-----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, Mo3RYLqeMgvDQpplbqfymZGGA3LOCorFf07o/6nRDBZRB9MjPQDDdXvKylcN25Rx jdgvdVmtvHUfRSmFwE1EXw== 0000907152-07-000003.txt : 20070209 0000907152-07-000003.hdr.sgml : 20070209 20070209143006 ACCESSION NUMBER: 0000907152-07-000003 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20061231 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070209 DATE AS OF CHANGE: 20070209 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: 07597202 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 q42006srtiearningsrelease.htm 2006 Q4 SRTI EARNINGS RELEASE OF FEB. 8, 2007

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) February 8, 2007
 

 
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 February 8, 2007, Sunrise Telecom Incorporated (the "Company") issued a press release regarding its preliminary unaudited financial results for the quarter ended December 31, 2006. A copy of this press release is attached as Exhibit 99.1 to this report. The Company is making forward-looking statements, including sales and gross margin expectations for the first quarter of 2007, and statements concerning Sunrise Telecom’s voluntary review of its stock option grant practices and need to restate its financial statements for the fiscal years 2001 through the present, in the press release.
 
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.
 

 
Item 99.1 Financial Statements and Exhibits.

(d) Exhibits.

Number
 
Description
99.1
 
Press Release dated February 8, 2007



 

 
 
 

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: February 9, 2007        
 
 
 
By:
 
/s/    RICHARD D. KENT        
 
 
 
 
 
 
Richard D. Kent
Chief Financial Officer
 

 
 
 

EXHIBIT INDEX
 
 
Number
  
Description
 
 
 
99.1
  
Press Release issued by the Company on February 8, 2007 announcing preliminary unaudited financial results for the three months ended December 31, 2006.
     



 
 
 

Exhibit 99.1
Sunrise Telecom Incorporated
Richard D. Kent
Chief Financial Officer
(408) 363-8000


SUNRISE TELECOM® REPORTS $36.6 MILLION SALES FOR FOURTH QUARTER OF 2006
·  
Preliminary GAAP income from operations of $5.5 million
·  
First quarter 2007 sales projected between $19 million and $23 million


SAN JOSE, CA, February 8, 2007 - Sunrise Telecom® Incorporated (OTC: SRTI.PK), a leading provider of service verification equipment for telecommunications, cable broadband and Internet networks, today reported sales of $36.6 million for the fourth quarter of 2006 up 69% as compared to $21.7 million in the fourth quarter of 2005 and up 47% sequentially from $24.8 million in the third quarter of 2006. Preliminary diluted GAAP net earnings per share were $0.10. Backlog at quarter-end was $7.7 million, compared with $7.6 million at the end of the fourth quarter of 2005, and $15.9 million at the end of the third quarter of 2006. All financial information other than revenue and backlog that is presented in this release should be considered preliminary, as Sunrise Telecom has not yet completed restatements of its historical financial results that may have an impact on subsequent reported results. Further, this financial information has not been subjected to completed audit or review procedures by our independent auditor.

“2006 was a good year for Sunrise Telecom with all of our product divisions delivering impressive revenue results. Our annual sales growth exceeded 45% resulting in profitability for the full fiscal year. I am especially pleased with our fourth quarter which had the highest quarterly sales in the Company’s history,” said Sunrise Telecom President and CEO, Paul Marshall. “Our performance reflects the accelerating triple play deployments in North America as well as the solid traction in our European sales offices.”

Wireline

Wireline products group posted $13.4 million in revenues, up 107% year-over-year and 58% sequentially. Strong sales were driven by the continuing demand for Sunrise Telecom’s handheld solutions used in the access portion of the network. The order activity was broad-based including major North American and European carriers as well as the smaller independent service providers. Among the best performing products were the ADSL/ADSL2+ modules for testing triple play services and the Ethernet modules targeting corporate applications. The legacy DSL business remained strong, reflecting a steady increase in DSL subscribers by carriers in North America and abroad.

Notably, during the fourth quarter of 2006 Sunrise Telecom shipped over $3.0 million of its Home Test Toolkit (HTT), which was custom designed for a North American Regional Bell Operating Company (RBOC) to facilitate its Fiber-to-the-X (FTTX) strategy. Sunrise Telecom expects further HTT order activity based on this RBOC’s commitment to pass 8 million homes with its triple play offering by the end of 2007, up from little over 2 million households at the end of 2006. Other significant customers during the quarter included a Tier-One carrier in France and a leading US provider of natural gas and electricity.

Broadband Cable

Broadband sales were $10.8 million, representing growth of 117% year-over-year and 35% sequentially. Sales to existing customers were complemented by new account wins in North America and Europe. The leading contributor to broadband sales was the CM750™ handheld, which is used by a major North American RBOC to test video-over-fiber installation and services. “In the fourth quarter we generated sales in excess of $4 million from the CM750. We are continuing to see strong order flow this quarter, consistent with our customer’s aggressive FTTX deployment schedule,” said Paul Marshall.

