Elastic Networks Inc. Reports 2001 Third Quarter Results.Business Editors ALPHARETTA, Ga.--(BUSINESS WIRE)--Oct. 25, 2001 Elastic elastic Of or relating to the demand for a good or service when the quantity purchased varies significantly in response to price changes in the good or service. Networks Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : ELAS ELAS Elastic ELAS Equitable Life Assurance Society ELAS Ethnikos Laikos Apeleftherotikos Stratos (Greek: National Popular Liberation Army) ELAS Enhanced Logbook Automation System (US Army aviation initiative) ) today reported results for the third quarter ended September September: see month. 30, 2001. In the third quarter, the Company reported revenues of $5.8 million compared to revenues of $8.0 million for the second quarter ended June June: see month. 30, 2001. The pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net loss for the quarter ended September 30, 2001 was $(5.0) million or $(0.16) per share, excluding restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. of $13.9 million and non-cash stock based compensation expenses totaling $1.3 million, compared with a pro forma net loss for the quarter ended June 30, 2001 of $(6.7) million or $(0.21) per share, excluding non-cash stock based compensation expenses totaling $1.2 million. "The increased economic uncertainty and recent events impacted our business in the third quarter. We saw several September orders and product shipments rescheduled and cancelled particularly from customers serving the hospitality market," said Guy Gill gill, in weights and measures gill, in weights and measures: see English units of measurement. , Chief Executive Officer and President of Elastic Networks. "We have taken actions to align align (  līn),v to move the teeth into their proper positions to conform to the line of occlusion. our spending with current market conditions resulting in a restructuring charge of $13.9 million for headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. reductions, facility consolidation, excess inventory and purchase commitments. In light of this tough economic environment, we remain focused on growing our customer base with the third quarter introduction of our new 10 Mbps Storm System products and the commencement of technology trials with two large potential customers in Asia." The Company will host a conference call on Thursday Thursday: see week. , October October: see month. 25, at 4:30 p.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT to discuss third quarter 2001 operating results. For access to our conference call within the U.S. please dial (888) 209-3775 by 4:15 p.m. EDT on October 25 and ask for the Elastic Networks Earnings Conference Call. For the live Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the broadcast, please access the Elastic Networks website at www.elastic.com, and then the Investor Relations Investor relations The process by which the corporation communicates with its investors. section where there will be a "Live Web cast" link. Please go to the website at least 15 minutes prior to the call to register, download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. and install any necessary audio software. A replay will be available shortly after the call and will remain on the Company's website for 14 days. About Elastic Networks Inc. Elastic Networks is a broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). leader in first-mile Ethernet Ethernet Telecommunications networking protocol introduced by Xerox Corp. in 1979. It was developed as an inexpensive way of sending information quickly between office machines connected together in a single room or building, but it rapidly became a standard computer access solutions, deploying its patented EtherLoop (ETHERnet Local LOOP) A transmission technology from Nortel Networks that combines DSL and Ethernet to deliver up to 6 Mbps between the customer and telco central office (CO). technology across a variety of products and high-speed high-speed adj. 1. Operated or designed for operation at high speed: a high-speed food processor. 2. Taking place at high speed: a high-speed chase. 3. multi-media applications. With the introduction of the Storm System(TM) family of intelligent IP-over-Ethernet products, Elastic Networks has successfully addressed the needs of the carrier, enterprise, MDU/MTU and hospitality markets for high-speed first-mile access solutions that deliver top quality service to end users while eliminating costly deployment and complicated support issues for service providers. Additionally, Elastic Networks is building strategic relationships with distributor, chip manufacturing and data networking partners. The company has offices in Alpharetta, Georgia Alpharetta is a city in Fulton County, Georgia, United States. As of 2006 census estimates, the city had a total population of 43,424[1]. Selected for its location next to a spring, it began as a campground, and was originally known as , and Hong Kong Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov. , China. For more information about Elastic Networks and its patented EtherLoop technology and products, visit www.elastic.com or contact Elastic's U.S. headquarters in Alpharetta, Georgia at 678-297-3100. For investor information, e-mail our Investor Relations group at irinfo@elastic.com, or call 678-297-3100. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Certain of the statements contained in this release are forward-looking statements (rather than historical facts) that are subject to risks and uncertainties that could cause actual results to differ materially from those described. With respect to such forward-looking statements, the Company seeks the protections afforded by the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These risks include, without limitation, (1) that the Company may fail to be competitive with existing and new competitors, (2) that the Company may not maintain or grow its level of revenues, given its currently limited customer base, (3) that the Company's limited number of product offerings may fail to achieve widespread market acceptance, (4) that negative changes in customer demands and requirements regarding our prices, technology and products may occur, (5) that DSL DSL in full Digital Subscriber Line Broadband digital communications connection that operates over standard copper telephone wires. It requires a DSL modem, which splits transmissions into two frequency bands: the lower frequencies for voice (ordinary technology may fail to achieve widespread market penetration Noun 1. market penetration - the extent to which a product is recognized and bought by customers in a particular market penetration - the act of entering into or through something; "the penetration of upper management by women" , (6) that interruptions or disruptions in our product shipments and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. our various arrangements with our distributors, manufacturers or resellers may negatively impact our ability to make sales and/or minimize our costs, (7) that the Company may not adequately respond to technological and regulatory developments impacting the telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. industry, (8) that needed financing may not be available to the Company if and as needed as needed prn. See prn order. , (9) that a decline in the size and potential growth of the MTU (1) (Maximum Transmission Unit, Maximum Transfer Unit) The largest frame size that can be transmitted over the network. For example, an Ethernet MTU is 1,500 bytes. Messages longer than the MTU must be divided into smaller frames. , carrier and international markets for our technology may occur, (10) that a significant reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its in the trend toward increased usage of the Internet may occur, (11) that a drastic, negative change in the U.S. economy or market conditions may occur, and (12) that some other unforeseen difficulties may occur from time to time. This list is intended to identify certain of the principal factors that could cause actual results to differ materially from those described in the forward-looking statements included elsewhere herein. These factors are not intended to represent a complete list of all risks and uncertainties inherent in the Company's business, and should be read in conjunction with the more detailed cautionary statements included in the Company's most recent filings with the SEC.
