Hypercom Corporation Announces Fourth Quarter and Full Year 2005 Financial Results.PHOENIX -- Hypercom Hypercom Corporation Hypercom is a global payment technology innovator. It provides complete, end-to-end high security payment solutions, from countertop and mobile credit/debit payment terminals to the network devices and services that quickly expedite the fast and secure Corporation (NYSE NYSE See: New York Stock Exchange :HYC HYC Houston Yacht Club (Texas) ) a leading global supplier of electronic payment solutions, today announced financial results for the three and twelve month periods ended December December: see month. 31, 2005. The financial information presented includes comparative year-over-year figures and sequential One after the other in some consecutive order such as by name or number. 2005 quarterly results. During the fourth quarter, the Company continued the 2005 comprehensive business review activities begun by executive management early in second quarter 2005, and additional decisions were made resulting in certain 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. . Where appropriate, the financial information includes comparative, adjusted non-GAAP financial results to exclude the specific restructuring charges resulting from this review. The Company also made a decision as of December 31, 2005, to discontinue dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: its UK-based leasing business by divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). via sale. As a result, this business has been reclassified as a discontinued operation discontinued operation A segment of a business that has been abandoned or sold or for which plans for one or another of these actions have been approved. See also continuing operations. and certain current and prior year figures have been accordingly reclassified. Revenue Revenue for the 2005 fourth quarter was $68.1 million, an 8.8% decrease compared to $74.6 million in the same quarter last year, and a 2.3% increase over revenue of $66.5 million in the third quarter of 2005. The Company believes that year-over-year revenue comparison between 2004 and 2005 is difficult since 2004 fourth quarter revenue was somewhat anomalous a·nom·a·lous adj. 1. Deviating from the normal or common order, form, or rule. 2. Equivocal, as in classification or nature. for two specific reasons: (1) a component shortage in the third quarter of 2004 that delayed deliveries delayed delivery Delivery of a certificate after the day on which delivery would occur with a regular-way contract. Delayed delivery is sometimes specified by the seller when the order to sell is entered. See also seller's option contract. of the L4100, a new, high demand product and shifted revenues from third quarter to fourth quarter 2004; and (2) an aggressive 2004 fourth quarter product sales discount program to stimulate stimulate /stim·u·late/ (stim´u-lat) to excite functional activity. stim·u·late v. To arouse a body or a responsive structure to increased functional activity. sales of older 8-bit products while the Company continued to ready its new 32-bit products for release during 2005. Gross Profit Gross profit for the 2005 fourth quarter was $23.4 million or 34.3% of revenue, a decrease of 19.2% compared to $28.9 million or 38.8% of revenue in the same quarter of 2004; and a decrease of 8.2% compared to gross profit of $25.5 million or 38.3% of revenue in the third quarter of 2005. Fourth quarter 2005 gross profit included $3.8 million of restructuring charges related to decisions associated with the Company's 2005 comprehensive business review. The charges were primarily related to inventory end-of-life end-of-life Cardiac pacing noun The point at which a pacemaker signals need for replacement, as its battery is nearing depletion Medtalk adjective reserves for discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: products, severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when costs for certain manufacturing management, and warranty An assurance, promise, or guaranty by one party that a particular statement of fact is true and may be relied upon by the other party. Warranties are used in a variety of commercial situations. In many instances a business may voluntarily make a warranty. provisions. On a normalized basis, adjusted fourth quarter 2005 non-GAAP gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. was $27.2 million or 40.0% of revenue, compared to $28.9 million or 38.8% of revenue in the same quarter of 2004, and compared to gross profit of $25.5 million or 38.3% of revenue in the third quarter of 2005. Gross profit as a percentage of revenue can vary significantly depending upon the specific quarterly revenue mix of customers, products, and services; relative revenue contribution by geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. region; variation in manufacturing costs; and other factors. Operating Expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. Operating expenses for the fourth quarter of 2005 were $26.1 million, comparable to $26.0 million in the same quarter of 2004, and $21.4 million in the third quarter of 2005. Fourth quarter 2005 operating expenses included $3.0 million of restructuring charges related to decisions arising from the Company's 2005 business review. These charges primarily related to severance costs of foreign sales management Sales Management Role and Goal Importance of sales management is critical for any commercial organization. Expanding business in not possible without increasing sales volumes, and effective sales management goal is to organize sales team work in such a manner that ensures a and costs related to an idle leased facility located in Phoenix, Arizona Phoenix /ˈfiːˌnɪks/ (English: Phoenix, Navajo: Hoozdo, lit. "the place is hot", Western Apache: Fiinigis) is the capital and the most populous city of the U.S. . On a normalized non-GAAP basis, adjusted fourth quarter 2005 operating expenses were $23.1 million, compared to $27.4 million in the same quarter of 2004, and $21.4 million in the third quarter of 2005. The decrease compared to 2004 is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to earlier 2005 business review decisions including reduction of 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. and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. , and the relocation RELOCATION, Scotch law, contracts. To let again to renew a lease, is called a relocation. 2. When a tenant holds over after the expiration of his lease, with the consent of his landlord, this will amount to a relocation. of certain research and development activities to lower cost foreign geographies. The sequential increase is primarily due to an increase in audit and Sarbanes-Oxley compliance costs. Income from Continuing Operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the The operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. from continuing operations for the fourth quarter was $2.8 million compared to operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $2.9 million in the same quarter of 2004 and operating income from continuing operations of $4.1 million in the third quarter of 2005. The fourth quarter 2005 operating loss included $6.8 million of restructuring charges arising from decisions related to the Company's 2005 business review. On a normalized non-GAAP basis, adjusted fourth quarter 2005 non-GAAP operating income was $4.1 million, an increase of 170% compared to non-GAAP operating income of $1.5 million in the same quarter of 2004, and essentially equal to non-GAAP operating income of $4.1 million in the third quarter of 2005. Net Income from Continuing Operations Net loss from continuing operations for fourth quarter 2005 was $3.3 million or -$0.06 