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Harmonic Announces Fourth Quarter and Year Ended 2012 Results


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2013-01-29 22:05:41 -

Harmonic Announces Fourth Quarter and Year Ended 2012 Results
                $75 Million Expansion of Share Repurchase Plan

SAN  JOSE,  Calif.  -  January  29, 2013 --  Harmonic  Inc.  (NASDAQ: HLIT), the
worldwide   leader   in  video  delivery  infrastructure,  announced  today  its
preliminary and unaudited results for the fourth quarter and year ended 2012.

Net  revenue for  the fourth  quarter of  2012 was $133.4 million, compared with
$136.7  million for the third quarter of  2012 and $143.6 million for the fourth
quarter  of  2011.  For  the  full 
year 2012, net revenue was $530.5 million, compared with $549.3 million for 2011. The company reported GAAP net income for the fourth quarter of 2012 of $4.8 million, or $0.04 per diluted share, compared with a GAAP net loss for the third quarter of 2012 of $8.2 million, or $(0.07) per share, and GAAP net income of $4.3 million, or $0.04 per diluted share, in the fourth quarter of 2011. For the full year 2012, GAAP net loss was $10.9 million, or $(0.09) per share, compared to net income of $8.8 million, or $0.08 per diluted share, for 2011. Non-GAAP net income for the fourth quarter of 2012 was $10.8 million, or $0.09 per diluted share, compared with $8.1 million, or $0.07 per diluted share, for the third quarter of 2012, and $14.0 million, or $0.12 per diluted share, for the fourth quarter of 2011.  For the full year 2012, non-GAAP net income was $29.3 million, or $0.25 per diluted share, compared with $47.5 million, or $0.41 per diluted share, for 2011. See "Use of Non-GAAP Financial Measures" and "GAAP to Non-GAAP Net Income (Loss) Reconciliation" below. Harmonic reported GAAP gross margins of 49% and GAAP operating margins of 2% for the fourth quarter of 2012, compared to 47% and 5%, respectively, for the same period of 2011. Non-GAAP gross margins were 53% and non-GAAP operating margins were 11% for the fourth quarter of 2012, compared to 51% and 13%, respectively, for the same period of 2011. As of December 31, 2012, the company had cash, cash equivalents and short-term investments of $201.2 million, an increase from $192.0 million as of September 28, 2012.  In the fourth quarter, the company generated approximately $20.6 million of cash from operations, and used approximately $8.3 million to repurchase 1.86 million shares of common stock under its previously announced share repurchase program. The company also announced it will expand its existing share repurchase program by $75 million. "During the fourth quarter we delivered our highest-ever revenue from international markets and our highest-ever gross margins, benefiting from the expansion of our global customer base and particularly strong demand for software products and follow-on licenses," said Patrick Harshman, President and Chief Executive Officer.  "This progress has been against a backdrop of slower customer spending in US cable and European markets, and reflects Harmonic's increasingly strong competitive position and expanding market share. During the fiscal year we generated a record level of cash and initiated a stock buyback program that we are now significantly expanding. "Looking ahead, while we do not expect an immediate reversal of macro-economic and customer investment trends, the recent CES event makes clear that new waves of investment in video infrastructure are coming. Harmonic is in the pole position to take advantage of these transformational market trends as they unfold over the next 18 months, and we will press our competitive advantage and continue to invest in new growth initiatives, including emerging market expansion, Converged Cable Access Platform, new High Efficiency Video Codec technology, and new UltraHD technology." Business Outlook Harmonic anticipates net revenue in the range of $115 million to $125 million for the first quarter of 2013.  GAAP gross margins and operating expenses for the first quarter of 2013 are expected to be in the range of 43% to 45% and $62 million to $63 million, respectively.  Non-GAAP gross margins and operating expenses for the first quarter of 2013, which will exclude stock-based compensation and the amortization of intangibles, are anticipated to be in the range of 49% to 50% and $56 million to $57 million, respectively. Conference Call Information Harmonic will host a conference call to discuss its financial results at 2:00 p.m. Pacific (5:00 p.m. Eastern) on Tuesday, January 29, 2013. A listen-only broadcast of the conference call can be accessed either from the company's website at www.harmonicinc.com or by calling +1.847. 