
strategic solutions to increase as a percentage of our total revenues."
New Product Introductions
During the quarter, Sunrise Telecom introduced the following new products:
-- The Micro OTDR Module on the SunSet MTT Platform -- field testing
solution for service providers deploying FTTx and next generation metro
services
-- The Optical Channel Monitor Module on the SunSet MTT Platform -- field
testing tool for metro services installation
-- Physical layer troubleshooting features on the SunSet SDH platform
Third Quarter Financial Highlights
In the third quarter of 2004, Sunrise Telecom recorded gross profit of 69%
of sales. Gross profit was 74% and 64% of sales for the second quarter of
2004 and the third quarter of 2003, respectively. Gross profit in the second
quarter of 2004 included a one-time benefit of $600,000 related to the sale of
inventory which was previously reserved. Sunrise Telecom Acting CFO, Paul
Marshall, said, "We do not expect sales of previously reserved inventory to be
a regular occurrence, and it did not recur during the third quarter. Had we
not benefited from the sale of reserved inventory in the second quarter, our
gross profit percentage would have been about 70% of sales in the second
quarter of 2004. Relative to the third quarter of 2003, our gross profit
percentage has increased due to lower inventory obsolescence."
GAAP loss from operations was $(2.0) million in the third quarter of 2004,
compared with GAAP income from operations of $0.6 million in the second
quarter of 2004 and a GAAP loss from operations of $(2.0) million in the third
quarter of 2003. The loss from operations was attributable mainly to lower
quarterly revenues.
Outlook
Paul Marshall, Sunrise Telecom Acting CFO, said, "Regarding our outlook,
we expect sales of $12 to $16 million during the fourth quarter driven by
strength in our protocol and cable broadband products. Next year we expect
our strategic product offerings to gain additional traction with the various
network change initiatives, resulting in substantial new revenue streams for
us."
Conference Call
Sunrise Telecom will host a conference call today at 1:15 p.m. Pacific
Time (4:15 p.m. Eastern Time), during which Paul Chang, President and Chief
Executive Officer, and Paul Marshall, Acting Chief Financial Officer, will
further discuss these results and Sunrise Telecom's outlook. To listen to the
call, please dial (800) 915-4836 at least five minutes prior to the start.
This call can also be accessed via Web cast at the Investors/Governance
section of the company's Web site at http://www.sunrisetelecom.com. A Web replay
will also be available for at least two weeks at this same Web address.
About Sunrise Telecom Incorporated
Sunrise Telecom Incorporated manufactures and markets service verification
equipment to pre-qualify, verify, and diagnose telecommunications, cable
broadband and Internet networks. Sunrise Telecom's products offer broad
functionality, leading-edge technology, and compact size to test a variety of
new broadband services. These services include wireline access (including
DSL), fiber optics, cable broadband, cable modem, and signaling networks.
Sunrise Telecom's products are designed to maximize technicians' effectiveness
in the field and to provide realistic network simulations for equipment
manufacturers to test their products. Sunrise Telecom was founded in 1991 and
is based in San Jose, California. Sunrise Telecom distributes its products
throughout six continents through a network of sales representatives,
distributors and a direct sales force. For more information, visit Sunrise
Telecom's Web site at http://www.sunrisetelecom.com.
NOTE: Sunrise Telecom is a registered trademark of Sunrise Telecom
Incorporated. All other trademarks mentioned in this document are the
property of their respective owners.
Forward-Looking Statements
This press release contains forward-looking statements, including sales
estimates for the fourth quarter of 2004, within the meaning of Section 21 E
of the Securities Exchange Act of 1934, as amended. These forward-looking
statements are made pursuant to safe harbor provisions and are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those projected. Specific factors that may cause results to
differ include the following: a lack of acceptance or slower than anticipated
acceptance for Sunrise Telecom's new or enhanced products and modules; slower
than anticipated product development or introduction into the marketplace;
unanticipated delays in product delivery schedules; lower than anticipated
end-user demand for telecommunications services and a corresponding cutback in
spending by customers; increased competitive pressures; rapid technological
change within the telecommunications industry; Sunrise Telecom's dependence on
a limited number of major customers; Sunrise Telecom's dependence on limited
source suppliers; deferred or lost sales resulting from order cancellations or
order changes; deferred or lost sales resulting from Sunrise Telecom's lengthy
sales cycle; unanticipated difficulties associated with international
operations; Sunrise Telecom's ability to manage growth and slowdowns; the
uncertain impact of the cost cutting measures Sunrise Telecom has taken to
date and those that Sunrise Telecom may take in the future; and the loss of
key personnel. These risks and uncertainties are described in more detail in
Sunrise Telecom's reports filed with the Securities and Exchange Commission,
including, but not limited to, its Form 10-K for the year ended
December 31, 2003 and its Forms 10-Q for the quarters ended March 31, 2004 and
June 30, 2004. Sunrise Telecom assumes no obligation to update the
forward-looking statements included in this press release.