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to net income from continuing operations of $2.7 million or $0.05 per diluted share in the same quarter of 2004, and net income from continuing operations of $2.8 million or $0.07 per diluted share in the third quarter of 2005. Fourth quarter 2005 loss from continuing operations included $6.6 million of restructuring charges related to the Company's business review. Approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $3.5 million of the charges are non-cash related. On a normalized non-GAAP basis, fourth quarter net income from continuing operations was $3.3 million, an increase of 156% compared to non-GAAP net income from continuing operations of $1.3 million in the same quarter of 2004, and an increase of 17.6% over non-GAAP net income from continuing operations of $2.8 million in the third quarter of 2005. Discontinued UK Leasing Business The Company reclassified operating results related to its UK-based leasing business to discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. as a result of management's decision to sell the business to a third party. Included in the fourth quarter loss from discontinued operations of $7.3 million, was an impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge of $6.6 million reflecting the Company's current expectation regarding projected proceeds from any future sale of the leasing business. "As can be seen by a review of the normalized results for the fourth quarter of 2005, the decisions and actions resulting from management's comprehensive business review during 2005 are strengthening the Company. On a normalized basis, the Company delivered income before discontinued operations for the fourth quarter of $3.3 million in 2005; an improvement of 156% over the same quarter in 2004," said Hypercom's CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. William William, crown prince of Germany William or Frederick William, 1882–1951, crown prince of Germany, son of William II. In World War I he commanded (1914) an army on the Western Front and was nominal commander in the German attack Keiper. "The additional decisions made during the fourth quarter, will allow us to focus on our strengths and operate even more effectively during 2006." Adjusted non-GAAP year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. financial results excluding charges for both the current and prior year are presented in the attached reconciliation. These charges will be discussed in the Company's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. that will be filed with the Securities and Exchange Commission on March 16, 2006. Hypercom's conference call to discuss the financial results for the period ended December 31, 2005 will be held on Wednesday Wednesday: see week. , March 1, 2006 at 8:30 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy . The conference call will be simultaneously si·mul·ta·ne·ous adj. 1. Happening, existing, or done at the same time. See Synonyms at contemporary. 2. Mathematics webcast at Hypercom's Web site, www.hypercom.com and will also be available approximately seven days after the call has concluded in the Investor Relations Investor relations The process by which the corporation communicates with its investors. section under "audio.archive (1) A file that contains one or more compressed files. Most archive formats are also capable of storing folders in order to reconstruct the file/folder relationship when decompressed. See archive formats. ". About Hypercom (www.hypercom.com) Global payment technology leader Hypercom Corporation (NYSE:HYC) delivers a full suite of high security, end-to-end end-to-end a pattern of anastomosis in which severed ends are matched and united, in contrast with other patterns such as end-to-side or side-to-side. Usually applied to anastomosis of the intestine. electronic payment products and services. The company's solutions address the high security electronic transaction needs of banks and other financial institutions, processors, large scale retailers, smaller merchants, quick service restaurants, and users in the transportation, healthcare, prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. , unattended and many other markets. Hypercom solutions enable
businesses in more than 100 countries to securely expand their revenues
and profits.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. This press release includes statements that may constitute forward-looking statements that are subject to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Section 27A of the Securities Act of 1933 and Section 21G of the Securities Exchange Act of 1934. The words "believe," "expect," "anticipate," "estimate," "will" and other similar expressions identify such forward-looking statements. These forward-looking statements include, among other things, statements regarding Hypercom's anticipated financial performance, projections regarding future revenue, operating profits Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. , net income, cash flows, losses from discontinued operations and the performance and market acceptance of new products. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results. Readers are referred to documents filed by Hypercom with the Securities and Exchange Commission, specifically the most recent reports on Forms 10-K, 10-Q, and 8-K, each as it may be amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. from time to time, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements. Among the important factors or risks that could cause actual results to differ from those contained in the forward-looking statements in this press release are: the state of the competition in the payments processing industry in general; the commercial feasibility fea·si·ble adj. 1. Capable of being accomplished or brought about; possible: a feasible plan. See Synonyms at possible. 2. of new products, services, and market development initiatives; risks relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the introduction of new products; projections regarding specific demand for our products and services; projections regarding future revenues, cost of sales, operating expenses, margins, cash flows, earnings, working capital and liquidity; the adequacy of our current facilities and management systems infrastructure to meet our operational needs; the status of our relationship with and condition of third parties upon whom we rely in the conduct of our business; the challenges presented by conducting business on an international basis; the sufficiency of our reserves for assets and obligations exposed to revaluation Revaluation A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. ; our ability to identify and complete acquisitions and strategic investments and successfully integrate them into our business; the impact of current litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. matters, including the shareholder class action and shareholder derivative actions A lawsuit brought by a shareholder of a corporation on its behalf to enforce or defend a legal right or claim, which the corporation has failed to do. A derivative action, more popularly known as a Stockholder's Derivative Suit, is derived from the primary right of the , on our business; our ability to timely remediate re·me·di·a·tion n. The act or process of correcting a fault or deficiency: remediation of a learning disability. re·me the material weaknesses and significant deficiencies identified through our internal controls evaluation; our ability to effectively hedge our exposure to foreign currency exchange rate fluctuations; risks associated with utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be of contract manufacturers of our products; industry and