Paradyne Reports Second Quarter Financial Performance; Exceeds Revenue and EPS Guidance.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. -- Paradyne (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 :PDYN), a leading provider of triple play 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). loop carriers (BLCs) and 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 equipment, today announced second quarter financial results for the period ended June 30, 2005. Highlights for the quarter include: --Second quarter revenue of $28 million exceeded guidance and Street expectation --Second quarter GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. is two cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. ; Non-GAAP EPS is three cents per share --Paradyne shipped to more than 262 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 customers in the quarter, including 23 new DSL customers "I am pleased to report that Paradyne had an outstanding second quarter," said Sean Belanger, president and 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. of Paradyne. "Our second quarter results reflect new customers, continued innovations in our products, and the full integration of Net to Net products into our manufacturing facilities, which has helped to increase our gross margin as a percent of revenue to over 41 percent." Paradyne reported second quarter net income of $.8 million representing two cents 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 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 (GAAP), compared with GAAP results of one cent per diluted share for the second quarter of 2004. For the second quarter, the Company reported non-GAAP net income of $1.3 million, representing non-GAAP diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of three cents, outperforming the non-GAAP one cent loss per diluted share as reflected in the guidance and Street consensus. The three cents non-GAAP diluted earnings per share compares with non-GAAP earnings per diluted share of two cents for the second quarter of 2004. Reconciliations between GAAP and non-GAAP results and earnings per share are provided in tables immediately following the Consolidated Statement of Operations See Income statement. . Paradyne's cash position remains healthy at $42.7 million, and the Company is debt free. Product shipment highlights include: --Total DSLAMs shipped exceeded 3,100 units in the second quarter of 2005 compared to 2,000 DSLAMs shipped in the second quarter of 2004. --Shipments of standards-based ADSL See DSL. ADSL - Asymmetric Digital Subscriber Line grew to 144,000 ports shipped in the second quarter of 2005, up 58 percent from approximately 91,500 ports shipped in the second quarter of 2004. Of the second quarter 2005 ADSL port shipments, 113,000 ports were ADSL2+. --Standards-based ADSL endpoint shipments exceeded 44,000 units in the second quarter of 2005, up from approximately 25,900 shipped in the same period one year ago. --Shipments of ReachDSL modems and Paradyne's ADSL/R combination modems supporting both standards-based ADSL and ReachDSL, combined for a total of more than 41,800 units shipped in the second quarter of 2005; an increase of 47 percent from the second quarter of 2004. Second Quarter Results Conference Call and Webcast As previously announced, Paradyne will host a conference call on Wednesday, July 20, 2005 at 6:30 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 second quarter 2005 results. The call will be broadcast live on the Internet for investors and the general public. This listen-only webcast can be accessed through the investor relations Investor relations The process by which the corporation communicates with its investors. page of the Paradyne website, http://www.paradyne.com. Participants should go to the website 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 706-634-1225. An audio replay of the call will be available through July 30, 2005. To access the replay use Conference ID # 7858901. About Paradyne Paradyne provides a broad family of IP-based broadband access See broadband and wireless broadband. solutions, including BLCs, DSLAMs, Ethernet in the First Mile Ethernet in the First Mile (EFM), also known as IEEE 802.3ah, is a collection of protocols specified in IEEE 802.3, defining the Ethernet in the Access networks, i.e. First/Last Mile. bonded solutions, IADs, and CPE (Customer Premises Equipment) Communications equipment that resides on the customer's premises. CPE - Customer Premises Equipment . Paradyne's products support both residential triple play solutions and business class bonded g.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 , ADSL2+ and T1/E1 solutions for LAN (Local Area Network) A communications network that serves users within a confined geographical area. The "clients" are the user's workstations typically running Windows, although Mac and Linux clients are also used. extension and cell site data backhaul applications. Paradyne's solutions are designed to enhance carrier revenue streams with full support for Multimedia Traffic Management (MTM MTM Medication Therapy Management MTM Minutes to Midnight (Linkin Park album) MTM Mary Tyler Moore (actress) MTM Made to Measure MTM Motoren-Technik-Mayer MTM Methods Time Measurement ) and to lower carrier operational expenses through Operational Intelligence (OpIQ). As previously announced, Paradyne and Zhone Technologies, Inc. have entered into a merger agreement. The transaction is subject to the approvals of both company's stockholders and other closing conditions and is expected to close in the fall of 2005. 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: risks associated with the proposed acquisition of Paradyne by Zhone Technologies, Inc.; 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 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. , dated March 16, 2005, the Registration Statement of Zhone Technologies, Inc. on Form S-4, dated July 15, 2005 (which includes a preliminary proxy statement Proxy Statement A document containing the information that a company is required by the SEC to provide to shareholders so they can make informed decisions about matters that will be brought up at an annual stockholder meeting. of Paradyne), and in Paradyne's other filings with the Securities and Exchange Commission. Editors Note: Paradyne and the Paradyne Logo are registered trademarks of Paradyne Corporation.
