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Proxim Corporation Reports Third Quarter 2003 Financial Results
- Revenues of $35.1 million – exceeding mid-quarter target by $2 million
- Non-GAAP net loss of $(0.04) per share – in line with target
- GAAP net loss of $(0.31) per share versus $(0.40) per share net loss in second quarter 2003
- Proxim ORiNOCO Wi-Fi portfolio sales growth outpaces third quarter 2003 industry forecasts
SUNNYVALE, Calif., October 21, 2003 -- Proxim Corporation (Nasdaq: PROX), a global leader in wireless networking equipment for Wi-Fi and broadband wireless, today announced financial results for the third quarter and nine months ended September 26, 2003. Total revenue for the third quarter of 2003 was $35.1 million, compared to total revenue of $24.1 million for the third quarter of 2002. Total revenue for the nine months ended September 26, 2003 was $109.9 million, which included license revenues of $6 million, compared to total revenue of $94.7 million for the nine months ended September 27, 2002. The 2002 financial results include: the results of the former Western Multiplex Corporation for the period from January 1, 2002 to September 27, 2002, the results of the former Proxim, Inc. from March 27, 2002 to September 27, 2002, and the results of the former Agere Wireless LAN Systems business from August 6, 2002 to September 27, 2002, in accordance with generally accepted accounting principles (GAAP) for accounting for business combinations.
The net loss attributable to common stockholders computed in accordance with GAAP for the third quarter of 2003 was $(38.2) million, or $(0.31) per share, compared to the GAAP net loss of $(48.7) million, or $(0.40) per share for the second quarter of 2003. The GAAP net loss attributable to common stockholders for the nine months ended September 26, 2003 was $(97.7) million, or $(0.81) per share, compared to the GAAP net loss of $(100.4) million or $(1.00) per share for the nine months ended September 27 2002. The net loss attributable to common stockholders reflects accretion of the redemption value of Series A Preferred Stock issued during the third quarter of 2002.
Excluding certain charges discussed below and the amortization of intangible assets and deferred stock compensation and purchased in-process research and development in the respective periods, the non-GAAP, or pro forma, net loss for the third quarter of 2003 was $(4.8) million, or $(0.04) per share, compared to the non-GAAP net loss of $(10.7) million, or $(0.09) per share for the third quarter of 2002. The non-GAAP net loss for the nine months ended September 26, 2003 was $(12.2) million, or $(0.10) per share, compared to the non-GAAP net loss of $(12.1) million, or $(0.12) per share for the nine months ended September 27, 2002.
During the third quarter of 2003, Proxim recorded a $25.8 million charge, or $(0.21) per share, for royalties ($22.9 million) and interest ($2.9 million) associated with the ongoing litigation with Symbol Technologies. This charge is a preliminary estimate based on the September 14, 2003 jury verdict. The amount and timing of any actual cash settlement will be dependent on the outcome of the ongoing legal proceedings, including a bench trial on Proxim’s equitable defenses. Proxim views the Symbol litigation as an ongoing legal matter. There has been no final judgment entered and Proxim is currently under no financial obligation as a result of the September 14, 2003 initial jury verdict. Proxim has also not been enjoined from continued sales of these products. Proxim will revise this preliminary estimate, if necessary, when more information becomes available.
The non-GAAP results of operations for the third quarter of 2003 exclude the Symbol litigation accrual, a $5.2 million benefit resulting from the revision of an estimate for a prior quarter restructuring charge, amortization of intangible assets of $5.4 million, bad debt charge of $2.3 million arising from restructuring, and accretion of Series A preferred stock redemption obligations of $1.6 million. In addition, the non-GAAP results for the third quarter of 2003 include a benefit for income taxes of $3.4 million, reflecting potential net operating loss carryforwards resulting from an operating loss during the period. The $5.2 million benefit resulting from the revision of estimates in prior quarter restructuring includes a $1.9 million charge related to employee severance, a $12.7 million charge related to facilities closures in the current quarter, and a reversal of $19.8 million of restructuring reserves previously recorded as a result of the settlement of lease obligations related to a building in Sunnyvale, CA.