general economic conditions; and future access to capital on terms that are acceptable, as well as assumptions related to the foregoing. The financial information contained in this press release should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge and notes thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. included in Hypercom's most recent reports on Form 10-K and 10-Q, each as it may be amended from time to time. Hypercom's results of operations for the three and twelve months ended December 31, 2005 are not necessarily indicative indicative: see mood. of Hypercom's operating results for any future periods. Any projections in this press release are based on limited information currently available to Hypercom, which is subject to change. Although any such projections and the factors influencing them will likely change, Hypercom is under no obligation, nor do we intend to, update the information, since Hypercom will only provide guidance at certain points during the year. Such information speaks only as of the date of this release. The Company does not endorse To sign a paper or document, thereby making it possible for the rights represented therein to pass to another individual. Also spelled indorse. endorse (indorse) v. any projections regarding future performance that may be made by third parties. Hypercom is a registered trademark of Hypercom Corporation. HYCF
HYPERCOM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------------------- -------------------------
(Amounts in
thousands, except
per share data) 2005 2004 2005 2004
----------- ----------- ----------- -----------
Net revenue:
Product and other $ 57,300 $ 67,261 $ 210,963 $ 214,239
Services 10,789 7,371 34,260 27,046
----------- ----------- ----------- -----------
Total net revenue 68,089 74,632 245,223 241,285
----------- ----------- ----------- -----------
Costs of revenue:
Product and other 35,254 40,047 144,649 123,419
Services 9,452 5,657 27,442 20,721
Write-off of
deferred
contract costs - - - 11,305
----------- ----------- ----------- -----------
Total costs of
revenue 44,706 45,704 172,091 155,445
----------- ----------- ----------- -----------
Gross profit 23,383 28,928 73,132 85,840
----------- ----------- ----------- -----------
Operating expenses:
Research and
development 6,409 7,282 27,555 27,188
Selling, general
and administrative 19,735 18,751 72,649 65,242
----------- ----------- ----------- -----------
Total operating
expenses 26,144 26,033 100,204 92,430
----------- ----------- ----------- -----------
Income (loss) from
continuing
operations (2,761) 2,895 (27,072) (6,590)
Interest income 874 415 2,679 1,198
Interest expense (183) (84) (787) (1,412)
Other income
(expense) (93) (6) (240) 13
Foreign currency
gain (loss) (401) 27 (1,297) (1,906)
----------- ----------- ----------- -----------
Income (loss)
before income
taxes and
discontinued
operations (2,564) 3,247 (26,717) (8,697)
Provision for
income taxes (728) (557) (3,526) (3,833)
----------- ----------- ----------- -----------
Income (loss)
before
discontinued
operations (3,292) 2,690 (30,243) (12,530)
Income (loss) from
discontinued
operations (7,279) 1,838 (3,123) 3,868
----------- ----------- ----------- -----------
Net income (loss) $ (10,571) $ 4,528 $ (33,366) $ (8,662)
=========== =========== =========== ===========
Basic income
(loss) per share:
Income (loss)
before
discontinued
operations $ (0.06) $ 0.05 $ (0.58) $ (0.24)
Income (loss) from
discontinued
operations (0.14) 0.04 (0.06) 0.07
----------- ----------- ----------- -----------
Basic income
(loss) per share $ (0.20) $ 0.09 $ (0.64) $ (0.17)
=========== =========== =========== ===========
Diluted income
(loss) per share:
Income (loss)
before
discontinued
operations $ (0.06) $ 0.05 $ (0.58) $ (0.24)
Income (loss) from
discontinued
operations (0.14) 0.03 (0.06) 0.07
----------- ----------- ----------- -----------
Diluted income
(loss) per share $ (0.20) $ 0.08 $ (0.64) $ (0.17)
=========== =========== =========== ===========
Weighted average
common shares:
Basic 52,343,898 51,804,830 52,395,001 51,251,975
=========== =========== =========== ===========
Diluted 52,343,898 53,507,505 52,395,001 51,251,975
=========== =========== =========== ===========
EBITDA from
continuing
operations $ (838) $ 5,021 $ (20,719) $ (476)
=========== =========== =========== ===========
HYPERCOM CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands) December 31, December 31,
2005 2004
------------- ----------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 35,940 $ 23,445
Marketable securities 57,951 69,962
Accounts receivable, net 48,852 59,776
Current portion of net investment
in sales-type leases - 9,441
Inventories 39,414 44,455
Prepaid expenses and other current
assets 8,946 12,955
Deferred tax assets 561 -
Assets of discontinued operations
held for sale 12,613 -
--------- ---------
Total current assets 204,277 220,034
Property, plant and equipment, net 27,746 29,920
Net investment in sales-type
leases - 17,668
Intangible assets, net 3,503 4,475
Other long-term assets 3,827 5,163
--------- ---------
Total assets $ 239,353 $ 277,260
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 17,721 $ 27,817
Accrued payroll and related
expenses 8,460 8,679
Accrued sales and other taxes 9,479 8,792
Accrued other liabilities 12,371 8,308
Deferred revenue 2,762 2,768
Deferred tax liabilities 439 -
Income taxes payable 1,651 3,411
Current portion of long-term debt 8,355 470
--------- ---------
Total current liabilities 61,238 60,245
Non-current liabilities 7,336 11,643
--------- ---------
Total liabilities 68,574 71,888
Stockholders' equity 170,779 205,372
--------- ---------
Total liabilities and
stockholders' equity $ 239,353 $ 277,260
========= =========
HYPERCOM CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------------- --------------------
(Amounts in thousands) 2005 2004 2005 2004
--------- -------- --------- --------
Cash flows from continuing
operations:
Net income (loss) from
continuing operations $ (3,292) $ 2,690 $ (30,243) $(12,530)
Adjustments to reconcile
net income (loss) from
continuing operations
to net cash provided by
(used in) operating
activities:
Depreciation/amortization 2,417 2,105 7,890 8,007
Amortization of deferred
financing costs 4 3 15 529
Amortization of discount on
marketable securities (333) (223) (1,099) (223)
Provision for bad debts 606 806 2,046 1,915
Provision for long-term
contract accounts
receivable - (1,385) - -
Write-down of excess and
obsolete inventory 7,456 1,995 18,539 7,922
Provision for warranty and
other product charges 1,260 409 8,926 727
Deferred income taxes 219 - 219 -
Non-cash stock compensation 343 76 828 405
Non-cash write-off of
marketing rights intangible
asset - 698 - 698
Foreign currency (gain) loss 492 (2,013) (976) 74
Write-off of capitalized
software and other assets 208 761 2,181 817
Write-off of deferred
contract costs - - - 11,305
Changes in operating assets
and liabilities, net (6,252) (2,833) (12,080) (10,797)
-------- -------- --------- --------
Net cash provided by (used
in) operating activities 3,128 3,089 (3,754) 8,849
-------- -------- --------- --------
Cash flows from investing
activities:
Purchase of property, plant
and equipment (1,334) (2,021) (4,916) (5,855)
Software development costs
capitalized - (790) (559) (2,953)
Purchase of marketable
securities (80,673) (35,832) (216,915) (90,239)
Proceeds from the sale or
maturity of marketable
securities 66,507 30,400 230,025 37,900
-------- -------- --------- --------
Net cash (used in) provided
by investing activities (15,500) (8,243) 7,635 (61,147)
-------- -------- --------- --------
Cash flows from financing
activities:
Repayments of bank notes
payable and other debt
instruments (87) (192) (424) (995)
Proceeds from issuance of
common stock 2,292 2,253 7,175 8,276