Paradyne Networks, Inc.
Condensed Unaudited Consolidated Statements of Operations
(Thousands except per share amounts)
Three months Ended Six months Ended
June 30, June 30,
2005 2004 2005 2004
Revenues:
Sales $26,744 $22,757 $52,228 $43,572
Services 1,247 1,489 2,447 2,971
Royalties 2 0 12 0
--------- -------- -------- --------
Total Revenues 27,993 24,246 54,687 46,543
Total cost of sales 16,391 14,246 33,188 27,326
--------- -------- -------- --------
Gross Margin 11,602 10,000 21,499 19,217
Operating expenses:
Research and development (a) 4,359 3,724 8,629 7,506
Selling, general &
administrative (a) 6,263 5,382 12,493 11,203
Amortization of intangible asset 515 305 1,031 609
Business restructuring charges 0 0 0 269
Other operating income, net 0 0 (765) 0
--------- -------- -------- --------
Total operating expenses 11,137 9,411 21,388 19,587
--------- -------- -------- --------
Operating Income (Loss) 465 589 111 (370)
Other (income) expenses:
Interest, net (302) (135) (547) (262)
Other, net (21) 44 (66) (1)
--------- -------- -------- --------
Income (loss) before provision
for income tax 788 680 724 (107)
Provision (benefit) for income
tax 0 0 0 0
--------- -------- -------- --------
Net income (loss) $788 $680 $724 ($107)
========= ======== ======== ========
Average shares outstanding
Basic 46,790 45,195 46,700 44,998
Diluted 47,263 49,550 47,842 44,998
Earnings per common share
Basic 0.02 0.02 0.02 (0.00)
Diluted 0.02 0.01 0.02 (0.00)
Non-GAAP diluted shares 47,263 49,550 47,842 49,047
Non-GAAP diluted net income
(loss) per share (1) $0.03 $0.02 $0.04 $0.02
(a) Amounts include stock-based compensation as follows:
Research and development $18 $22 $36 $46
Selling, general and
administrative 15 15 30 30
--------- -------- -------- --------
$33 $37 $66 $76
--------- -------- -------- --------
Paradyne Networks, Inc.