The non-GAAP results of operations for the third quarter of 2002 exclude a charge of $4.9 million related to the amortization of purchased intangibles and deferred stock compensation, a restructuring charge of $2.3 million related to the closing of certain facilities and severance pay for terminated employees, $10.4 million charged to purchased in-process research and development, Series A preferred stock dividend of $2.7 million, accretion of Series A preferred stock redemption obligations of $0.5 million, and include a benefit for income taxes of $3.6 million.
As of September 26, 2003, cash, including cash equivalents, short-term investments and restricted cash totaled $15.6 million, as compared to $7.9 million as of June 27, 2003.
Also today, Proxim entered into definitive documents with Warburg Pincus and Broadview Capital to amend the terms of its outstanding $30 million secured promissory notes. The terms of the amended financing agreements, as described in the Company’s October 2, 2003 press release, are more fully described in a Form 8-K to be filed by Proxim.
“Proxim is continuing to see tangible results in our plan to return to sustained growth and profitability,” said Frank Plastina, President and CEO, Proxim. “We were especially pleased with the 17 percent sequential revenue performance for our Proxim ORiNOCO Wi-Fi products, which outpaced industry forecasts of three percent for Wi-Fi access point revenue growth. Based on our performance and industry forecasts, we believe we gained market share during the third quarter.”
Conference Call Information
Today’s call begins at 5:00 PM Eastern/2:00 PM Pacific Time.
Dial-In Information
To listen to the conference call via telephone, dial (913) 981-5507 at least five minutes prior to the scheduled start time.
Webcast Information
To listen to the webcast, go to www.proxim.com, and click on the link titled “Proxim Announces Third Quarter 2003 Results Call.”
The minimum requirements to listen include sound capabilities on your personal computer and installation of RealPlayer software available at no cost for Windows 95/98, Windows 3.1, Windows NT, Macintosh, and UNIX systems from Real Audio, www.real.com.
The call will be archived immediately following the conference call and will remain available at http://investor.proxim.com. Additionally, the conference call will be available on a recorded telephone archive by calling toll free (888) 203-1112 and entering pass code 327297, beginning Tuesday, October 21, 2003 at 8:00 PM, Eastern Time until midnight Eastern Time on Friday, October 24, 2003. For international callers, the recorded telephone archive is available by calling the following toll number: (719) 457-0820 and entering pass code 327297.
About Proxim
Proxim Corporation is a global leader in wireless networking equipment for Wi-Fi and broadband wireless networks. The company is providing its enterprise and service provider customers with wireless solutions for the mobile enterprise, security and surveillance, last mile access, voice and data backhaul, public hot spots, and metropolitan area networks. This press release and more information about Proxim can be found on the Web at www.proxim.com.
Safe Harbor
This press release contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements concerning Proxim’s estimates relating to potential liability to Symbol Technologies and Proxim’s plan to return to sustained growth and profitability, and are subject to risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include, but are not limited to: the risks relating to future proceedings before the court in the Symbol litigation; the risk that required payments to Symbol exceed current estimates; Proxim’s ability to make any required payments to Symbol; Proxim’s ability to maintain its debt and credit facilities; the risk that Proxim's efforts to improve operating efficiencies and return to profitability will not succeed; the risk that the market for Proxim’s products will not grow as anticipated or that Proxim will not be able to take advantage of market opportunities due to competition, product performance, product pricing, product supply or other issues and other risks and uncertainties associated with Proxim's business. For additional information regarding risks relating to Proxim's business, see Proxim Corporation's Form 10-K for the year ended December 31, 2002, Form 10-Q for the quarter ended June 27, 2003, and March 28, 2003. Current Reports on Form 8-K and other relevant materials filed by Proxim with the SEC.
