-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UajV4C2BcAn4b0KnEaurUf9K1GR+fHtAb9cXA5HYKu732xF9eFrR+W4ZoMg/Ywya +jAFqF+1C2/GmByz9bEOnQ== 0000907152-05-000015.txt : 20050802 0000907152-05-000015.hdr.sgml : 20050802 20050802161658 ACCESSION NUMBER: 0000907152-05-000015 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20050630 ITEM INFORMATION: Results of Operations and Financial Condition FILED AS OF DATE: 20050802 DATE AS OF CHANGE: 20050802 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUNRISE TELECOM INC CENTRAL INDEX KEY: 0000907152 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 770291197 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-30757 FILM NUMBER: 05992259 BUSINESS ADDRESS: STREET 1: 302 ENZO DRIVE STREET 2: ---------------------------------------- CITY: SAN JOSE STATE: CA ZIP: 95138 BUSINESS PHONE: 4083638000 MAIL ADDRESS: STREET 1: 302 ENZO DRIVE STREET 2: ---------------------------------------- CITY: SAN JOSE STATE: CA ZIP: 95138 8-K 1 q22005earningsrelease.htm Q2 2005 SUNRISE TELECOM EARNINGS RELEASE Q2 2005 Sunrise Telecom Earnings Release

 
 
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 

 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Date of Report (Date of earliest event reported) August 2, 2005
 

 
Sunrise Telecom Incorporated
(Exact name of registrant as specified in its charter)
 
 
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)
 
Registrant's telephone number, including area code  (408) 363-8000
 
Not Applicable
(Former name or former address if changed since last report)
 


Item 2.02 Results of Operations and Financial Condition


On August 2, 2005, Sunrise Telecom Incorporated (the "Company") issued a press release and will hold a conference call regarding its financial results for the quarter ended June 30, 2005. A copy of this press release is attached as Exhibit 99.1 to this report. The Company is making forward-looking statements, including sales expectations and estimates for the third quarter of 2005, growth opportunities for product sales during the third quarter of and full year 2005, and the goal of delivering growth for 2005, in the press release and during the conference call.
 
In accordance with General Instruction B.2, the information in this Current Report on Form 8-K, including exhibit 99.1, shall be deemed "furnished", not "filed", for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly set forth by specific reference in such filing.
 
In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, the Company provides non-GAAP results of operations in the attached press release as supplemental information about its operating results. These measures are not in accordance with or an alternative to GAAP and may be different than measures used by other companies. The non-GAAP results of operations eliminate certain items of expenses and losses from cost of goods sold, operating expenses, and income tax expense. The Company's management believes that these non-GAAP financial measures help investors to evaluate the current operational and financial performance of the Company's business. The Company discloses this information along with a reconciliation of the non-GAAP financial measures to the comparable GAAP measures. This allows investors to evaluate the details and general nature of the adjustments made to the GAAP financial measures.
 
2

 
SIGNATURES
 
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.
 
 
 
 
 
SUNRISE TELECOM INCORPORATED
(Registrant)
                 
Date: August 2, 2005        
 
 
 
By:
 
/s/    RICHARD D. KENT        
 
 
 
 
 
 
Richard D. Kent
Chief Financial Officer
 
3
 

 
EXHIBIT INDEX
 
 
Number
  
Description
     
99.1
  
Press Release issued by the Company on August 2, 2005 announcing financial results for the three months ended June 30, 2005.
 
4
 


EXHIBIT 99.1

At Sunrise Telecom Incorporated
Richard D. Kent
Chief Financial Officer
(408) 363-8000


SUNRISE TELECOM REPORTS $18.3 MILLION SALES FOR SECOND QUARTER OF 2005
·  
GAAP loss from operations of $3.1 million
·  
Backlog at quarter end of $5.5 million
·  
Third quarter 2005 sales projected between $14 and $17 million


SAN JOSE, CA, August 2, 2005 - Sunrise Telecom Incorporated (NASDAQ: SRTI), a leader in testing and monitoring solutions for voice, video, data services and next-generation digital multi-media, today reported sales for the second quarter of 2005 of $18.3 million, compared with $15.0 million in the second quarter of 2004 and $11.7 million in the first quarter of 2005. Diluted GAAP net loss per share was $(0.06), compared with GAAP net income of $0.02 per share in the second quarter of 2004 and GAAP net loss of $(0.09) per share for the first quarter of 2005. Backlog at quarter-end was $5.5 million, compared with $4.8 million at the end of the second quarter of 2004 and $7.6 million at the end of the first quarter of 2005.