Footnote To Condensed Unaudited Consolidated Statements of Operations
(Thousands except per share amounts)
(1) Reconciliation of Earnings and Earnings Per Share Following
Generally Accepted Accounting Principles With Non-GAAP Financial
Measures (Non-GAAP Earnings and Non-GAAP Earnings Per Share)
Management believes that presenting non-GAAP earnings and non-GAAP earnings per share is useful to investors in addition to the GAAP measures because the non-GAAP measures help investors understand operating results and make comparisons with prior periods. Management believes that excluding each of the below adjustments in calculating non-GAAP results is helpful to investors in comparing the operations of the core business between periods. In addition to providing investors with a helpful comparison, management believes that: --excluding the amortization of deferred stock compensation is helpful because it is a non-cash item; --excluding the amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. is helpful because it is non-cash and the intangible asset is not expected to be replaced when fully amortized (as might a depreciable depreciable Of, relating to, or being a long-term tangible asset that is subject to depreciation. asset); and --excluding the business 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. is useful because while the category of expense recurs, including such expenditures may actually distort the comparability of expenses from period to period. Paradyne's management uses non-GAAP measures internally to evaluate the Company's net income and operating performance of the core business on a period-over-period basis, and for planning and forecasting future periods. Management does not consider the amortization of deferred stock compensation and intangible assets in its review of the business. Additionally, while management constantly reviews the structure of the business to assure it is properly and efficiently operating, once changes are made, there is no value in comparing restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). costs from period to period. The value is only in reviewing the expected operating results after making a restructuring change. In order to calculate non-GAAP earnings per share, the Company may also need to calculate non-GAAP diluted shares. Whenever the Company has a net loss, both basic and diluted shares will be the same because the effect of increasing the number of shares for dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. would be to decrease the loss per share (which would be anti-dilutive), since the calculation is net loss divided by the number of shares. When transactions are excluded in computing computing - computer non-GAAP earnings, in some cases, the exclusion can result in changing a net loss to net income. When this happens, increasing the share count will reduce earnings per share. Therefore, when the Company excludes transactions from its GAAP net loss resulting in non-GAAP net income, the Company calculates non-GAAP diluted shares by increasing the share count by the dilutive effect Dilutive effect Result of a transaction that decreases earnings per common share (EPS). of stock options.
Reconciliation of GAAP Earnings to Non-GAAP Earnings
Three months Ended Six months Ended
June 30, June 30,
2005 2004 2005 2004
Net income (loss), as reported $788 $680 $724 $(107)
Increase to net income:
Exclusion of amortization of
deferred stock compensation and
intangible assets 548 342 1,097 685
Exclusion of business
restructuring charges - - - 269
-------- -------- ------- --------
Adjustment to net income (loss) 548 342 1,097 954
-------- -------- ------- --------
Non-GAAP net income $1,336 $1,022 $1,821 $847
======== ======== ======= ========
Reconciliation of GAAP Earnings Per Share to Non-GAAP Earnings Per
Share
Three months Ended Six months Ended
June 30, June 30,
2005 2004 2005 2004
Diluted net income (loss) per
share, as reported $0.02 $0.01 $0.02 $(0.00)
Exclusion of amortization of
deferred stock compensation &
intangible asset 0.01 0.01 0.02 0.01
Exclusion of business
restructuring charges - - - 0.01
-------- ---------------- --------
Adjustment to net income (loss) 0.01 0.01 0.02 0.02
-------- -------- ------- --------
Non-GAAP diluted net income per
share $0.03 $0.02 $0.04 $0.02
======== ======== ======= ========
Reconciliation of Average Shares Outstanding with Non-GAAP Diluted
Shares (Thousands of Shares)
Three months Ended Six months Ended
June 30, June 30,
2005 2004 2005 2004
Average shares outstanding 46,790 45,195 46,700 44,998
Dilutive effect of stock options 473 4,355 1,142 4,049
-------- -------------------------
Non-GAAP diluted shares 47,263 49,550 47,842 49,047
======== =========================
Paradyne Networks, Inc.
Condensed Unaudited Consolidated Balance Sheets
(In Thousands)
June 30, December 31,
ASSETS 2005 2004
-------------- --------------
CURRENT ASSETS:
Cash and cash equivalents $42,714 $43,832
Accounts receivables, net 16,239 16,904
Inventories, net 20,067 17,193
Prepaid & other current assets 1,699 1,246
-------------- --------------
Total current assets 80,719 79,175
Property, plant & equipment, net 2,644 3,495
Intangible assets, net 6,130 7,160
Other assets 463 471
-------------- --------------
Total assets $89,956 $90,301
============== ==============
Research and development (a)
Selling, general & administrative (a)
Accounts payable $6,640 $7,296
Payroll & benefit related liabilities 1,454 2,214
Other current liabilities 6,609 6,826
-------------- --------------
Total current liabilities 14,703 16,336
-------------- --------------
Total liabilities 14,703 16,336
Stockholders' equity 75,253 73,965
-------------- --------------
Total liabilities and
stockholders' equity $89,956 $90,301
============== ==============
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