8-K 1 qtrtwoeightk2003.htm Sunrise Telecom - (SEC Form 8-K 7/23/2003)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 24, 2003

Sunrise Telecom Incorporated

(Exact name of the Registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)
     
Delaware 000-17781   77-0181864
 
(State or other jurisdiction of incorporation) (Commission
File Number) 		  (IRS Employer
Identification No.)
     
302 Enzo Drive, San Jose, California   95138
(Address of principal executive offices)   (Zip code)

(408) 363-8000

(The Registrant’s telephone number)

Not Applicable

(Former name or former address, if changed since last report)

 

ITEM 7: Financial Statements and Exhibits.

(c)   Exhibits.
 
 Number   Exhibit
     
  99.1   Press Release issued by Sunrise Telecom Incorporated on July 24, 2003. 


ITEM 9: Regulation FD Disclosure (Information Provided Under Item 12-Disclosure of Results of Operations and Financial Condition)

     On July 24, 2003, we issued a press release and are holding a conference call regarding our financial results for the quarter ended June 30, 2003. A copy of the press release is furnished as Exhibit 99.1 to this report. We are making forward-looking statements regarding our third quarter 2003 sales in the press release and during the conference call. 

 

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

         
Date: July 24, 2003       SUNRISE TELECOM INCORPORATED
(Registrant)
         
    By:   /s/ Paul A. Marshall
       
        Paul A. Marshall
        Chief Operating Officer and 
Acting Chief Financial Officer

 


EXHIBIT 99.1

 

At Sunrise Telecom Incorporated 
Paul Marshall
Acting Chief Financial Officer
(408) 363-8000

For Immediate Release

SUNRISE TELECOM REPORTS SECOND QUARTER 2003 FINANCIAL RESULTS

Posts Revenues of $10.3 million; Loss Per Share of $0.05

Growth in Fiber Optics and Protocol Segments Help Offset Wireline and Cable Declines

Implements Cost-Savings Initiatives

Maintains Strong Cash Balance

Takes Advantage of New Tax Laws with $0.04 Per Share Dividend

SAN JOSE, CA, July 24, 2003 - Sunrise Telecom Incorporated (Nasdaq: SRTI), a leading provider of service verification equipment for telecommunications and cable broadband industries, reported sales for the second quarter of 2003 of $10.3 million, compared to $14.7 million in the prior year second quarter. Diluted net loss per share was $0.05, compared to a net loss of $0.01 per share for the second quarter of 2002. At quarter end, backlog improved to $3.0 million from $2.0 million at the end of the first quarter of 2003.

Sales for the first six months of 2003 were $22.2 million compared to sales of $23.4 million for the first half of 2002.

"While service providers continue to reduce capital expenditures, Sunrise remains focused on the future," stated Paul Chang, President and CEO of Sunrise Telecom. "Our ability to withstand the current environment is a result of the Company's emphasis on new product development, a strong balance sheet and our dedicated employees."

"We believe that the steady introduction of products and features is providing continuity from our legacy products to new products that address emerging opportunities. Strong growth from our Fiber Optic and Protocol/Signaling segments helped offset declines in our Wireline Access and Cable Broadband segments. Success in our Fiber Optic business was driven primarily by the completion of the Sunset OCx standardization at principal local telephone companies in North America during the first quarter and increased sales of our STT product introduced at the end of last year, which continues to build momentum this year. We saw solid sales increases from our Ghepardo and NeTracker products in our Protocol group. While Cable activity declined during the quarter, we are seeing encouraging signs from some Cable products, including remote testing applications and spectrum analyzers," Chang continued.

Cost Savings Initiative

During the second quarter, responding to what the Company views as continued weakness in Sunrise's target markets, the Company reduced its staff by about 40 employees or approximately 10%.  Also, the Company implemented salary reductions at the end of the second quarter.

"We believe that the steps we have taken to shift our cost structure toward the current level of business will hasten our return to profitability while maintaining our ability to pursue new opportunities," concluded Chang.