Sunrise Telecom President and CEO, Paul Chang, said, “I am very pleased with our strong top-line growth in the second quarter. We made significant progress in building scale and further diversifying our revenue base. I would like to emphasize that growth came from the new, strategic areas of our business including testing solutions for FTTx, protocol and Gigabit Ethernet.”

During the quarter, Sunrise Telecom signed a significant contract with a Regional Bell Operating Company (RBOC) to supply next generation testing solutions for FTTx deployments. Under this contract, Sunrise will be the sole source of video test solutions supporting the carrier’s aggressive roll-out of triple-play services in several metropolitan markets. A second RBOC has standardized on Sunrise Telecom’s ADSL2+ testing tools for its FTTx networks.

Said Paul Chang, “For the past couple of quarters, we have been talking about significant opportunities that Sunrise has been pursuing in the emerging area of FTTx testing. In the second quarter we finally saw the initial impact of these opportunities on our income statement and anticipate seeing the full impact on future orders. These two wins validated our technology in the field and facilitated dialogue with other carriers looking for similar solutions.”

Sunrise Telecom Reports Second Quarter Results
August 2, 2005/Page of


Financial Results Summary

(In thousands, except per share and percentage data, unaudited)


 
For the Three Months Ended
  
For the Six Months Ended
 
June 30,
2005
  
March 31, 2005
  
June 30,
2004
  
June 30,
2005
  
June 30,
2004
                                       
GAAP Financial Results:
                                      
                                       
Net sales
$
18,330
    
$
11,718
    
$
15,004
    
$
30,048
    
$
28,805
  
Income (loss) from operations
$
(3,136
)
  
$
(4,896
)
  
$
576
    
$
(8,032
)
  
$
756
  
Net income (loss)
$
(3,239
)
  
$
(4,790
)
  
$
813
    
$
(8,029
)
  
$
(6,473
)
Diluted EPS
$
(0.06
)
  
$
(0.09
)
  
$
0.02
    
$
(0.16
)
  
$
(0.13
)
Shares outstanding (diluted)
  
50,965
      
50,758
      
51,265
      
50,862
      
50,295
  
Gross profit percentage
  
63
%
    
66
%
    
74
%
    
64
%
    
73
%
                                       
Non-GAAP Financial Results:
                                      
                                       
Income (loss) from operations
$
(2,695
)
  
$
(4,310
)
  
$
1,289
    
$
(7,005
)
  
$
2,458
  
Net income (loss)
$
(2,974
)
  
$
(4,438
)
  
$
1,241
    
$
(7,412
)
  
$
1,897
  
Diluted EPS
$
(0.06
)
  
$
(0.09
)
  
$
0.02
    
$
(0.15
)
  
$
0.04
  
Shares outstanding (diluted)
  
50,965
      
50,758
      
51,265
      
50,862
      
51,355
  
                                       
Backlog at end of quarter
$
5,450
    
$
7,599
    
$
4,789
                  
                                       

Refer to the “Reconciliation of GAAP to Non-GAAP Financial Measures” in the financial tables section of this release for a reconciliation of the non-GAAP financial measures to the most comparable GAAP financial measures.

Products

VoIP deployments by cable operators continued to generate strong demand for Sunrise Telecom’s broadband cable solutions. Broadband sales grew 75% sequentially and 91% year-over-year. Optical group revenue was also strong, driven by the emerging Ethernet-over-SONET phenomenon. To accommodate growing Ethernet traffic, carriers are implementing systems that map Ethernet packets over Sonet/SDH links. Sunrise Telecom’s STT platform has both the 10Gigiabit Ethernet and Sonet/SDH modules that can be plugged-in interchangeably and offer a convenient solution for testing Ethernet-over-SONET. Sales of the STT Optical Testing Platform grew by more than 350% sequentially and 140% year-over-year.

New Product Introductions

During the quarter, Sunrise Telecom introduced the following new products:

·  
TAMS 7-VoIP Monitoring System. TAMS 7-VoIP gathers data from Sunrise Telecom protocol analyzers, the 3GMaster, NeTracker and STT-MSA, and provides an extensive set of tools for traffic analysis, network management and trouble shooting.
·  
Several new modules on its STT Optical Testing Platform:
-  
10 Gigabit Ethernet Module for testing next generation central office and head-end equipment;
-  
xWDM module, the first tool to incorporate a tunable laser; and
-  
the Dispersion Test module to test Chromatic Dispersion (CD) and Polarization Mode Dispersion (PMD) with a single instrument.