SUNRISE TELECOM INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data, unaudited)
September 30, December 31,
2004 2003
ASSETS
Current assets:
Cash and cash equivalents $37,641 $39,885
Accounts receivable, net of allowance
of $727 and $1,380, respectively 9,476 13,112
Inventories 13,065 7,286
Prepaid expenses and other assets 1,017 577
Deferred tax assets 166 5,604
Total current assets 61,365 66,464
Property and equipment, net 26,741 26,929
Restricted cash 306 106
Marketable securities 1,641 2,133
Goodwill 12,570 12,815
Intangible assets, net 3,866 5,869
Deferred tax assets -- 1,660
Other assets 820 631
Total assets $107,309 $116,607
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings
and current portion of notes payable $184 $382
Accounts payable 2,297 1,729
Other accrued expenses 9,385 8,979
Income taxes payable 647 23
Deferred revenue 467 660
Total current liabilities 12,980 11,773
Notes payable, less current portion 975 1,095
Deferred tax liabilities 65 --
Deferred revenue 120 178
Other liabilities 3 4
Stockholders' equity:
Common stock, $0.001 par value per share;
175,000,000 shares authorized; 52,269,980 and
51,827,926 shares issued as of
September 30, 2004 and December 31, 2003,
respectively; 50,518,101 and 50,076,047 shares
outstanding as of September 30, 2004 and
December 31, 2003, respectively 51 50
Additional paid-in capital 69,626 69,099
Deferred stock-based compensation -- (267)
Retained earnings 22,159 33,294
Accumulated other comprehensive income 1,330 1,381
Total stockholders' equity 93,166 103,557
Total liabilities
and stockholders' equity $107,309 $116,607
SUNRISE TELECOM INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data, unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Net sales $12,725 $12,338 $41,530 $34,505
Cost of sales 4,005 4,451 11,796 12,969
Gross profit 8,720 7,887 29,734 21,536
Operating expenses:
Research and development 3,824 3,664 11,538 12,024
Selling and marketing 4,164 3,786 12,424 12,308
General and administrative 2,774 2,463 7,058 7,246
Total operating expenses 10,762 9,913 31,020 31,578
Loss from operations (2,042) (2,026) (1,286) (10,042)
Other income (expense), net 232 (66) 632 462
Loss before income taxes (1,810) (2,092) (654) (9,580)
Income tax expense (benefit) 345 (816) 7,974 (3,736)
Net loss $(2,155) $(1,276) $(8,628) $(5,844)
Loss per share:
Basic $(0.04) $(0.03) $(0.17) $(0.12)
Diluted $(0.04) $(0.03) $(0.17) $(0.12)
Shares used in per share computation:
Basic 50,504 49,819 50,365 49,665
Diluted 50,504 49,819 50,365 49,665
SUNRISE TELECOM INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
Nine Months Ended
September 30,
2004 2003
Cash flows from operating activities:
Cash received from customers $45,433 $37,512
Cash paid to suppliers and employees (43,842) (38,904)
Income taxes refunded (paid), net 139 (344)
Interest and other receipts, net 364 712
Net cash provided by (used in)
operating activities 2,094 (1,024)
Cash flows from investing activities:
Sales of marketable securities 687 1,036
Capital expenditures (2,749) (1,898)
Acquisition of business, net of cash acquired -- (554)
Repayment of loan to related party -- 200
Net cash used in investing activities (2,062) (1,216)
Cash flows from financing activities:
Increase in restricted cash (200) --
Proceeds from notes payable -- 42
Payments on notes payable (242) (409)
Dividends paid (2,507) (1,994)
Net proceeds from issuance of common stock 319 231
Proceeds from exercise of stock options 209 154
Net cash used in financing activities (2,421) (1,976)
Effect of exchange rate changes
on cash and cash equivalents 145 208
Net decrease in cash and cash equivalents (2,244) (4,008)
Cash and cash equivalents
at the beginning of the period 39,885 36,440
Cash and cash equivalents
at the end of the period $37,641 $32,432
SUNRISE TELECOM INCORPORATED
NET SALES DETAILS
(In thousands, unaudited)
Three Months Ended
September 30, June 30, September 30,
2004 2004 2003