Declaration of Cash Dividend

The Company also announced that its Board of Directors declared a cash dividend of $0.04 per share, payable on August 25, 2003 to stockholders of record as of August 15, 2003.  "Given the recent changes in the tax law, dividends have become a more attractive means of returning value to stockholders," said Paul Marshall, Acting Chief Financial Officer of Sunrise Telecom Incorporated.  "With cash balances in excess of our foreseeable requirements, the Board views this dividend payment as an opportunity to provide stockholders with liquid returns while maintaining a sizable cash balance to support future growth in our business and retain the flexibility to declare additional cash dividends in the future."

Outlook

During the third quarter, the Company expects limited capital spending by its primary customers, resulting in estimated sales of $9 to $12 million for the quarter. The Company has invested heavily in new applications, which should help generate new revenue in subsequent periods.  However, substantial uncertainties in Sunrise's target market and limited visibility remain, as the Company typically ships products two to six weeks after receiving orders and has few long-term contracts.

Conference Call

Sunrise Telecom will host a conference call today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time), during which President and Chief Executive Officer, Paul Chang, and Acting Chief Financial Officer, Paul Marshall, will further discuss these results. To listen to the call, please dial (800) 915-4836 at least five minutes prior to the start. This call can also be accessed via Web cast at www.sunrisetelecom.com. A Web replay will also be available for approximately 90 days at this same Web address.

Summary of Financial Results 

(In thousands, except per share data)
			      For the Three Months Ended        	 For the Six Months Ended
			June 30,	March 31,	June 30,	 June 30,	June 30,
			  2003 		  2003   	  2002  	   2003  	   2002 


Net sales	 	$10,309 	$11,858 	$14,730 	 $22,167 	 $23,379
Operating loss	  	$(4,522)	$(3,494)	$(2,180)	 $(8,016)	 $(7,378)
Net loss	 	$(2,533)	$(2,035)	$(738)		 $(4,568)	 $(4,710)
Diluted EPS	 	$(0.05)		$(0.04)		$(0.01)		 $(0.09)	 $(0.09)

Shares outstanding
(diluted)	 	49,666 	 	49,507 	 	50,023 	 	  49,587 	  50,173

The Company is discontinuing the presentation of non-GAAP ("Pro forma") financial measures in its quarterly releases of financial results in order to provide a simpler and clearer disclosure of those results. The Company has included a supplemental disclosure of certain non-cash expenses related to amortization of acquisition-related intangible assets and deferred stock-based compensation for those parties that use this specific information in their analysis of the Company's financial results.

About Sunrise Telecom Incorporated

Sunrise Telecom Incorporated manufactures and markets service verification equipment to pre-qualify, verify, and diagnose telecommunications, cable TV, and Internet networks. The Company's products offer broad functionality, leading-edge technology, and compact size to test a variety of new broadband services. These services include wireline access (including DSL), fiber optics, cable TV, cable modem, and signaling networks. The Company's products are designed to maximize technicians' effectiveness in the field and to provide realistic network simulations for equipment manufacturers to test their products. The Company was founded in 1991 and is based in San Jose, California. The Company distributes its products throughout six continents through a network of sales representatives, distributors, and a direct sales force. For more information, visit the Company's Web site at www.sunrisetelecom.com.

Sunrise Telecom, SUNSET, and STT are registered trademarks of Sunrise Telecom Incorporated. Ghepardo and NeTracker are also trademarks of Sunrise Telecom Incorporated. All other trademarks mentioned in this document are the property of their respective owners.