Second Quarter Financial Highlights

In the second quarter of 2005, Sunrise Telecom recorded gross margin of 63% of net sales. Gross margin was 66% of net sales for the first quarter of 2005. Gross margin was 74% of net sales for the second quarter of 2004. Gross profit in the second quarter of 2004 included a one-time benefit of approximately $600,000 related to the sale of inventory previously reserved. Excluding this benefit, the second quarter gross profit was 70% of net sales. The sequential decline in gross margin was mainly attributable to the product mix. Revenue from the basic models of our video-testing handhelds, CM, contributed a larger than usual portion of total quarterly sales.

GAAP loss from operations was $(3.1) million in the second quarter of 2005, compared with GAAP income from operations of $0.6 million in the second quarter of 2004 and GAAP loss from operations of $(4.9) million in the first quarter of 2005.

Sunrise Telecom Chief Financial Officer, Rick Kent, said, “Our continuing investment in our sales channels to more effectively align with carrier needs and increase our international presence are beginning to have a positive impact on our top line. These investments in our sales channels have increased Sunrise’s cost structure; however, we believe that over time these initiatives will yield attractive returns for our stockholders.”

The second quarter operating expenses were also impacted by legal costs associated with Sunrise’s patent litigation to defend the Company and enforce its intellectual property and other legal rights. During the second quarter of 2005, Sunrise Telecom incurred approximately $1.6 million in costs associated with the above mentioned legal proceedings, compared to $0.8 million during the first quarter of 2005. There were no significant costs associated with these proceedings during the second quarter of 2004.

Outlook

Said Rick Kent, “Based on the current backlog and anticipated order activity, we expect our third quarter sales to be in the range of $14 to $17 million. This reflects a seasonally slow quarter in our European markets.

Carriers are increasingly encroaching on each other’s territory, creating new opportunities for test equipment providers. The key revenue opportunities for Sunrise related to service providers’ moving into each other’s domain include sales of VoIP testing solutions to cable companies and video testing tools to telcos. We are excited about these market trends and reiterate our goal of delivering revenue growth in 2005.”

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 Paul Chang, President and Chief Executive Officer, and Richard D. Kent, Chief Financial Officer, will further discuss these results and Sunrise Telecom’s outlook. 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 the Investors/Governance section of the company’s Web site at www.sunrisetelecom.com. A Web replay will also be available for at least two weeks at this same Web address.About Sunrise Telecom Incorporated

Sunrise Telecom Reports Second Quarter Results
August 2, 2005/Page of


 
Sunrise Telecom develops testing and monitoring solutions that ensure its customers can deliver high-quality voice, video, data and next-generation digital multimedia services quickly, reliably, and cost-effectively. The firm's feature-rich, easy-to-use solutions allow service providers to pre-qualify, verify, and diagnose telecommunications, cable TV, and Internet networks, and new broadband services including wireline access, DSL, fiber optics, cable TV, cable modem, and signaling networks to ensure their customers' satisfaction. Sunrise Telecom's products maximize service technicians' effectiveness and provide advanced network monitoring to proactively identify and react to network problems before network use is disrupted. Based in San Jose, California, Sunrise Telecom distributes its products through a network of sales representatives, distributors and a direct sales force throughout Asia, Europe, and North America. For more information, visit the company's website at www.sunrisetelecom.com.
 
 
Sunrise Telecom is a registered trademark 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 expectations and estimates for the third quarter of 2005, growth opportunities for product sales during the third quarter and full year, and the goal of delivering revenue growth for 2005, 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: a lack of acceptance or slower than anticipated acceptance for Sunrise Telecom’s new or enhanced products and modules; slower than anticipated product development or introduction into the marketplace; unanticipated delays in product delivery schedules; lower than anticipated end-user demand for telecommunications services and a corresponding cutback in spending by customers; increased competitive pressures; rapid technological change within the telecommunications industry; Sunrise Telecom’s dependence on a limited number of major customers; Sunrise Telecom’s dependence on limited source suppliers; deferred or lost sales resulting from order cancellations or order changes; deferred or lost sales resulting from Sunrise Telecom’s lengthy sales cycle; unanticipated difficulties associated with international operations; Sunrise Telecom’s ability to manage growth and slowdowns; the uncertain impact of the cost cutting measures Sunrise Telecom has taken to date and those that Sunrise Telecom may take in the future; the loss of key personnel; and protracted litigation, which could disrupt our business. These risks and uncertainties are described in more detail in Sunrise Telecom’s reports filed with the Securities and Exchange Commission, including, but not limited to, its Form 10-K for the year ended December 31, 2004 and its Form 10-Q for the quarter ended March 31, 2005. Sunrise Telecom assumes no obligation to update the forward-looking statements included in this press release.
 