Purchase of treasury stock (295) - (9,236) -
Repayment of advances to
stockholders - - - 1,056
-------- -------- --------- --------
Net cash provided by (used
in) financing activities 1,910 2,061 (2,485) 8,337
-------- -------- --------- --------
Effect of exchange rate
changes on cash (223) 438 (333) 407
-------- -------- --------- --------
Net (decrease) increase in
cash flows from continuing
operations (10,685) (2,655) 1,063 (43,554)
Net cash (used in) provided
by in operating activities
from discontinued operations (453) (660) 11,432 4,450
Net cash (used in) investing
activities from
discontinued operations - (764) - (2,866)
Cash and cash equivalents,
beginning of period 47,078 27,524 23,445 65,415
-------- -------- --------- --------
Cash and cash equivalents,
end of period $ 35,940 $ 23,445 $ 35,940 $ 23,445
======== ======== ========= ========
HYPERCOM CORPORATION
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended December 31,
--------------------------------
2005
--------------------------------
(Amounts in thousands, except per Non-GAAP
share data) GAAP Adjustments Non-GAAP
--------- ------------ --------
Net revenue:
Product and other $ 57,300 $ - $57,300
Services 10,789 - 10,789
-------- -------- -------
Total net revenue 68,089 - 68,089
-------- -------- -------
Costs of revenue:
Product and other 35,254 (3,847) 31,407
Services 9,452 - 9,452
-------- -------- -------
Total costs of revenue 44,706 (3,847) 40,859
-------- -------- -------
Gross profit 23,383 3,847 27,230
-------- -------- -------
Operating expenses:
Research and development 6,409 (237) 6,172
Selling, general and administrative 19,735 (2,757) 16,978
-------- -------- -------
Total operating expenses 26,144 (2,994) 23,150
-------- -------- -------
Income (loss) from continuing
operations (2,761) 6,841 4,080
Interest income 874 - 874
Interest expense (183) - (183)
Other expense (93) - (93)
Foreign currency gain (loss) (401) - (401)
-------- -------- -------
Income (loss) before income taxes and
discontinued operations (2,564) 6,841 4,277
Provision for income taxes (728) (203) (931)
-------- -------- -------
Income (loss) before discontinued
operations (3,292) 6,638 3,346
Income (loss) from discontinued
operations (7,279) - (7,279)
-------- -------- -------
Net income (loss) $(10,571) $ 6,638 $(3,933)
======== ======== =======
Basic income (loss) per share:
Income (loss) before discontinued
operations $ (0.06) $ 0.12 $ 0.06
Income (loss) from discontinued
operations (0.14) - (0.14)
-------- -------- -------
Basic income (loss) per share $ (0.20) $ 0.12 $ (0.08)
======== ======== =======
Diluted income (loss) per share:
Income (loss) before discontinued
operations $ (0.06) $ 0.06
Income (loss) from discontinued
operations (0.14) (0.13)
-------- -------
Diluted income (loss) per share $ (0.20) $ (0.07)
======== =======
Three Months Ended December 31,
------------------------------
2004
------------------------------
(Amounts in thousands, except per share Non-GAAP
data) GAAP Adjustments Non-GAAP
-------- ------------ --------
Net revenue:
Product and other $67,261 $ - $67,261
Services 7,371 - 7,371
------- ------- -------
Total net revenue 74,632 - 74,632
------- ------- -------
Costs of revenue:
Product and other 40,047 - 40,047
Services 5,657 - 5,657
------- ------- -------
Total costs of revenue 45,704 - 45,704
------- ------- -------
Gross profit 28,928 - 28,928
------- ------- -------
Operating expenses:
Research and development 7,282 - 7,282
Selling, general and administrative 18,751 1,385 20,136
------- ------- -------
Total operating expenses 26,033 1,385 27,418
------- ------- -------
Income (loss) from continuing
operations 2,895 (1,385) 1,510
Interest income 415 - 415
Interest expense (84) - (84)
Other expense (6) - (6)
Foreign currency gain (loss) 27 - 27
------- ------- -------
Income (loss) before income taxes and
discontinued operations 3,247 (1,385) 1,862
Provision for income taxes (557) - (557)
------- ------- -------
Income (loss) before discontinued
operations 2,690 (1,385) 1,305
Income (loss) from discontinued
operations 1,838 - 1,838
------- ------- -------
Net income (loss) $ 4,528 $(1,385) $ 3,143
======= ======= =======
Basic income (loss) per share:
Income (loss) before discontinued
operations $ 0.05 $ (0.02) $ 0.03
Income (loss) from discontinued
operations 0.04 (0.01) 0.03
------- ------- -------
Basic income (loss) per share $ 0.09 $ (0.03) $ 0.06
======= ======= =======
Diluted income (loss) per share:
Income (loss) before discontinued
operations $ 0.05 $ 0.02
Income (loss) from discontinued
operations 0.03 0.04
------- -------
Diluted income (loss) per share $ 0.08 $ 0.06
======= =======
HYPERCOM CORPORATION
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Year Ended December 31,
---------------------------------
2005
--------------------------------
(Amounts in thousands, except per Non-GAAP
share data) GAAP Adjustments Non-GAAP
--------- ------------ ---------
Net revenue:
Product and other $210,963 $ 365 $211,328
Services 34,260 - 34,260
--------- -------- --------
Total net revenue 245,223 365 245,588
--------- -------- --------
Costs of revenue:
Product and other 144,649 (19,042) 125,607
Services 27,442 (930) 26,512
Write-off of deferred contract
costs - - -
--------- -------- --------
Total costs of revenue 172,091 (19,972) 152,119
--------- -------- --------
Gross profit 73,132 20,337 93,469
--------- -------- --------
Operating expenses:
Research and development 27,555 (1,273) 26,282
Selling, general and administrative 72,649 (6,394) 66,255
--------- -------- --------
Total operating expenses 100,204 (7,667) 92,537
--------- -------- --------
Income (loss) from continuing
operations (27,072) 28,004 932
Interest income 2,679 - 2,679
Interest expense (787) - (787)
Other income (expense) (240) - (240)
Foreign currency loss (1,297) - (1,297)
--------- -------- --------
Income (loss) before income taxes
and discontinued operations (26,717) 28,004 1,287
Provision for income taxes (3,526) (264) (3,790)
--------- -------- --------
Loss before discontinued
operations (30,243) 27,740 (2,503)
Income (loss) from discontinued
operations (3,123) - (3,123)
--------- -------- --------
Net income (loss) $(33,366) $ 27,740 $ (5,626)
========= ======== ========
Basic and diluted income (loss) per
share:
Income (loss) before discontinued
operations $(0.58) $ (0.05)
Income (loss) from discontinued
operations (0.06) (0.06)
--------- --------
Basic and diluted income (loss) per
share $(0.64) $ (0.11)
========= ========
Year Ended December 31,
--------------------------------
2004
-------------------------------
(Amounts in thousands, except per Non-GAAP
share data) GAAP Adjustments Non-GAAP
--------- ------------ ---------
Net revenue:
Product and other $214,239 $ - $214,239
Services 27,046 - 27,046
-------- -------- --------
Total net revenue 241,285 - 241,285
-------- -------- --------
Costs of revenue:
Product and other 123,419 - 123,419
Services 20,721 - 20,721
Write-off of deferred contract costs 11,305 (11,305) -
-------- -------- --------
Total costs of revenue 155,445 (11,305) 144,140
-------- -------- --------
Gross profit 85,840 11,305 97,145
-------- -------- --------
Operating expenses:
Research and development 27,188 - 27,188
Selling, general and administrative 65,242 - 65,242
-------- -------- --------
Total operating expenses 92,430 - 92,430
-------- -------- --------
Income (loss) from continuing
operations (6,590) 11,305 4,715
Interest income 1,198 - 1,198
Interest expense (1,412) - (1,412)
Other income (expense) 13 - 13
Foreign currency loss (1,906) - (1,906)
-------- -------- --------
Income (loss) before income taxes
and discontinued operations (8,697) 11,305 2,608
Provision for income taxes (3,833) - (3,833)
-------- -------- --------
Loss before discontinued