Forward-Looking Statements

This press release contains forward-looking statements, including sales estimates for the third quarter of 2003, within the meaning of Section 21 E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are made pursuant to safe harbor provisions and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Specific factors that may cause results to differ include the following: quarterly fluctuations in the Company's operating results; the Company's ability to manage growth and slowdowns; unanticipated delays in product delivery schedules; deferred or lost sales resulting from the Company's lengthy sales cycle; slower than anticipated or poor integration of the operations of acquired entities and businesses; the uncertain impact of the cost cutting measures the Company has taken to date and those that the Company may take in the future; unanticipated difficulties associated with international operations; increased competitive pressures; rapid technological change within the telecommunications industry; the Company's dependence on a limited number of major customers; the Company's dependence on limited source suppliers; a sustained downturn in demand for the Company's products; a sustained slowdown in the growth of the telecommunications industry; and the loss of key personnel. The matters discussed in this press release also involve risks and uncertainties described from time to time in the Company's reports filed with the Securities and Exchange Commission, including, but not limited to, the Company's Form 10-K for the year ended December 31, 2002, and the Company's Form 10-Q for the quarter ended March 31, 2003. The Company assumes no obligation to update the forward-looking statements included in this press release.



-Financial Tables Below-

SUNRISE TELECOM INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data) 

								June 30,        December 31,
								  2003             2002    
                              ASSETS
Current assets:
 Cash and cash equivalents					 $36,934 	 $36,440
 Marketable securities						    - 	 	   1,023
 Accounts receivable, net 					   6,147 	  13,019
 Inventories							   9,300 	   8,143
 Prepaid expenses and other assets				     393 	     708
 Income taxes receivable	 				   2,647 	     348
 Deferred tax assets						   5,034 	   4,746
   Total current assets						  60,455 	  64,427
Property and equipment, net					  28,267 	  28,126
Restricted cash	 						     106 	     106
Marketable securities	 					   1,449 	       -
Goodwill							  12,693 	  12,656
Intangible assets, net						   7,399 	   8,754
Deferred tax assets						   2,236 	   2,331
Loan to related party						   1,050 	   1,051
Other assets							     491 	   1,470
Total assets							$114,146 	$118,921

                LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Short-term borrowings and current portion of notes payable	    $346 	    $410
 Accounts payable						   1,250 	   1,869
 Other accrued expenses						   7,710 	   8,296
 Deferred revenue						     596 	   1,081
   Total current liabilities					   9,902 	  11,656
Notes payable, less current portion				   1,340 	   1,177
Deferred revenue						     225 	     314
Other liabilities						      11 	       5
Stockholders' equity:
  Common stock, $0.001 par value per share; 175,000,000 shares
   authorized;  51,489,798 and 51,233,309 shares issued as of
   June 30, 2003 and December 31, 2002, respectively; 49,734,098
   and 49,477,609 shares outstanding as of June 30, 2003 and
   December 31, 2002, respectively	 			      50 	      49
  Additional paid-in capital					  68,258 	  68,462
  Deferred stock-based compensation				  (1,146)	  (2,124)
  Retained earnings						  34,590 	  39,158
  Accumulated other comprehensive income 	 		     916 	     224
Total stockholders' equity					 102,668 	 105,769
Total liabilities and stockholders' equity			$114,146 	$118,921


SUNRISE TELECOM INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data) 


								      Three Months		      Six Months
								     Ended June 30,    		    Ended June 30,     	
								   2003 	  2002 		  2003 		  2002 

Net sales							 $10,309 	$14,730 	$22,167 	$23,379
Cost of sales 	 						   4,015 	  4,975 	  8,518 	  8,121
Gross profit	 						   6,294 	  9,755 	 13,649 	 15,258
Operating expenses:
Research and development 	 				   4,154 	  4,441 	  8,360 	  8,372
Selling and marketing 	 					   4,151 	  4,426 	  8,522 	  8,349
General and administrative 	 				   2,511 	  3,068 	  4,783 	  5,915
Total operating expenses	 				  10,816 	 11,935 	 21,665 	 22,636

Loss from operations	 					 (4,522)	 (2,180)	 (8,016)	 (7,378)
Other income, net	 					    370  	    417 	    528 	    650

Loss before income taxes	 				 (4,152)	 (1,763)	 (7,488)	 (6,728)
Income tax benefit	 					 (1,619)	 (1,025	         (2,920)	 (2,018)

Net loss	 					  	$(2,533)	  $(738)	$(4,568)	$(4,710)