Investor Contact:
Kate Sidorovich
Investor Relations
415-445-3236
ksidorovich@sunrisetelecom.com
 

 
-Financial Tables Following-

Sunrise Telecom Reports Second Quarter Results
August 2, 2005/Page of


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

 
June 30,
2005
  
December 31, 2004
ASSETS
              
Current assets:
              
Cash and cash equivalents
$
14,903
    
$
17,758
  
Short-term investments
  
12,815
      
16,113
  
Accounts receivable, net of allowance of $558 and $799 respectively
 
13,520
      
15,111
  
Inventories
 
13,176
      
13,265
  
Prepaid expenses and other assets
 
1,066
      
1,305
  
Deferred tax assets
 
342
      
303
  
Total current assets
 
55,822
      
63,855
  
               
Property and equipment, net
 
27,466
      
27,176
  
Restricted cash
 
11
      
305
  
Marketable securities
 
1,093
      
1,433
  
Goodwill
 
12,532
      
12,729
  
Intangible assets, net
 
2,344
      
3,249
  
Deferred tax assets
 
95
      
7
  
Other assets
 
863
      
738
  
Total assets
$
100,226
    
$
109,492
  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
              
Current liabilities:
              
Short-term borrowings and current portion of notes payable
$
203
    
$
223
  
Accounts payable
 
2,379
      
2,190
  
Other accrued expenses
 
10,109
      
8,788
  
Income taxes payable
 
1,558
      
1,496
  
Deferred tax liabilities
  
131
      
133
  
Deferred revenue
 
579
      
459
  
Total current liabilities
 
14,959
      
13,289
  
               
Notes payable, less current portion
 
714
      
882
  
Deferred revenue
 
44
      
129
  
Other liabilities
  
—
      
2
  
               
Stockholders’ equity:
              
Common stock, $0.001 par value per share; 175,000,000 shares authorized; 52,813,226 and 52,454,531 shares issued as of June 30, 2005 and December 31, 2004, respectively; 51,061,347 and 50,702,652 shares outstanding as of June 30, 2005 and December 31, 2004, respectively
 
51
      
51
  
Additional paid-in capital
 
70,563
      
69,993
  
Retained earnings
 
12,524
      
23,092
  
Accumulated other comprehensive income
 
1,371
      
2,054
  
Total stockholders’ equity
 
84,509
      
95,190
  
Total liabilities and stockholders’ equity
$
100,226
    
$
109,492
  
               



Sunrise Telecom Reports Second Quarter Results
August 2, 2005/Page of


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

 
Three Months Ended
  
Six Months Ended
 
June 30,
  
June 30,
 
2005
  
2004
  
2005
  
2004
                               
Net sales
$
18,330
    
$
15,004
    
$
30,048
    
$
28,805
  
Cost of sales
  
6,778
      
3,856
      
10,817
      
7,791
  
Gross profit
  
11,552
      
11,148
      
19,231
      
21,014
  
                               
Operating expenses:
                              
Research and development
  
4,396
      
3,802
      
8,966
      
7,714
  
Selling and marketing
  
6,159
      
4,297
      
11,010
      
8,260
  
General and administrative
  
4,133
      
2,473
      
7,287
      
4,284
  
Total operating expenses
  
14,688
      
10,572
      
27,263
      
20,258
  
                               
Income (loss) from operations
  
(3,136
)
    
576
      
(8,032
)
    
756
  
Other income, net
  
36
      
347
      
248
      
400
  
                               
Income (loss) before income taxes
  
(3,100
)
    
923
      
(7,784
)
    
1,156
  
Income tax expense
  
139
      
110
      
245
      
7,629
  
                               
Net income (loss)
$
(3,239
)
  
