Paradyne Reports Second Quarter 2003 Results.Business Editors/High-Tech Writers LARGO Largo, town (1990 pop. 65,674), Pinellas co., W Fla., on the Pinellas peninsula and the Gulf Coast, across the bay from Tampa; settled 1853, inc. 1905. It is a packing, canning, and shipping center in a citrus fruit and fishing area. , Fla.--(BUSINESS WIRE)--July 16, 2003 Paradyne Networks, Inc. (Nasdaq:PDYN), a leading provider of 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). voice, data and video network access solutions, today reported its second quarter 2003 financial results. Paradyne's 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 second quarter of 2003 was ($3.6 million) or ($0.08) 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, matching the First Call consensus estimates. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). net loss reported for the second quarter of 2003 was ($4.9 million) or ($0.11) per diluted share. The primary differences between pro forma and GAAP results were the business restructuring charge 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 $1.7 million, and the exclusion from the pro forma loss of the positive product margin of $.7 million generated from inventory reserve reversals upon the sale of previously written off inventory. Total revenues for the second quarter were $19.5 million with broadband revenues representing the major portion of total revenues at $15.3 million or 78 percent. Narrowband In communications, transmission rates up to T1 speeds (1.544 Mbps). The upper limit is moving target. At one time, narrowband meant 150 bps (that is 150 bits per second!). Then, the upper limit became 2,400 bps. Later, it moved to 64 Kbps. Contrast with wideband and broadband. revenues were $1.7 million, and service and royalties accounted for the remaining $2.5 million. Paradyne's cash position remained strong at $44.5 million at the end of the second quarter. Highlights for the second quarter include: -- Paradyne shipped approximately 8,400 ReachDSL(TM) endpoints, over 5,500 ADSL/R endpoints, and over 8,000 ReachDSL DSLAM (DSL Access Multiplexor) A central office (CO) device for ADSL service that intermixes voice traffic and DSL traffic onto a customer's DSL line. It also separates incoming phone and data signals and directs them onto the appropriate carrier's network. See DSL. ports, bringing the total to over 385,000 endpoints and over 428,000 ReachDSL CO ports shipped worldwide. -- Paradyne shipped over 20,000 ADSL See DSL. ADSL - Asymmetric Digital Subscriber Line ports in Q2, up from approximately 9,000 in Q1. This increase is a reflection of the success of Paradyne's new product strategy. -- Paradyne shipped over 770 DSLAMs in the quarter, bringing the total number of our DSLAMs in the marketplace to over 32,900 representing over 5 million ports of capacity in the field. -- Paradyne introduced the GranDSLAM 4200IP, a 1U DSLAM that provides enough bandwidth to sustain at least 3 streams of MPEG (Moving Pictures Experts Group) An ISO/ITU standard for compressing digital video. Pronounced "em-peg," it is the universal standard for digital terrestrial, cable and satellite TV, DVDs and digital video recorders (DVRs). 2 video, voice and data to each subscriber. The 4200IP DSLAM supports the multicast (1) To transmit data to multiple recipients on the network at the same time using one transmission stream to the switches, at which point data are distributed out to the end users on separate lines. features required to efficiently support broadcast video. -- Paradyne introduced the GranDSLAM 8820 Tsunami Platform, a standards-based, carrier class, scalable, high-capacity multi-service DSLAM that supports the widest range of 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 technologies in the industry, including ADSL2+, ReachDSL, SHDSL SHDSL Single-Line High-bit-rate Digital Subscriber Line SHDSL Symmetrical High-Density Digital Subscriber Line SHDSL Symmetrical High Bitrate Digital Subscriber Line (Ericsson) SHDSL Symmetrical Highspeed Digital Subscriber Loop , and TDM (Time Division Multiplexing) A technology that transmits multiple signals simultaneously over a single transmission path. Each lower-speed signal is time sliced into one high-speed transmission. SHDSL as well as T1/E1 termination. This product puts Paradyne in a competitive position with any DSL offering in the world. -- Paradyne introduced the CPX-1000MG, a multi-service media gateway for carriers, supporting VoIP, ATM, and TDM in the same chassis Pronounced "chah-see," it is a physical structure that holds everything or that everything is attached to. A computer's cabinet is often called the chassis. . -- Paradyne introduced the PacketSurfer(TM) media gateway, a low cost multi-service gateway platform designed for carriers and large enterprises. The PacketSurfer is focused on Voice over IP and complements the larger CPX-1000MG media gateway solution. -- Paradyne launched the iMarc(TM) Series of IP Products. iMarc products include a wide range of IP, frame relay A high-speed packet switching protocol used in wide area networks (WANs). Providing a granular service of up to DS3 speed (45 Mbps), it has become popular for LAN to LAN connections across remote distances, and services are offered by most major carriers. , and ATM aware WAN endpoints. The iMarc product suite is made up of intelligent network demarcation devices including routers, DSU/CSUs, and in-line In-line Used in the context of general equities. (1) An order or market in a specific security within the inside market; 2) any announcement (earnings) that adheres closely to Wall Street analysts' expectations. monitoring devices. -- Paradyne hosted a private suite during SuperComm and showcased live demonstrations