Loss per share:
Basic	 							 $(0.05)	 $(0.01)	 $(0.09)	 $(0.09)
Diluted	 							 $(0.05)	 $(0.01)	 $(0.09)	 $(0.90)

Shares used in per share computation:
Basic	 							 49,666 	 50,023 	 49,587 	 50,173
Diluted	 							 49,666 	 50,023 	 49,587 	 50,173

Supplemental presentation of certain non-cash expenses:

    Amortization of acquisition-related intangible assets 	    883		    963		  1,761		  1,593
    Amortization of deferred stock-based compensation		    482		    521		  1,012		  1,046


SUNRISE TELECOM INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands) 

									   Six Months
									 Ended June 30,        
								  2003			  2002
Cash flows from operating activities:
  Net loss	 						$(4,568)		$(4,710)
Adjustments to reconcile net loss to net cash provided by
  operating activities:
	Depreciation and amortization				  3,944			  3,316
	Amortization of deferred stock-based compensation	  1,012			  1,046
	Provision for losses on accounts receivable		   (145)		    847
	Loss on disposal of property and equipment		    167			     39
	Purchased in-process research and development		     37			    -
	Deferred income taxes					   (334)		 (2,370)
Changes in operating assets and liabilities
	(net of acquisition balances):
	Accounts receivable					  7,104			  3,629
	Inventories						 (1,797)		   (878)
	Prepaid expenses and other assets			    175			   (143)
	Accounts payable and accrued expenses			 (1,175)		    (65)
	Income taxes receivable and payable			 (2,814)		   (250)
	Deferred revenue					   (575)		   (111)
	Net cash provided by operating activities		  1,031 	            350  
Cash flows from investing activities:
	Purchases of marketable securities			    -			 (3,275)
	Sales of marketable securities				  1,036			  3,491
	Capital expenditures					 (1,454)		 (1,250)
	Acquisitions of businesses, net of cash acquired	   (554)		 (7,322)
	Loan to related party					      - 	         (1,050)
	Net cash used in investing activities			   (972)		 (9,406)
Cash flows from financing activities:
	Net proceeds from (payments on) short-term borrowings	      1			    (48)
	Proceeds from notes payable				     41			    273
	Payments on notes payable				   (154)		   (139)
	Repurchase of common stock				    -			 (3,243)
	Net proceeds from issuance of common stock		    225			    454
	Proceeds from exercise of stock options			     51			     87 
	Net cash provided by (used in) financing activities	    164			 (2,616)

Effect of exchange rate changes on cash and cash equivalents	    271			    328 
Net increase (decrease) in cash and cash equivalents		    494			(11,344)

Cash and cash equivalents at the beginning of the period	 36,440			 48,713 

Cash and cash equivalents at the end of the period		$36,934			$37,369


SUNRISE TELECOM INCORPORATED
DETAILS OF NET SALES
(In thousands) 


				                   Three Months Ended                       	
				June 30,		March 31,		June 30,
				  2003  	          2003  	          2002  
By Product:
Wire line access		$ 3,446	  34%		$ 5,978	  50%		$ 6,064	  41%
Fiber optics		 	  3,193	  31%		  2,334	  20%		  3,085	  21%
Cable TV		 	  2,807	  27%		  3,157	  27%		  4,882	  33%
Signaling		   	    756	   7%		    328	   3%		    660	   5%
Other			   	    107	   1%		     61	   0%		     39	   0%
		       		$10,309	 100%		$11,858	 100%		$14,730	 100%


				                   Three Months Ended                       	
				June 30,		March 31,		June 30,
				  2003  		  2003  		  2002  
By Region:
North America
(United States and Canada)	$ 7,072	  68%		$ 6,664	  56%		$11,768	  80%
Asia/Pacific			  1,617	  16%		  2,723	  23%		    936	   6%
Europe/Africa/Middle East	  1,315	  13%		  2,113	  18%		  1,686	  12%
Latin America			    305	   3%		    358	   3%		    340	   2%
				$10,309	 100%		$11,858	 100%		$14,730	 100%


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