operations (12,530) 11,305 (1,225)
Income (loss) from discontinued
operations 3,868 - 3,868
-------- -------- --------
Net income (loss) $ (8,662) $ 11,305 $ 2,643
======== ======== ========
Basic and diluted income (loss) per
share:
Income (loss) before discontinued
operations $ (0.24) $ (0.02)
Income (loss) from discontinued
operations 0.07 0.07
-------- --------
Basic and diluted income (loss) per
share $ (0.17) $ 0.05
======== ========
HYPERCOM CORPORATION
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
-------------------------------
March 31, 2005
------------------------------
Non-GAAP
(Amounts in thousands, except per share Adjustments
data) GAAP (1) Non-GAAP
--------- ------------ --------
Net revenue:
Product and other $ 43,654 $ 148 $43,802
Services 6,779 - 6,779
-------- ------- -------
Total net revenue 50,433 148 50,581
-------- ------- -------
Costs of revenue:
Product and other 28,609 (2,838) 25,771
Services 5,287 - 5,287
-------- ------- -------
Total costs of revenue 33,896 (2,838) 31,058
-------- ------- -------
Gross profit 16,537 2,986 19,523
-------- ------- -------
Operating expenses:
Research and development 7,258 (456) 6,802
Selling, general and administrative 20,187 (1,673) 18,514
-------- ------- -------
Total operating expenses 27,445 (2,129) 25,316
-------- ------- -------
Income (loss) from continuing
operations (10,908) 5,115 (5,793)
Interest income 557 - 557
Interest expense (174) - (174)
Other expense (45) - (45)
Foreign currency loss (272) - (272)
-------- ------- -------
Income (loss) before income taxes
and discontinued operations (10,842) 5,115 (5,727)
Provision for income taxes (805) (61) (866)
-------- ------- -------
Income (loss) before discontinued
operations (11,647) 5,054 (6,593)
Income (loss) from discontinued
operations 2,007 - 2,007
-------- ------- -------
Net income (loss) $ (9,640) $ 5,054 $(4,586)
======== ======= =======
Three Months Ended
-----------------------------
June 30, 2005
-----------------------------
Non-GAAP
(Amounts in thousands, except per Adjustments
share data) GAAP (1) Non-GAAP
--------- ------------ --------
Net revenue:
Product and other $ 52,852 $ 217 $53,069
Services 7,302 - 7,302
-------- -------- -------
Total net revenue 60,154 217 60,371
-------- -------- -------
Costs of revenue:
Product and other 45,905 (12,357) 33,548
Services 6,516 (930) 5,586
-------- -------- -------
Total costs of revenue 52,421 (13,287) 39,134
-------- -------- -------
Gross profit 7,733 13,504 21,237
-------- -------- -------
Operating expenses:
Research and development 7,592 (580) 7,012
Selling, general and administrative 17,641 (1,964) 15,677
-------- -------- -------
Total operating expenses 25,233 (2,544) 22,689
-------- -------- -------
Income (loss) from continuing
operations (17,500) 16,048 (1,452)
Interest income 637 - 637
Interest expense (209) - (209)
Other expense (14) - (14)
Foreign currency loss (437) - (437)
-------- -------- -------
Income (loss) before income taxes
and discontinued operations (17,523) 16,048 (1,475)
Provision for income taxes (626) - (626)
-------- -------- -------
Income (loss) before discontinued
operations (18,149) 16,048 (2,101)
Income (loss) from discontinued
operations 1,493 - 1,493
-------- -------- -------
Net income (loss) $(16,656) $ 16,048 $ (608)
======== ======== =======
Three Months Ended
------------------------------
September 30, 2005
-------------------------------
(Amounts in thousands, except per Non-GAAP
share data) GAAP Adjustments Non-GAAP
---------- ------------ --------
Net revenue:
Product and other $57,157 $ - $57,157
Services 9,390 - 9,390
------- ------- -------
Total net revenue 66,547 - 66,547
------- ------- -------
Costs of revenue:
Product and other 34,881 - 34,881
Services 6,187 - 6,187
------- ------- -------
Total costs of revenue 41,068 - 41,068
------- ------- -------
Gross profit 25,479 - 25,479
------- ------- -------
Operating expenses:
Research and development 6,296 - 6,296
Selling, general and administrative 15,086 - 15,086
------- ------- -------
Total operating expenses 21,382 - 21,382
------- ------- -------
Income (loss) from continuing
operations 4,097 - 4,097
Interest income 611 - 611
Interest expense (221) - (221)
Other expense (88) - (88)
Foreign currency loss (187) - (187)
------- ------- -------
Income (loss) before income taxes
and discontinued operations 4,212 - 4,212
Provision for income taxes (1,367) - (1,367)
------- ------- -------
Income (loss) before discontinued
operations 2,845 - 2,845
Income (loss) from discontinued
operations 656 - 656
------- ------- -------
Net income (loss) $ 3,501 $ - $ 3,501
======= ======= =======
Three Months Ended
-------------------------------
December 31, 2005
-------------------------------
(Amounts in thousands, except per Non-GAAP
share data) GAAP Adjustments Non-GAAP
---------- ------------ --------
Net revenue:
Product and other $ 57,300 $ - $57,300
Services 10,789 - 10,789
-------- ------- -------
Total net revenue 68,089 - 68,089
-------- ------- -------
Costs of revenue:
Product and other 35,254 (3,847) 31,407
Services 9,452 - 9,452
-------- ------- -------
Total costs of revenue 44,706 (3,847) 40,859
-------- ------- -------
Gross profit 23,383 3,847 27,230
-------- ------- -------
Operating expenses:
Research and development 6,409 (237) 6,172
Selling, general and administrative 19,735 (2,757) 16,978
-------- ------- -------
Total operating expenses 26,144 (2,994) 23,150
-------- ------- -------
Income (loss) from continuing
operations (2,761) 6,841 4,080
Interest income 874 - 874
Interest expense (183) - (183)
Other expense (93) - (93)
Foreign currency loss (401) - (401)
-------- ------- -------
Income (loss) before income taxes
and discontinued operations (2,564) 6,841 4,277
Provision for income taxes (728) (203) (931)
-------- ------- -------
Income (loss) before discontinued
operations (3,292) 6,638 3,346
Income (loss) from discontinued
operations (7,279) - (7,279)
-------- ------- -------
Net income (loss) $(10,571) $ 6,638 $(3,933)
======== ======= =======
Year Ended December 31, 2005
--------------------------------
(Amounts in thousands, except per Non-GAAP
share data) GAAP Adjustments Non-GAAP
---------- ------------ ---------
Net revenue:
Product and other $210,963 $ 365 $211,328
Services 34,260 - 34,260
-------- -------- --------
Total net revenue 245,223 365 245,588
-------- -------- --------
Costs of revenue:
Product and other 144,649 (19,042) 125,607
Services 27,442 (930) 26,512
-------- -------- --------
Total costs of revenue 172,091 (19,972) 152,119
-------- -------- --------
Gross profit 73,132 20,337 93,469
-------- -------- --------
Operating expenses:
Research and development 27,555 (1,273) 26,282
Selling, general and administrative 72,649 (6,394) 66,255
-------- -------- --------
Total operating expenses 100,204 (7,667) 92,537
-------- -------- --------
Income (loss) from continuing
operations (27,072) 28,004 932
Interest income 2,679 - 2,679
Interest expense (787) - (787)
Other expense (240) - (240)
Foreign currency loss (1,297) - (1,297)
-------- -------- --------
Income (loss) before income taxes
and discontinued operations (26,717) 28,004 1,287
Provision for income taxes (3,526) (264) (3,790)
-------- -------- --------
Income (loss) before discontinued
operations (30,243) 27,740 (2,503)
Income (loss) from discontinued
operations (3,123) - (3,123)
-------- -------- --------
Net income (loss) $(33,366) $ 27,740 $ (5,626)
======== ======== ========
(1) Non-GAAP adjustments differ from previously reported amounts as
charges related to the UK Lease Portfolio ($141 during the 2005
first quarter and $749 during the 2005 second quarter) have been
excluded from the Non-GAAP Adjustment column and are now reflected
in the income from discontinued operations line.