of its video, voice and data solutions using the GranDSLAM(R), BitStorm(TM), iMarc and Jetstream(R) products portfolios. Additionally, Paradyne hosted a seminar focused on IP Video with presentations from our video solution partners. -- Paradyne announced a strategic alliance with SkyStream Networks, a leading provider of advanced video networking solutions, and VideoTele.com, a leader in delivering digital TV over xDSL. -- Paradyne exhibited at HITEC HITEC Highway Innovative Technology Evaluation Center , a technology tradeshow for the hospitality industry in New Orleans New Orleans (ôr`lēənz –lənz, ôrlēnz`), city (2006 pop. 187,525), coextensive with Orleans parish, SE La., between the Mississippi River and Lake Pontchartrain, 107 mi (172 km) by water from the river mouth; founded , during June. Paradyne showcased its BitStorm(TM) product portfolio through video and high-speed Internet See broadband. Access solutions demonstrations. -- Paradyne announced its selection by Adam's Mark Adam's Mark is a chain of five upscale hotels in the United States. The chain was founded in the early 1970s by Fred Kummer and the chain is currently owned by HBE, Inc., which was also founded by Kummer. Hotels as the preferred DSL vendor. The BitStorm 4800 DSLAM has been deployed into 5 different Adam's Mark properties to date. Adam's Mark is planning to introduce the BitStorm DSLAM into several additional properties in the coming months. -- Paradyne announced The CPX-1000MG has been selected for deployment by Lightship lightship, moored vessel bearing lights and other signal devices to guide ships and warn of hazards to navigation. Lightships are generally stationed at points where a lighthouse cannot be erected; they are given distinctive features (e.g. Telecom, a provider of bundled telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. solutions to business customers in the Northeastern 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. . Deployment of the Jetstream-enabled services is slated to commence this summer. Second Quarter Results Conference Call and Webcast As previously announced, Paradyne will host a conference call on Thursday, July 17, 2003 at 9:00 a.m. (ET) to discuss second quarter 2003 results and its outlook for the third quarter of 2003. The call will be broadcast live on the 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 for investors and the general public. This listen-only Webcast can be accessed through the Company section of the Paradyne Web site (http://www.paradyne.com/corporate_info). Participants should go to the Web site at least ten minutes before this event to 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. Or, participants may dial into the call at 706-634-6062. About Paradyne Paradyne is a leading developer of carrier-class, high-speed network access solutions for broadband voice, data and video. A recognized market leader in digital subscriber line See DSL. (communications, protocol) Digital Subscriber Line - (DSL, or Digital Subscriber Loop, xDSL - see below) A family of digital telecommunications protocols designed to allow high speed data communication over the existing copper telephone lines between end-users and (DSL), service level management (SLM See service level management system and spatial light modulator. ), and Broadband Voice and Media Gateway solutions, Paradyne markets its award-winning GranDSLAM and BitStorm DSL systems, ReachDSL and EtherLoop(R) products, Jetstream Media Gateway systems and iMarc/FrameSaver(R) Service Level Management systems to service providers and business customers worldwide. More information may be obtained by visiting http://www.paradyne.com or by calling +1-727-530-8623. Information about 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 contains forward-looking statements that involve a number of risks and uncertainties. These forward-looking statements are made pursuant to the "safe-harbor" provisions of 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 and are made based on management's current expectations and beliefs as well as on assumptions made by, and information currently available to, management. Among the factors that could cause actual future events to differ materially include: the uncertainty regarding the acceptance of new telecommunications services In telecommunication, the term telecommunications service has the following meanings: 1. Any service provided by a telecommunication provider. 2. based on DSL technology; reduction or discontinuation dis·con·tin·u·a·tion n. A cessation; a discontinuance. Noun 1. discontinuation - the act of discontinuing or breaking off; an interruption (temporary or permanent) discontinuance of purchase of our products by NSPs; the failure of NSPs to incorporate our products into their infrastructure; the possibility that Paradyne's competitors may develop competing products that are superior in terms of quality, cost or both. For a detailed discussion of other risk factors that could affect Paradyne's business, please refer to the risks identified in Paradyne's Current Report on Form 10-K/A, dated March 24, 2003, and in Paradyne's other filings with the Securities and Exchange Commission. Editor's Note Editor's Note (foaled in 1993 in Kentucky) is an American thoroughbred Stallion racehorse. He was sired by 1992 U.S. Champion 2 YO Colt Forty Niner, who in turn was a son of Champion sire Mr. Prospector and out of the mare, Beware Of The Cat. Trained by D. : BitStorm, iMarc, PacketSurfer and ReachDSL are trademarks of Paradyne Corporation. EtherLoop, FrameSaver, GranDSLAM, Jetstream, Paradyne, and the Paradyne logo are registered trademarks of Paradyne Corporation. All other service marks and trademarks are the property of their respective owners.