Another strong contributor to broadband sales was the AT2500 spectrum analyzer driven by the continuing investment in infrastructure by cable operators and video-over-fiber by telecom carriers. Major AT2500 customers during the quarter included a North American RBOC, a tier-one US cable operator and one of the leading MSOs in Asia.

Fiber Optics

Fiber optics revenues were $7.6 million during the fourth quarter of 2006 as compared to $8.1 million in the fourth quarter of 2005 and $7.0 million in the third quarter of 2006. Sales of the modular testing platform, the Scalable Test Toolkit (STT®), for core and metro networks generated over 40% of the revenues, with handheld optical testing equipment contributing the rest. Sales of STT were especially strong in Europe, driven by the proliferation of Ethernet over SDH. Sunrise Telecom addresses this trend through its ONE module, which supports Ethernet payloads inside SONET/SDH and OTN transport lines. The Company is working on a number of opportunities with major European carriers which could potentially standardize on the STT platform.

International sales of handheld equipment were also strong during the fourth quarter of 2006. The optical testing toolkit targeting access networks was popular with European carriers as a tool for Ethernet and Fiber channel testing, while the SDH handhelds continued to generate significant demand in developing markets, including Eastern Europe and Asia.

Protocol

Protocol products generated fourth quarter 2006 revenues of $4.7 million as compared to $2.1 million in the fourth quarter of 2005 and $1.4 million in the third quarter of 2006. During the fourth quarter of 2006 Sunrise Telecom recognized over $3.0 million in revenues related to its contract with O2 Germany. Sunrise Telecom provides O2 Germany with its Traffic Analysis and Monitoring System (TAMS) comprised of 3GMaster® technology, software and multiple servers.










 
 
 
Financial Results Summary

(In thousands, except per share and percentage data, unaudited)
 
For the Three
Months Ended
 
Dec. 31,
2006
  
     
Selected Income Statement Data (preliminary)
        
         
Net sales
$
36,559
    
Income from operations
$
5,487
    
Net income
$
5,292
    
Diluted earnings per share
$
0.10
    
Shares outstanding (diluted)
  
51,646
    
Gross profit percentage
  
66
%
  
         
Backlog at end of quarter
$
7,669
    
         

Selected Consolidated Balance Sheet Data (preliminary)
 
Dec. 31,
2006
  
     
Cash and cash equivalents
$
17,438
    
Short-term investments
  
4,565
    
Accounts receivable, net of allowance of $395
 
22,640
    
Inventories
 
17,466
    
Short-term borrowings and current portion of notes payable
  
181
    
Accounts payable
 
2,453
    
Other accrued expenses
 
14,246
    
Deferred revenue
 
2,894
    
Notes payable, less current portion
 
528
    

These results are preliminary and subject to change because they do not reflect the potential impact of expected restatements of financial results since 2001, nor has this financial information been subjected to completed audit or review procedures, by our independent auditor.

Fourth Quarter Financial Highlights

In the fourth quarter of 2006, Sunrise Telecom reported preliminary gross margin of 66%. The Company expects that its first quarter gross margins will be in the 63% to 67% range. Preliminary fourth quarter 2006 income from operations was $5.5 million, reflecting strong sales performance. Fourth quarter 2006 operating expenses increased sequentially in absolute terms, but declined as percentage of sales. The increase in operating expenses was driven by higher sales commissions, ongoing investments into R&D and approximately $0.4 million of costs related to the review of stock option grant practices.
 
Outlook

“Our growth last year was a direct result of Sunrise Telecom’s ability to partner with carriers to solve their unique triple play testing challenges. In 2007, we expect to see continuing strength in the North American markets related to triple play deployments. Our international sales strategy reflects the same commitment to partnering with major carriers and providing them with top quality testing solutions. Our direct sales offices in EMEA region generated over $10 million in revenues in 2006, representing 47% growth over the same period in the prior year. Sunrise Telecom is currently working on new opportunities in Europe which can provide a strong upside to the 2007 performance,” said Paul Marshall. “Our guidance reflects these considerations, as well as the seasonal weakness we typically experience in the first quarter. We currently expect first quarter 2007 sales to be in the $19 to $23 million range, representing a 16% to 40% growth rate from the first quarter of 2006.”

Stock Option Review Update

In the fourth quarter of 2006, Sunrise Telecom completed the voluntary review of its stock option grant practices. The review was initiated and conducted by Sunrise Telecom's management. Sunrise Telecom has determined that it used incorrect measurement dates with respect to the accounting for certain stock options granted in 2001 and 2002. However, the review did not find any intentional wrongdoing, falsification of documents or other misconduct by Sunrise Telecom's current executives, staff or directors. The findings were examined by the Audit Committee of Sunrise Telecom’s Board of Directors and provided to Sunrise Telecom’s independent auditor.

As a result of these findings, Sunrise Telecom will realize a one-time non-cash charge of approximately $6 million and will restate its financial statements for the fiscal years 2001 through 2005. The Company’s filings will provide further details as to the nature and amount of changes made. Sunrise Telecom is making every effort to file its restated financial statements and its past due periodic reports as promptly as possible. The Company currently expects to become current during the third quarter of 2007, although no assurance can be made can be made in that regard.