Further Information
Proxim will be filing revised proxy materials with the SEC that will be mailed to Proxim's stockholders. Investors and security holders of Proxim are urged to read the revised proxy materials when available because they will contain important information about Proxim, the financing and related matters. The proxy statement will solicit proxies in connection with a special meeting at which Proxim's stockholders will be asked to approve the investors’ ability to exchange the financing indebtedness into shares of Series B preferred stock and the Company’s issuance of warrants to purchase common stock. Investors and security holders will be able to obtain free copies of these documents through the web site maintained by the U.S. Securities and Exchange Commission at http://www.sec.gov. In addition to the proxy statement, Proxim files annual, quarterly, and special reports, proxy statements, and other information with the Securities and Exchange Commission. You may read and copy any reports, statements, and other information filed by Proxim at the Commission's public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549 or at the Commission's other public reference rooms in New York, New York and Chicago, Illinois. Please call the Commission at 800/SEC-0330 for further information on public reference rooms. Proxim's filings with the Commission are also available to the public from commercial document-retrieval services and the website maintained by the Commission at http://www.sec.gov. The proxy materials and these other documents may also be obtained free from Proxim.
Proxim and its respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of Proxim in favor of the approval of the investors’ ability to exchange the financing indebtedness into shares of Series B preferred stock and issuance of warrants to acquire shares of Proxim's common stock. The directors and executive officers of Proxim, their beneficial ownership of Proxim common stock and their interests in the financing are set forth in the definitive proxy materials that were filed on September 8, 2003.
Proxim Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
September 26, December 31,
Assets 2003 2002
Current assets:
Cash, cash equivalents and
short-term investments $13,597 $17,048
Accounts receivable, net 17,409 30,535
Inventory, net 24,937 36,799
Assets held for sale 3,041 --
Other current assets 4,288 4,657
Total current assets 63,272 89,039
Property and equipment, net 7,828 10,110
Goodwill and other intangible assets, net 55,423 71,652
Restricted cash 1,990 2,489
Other assets 2,555 4,133
Total assets $131,068 $177,423
Liabilities, Mandatorily Redeemable
Preferred Stock and Stockholders'
Equity (Deficit)
Current liabilities:
Accounts payable $17,848 $18,147
Capital lease obligations, current 1,060 --
Accrued royalties and interest 25,819 --
Other accrued liabilities 20,952 16,917
Convertible promissory note 30,000 --
Total current liabilities 95,679 35,064
Capital lease obligations, long-term 1,075 --
Long-term debt 101 101
Restructuring accruals, long-term 10,001 26,579
Total liabilities 106,856 61,744
Series A mandatorily redeemable
preferred stock 71,258 64,412
Stockholders' equity (deficit):
Capital stock 314,484 315,868
Accumulated deficit (361,698) (264,010)
Notes receivable from stockholders (711) (898)
Accumulated other comprehensive income 879 307
Total stockholders' equity (deficit) (47,046) 51,267
Liabilities, mandatorily redeemable
preferred stock and stockholders'
equity (deficit) $131,068 $177,423
Proxim Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
2003 2002 2003 2002
Product revenue $35,058 $24,118 $103,892 $94,709
License revenue -- -- 6,000 --
Total revenue 35,058 24,118 109,892 94,709
Cost of revenue 22,041 14,091 64,670 54,730
Royalty charges 22,869 -- 22,869 --
Restructuring
provision for
excess and
obsolete
inventory -- -- 22,549 12,659
Gross profit
(loss) (9,852) 10,027 (196) 27,320
Operating expenses:
Research and
development 4,915 8,699 19,032 20,543
Selling, general
and administrative 13,179 15,220 37,720 35,617