HYPERCOM CORPORATION
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
----------------------------------
March 31, 2005
----------------------------------
As Discontinued
(Amounts in thousands, except per Previously Operations
share data) Reported (2) GAAP
------------ ------------ ---------
Net revenue:
Product and other $ 47,752 $(4,098) $ 43,654
Services 6,779 - 6,779
-------- ------- --------
Total net revenue 54,531 (4,098) 50,433
-------- ------- --------
Costs of revenue:
Product and other 30,685 (2,076) 28,609
Services 5,287 - 5,287
-------- ------- --------
Total costs of revenue 35,972 (2,076) 33,896
-------- ------- --------
Gross profit 18,559 (2,022) 16,537
-------- ------- --------
Operating expenses:
Research and development 7,258 - 7,258
Selling, general and administrative 20,603 (416) 20,187
-------- ------- --------
Total operating expenses 27,861 (416) 27,445
-------- ------- --------
Income (loss) from continuing
operations (9,302) (1,606) (10,908)
Interest income 557 - 557
Interest expense (174) - (174)
Other expense (45) - (45)
Foreign currency gain (loss) (270) (2) (272)
-------- ------- --------
Income (loss) before income taxes
and discontinued operations (9,234) (1,608) (10,842)
Provision for income taxes (805) - (805)
-------- ------- --------
Income (loss) before discontinued
operations (10,039) (1,608) (11,647)
Income (loss) from discontinued
operations 399 (1) 1,608 2,007
-------- ------- --------
Net income (loss) $ (9,640) $ - $ (9,640)
======== ======= ========
Three Months Ended
-----------------------------------
June 30, 2005
-----------------------------------
As Discontinued
(Amounts in thousands, except per Previously Operations
share data) Reported (2) GAAP
------------ ------------ ---------
Net revenue:
Product and other $ 56,713 $(3,861) $ 52,852
Services 7,302 - 7,302
-------- ------- --------
Total net revenue 64,015 (3,861) 60,154
-------- ------- --------
Costs of revenue:
Product and other 47,661 (1,756) 45,905
Services 6,516 - 6,516
-------- ------- --------
Total costs of revenue 54,177 (1,756) 52,421
-------- ------- --------
Gross profit 9,838 (2,105) 7,733
-------- ------- --------
Operating expenses:
Research and development 7,592 - 7,592
Selling, general and administrative 17,950 (309) 17,641
-------- ------- --------
Total operating expenses 25,542 (309) 25,233
-------- ------- --------
Income (loss) from continuing
operations (15,704) (1,796) (17,500)
Interest income 637 - 637
Interest expense (209) - (209)
Other expense (14) - (14)
Foreign currency gain (loss) (740) 303 (437)
-------- ------- --------
Income (loss) before income taxes
and discontinued operations (16,030) (1,493) (17,523)
Provision for income taxes (626) - (626)
-------- ------- --------
Income (loss) before discontinued
operations (16,656) (1,493) (18,149)
Income (loss) from discontinued
operations - 1,493 1,493
-------- ------- --------
Net income (loss) $(16,656) $ - $(16,656)
======== ======= ========
Three Months Ended
---------------------------------
September 30, 2005
---------------------------------
As Discontinued
(Amounts in thousands, except per Previously Operations
share data) Reported (2) GAAP
----------- ------------ --------
Net revenue:
Product and other $60,419 $(3,262) $57,157
Services 9,390 - 9,390
------- ------- -------
Total net revenue 69,809 (3,262) 66,547
------- ------- -------
Costs of revenue:
Product and other 37,121 (2,240) 34,881
Services 6,187 - 6,187
------- ------- -------
Total costs of revenue 43,308 (2,240) 41,068
------- ------- -------
Gross profit 26,501 (1,022) 25,479
------- ------- -------
Operating expenses:
Research and development 6,296 - 6,296
Selling, general and administrative 15,374 (288) 15,086
------- ------- -------
Total operating expenses 21,670 (288) 21,382
------- ------- -------
Income (loss) from continuing
operations 4,831 (734) 4,097
Interest income 611 - 611
Interest expense (221) - (221)
Other expense (88) - (88)
Foreign currency gain (loss) (265) 78 (187)
------- ------- -------
Income (loss) before income taxes
and discontinued operations 4,868 (656) 4,212
Provision for income taxes (1,367) - (1,367)
------- ------- -------
Income (loss) before discontinued
operations 3,501 (656) 2,845
Income (loss) from discontinued
operations - 656 656
------- ------- -------
Net income (loss) $ 3,501 $ - $ 3,501
======= ======= =======
Three Months Ended
-------------------------------------
December 31, 2005
-------------------------------------
Before
Discontinued Discontinued
(Amounts in thousands, except per Operations Operations
share data) (3) (3) GAAP
-------------- ------------ ---------
Net revenue:
Product and other $60,434 $(3,134) $ 57,300
Services 10,789 - 10,789
------- ------- --------
Total net revenue 71,223 (3,134) 68,089
------- ------- --------
Costs of revenue:
Product and other 38,713 (3,459) 35,254
Services 9,452 - 9,452
------- ------- --------
Total costs of revenue 48,165 (3,459) 44,706
------- ------- --------
Gross profit 23,058 325 23,383
------- ------- --------
Operating expenses:
Research and development 6,409 - 6,409
Selling, general and
administrative 20,119 (384) 19,735
------- ------- --------
Total operating expenses 26,528 (384) 26,144
------- ------- --------
Income (loss) from continuing
operations (3,470) 709 (2,761)
Interest income 874 - 874
Interest expense (183) - (183)
Other expense (93) - (93)
Foreign currency gain (loss) (362) (39) (401)
------- ------- --------
Income (loss) before income taxes
and discontinued operations (3,234) 670 (2,564)
Provision for income taxes (728) - (728)
------- ------- --------
Income (loss) before discontinued
operations (3,962) 670 (3,292)
Income (loss) from discontinued
operations - (7,279) (7,279)
------- ------- --------
Net income (loss) $(3,962) $(6,609) $(10,571)
======= ======= ========
Year Ended December 31, 2005
------------------------------------
Before
Discontinued Discontinued
(Amounts in thousands, except Operations Operations
per share data) (3) (3) GAAP
------------- ------------ ---------
Net revenue:
Product and other $225,318 $(14,355) $210,963
Services 34,260 - 34,260
-------- -------- --------
Total net revenue 259,578 (14,355) 245,223
-------- -------- --------
Costs of revenue:
Product and other 154,180 (9,531) 144,649
Services 27,442 - 27,442
-------- -------- --------
Total costs of revenue 181,622 (9,531) 172,091
-------- -------- --------
Gross profit 77,956 (4,824) 73,132
-------- -------- --------
Operating expenses:
Research and development 27,555 - 27,555
Selling, general and
administrative 74,046 (1,397) 72,649
-------- -------- --------
Total operating expenses 101,601 (1,397) 100,204
-------- -------- --------
Income (loss) from continuing
operations (23,645) (3,427) (27,072)
Interest income 2,679 - 2,679
Interest expense (787) - (787)
Other expense (240) - (240)
Foreign currency gain (loss) (1,637) 340 (1,297)
-------- -------- --------
Income (loss) before income taxes
and discontinued operations (23,630) (3,087) (26,717)
Provision for income taxes (3,526) - (3,526)
-------- -------- --------
Income (loss) before
discontinued operations (27,156) (3,087) (30,243)
Income (loss) from discontinued
operations 399 (1) (3,522) (3,123)
-------- -------- --------
Net income (loss) $(26,757) $ (6,609) $(33,366)
======== ======== ========
(1) During the 2005 first quarter, the Company recorded income from
discontinued operations principally relating to the release of
excess reserves no longer required due to the expiration of the
indemnification period under a prior purchase and sales agreement
of a discontinued business.