Paradyne Networks, Inc.
Condensed Unaudited Consolidated Statements of Operations
(Thousands except per share amounts)
Three months Ended Six months Ended
June 30, June 30,
2003 2002 2003 2002
Revenues:
Sales $16,966 $25,429 $34,700 $62,452
Services 1,749 1,112 3,313 2,141
Royalties 800 191 800 697
-------- -------- -------- --------
Total Revenues 19,515 26,732 38,813 65,290
Total cost of sales 10,163 11,421 19,728 32,790
-------- -------- -------- --------
Gross Margin 9,352 15,311 19,085 32,500
Operating expenses:
Research and development
(includes $2,830 of purchased
R&D in March 2002) 5,597 6,525 11,206 14,669
Selling, general & administrative 6,695 9,484 13,945 17,356
Amortization of deferred stock
compensation and intangible asset 374 428 797 615
Business restructuring charges 1,742 0 1,742 1,011
-------- -------- -------- --------
Total operating expenses 14,408 16,437 27,690 33,651
-------- -------- -------- --------
Operating Income (Loss) (5,056) (1,126) (8,605) (1,151)
Other (income) expenses:
Interest, net (162) (263) (316) (413)
Other, net 48 (137) 141 (76)
-------- -------- -------- --------
Income (loss) before provision
for income tax (4,942) (726) (8,430) (662)
Provision (benefit) for income tax 0 0 0 (859)
-------- -------- -------- --------
Net income (loss) ($4,942) ($726) ($8,430) $197
======== ======== ======== ========
Average shares outstanding
Basic 43,121 42,252 42,992 39,206
Diluted 43,121 42,252 42,992 41,649
Earnings per common share
Basic (0.11) (0.02) (0.20) 0.01
Diluted (0.11) (0.02) (0.20) 0.00
Pro forma diluted net income
(loss) per share (A) ($0.08) ($0.07) ($0.17) $0.02
Paradyne Networks, Inc.
Footnote To Condensed Consolidated Statements of Operations
(Thousands except per share amounts)
(Unaudited)
(A) Reconciliation of Earnings Following Generally Accepted
Accounting Principles (GAAP) With Non-GAAP Financial Measures
(Pro Forma Earnings)
Paradyne supplements its earnings releases provided in accordance
with generally accepted accounting principles, with non-GAAP financial
measures that exclude those transactions that management does not
reasonably expect to be part of recurring business transactions over
the long term. Paradyne's management believes the pro forma
information provides investors useful information to understand
operating results and make comparisons with prior periods. Paradyne's
management uses such pro forma measures internally, to evaluate the
company's net income and operating performance on a period-over-
period basis, and for planning and forecasting future periods.
Pro forma diluted net income (loss) per share calculations exclude
the elimination of positive margin generated from the reversal of
inventory reserves, the financial statement impact of the writeoff of
purchased research and development related to the acquisition of
Elastic Networks Inc., the amortization of deferred stock compensation
and intangible assets, business restructuring charges and tax benefit
from the Job Creation and Worker Assistance Act of 2002.
Three months Ended Six months Ended
June 30, June 30,
2003 2002 2003 2002
Net income (loss) before excluding
items to normalize results ($4,942) ($726) ($8,430) $197
Increase (decrease) to net income:
Elimination of positive margin
generated from the reversal of
inventory reserves (732) (2,825) (1,475) (2,825)
Exclusion of writeoff of
purchased research and
development 2,830
Exclusion of amortization of
deferred stock compensation
& intangible assets 374 428 797 615
Exclusion of business
restructuring charges 1,742 1,742 1,011
Exclusion of tax benefit (859)
-------- -------- -------- --------
Adjustment to net income (loss) 1,384 (2,397) 1,064 772
Pro Forma net income (loss) $(3,558) $(3,123) $(7,366) $969
======== ======== ======== ========
Paradyne Networks, Inc.
Condensed Unaudited Consolidated Balance Sheets
(In Thousands)
June 30, Dec. 31,
2003 2002
ASSETS -------- --------
CURRENT ASSETS:
Cash and cash equivalents $44,538 $47,706
Accounts receivables, net 8,493 13,072
Inventories, net 16,952 16,661
Prepaid & other current assets 1,318 2,896
-------- --------
Total current assets 71,301 80,335
Property plant & equipment, net 7,884 10,396
Other assets 5,824 6,525
-------- --------
Total assets $85,009 $97,256
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $4,366 $6,333
Current portion of debt 130 396
Payroll & benefit related liabilities 2,463 3,445
Other current liabilities 7,494 9,087
-------- --------
Total current liabilities 14,453 19,261
-------- --------
Total liabilities 14,453 19,261
Stockholders' equity 70,556 77,995
-------- --------
Total liabilities and stockholders' equity $85,009 $97,256
======== ========
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