944.7317 or +1.866.297.6395 (passcode 33961615). The replay will be available after 6:00 p.m. Pacific at the same website address or by calling +1.630.652.3042 or +1.888.843.7419 (passcode 33961615#). About Harmonic Inc. Harmonic (NASDAQ: HLIT) is the worldwide leader in video delivery infrastructure for emerging television and video services. The company's production-ready innovation enables content and service providers to efficiently create, prepare, and deliver differentiated services for television and new media video platforms. More information is available at www.harmonicinc.com. Legal Notice Regarding Forward-Looking Statements This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements related to our expectations regarding: our final results for the fourth quarter and year ended December 31,, 2012; the expansion of our stock repurchase program; our strategic emphasis on expanding our global customer base; our increasingly strong competitive position and market share; any immediate reversal of macro-economic and customer investment trends; new waves of investment in video infrastructure; our positioning to take advantage of transformational market trends; our continuing press of our competitive advantage; our continuing investment in new growth initiatives, respecting both geographic markets and new products; and  net revenue, GAAP gross margins, GAAP operating expenses, non-GAAP gross margins and non-GAAP operating expenses for the first quarter of 2013. Our expectations regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include the possibility, in no particular order, that: the trends toward more high-definition, on-demand and anytime, anywhere video will not continue to develop at its current pace or will expire; the possibility that our products will not generate sales that are commensurate with our expectations or that our cost of revenue or operating expenses may exceed our expectations; the mix of products and services sold in various geographies and the effect it has on gross margins; delays or decreases in capital spending in the cable, satellite and telco and broadcast and media industries; customer concentration and consolidation; the impact of general economic conditions, including as a result of recent turmoil in the global financial markets, particularly in Europe, on our  sales and operations; our ability to develop new and enhanced products in a timely manner and market acceptance of new or existing Harmonic products; losses of one or more key customers; risks associated with Harmonic's international operations; dependence on market acceptance of several broadband services, on the adoption of new broadband technologies and on broadband industry trends;   inventory management; the lack of timely availability of parts or raw materials necessary to produce our products; the impact of increases in the prices of raw materials and oil; the effect of competition, on both revenue and gross margins; difficulties associated with rapid technological changes in Harmonic's markets; risks associated with unpredictable sales cycles; our dependence on contract manufacturers and sole or limited source suppliers; the effect on Harmonic's business of natural disasters;  the risks that our international sales and support center will not provide the operational or tax benefits that we anticipate or that its expenses exceed our plans; and the risk that our stock repurchase program will not result in material purchases of our common stock The forward-looking statements contained in this press release are also subject to other risks and uncertainties, including those more fully described in Harmonic's filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2011, our Quarterly Report on Form 10-Q for the quarter ended September 28, 2012, and our Current Reports on Form 8-K. The forward-looking statements in this press release are based on information available to the Company as of the date hereof, and Harmonic disclaims any obligation to update any forward-looking statements.   Harmonic Inc.   Condensed Consolidated Balance Sheets   (Unaudited)     December 31, 2012   December 31, 2011 ------------------------- -------------------------     (In thousands)   ASSETS   Current assets:   Cash and cash equivalents  $             96,670    $            90,983   Short-term investments               104,506                  70,854   Accounts receivable, net                 85,920                109,886   Inventories                 64,270                  70,649   Deferred income taxes                 21,870                  28,032 Prepaid expenses and other   current assets                 23,636                  21,474 ------------------------- -------------------------   Total current assets               396,872                391,878 Property and equipment,   net                 38,122                  40,469 Goodwill, intangibles and   other assets               282,537                301,819 ------------------------- -------------------------   Total assets  $           717,531    $          734,166 ------------------------- ------------------------- LIABILITIES AND   