$
813
    
$
(8,029
)
  
$
(6,473
)
                               
Earnings (loss) per share:
                              
Basic
$
(0.06
)
  
$
0.02
    
$
(0.16
)
  
$
(0.13
)
Diluted
$
(0.06
)
  
$
0.02
    
$
(0.16
)
  
$
(0.13
)
                               
Shares used in per share computation:
                              
Basic
  
50,965
      
50,426
      
50,862
      
50,295
  
Diluted
  
50,965
      
51,265
      
50,862
      
50,295
  
                               


Sunrise Telecom Reports Second Quarter Results
August 2, 2005/Page of


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


 
Six Months Ended
June 30,
 
2005
  
2004
Cash flows from operating activities:
              
Cash received from customers
$
31,725
    
$
32,310
  
Cash paid to suppliers and employees
 
(33,910
)
    
(29,259
)
Income taxes refunded (paid)
 
(444
)
    
231
  
Interest and other receipts, net
 
318
      
68
  
Net cash provided by (used in) operating activities
 
(2,311
)
    
3,350
  
               
Cash flows from investing activities:
              
Sales of short-term investments, net
 
9,497
      
7,102
  
Purchases of short-term investments, net
  
(6,200
)
    
(12,150
)
Sales of marketable securities
 
—
      
633
  
Capital expenditures
 
(1,763
)
    
(1,369
)
Net cash provided by (used in) investing activities
 
1,534
      
(5,784
)
               
Cash flows from financing activities:
              
Decrease (increase) in restricted cash
 
294
      
(200
)
Proceeds from notes payable
  
6
      
—
  
Payments on notes payable
 
(61
)
    
(83
)
Dividends paid
 
(2,539
)
    
(2,507
)
Net proceeds from issuance of common stock
  
338
      
319
  
Proceeds from exercise of stock options
 
232
      
182
  
Net cash used in financing activities
 
(1,730
)
    
(2,289
)
               
Effect of exchange rate changes on cash and cash equivalents
 
(348
)
    
149
  
Net increase (decrease) in cash and cash equivalents
 
(2,855
)
    
(4,574
)
               
Cash and cash equivalents at the beginning of the period
 
17,758
      
23,079
  
Cash and cash equivalents at the end of the period
$
14,903
    
$
18,505
  
               



Sunrise Telecom Reports Second Quarter Results
August 2, 2005/Page of


SUNRISE TELECOM INCORPORATED
NET SALES DETAILS
(In thousands, unaudited)



 
Three Months Ended
      
 
June 30,
      
March 31,
      
June 30,
      
 
2005
      
2005
      
2004
      
By Product:
                              
Wireline access
$
5,239
  
29
%
$
4,790
  
41
%
$
6,862
  
46
%
Cable broadband
  
6,903
  
38
%
  
3,930
  
34
%
  
3,605
  
24
%
Fiber optics
  
4,834
  
26
%
  
2,366
  
20
%
  
3,628
  
24
%
Protocol
  
1,354
  
7
%
  
632
  
5
%
  
909
  
6
%
 
$
18,330
      
$
11,718
      
$
15,004
      




 
Three Months Ended
      
 
June 30,
      
March 31,
      
June 30,
      
 
2005
      
2005
      
2004
      
By Region:
                              
North America (United States and Canada)
$
11,378
  
62
%
$
5,257
  
45
%
$
7,815
  
52
%
Asia Pacific
  
2,918
  
16
%
  
3,004
  
26
%
  
4,075
  
27
%
Europe/Africa/Middle East
  
3,574
  
19
%
  
2,873
  
24
%
  
2,880
  
19
%
Latin America
  
460
  
3
%
  
584
  
5
%
  
234
  
2
%
 
$
18,330
      
$
11,718
      
$
15,004
      



Sunrise Telecom Reports Second Quarter Results
August 2, 2005/Page of


SUNRISE TELECOM INCORPORATED
RECONCILIATON OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data, unaudited)

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, Sunrise Telecom Incorporated provides non-GAAP results of operations as supplemental information about its operating results. These results are not in accordance with or an alternative to GAAP and may be different than non-GAAP measures used by other companies. The non-GAAP results of operations eliminate certain items of expenses and losses from cost of goods sold, operating expenses, and income tax expense. Sunrise Telecom’s management believes that these non-GAAP financial measures help investors to evaluate the current operational and financial performance of Sunrise Telecom’s business. Sunrise Telecom discloses this information along with the following reconciliation of the non-GAAP financial measures to the comparable GAAP measures. This allows investors to evaluate the details and general nature of the adjustments made to the GAAP financial measures.