ELASTIC NETWORKS INC.
Pro Forma Condensed Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
2001 2000 2001 2000
------- ------- ------- -------
Net revenues $5,825 $11,204 $ 19,468 $25,897
Cost of revenues 4,627 10,062 16,964 24,193
------- ------- ------- -------
Gross profit 1,198 1,142 2,504 1,704
Operating expenses:
Sales and
marketing 2,148 3,842 9,097 9,979
Research and
development 2,376 2,924 8,821 7,681
General and
administrative 1,856 1,377 6,451 3,540
------- ------- ------- -------
Total operating
expenses 6,380 8,143 24,369 21,200
------- ------- ------- -------
Operating loss (5,182) (7,001) (21,865) (19,496)
Other income
(expense), net 198 (247) 1,638 (194)
------- ------- ------- -------
Pro forma net loss(1) $(4,984) $(7,248) $(20,227) $(19,690)
======= ======= ======= =======
Pro forma net loss
per share - diluted $ (0.16) $ (0.43) $ (0.64) $ (1.18)
======= ======= ======= =======
Weighted Shares used
in computing pro
forma basic and
diluted net loss per
share 31,523 16,691 31,460 16,680
======= ======= ======= =======
The above Pro Forma Condensed Statements of Operations is not a
presentation in accordance with accounting principles generally
accepted in the United States of America as it excludes the effects of
the following:
(1) Excludes $13.9 million of restructuring charges and excess
inventory provisions for the three months ended September 30, 2001.
Excludes $27.9 million of restructuring charges, excess inventory
provisions, and additional accruals for uncollectable accounts for the
nine months ended September 30, 2001. Excludes $1.3 million, $1.2
million, $3.6 million, and $2.0 million of non-cash stock based
compensation expenses for the three months ended September 30, 2001
and 2000 and nine months ended September 30, 2001 and 2000,
respectively. Excludes accretion of series A preferred stock and
non-cash stock based financing expenses of $0.1 million and $0.3
million for the three months and nine months ended September 30, 2000,
respectively.
The pro forma data is presented for informational purposes only
and should not be considered as a substitute for the historical
financial data presented in accordance with accounting principles
generally accepted in the United States of America.
ELASTIC NETWORKS INC.
Condensed Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
2001 2000 2001 2000
------- ------- ------- -------
Net revenues $ 5,825 $ 11,204 $ 19,468 $ 25,897
Cost of revenues 4,627 10,062 16,964 24,193
Charges related to
excess inventory on
hand and on order and
restructuring charges 12,145 - 23,998 -
------- ------- ------- -------
Gross profit (loss) (10,947) 1,142 (21,494) 1,704
Operating expenses:(1)
Sales and marketing 2,864 3,882 9,895 10,123
Research and
development 3,017 2,956 9,545 8,385
General and
administrative 3,575 2,492 12,478 4,696
------- ------- ------- -------
Total operating
expenses 9,456 9,330 31,918 23,204
------- ------- ------- -------
Operating loss (20,403) (8,188) (53,412) (21,500)
Other income (expense),
net 198 (904) 1,638 (851)
------- ------- ------- -------
Net loss (20,205) (9,092) (51,774) (22,351)
Accretion of Series A
preferred stock - (133) - (399)
------- ------- ------- -------
Net loss attributed
to common
stockholders $(20,205) $ (9,225) $ (51,774) $(22,750)
======= ======= ======= =======
Basic and diluted net
loss per common share$ (0.64) $ (0.55) (1.65) (1.36)
======= ======= ======= =======
Weighted average shares
used in computing
basic and diluted net
loss per common share 31,523 16,691 31,460 16,680
======= ======= ======= =======
(1) Includes $1.8 million of restructuring charges for the three
months ended September 30, 2001 and $3.9 million of restructuring
charges and additional accruals for uncollectable accounts for the
nine months ended September 30, 2001. Includes $1.3 million, $1.2
million, $3.6 million, and $2.0 million of non-cash stock based
compensation expenses for the three months ended September 30, 2001
and 2000 and nine months ended September 30, 2001 and 2000,
respectively.
ELASTIC NETWORKS INC.
Condensed Balance Sheets
(in thousands)
(unaudited)
September 30, December 31,
2001 2000
------------ -----------
Assets
Current assets:
Cash, cash equivalents, restricted
cash, and short-term investments $ 32,288 $ 68,591
Accounts receivable, net of allowances 1,967 8,068
Inventories 5,988 6,467
Note receivable - 2,951
Other current assets 941 1,799
------------ -----------
Total current assets 41,184 87,876
Other assets 3,507 3,477
------------ -----------
Total assets $ 44,691 $ 91,353
============ ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 6,336 $ 10,891
Accrued liabilities 8,891 2,341
Deferred revenues 796 926
Capital lease obligations 231 216
------------ -----------
Total current liabilities 16,254 14,374
Deferred revenues, long-term 153 712
Capital lease obligations, long-term 134 305
Stockholders' equity 28,150 75,962
------------ -----------
Total liabilities and
stockholders' equity $ 44,691 $ 91,353
============ ===========
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