By Product:
Wireline access $4,869 38% $6,862 46% $4,532 37%
Cable broadband 3,828 30% 3,605 24% 3,990 32%
Fiber optics 2,985 24% 3,628 24% 3,253 26%
Protocol 1,043 8% 909 6% 563 5%
$12,725 $15,004 $12,338
Three Months Ended
September 30, June 30, September 30,
2004 2004 2003
By Region:
North America
(United States and Canada) $7,136 56% $7,815 52% $8,010 65%
Asia Pacific 3,332 26% 4,075 27% 2,274 18%
Europe/Africa/Middle East 1,974 16% 2,880 19% 1,954 16%
Latin America 283 2% 234 2% 100 1%
$12,725 $15,004 $12,338
SUNRISE TELECOM INCORPORATED
RECONCILIATON OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data, unaudited)
In addition to reporting financial results in accordance with generally
accepted accounting principles, or GAAP, Sunrise Telecom Incorporated provides
non-GAAP results of operations as supplemental information about its operating
results. These results are not in accordance with or an alternative to GAAP
and may be different than non-GAAP measures used by other companies. The
non-GAAP results of operations eliminate certain items of expenses and losses
from cost of goods sold, operating expenses, and income tax expense. Sunrise
Telecom's management believes that these non-GAAP financial measures help
investors to evaluate the current operational and financial performance of
Sunrise Telecom's business. Sunrise Telecom discloses this information along
with the following reconciliation of the non-GAAP financial measures to the
comparable GAAP measures. This allows investors to evaluate the details and
general nature of the adjustments made to the GAAP financial measures.
Three Months Ended Nine Months Ended
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2004 2004 2003 2004 2003
Income (loss) from
operations - GAAP $(2,042) $576 $(2,026) $(1,286) $(10,042)
Adjustments:
Amortization of
acquisition-related
intangible assets 655 713 753 2,090 2,513
Stock-based
compensation expense -- -- 475 267 1,486
Income (loss) from
operations - Non-GAAP $(1,387) $1,289 $(798) $1,071 $(6,043)
Net income (loss) - GAAP $(2,155) $813 $(1,276) $(8,628) $(5,844)
Adjustments:
Amortization of
acquisition-related
intangible assets,
net of tax 393 428 459 1,254 1,533
Stock-based compensation
expense, net of tax -- -- 290 160 906
Charge for valuation
allowance on
deferred tax assets -- -- -- 7,349 --
Net income (loss)
- Non-GAAP $(1,762) $1,241 $(527) $135 $(3,405)
Earnings (loss) per share:
Basic - GAAP $(0.04) $0.02 $(0.03) $(0.17) $(0.12)
Basic - Non-GAAP $(0.03) $0.02 $(0.01) $0.00 $(0.07)
Diluted - GAAP $(0.04) $0.02 $(0.03) $(0.17) $(0.12)
Diluted - Non-GAAP $(0.03) $0.02 $(0.01) $0.00 $(0.07)
Shares used in computing earnings (loss) per share:
Basic - GAAP 50,504 50,426 49,819 50,365 49,665
Basic - Non-GAAP 50,504 50,426 49,819 50,365 49,665
Diluted - GAAP 50,504 51,265 49,819 50,365 49,665
Diluted - Non-GAAP 50,504 51,265 49,819 51,284 49,665
SUNRISE TELECOM INCORPORATED
SUMMARY OF CERTAIN NONCASH EXPENSES
(In thousands, unaudited)
The following expenses are included in the applicable lines of Sunrise
Telecom Incorporated's Condensed Consolidated Statements of Operations, as
required by accounting principles generally accepted in the United States of
America.
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Amortization of
acquisition-related intangible
assets included in
general and administrative $655 $753 $2,090 $2,513
Amortization of deferred stock-based compensation:
Included in cost of sales $-- $68 $40 $206
Included in
research and development -- 169 84 526
Included in
selling and marketing -- 151 90 461
Included in
general and administrative -- 87 53 293
$-- $475 $267 $1,486
SOURCE Sunrise Telecom Incorporated
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Related links:
http://www.sunrisetelecom.com
CONTACT:
Paul Marshall, Acting Chief Financial Officer
of Sunrise Telecom Incorporated, +1-408-363-8000
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