STOCKHOLDERS' EQUITY   Current liabilities:   Accounts payable  $             25,447    $            30,537   Income taxes payable                  1,797                    2,290   Deferred revenue                 33,235                  33,095   Accrued liabilities                 42,415                  46,896 ------------------------- -------------------------   Total current liabilities               102,894                112,818 Income taxes payable,   long-term                 49,309                  47,307 Deferred income taxes,                       -   long-term                        655 Other non-current   liabilities                 11,915                    9,070 ------------------------- -------------------------   Total liabilities               164,118                169,850 ------------------------- -------------------------   Stockholders' equity:   Common stock            2,432,904             2,433,280   Accumulated deficit           (1,879,026)            (1,868,089) Accumulated other   comprehensive loss  (465)                     (875) ------------------------- -------------------------   Total stockholders' equity               553,413                564,316 ------------------------- ------------------------- Total liabilities and   stockholders' equity  $           717,531    $          734,166 ------------------------- -------------------------  Condensed Consolidated Statements of Operations  (Unaudited)      Quarter ended December 31,    Year ended December 31, ----------------------------- ----------------------------     2,012   2,011   2,012   2,011 -------------- ------------- -------------- ------------      (In thousands, except per share amounts)  Net revenue  $  133,427  $  143,630  $  530,464  $  549,332  Cost of revenue     68,016     76,760    293,909    294,818 -------------- ------------- -------------- ------------  Gross profit     65,411     66,870    236,555    254,514  Operating expenses:  Research and development     26,225     25,283    106,219    102,732  Selling, general and administrative     34,335     32,730    130,938    131,091  Amortization of intangibles       2,157       2,230       8,705       8,918 -------------- ------------- -------------- ------------  Total operating expenses     62,717     60,243    245,862    242,741 -------------- ------------- -------------- ------------  Income (loss) from operations       2,694       6,627      (9,307)     11,773  Interest and other income (expense), net         (260)         (371)          222         (140) -------------- ------------- -------------- ------------  Income (loss) before income taxes       2,434       6,256      (9,085)     11,633  Provision for (benefit from) income taxes      (2,370)       1,929       1,852       2,854 -------------- ------------- -------------- ------------  Net income (loss)  $     4,804  $     4,327  $  (10,937)  $     8,779 -------------- ------------- -------------- ------------  Net income (loss) per share:  Basic  $       0.04  $       0.04  $      (0.09)  $       0.08 -------------- ------------- -------------- ------------  Diluted  $       0.04  $       0.04  $      (0.09)  $       0.08 -------------- ------------- -------------- ------------  Weighted average shares:  Basic    115,097    116,123    116,457    115,175  Diluted    115,732    116,664    116,457    116,427 Harmonic Inc. Condensed Consolidated Statements of Cash Flows (Unaudited)     Year ended December 31, ---------------------------------------------     2,012   2,011 ----------------------- --------------------     (In thousands) Cash flows from operating activities: Net income (loss) $           (10,937)  $            8,779 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Amortization of intangibles              29,204            30,420 Depreciation              15,195            13,867 Stock-based compensation              18,926            20,913 Net loss (gain) on disposal of fixed assets                    (36)                 671 Deferred income taxes               (4,969)                (361) Provision for doubtful accounts                1,226              2,123 Provision for excess and obsolete inventories                3,377              3,936 Excess tax benefits from stock- based compensation                  (121)             (1,955) Other non-cash adjustments, net                1,006                 801 Changes in assets and liabilities: Accounts receivable              22,744           (10,365) Inventories                3,003           (16,588) Prepaid expenses and other assets               (2,684)              7,924 Accounts payable               (5,201)              4,750 Deferred revenue                1,334           (13,470) Income taxes payable                1,535             (6,843) Accrued and other liabilities               (2,789)                 575 ----------------------- -------------------- Net cash provided by operating activities              