Legal expense
for certain
litigation 1,700 -- 5,700 --
Amortization of
intangible assets 5,364 4,606 16,229 6,959
Amortization of
deferred stock
compensation -- 316 -- 741
Bad debt expense
arising from
restructuring 2,305 -- 2,305 --
Restructuring
charges (benefit) (5,194) 2,335 7,298 41,295
In-process research
and development -- 10,364 -- 16,100
Loss from
operations (32,121) (31,513) (88,480) (93,935)
Interest income
(expense), net (4,434) (355) (4,527) 16
Loss before
income taxes (36,555) (31,868) (93,007) (93,919)
Income tax provision -- -- -- 3,224
Net loss (36,555) (31,868) (93,007) (97,143)
Deemed Series A
preferred
stock dividend -- (2,740) -- (2,740)
Accretion of
Series A preferred
stock obligations (1,596) (476) (4,681) (476)
Net loss
attributable
to common
stockholders
- basic and
diluted $(38,151) $(35,084) $(97,688) $(100,359)
Net loss per share
- basic and diluted $(0.31) $(0.29) $(0.81) $(1.00)
Weighted average
common shares 121,985 119,557 121,324 100,006
As a percentage
of revenue:
Gross margin -28.1% 41.6% -0.2% 28.8%
Research and
development 14.0% 36.1% 17.3% 21.7%
Selling, general
and administrative 37.6% 63.1% 34.3% 37.6%
Proxim Corporation
Pro Forma Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
2003 2002 2003 2002
Product revenue $35,058 $24,118 $103,892 $94,709
License revenue -- -- 6,000 --
Total revenue 35,058 24,118 109,892 94,709
Cost of revenue 22,041 14,091 64,670 54,730
Gross profit 13,017 10,027 45,222 39,979
Operating expenses:
Research and
development 4,915 8,699 19,032 20,543
Selling, general
and administrative 13,179 15,220 37,720 35,617
Legal expense
for certain
litigation 1,700 -- 5,700 --
Loss from
operations (6,777) (13,892) (17,230) (16,181)
Interest income
(expense), net (1,484) (355) (1,577) 16
Loss before
income taxes (8,261) (14,247) (18,807) (16,165)
Income tax benefit (3,418) (3,562) (6,582) (4,041)
Net loss $(4,843) $(10,685) $(12,225) $(12,124)
Basic and diluted
net loss per share $(0.04) $(0.09) $(0.10) $(0.12)
Weighted average
common shares
- diluted 121,985 119,557 121,324 100,006
As a percentage
of revenue:
Gross margin 37.1% 41.6% 41.2% 42.2%
Research and
development 14.0% 36.1% 17.3% 21.7%
Selling, general
and administrative 37.6% 63.1% 34.3% 37.6%
Proxim Corporation
GAAP to Pro Forma Loss Reconciliation
(in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
2003 2002 2003 2002
GAAP net loss $(38,151) $(35,084) $(97,688) $(100,359)
Royalty charges
and interest 25,819 -- 25,819 --
Provision for
excess and
obsolete
inventory -- -- 22,549 12,659
Amortization of
intangible assets 5,364 4,606 16,229 6,959
Amortization of
deferred stock
compensation -- 316 -- 741
Bad debt expense
arising from
restructuring 2,305 -- 2,305 --
Restructuring
charges (benefit) (5,194) 2,335 7,298 41,295
In-process
research and
development -- 10,364 -- 16,100
Deemed Series A
preferred stock
dividend -- 2,740 -- 2,740
Accretion of
Series A
preferred stock 1,596 476 4,681 476
Income tax benefit 3,418 3,562 6,582 7,265
Pro forma net loss $(4,843) $(10,685) $(12,225) $(12,124)
Use of Pro Forma Financial Information
To supplement our consolidated financial statements presented on a GAAP
basis, Proxim uses non-GAAP, or pro forma, measures of operating results, net
income/loss and income/loss per share, which are adjusted to exclude certain
costs, expenses, gains and losses that we believe are appropriate to enhance
the overall understanding of our financial performance. These adjustments to
our GAAP results are made with the intent of providing both management and
investors a supplemental understanding of Proxim's underlying operational
results and trends. Adjusted pro forma results are among the primary
indicators management uses as a basis for planning and forecasting our
business. The presentation of this additional information is not meant to be
considered in isolation or as a substitute for Proxim's financial results
prepared in accordance with generally accepted accounting principles in the
United States.
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