A shareholder derivative lawsuit was filed in the Superior Court of the State of California, Santa Clara County in December 2006, naming certain of the Company's current and former officers and board members as defendants.  The lawsuit alleges, among other things, that the individual defendants improperly selected stock option grant dates. The Company has not yet responded to the complaint. Additional similar complaints may be filed.

Lawsuit Against VeEx Inc.

On January 22, 2007, Sunrise Telecom filed a lawsuit in the Superior Court of the State of California, Santa Clara County against VeEx Inc, its principals, Paul Chang and Cyrille Morelle, and several other former employees of Sunrise Telecom for misappropriation of trade secrets, unfair competition, breach of contract and breach of fiduciary duty. Sunrise Telecom seeks compensatory and punitive damages, and injunctive relief.
 
About Sunrise Telecom Incorporated
 
Sunrise Telecom develops and manufactures communications test and measurement solutions that enable service providers to deliver high-quality voice, video, data and next-generation digital multimedia services quickly, reliably, and cost-effectively. The Company offers a robust portfolio of feature-rich, easy-to-use products that pre-qualify, verify, and diagnose telecommunications, cable TV, and Internet networks from a variety of access points including wireline, DSL, optical fiber, coaxial cable, and signaling links. Based in San Jose, California, Sunrise Telecom distributes its products through a direct sales force and a network of sales representatives and distributors worldwide. For more information, visit www.sunrisetelecom.com.
 
NOTE: 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 within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including, but not limited to, sales and gross margin expectations for the first quarter of 2007, and statements concerning Sunrise Telecom’s voluntary review of its stock option grant practices and need to restate its financial statements for the fiscal years 2001 through the present. These forward-looking statements are subject to many 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 unknown effects of management changes; the loss of key personnel; competition from former employees; the results of Sunrise Telecom's review of its stock option grant practices and the corresponding timing for filing its restated financial statements; other accounting adjustments that may result from review of Sunrise Telecom's financial statements for the periods in question; the ramifications of Sunrise Telecom's inability to file required reports with the SEC on a timely basis; any potential claims or proceedings related to such matters, including shareholder litigation and any action by the SEC; any negative tax or other implications for Sunrise Telecom resulting from accounting adjustments and other factors; and protracted litigation, which could disrupt our normal business operations. Some of 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 Forms 10-Q for the quarters ended March 31 and June 30, 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 INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (preliminary)
(In thousands, except per share data, unaudited)

 
Three Months Ended
Dec. 31,
 
 
2006
  
         
Net sales
$
36,559
    
Cost of sales
  
12,396
    
Gross profit
  
24,163
    
         
Operating expenses:
        
Research and development
  
5,886
    
Selling and marketing
  
8,522
    
General and administrative
  
4,268
    
Total operating expenses
  
18,676
    
         
Income from operations
  
5,487
    
Other income, net
  
911
    
         
Income before income taxes
  
6,398
    
Income tax expense
  
1,106
    
         
Net income
$
5,292
    
         
Earnings per share:
        
Basic
$
0.10
    
Diluted
$
0.10
    
         
Shares used in per share computation:
        
Basic
  
51,349
    
Diluted
  
51,646
    
         

 
 
 

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

 
Three Months Ended
      
 
Dec. 31,
      
Sept. 30,
      
Dec. 31,
      
 
2006
      
2006
      
2005
      
By Product:
                              
Wireline access
$
13,416
  
37
%
$
8,485
  
34
%
$
6,474
  
30
%
Cable broadband
  
10,832
  
29
%
  
8,001
  
32
%
  
4,995
  
23
%
Fiber optics
  
7,620
  
21
%
  
6,997
  
28
%
  
8,129
  
37
%
Protocol
  
4,691
  
13
%
  
1,364
  
6
%
  
2,085
  
10
%
 
$
36,559
      
$
24,847
      
$
21,683
      


 
Three Months Ended
      
 
Dec. 31,
      
Sept. 30,
      
Dec. 31,
      
 
2006
      
2006
      
2005
      
By Region:
                              
North America (United States and Canada)
$
21,172
  
58
%
$
13,673
  
45
%
$
11,003
  
51
%
Asia Pacific
  
3,972
  
11
%
  
5,347
  
26
%
  
3,471
  
16
%
Europe/Africa/Middle East
  
10,312
  
28
%
  
5,273
  
24
%
  
6,569
  
30
%
Latin America
  
1,103
  
3
%
  
554
  
5
%
  
640
  
3
%
 
$
36,559
      
$
24,847
      
$
21,683
      


SUMMARY OF CERTAIN NONCASH EXPENSES (preliminary)
(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
 
Dec. 31,
 
2006
  
Share based compensation:
        
Included in cost of sales
$
10
    
Included in research and development
  
127
    
Included in selling and marketing
  
78
    
Included in general and administrative
  
33
    
 
$
248
    
         
Amortization of acquisition-related intangible assets included in general and administrative
$
210
    
         

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