70,813            45,177 ----------------------- -------------------- Cash flows from investing activities: Purchases of investments            (133,778)         (107,544) Proceeds from sales and maturities of investments              98,838            59,732 Acquisition of property and equipment             (12,609)           (17,269) Other acquisitions                       -                (250) ----------------------- -------------------- Net cash used in investing activities             (47,549)           (65,331) ----------------------- -------------------- Cash flows from financing activities: Repurchase of common stock             (22,639)                     - Proceeds from issuance of common stock, net                4,819            12,701 Excess tax benefits from stock- based compensation                   121              1,955 ----------------------- -------------------- Net cash (used in) provided by financing activities             (17,699)            14,656 ----------------------- -------------------- Effect of exchange rate changes on cash and cash equivalents                   122                 (52) ----------------------- -------------------- Net increase (decrease) in cash and cash equivalents                5,687             (5,550) Cash and cash equivalents at beginning of period              90,983            96,533 ----------------------- -------------------- Cash and cash equivalents at end of period $            96,670  $          90,983 ----------------------- -------------------- Harmonic Inc. Revenue Information (Unaudited)     Quarter ended December 31,   Year ended December 31, ---------------------------------- ---------------------------------     2012   2011   2012   2011 ---------------- ---------------- ---------------- ---------------     (In thousands, except percentages) Product Video Processing $ 57,561   43%  $ 64,314   45% $ 219,440   41%  $ 236,624   43% Production and Playout   24,919   19%   25,837   18%   90,247   17%   98,842   18% Edge and Access   28,169   21%   32,218   22%   138,653   26%   141,880   26% Services and Support   22,778   17%   21,261   15%   82,124   16%   71,986   13% --------- ------ --------- ------ --------- ------ --------- ----- Total $ 133,427   100%  $ 143,630   100% $ 530,464   100%  $ 549,332   100% --------- --------- --------- --------- Geography United States $ 50,778   38%  $ 61,647   43% $ 230,336   43%  $ 244,897   45% International   82,649   62%   81,983   57%   300,128   57%   304,435   55% --------- ------ --------- ------ --------- ------ --------- ----- Total $ 133,427   100%  $ 143,630   100% $ 530,464   100%  $ 549,332   100% --------- --------- --------- --------- Market Cable $ 60,398   45%  $ 62,526   44% $ 253,978   48%  $ 245,310   45% Satellite and Telco   26,159   20%   30,686   21%   107,885   20%   128,005   23% Broadcast and Media   46,870   35%   50,418   35%   168,601   32%   176,017   32% --------- ------ --------- ------ --------- ------ --------- ----- Total $ 133,427   100%  $ 143,630   100% $ 530,464   100%  $ 549,332   100% --------- --------- --------- --------- Use of Non-GAAP Financial Measures In establishing operating budgets, managing its business performance, and setting internal measurement targets, the Company excludes a number of items required by GAAP. Management believes that these accounting charges and credits, most of which are non-cash or non-recurring in nature, are not useful in managing its operations and business. Historically, the Company has also publicly presented these supplemental non-GAAP measures in order to assist the investment community to see the Company "through the eyes of management," and thereby enhance understanding of its operating performance. The non-GAAP measures presented here are gross margin, operating expenses, net income and net income per share. The presentation of non-GAAP information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP, and is not necessarily comparable to non-GAAP results published by other companies. A reconciliation of the historical non-GAAP financial measures discussed in this press release to the most directly comparable historical GAAP financial measures is included with the financial statements contained in this presentation. The non-GAAP adjustments described below have historically been excluded from our GAAP financial measures. These adjustments are excess facilities and severance charges and non-cash items, such as stock-based compensation expense, amortization of intangibles, and adjustments that normalize the tax rate.  With respect to our expectations under "Business Outlook" above, reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available without unreasonable efforts on a forward-looking basis due to the high variability and low visibility with respect to the charges which are excluded from these non-GAAP measures.  