 
Three Months Ended
  
Six Months Ended
 
June 30,
2005
  
March 31, 2005
  
June 30,
2004
  
June 30,
2005
  
June 30,
2004
                                       
Income (loss) from operations - GAAP
$
(3,136
)
  
$
(4,896
)
  
$
576
    
$
(8,032
)
  
$
756
  
                                       
Adjustments:
                                      
Amortization of acquisition-related intangible assets
  
441
      
586
      
713
      
1,027
      
1,435
  
Stock-based compensation expense
  
—
      
—
      
—
      
—
      
267
  
                                       
Income (loss) from operations - Non-GAAP
$
(2,695
)
  
$
(4,310
)
  
$
1,289
    
$
(7,005
)
  
$
2,458
  
                                       

(Continued on following page)

Sunrise Telecom Reports Second Quarter Results
August 2, 2005/Page of


SUNRISE TELECOM INCORPORATED
RECONCILIATON OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data, unaudited)

(Continued from previous page)

 
Three Months Ended
  
Six Months Ended
 
June 30,
2005
  
March 31, 2005
  
June 30,
2004
  
June 30,
2005
  
June 30,
2004
                                       
Net income (loss) - GAAP
$
(3,239
)
  
$
(4,790
)
  
$
813
    
$
(8,029
)
  
$
(6,473
)
                                       
Adjustments:
                                      
Amortization of acquisition-related intangible assets, net of tax
  
265
      
352
      
428
      
617
      
861
  
Stock-based compensation expense, net of tax
  
—
      
—
      
—
      
—
      
160
  
Charge for valuation allowance on deferred tax assets
  
—
      
—
      
—
      
—
      
7,349
  
                                       
Net income (loss) - Non-GAAP
$
(2,974
)
  
$
(4,438
)
  
$
1,241
    
$
(7,412
)
  
$
1,897
  
                                       
Earnings (loss) per share:
                                      
Basic - GAAP
$
(0.06
)
  
$
(0.09
)
  
$
0.02
    
$
(0.16
)
  
$
(0.13
)
Basic - Non-GAAP
$
(0.06
)
  
$
(0.09
)
  
$
0.02
    
$
(0.15
)
  
$
0.04
  
Diluted - GAAP
$
(0.06
)
  
$
(0.09
)
  
$
0.02
    
$
(0.16
)
  
$
(0.13
)
Diluted - Non-GAAP
$
(0.06
)
  
$
(0.09
)
  
$
0.02
    
$
(0.15
)
  
$
0.04
  
                                       
Shares used in computing earnings (loss) per share:
                                      
Basic - GAAP
  
50,965
      
50,758
      
50,426
      
50,862
      
50,295
  
Basic - Non-GAAP
  
50 965
      
50,758
      
50,426
      
50,862
      
50,295
  
Diluted - GAAP
  
50,965
      
50,758
      
51,265
      
50,862
      
50,295
  
Diluted - Non-GAAP
  
50,965
      
50,758
      
51,265
      
50,862
      
51,355
  
                                       

Effective tax rate of 40% utilized for all net of tax calculations for all periods.


Sunrise Telecom Reports Second Quarter Results
August 2, 2005/Page of



SUNRISE TELECOM INCORPORATED
SUMMARY OF CERTAIN NONCASH EXPENSES
(In thousands, unaudited)

The following expenses are included in the applicable lines of Sunrise Telecom Incorporated’s Condensed Consolidated Statements of Operations, as required by GAAP.

 
Three Months Ended
  
Six Months Ended
 
June 30,
  
June 30,
 
2005
  
2004
  
2005
  
2004
                               
Amortization of deferred stock-based compensation:
                              
Included in cost of sales
$
—
    
$
—
    
$
—
    
$
40
  
Included in research and development
  
—
      
—
      
—
      
84
  
Included in selling and marketing
  
—
      
—
      
—
      
90
  
Included in general and administrative
  
—
      
—
      
—
      
53
  
 
$
—
    
$
—
    
$
—
    
$
267
  
                               
Amortization of acquisition-related intangible assets included in general and administrative
$
441
    
$
713
    
$
1,027
    
$
1,435
  
                               
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