(2) All amounts related to the UK Lease Portfolio have been classified
as discontinued operations and accordingly have been reflected
above as an adjustment to amounts previously reported to arrive at
GAAP amounts.
(3) During the 2005 fourth quarter, the Company made the decision to
sell its UK Lease Portfolio as this leasing business does not
align with the Company's core business. As a result, for the
quarter and year ended December 31, 2005, the Company has provided
a non-GAAP statement of operations "before discontinued
operations" adjusted for the results of the "discontinued
operations" to arrive at the GAAP amounts.
HYPERCOM CORPORATION
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
---------------------------------
March 31, 2004
---------------------------------
As Discontinued
(Amounts in thousands, except per Previously Operations
share data) Reported (1) GAAP
----------- ------------ --------
Net revenue:
Product and other $43,531 $(2,468) $41,063
Services 6,111 - 6,111
------- ------- -------
Total net revenue 49,642 (2,468) 47,174
------- ------- -------
Costs of revenue:
Product and other 24,601 (2,444) 22,157
Services 4,543 - 4,543
Write-off of deferred contract costs - - -
------- ------- -------
Total costs of revenue 29,144 (2,444) 26,700
------- ------- -------
Gross profit 20,498 (24) 20,474
------- ------- -------
Operating expenses:
Research and development 6,825 - 6,825
Selling, general and administrative 14,885 (213) 14,672
------- ------- -------
Total operating expenses 21,710 (213) 21,497
------- ------- -------
Income (loss) from continuing
operations (1,212) 189 (1,023)
Interest income 273 - 273
Interest expense (491) - (491)
Other income (expense) 18 - 18
Foreign currency gain (loss) (732) 119 (613)
------- ------- -------
Income (loss) before income taxes
and discontinued operations (2,144) 308 (1,836)
Provision for income taxes (829) - (829)
------- ------- -------
Income (loss) before discontinued
operations (2,973) 308 (2,665)
Income (loss) from discontinued
operations - (308) (308)
------- ------- -------
Net income (loss) $(2,973) $ - $(2,973)
======= ======= =======
Three Months Ended
------------------------------------
June 30, 2004
------------------------------------
As Discontinued
(Amounts in thousands, except per Previously Operations
share data) Reported (1) GAAP
----------- ------------ ---------
Net revenue:
Product and other $ 55,564 $(2,450) $ 53,114
Services 7,495 - 7,495
-------- ------- --------
Total net revenue 63,059 (2,450) 60,609
-------- ------- --------
Costs of revenue:
Product and other 30,830 (571) 30,259
Services 5,375 - 5,375
Write-off of deferred contract
costs 11,305 - 11,305
-------- ------- --------
Total costs of revenue 47,510 (571) 46,939
-------- ------- --------
Gross profit 15,549 (1,879) 13,670
-------- ------- --------
Operating expenses:
Research and development 6,444 - 6,444
Selling, general and
administrative 16,962 (253) 16,709
-------- ------- --------
Total operating expenses 23,406 (253) 23,153
-------- ------- --------
Income (loss) from continuing
operations (7,857) (1,626) (9,483)
Interest income 221 - 221
Interest expense (445) - (445)
Other income (expense) 2 - 2
Foreign currency gain (loss) (907) 316 (591)
-------- ------- --------
Income (loss) before income taxes
and discontinued operations (8,986) (1,310) (10,296)
Provision for income taxes (1,540) - (1,540)
-------- ------- --------
Income (loss) before discontinued
operations (10,526) (1,310) (11,836)
Income (loss) from discontinued
operations - 1,310 1,310
-------- ------- --------
Net income (loss) $(10,526) $ - $(10,526)
======== ======= ========
Three Months Ended
----------------------------------
September 30, 2004
----------------------------------
As Discontinued
(Amounts in thousands, except per Previously Operations
share data) Reported (1) GAAP
----------- ------------ --------
Net revenue:
Product and other $56,682 $(3,881) $52,801
Services 6,069 - 6,069
------- ------- -------
Total net revenue 62,751 (3,881) 58,870
------- ------- -------
Costs of revenue:
Product and other 33,306 (2,350) 30,956
Services 5,146 - 5,146
Write-off of deferred contract costs - - -
------- ------- -------
Total costs of revenue 38,452 (2,350) 36,102
------- ------- -------
Gross profit 24,299 (1,531) 22,768
------- ------- -------
Operating expenses:
Research and development 6,637 - 6,637
Selling, general and administrative 15,413 (303) 15,110
------- ------- -------
Total operating expenses 22,050 (303) 21,747
------- ------- -------
Income (loss) from continuing
operations 2,249 (1,228) 1,021
Interest income 289 - 289
Interest expense (392) - (392)
Other income (expense) (1) - (1)
Foreign currency gain (loss) (929) 200 (729)
------- ------- -------
Income (loss) before income taxes
and discontinued operations 1,216 (1,028) 188
Provision for income taxes (907) - (907)
------- ------- -------
Income (loss) before discontinued
operations 309 (1,028) (719)
Income (loss) from discontinued
operations - 1,028 1,028
------- ------- -------
Net income (loss) $ 309 $ - $ 309
======= ======= =======
Three Months Ended
----------------------------------
December 31, 2004
----------------------------------
As Discontinued
(Amounts in thousands, except per Previously Operations
share data) Reported (1) GAAP
----------- ------------ --------
Net revenue:
Product and other $72,332 $(5,071) $67,261
Services 7,371 - 7,371
------- ------- -------
Total net revenue 79,703 (5,071) 74,632
------- ------- -------
Costs of revenue:
Product and other 42,296 (2,249) 40,047
Services 5,657 - 5,657
Write-off of deferred contract costs - - -
------- ------- -------
Total costs of revenue 47,953 (2,249) 45,704
------- ------- -------
Gross profit 31,750 (2,822) 28,928
------- ------- -------
Operating expenses:
Research and development 7,282 - 7,282
Selling, general and administrative 19,053 (302) 18,751
------- ------- -------
Total operating expenses 26,335 (302) 26,033
------- ------- -------
Income (loss) from continuing
operations 5,415 (2,520) 2,895
Interest income 415 - 415
Interest expense (84) - (84)
Other income (expense) (6) - (6)
Foreign currency gain (loss) (655) 682 27
------- ------- -------
Income (loss) before income taxes
and discontinued operations 5,085 (1,838) 3,247
Provision for income taxes (557) - (557)
------- ------- -------
Income (loss) before discontinued
operations 4,528 (1,838) 2,690
Income (loss) from discontinued
operations - 1,838 1,838
------- ------- -------
Net income (loss) $ 4,528 $ - $ 4,528
======= ======= =======
Year Ended December 31, 2004
----------------------------------
As Discontinued
(Amounts in thousands, except per Previously Operations
share data) Reported (1) GAAP
----------- ------------ ---------
Net revenue:
Product and other $228,109 $(13,870) $214,239
Services 27,046 - 27,046
-------- -------- --------
Total net revenue 255,155 (13,870) 241,285
-------- -------- --------
Costs of revenue:
Product and other 131,033 (7,614) 123,419
Services 20,721 - 20,721
Write-off of deferred contract costs 11,305 - 11,305
-------- -------- --------
Total costs of revenue 163,059 (7,614) 155,445
-------- -------- --------
Gross profit 92,096 (6,256) 85,840
-------- -------- --------
Operating expenses:
Research and development 27,188 - 27,188
Selling, general and administrative 66,313 (1,071) 65,242
-------- -------- --------
Total operating expenses 93,501 (1,071) 92,430
-------- -------- --------
Income (loss) from continuing
operations (1,405) (5,185) (6,590)
Interest income 1,198 - 1,198
Interest expense (1,412) - (1,412)
Other income (expense) 13 - 13
Foreign currency gain (loss) (3,223) 1,317 (1,906)
-------- -------- --------
Income (loss) before income taxes
and discontinued operations (4,829) (3,868) (8,697)
Provision for income taxes (3,833) - (3,833)
-------- -------- --------
Income (loss) before discontinued
operations (8,662) (3,868) (12,530)
Income (loss) from discontinued
operations - 3,868 3,868
-------- -------- --------
Net income (loss) $ (8,662) $ - $ (8,662)
======== ======== ========
(1) All amounts related to the UK Lease Portfolio have been classified
as discontinued operations and accordingly have been reflected
above as an adjustment to amounts previously reported as GAAP
amounts.