The effects of stock-based compensation expense specific to common stock options are directly impacted by unpredictable fluctuations in our stock price.  We expect the variability of the above charges to have a significant impact on our GAAP financial results. Harmonic Inc. GAAP to Non-GAAP Net Income (Loss) Reconciliation (Unaudited)     Quarter ended December 31, ----------------------------------------------------------------------     2012   2011 ----------------------------------- ---------------------------------- Gross Operating Net Gross Operating Net     Profit   Expense   Income   Profit   Expense   Income ----------------------------------- ----------------------------------     (In thousands, except per share amounts) GAAP $ 65,411 $  62,717 $   4,804 $ 66,870 $ 60,243 $   4,327 Cost of revenue related to stock-based compensation expense   695     -         695   723     -         723 Research and development expense related to stock-based compensation expense         -    (1,458)      1,458         -     (1,661)       1,661 Selling, general and administrative expense related to stock-based compensation expense         -    (2,651)      2,651         -   (2,430)     2,430 Amortization of intangibles   5,043    (2,157)     7,200   5,423   (2,230)     7,653 Discrete tax items and adjustments         -     -   (5,979)         -     -    (2,751) ---------- ------------ ----------- --------- ------------ ---------- Non-GAAP $ 71,149 $  56,451 $  10,829 $  73,016 $ 53,922 $  14,043 ---------- ------------ ----------- --------- ------------ ---------- GAAP net income per share - basic         $      0.04          $      0.04 ----------- ---------- GAAP net income per share - diluted         $      0.04          $      0.04 ----------- ---------- Non-GAAP net income per share - basic         $      0.09          $ 0.12 ----------- ---------- Non-GAAP net income per share - diluted         $      0.09          $ 0.12 ----------- ---------- Shares used in per share calculation - basic            115,097           116,123 ----------- ---------- Shares used in per share calculation - diluted            115,732            116,664 ----------- ---------- Shares used in per share calculation - diluted, non- GAAP            115,732            116,664 ----------- ----------      Year ended December 31, ----------------------------------------------------------------------                         2,012                        2,011 ----------------------------------- ----------------------------------  Gross  Operating  Net  Gross  Operating  Net     Profit   Expense   Income   Profit   Expense   Income ----------------------------------- ----------------------------------      (In thousands, except per share amounts) GAAP $  236,555 $  245,862 $  (10,937) $ 254,514 $ 242,741 $   8,779 Cost of revenue related to stock-based compensation expense   2,996     -     2,996   3,075     -     3,075 Research and development expense related to stock-based compensation expense         -   (6,405)     6,405         -   (6,926)     6,926 Selling, general and administrative expense related to stock-based compensation expense         -   (9,525)     9,525         -   (10,912)     10,912 Selling, general and administrative expense related to excess facility costs, severance      costs and other non- recurring expenses         -     -     -         -       (409)         409 Amortization of intangibles     20,499   (8,705)   29,204    21,502    (8,918)   30,420 Discrete tax items and adjustments         -     -     (7,911)         -     -    (12,989) ---------- ------------ ----------- --------- ------------ ---------- Non-GAAP $  260,050 $ 221,227 $ 29,282 $ 279,091 $ 215,576 $ 47,532 ---------- ------------ ----------- --------- ------------ ---------- GAAP net income (loss) per share - basic         $    (0.09)          $      0.08 ----------- ---------- GAAP net income (loss) per share - diluted         $    (0.09)          $      0.08 ----------- ---------- Non-GAAP net income per share - basic         $      0.25          $ 0.41 ----------- ---------- Non-GAAP net income per share - diluted         $      0.25          $ 0.41 ----------- ---------- Shares used in per share calculation - basic            116,457           115,175 ----------- ---------- Shares used in per share calculation - diluted, GAAP            116,457            116,427 ----------- ---------- Shares used in per share calculation - diluted, non- GAAP           117,041            116,427 ----------- ---------- CONTACTS: Carolyn V. Aver Michael Bishop Chief Financial Officer Investor Relations Harmonic Inc. +1.408.542.2760 +1.408.542.2500 This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that: (i) the releases contained herein are protected by copyright and other applicable laws; and (ii) they are solely responsible for the content, accuracy and originality of the information contained therein. Source: Harmonic Inc via Thomson Reuters ONE [HUG#1673988]


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