Note 1: Reconciliation of Non-GAAP Measures and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become Presentation This earnings release contains non-GAAP financial measures. For purposes of Regulation G, a non-GAAP financial measure is a numerical numerical expressed in numbers, i.e. Arabic numerals of 0 to 9 inclusive. numerical nomenclature a numerical code is used to indicate the words, or other alphabetical signals, intended. measure of a registrant's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ") in the statement of income, balance sheet, or statement of cash flows (or equivalent statements) of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable GAAP measure. Pursuant to the requirements of Regulation G, the Company has provided a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures. Non-GAAP operating results are presented in the earnings release because management believes that such supplemental information is of interest to its investors to reflect the current period operating results exclusive of material non-recurring items that may not be indicative of our core business operating results. The non-GAAP 2005 results and related non-GAAP adjustments are not intended to be considered in isolation, as a substitute for the actual 2005 results in this earnings release or presented in accordance with GAAP. Management has attempted to use a consistent method from quarter to quarter and year to year when computing computing - computer the non-GAAP financial measures. During the latter part of March 2005, a change in senior management was made at the Company. An interim Chief Executive Officer and interim Chief Financial Officer (collectively "Interim Management") were appointed ap·point tr.v. ap·point·ed, ap·point·ing, ap·points 1. To select or designate to fill an office or a position: appointed her the chief operating officer of the company. 2. to replace the former Chief Executive Officer and Chief Financial Officer. The interim Chief Executive Officer, William Keiper, was appointed as the Company's Chief Executive Officer and President on August 29, 2005 and a new Chief Financial Officer was appointed in October October: see month. 2005. Interim Management commenced a comprehensive review of the Company's financial performance; market strategy; products; product development and life cycle management; and employee, customer and vendor relationships (the "2005 Business Review"). The objective of the 2005 Business Review was to create a plan to improve profitability and customer relations, transition more rapidly to 32-bit technology products, rationalize ra·tion·al·ize v. 1. To make rational. 2. To devise self-satisfying but false or inconsistent reasons for one's behavior, especially as an unconscious defense mechanism through which irrational acts or feelings are made to appear operations and reorganize re·or·gan·ize v. re·or·gan·ized, re·or·gan·iz·ing, re·or·gan·iz·es v.tr. To organize again or anew. v.intr. To undergo or effect changes in organization. the Company's corporate structure. The following table sets forth charges recorded during 2005 in conjunction with the 2005 Business Review (in thousands):
2005 2005 2005 2005
First Second Fourth Full
Quarter Quarter Quarter Year
--------- --------- --------- --------
Revenues and cost of revenues:
Warranty charges and product
return accruals $ 706 $ 6,076 $ 667 $ 7,449
Inventory write-downs,
primarily for product
end-of-life decisions 2,132 7,090 2,888 12,110
One-time termination benefits
and related employment costs 177 292 469
Other 148 161 309
------ ------- -------- -------
Revenues and cost of revenues
total 2,986 13,504 3,847 20,337
------ ------- ------ -------
Operating expenses and income
taxes:
One-time termination benefits
and related employment costs 1,543 2,021 1,349 4,913
Idled lease facility rent charge 1,013 1,013
Other 525 523 429 1,477
------ ------- ------ -------
Operating expenses and income
taxes total 2,068 2,544 2,791 7,403
------ ------- ------ -------
$5,054 $16,048 $6,638 $27,740
====== ======= ====== =======
EBITDA is presented in the earnings release because management believes that it is a commonly used financial measure that is of interest to its investors. The Company defines EBITDA as earnings before interest, income taxes, depreciation, and amortization. EBITDA does not represent cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses , as defined by generally accepted accounting principles in the United States. EBITDA should not be considered as a substitute for net income or loss, or as an indicator Indicator Anything used to predict future financial or economic trends. Notes: In the context of technical analysis, an indicator is a mathematical calculation based on a securities price and/or volume. The result is used to predict future prices. of operating performance or whether cash flows will be sufficient to fund cash needs. Below is a reconciliation of the loss before taxes and discontinued operations to EBITDA from continuing operations (amounts in thousands and unaudited):
Three Months Ended Year Ended
December 31, December 31,
------------------ ------------------
2005 2004 2005 2004
--------- ------- -------- -------
EBITDA from continuing operations:
Income (loss) before income taxes
and discontinued operations $(2,564) $ 3,247 $(26,717) $(8,697)
Depreciation and amortization 2,417 2,105 7,890 8,007
Interest, net (691) (331) (1,892) 214
------- ------- -------- -------
EBITDA from continuing operations $ (838) $ 5,021 $(20,719) $ (476)
======= ======= ======== =======
Note 2: Reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. of Discontinued Operations This press release also includes the consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: operating results adjusted for the discontinued operations of the Company's UK based leasing business to arrive at the GAAP amounts. This non-GAAP information is presented in the press release because management believes that it is of interest to its investors. The reclassification of the discontinued operations amounts into the natural income statement accounts is not a GAAP measure and should not be considered a substitute for the actual 2005 and 2004 results in this earnings release or presented in accordance with GAAP. |
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