Press Room
palmOne Reports Q4 Results
Revenue Up 23%; Operating Margin 6.0%MILPITAS, Calif., June 21 -- palmOne, Inc. (Nasdaq: PLMO) today reported a profitable fourth quarter of fiscal year 2004, ended May 28, with revenue totaling $267.3 million, up 23 percent from the $217.1 million reported during the comparable quarter a year ago, and up 10 percent sequentially.
Net income was $13.3 million, or $0.27 per share. This compares to a net loss for the fourth quarter of fiscal year 2003 of $15.0 million or $0.51 per share and net loss for the third quarter of fiscal year 2004 of $9.3 million or $0.20 per share.
Net income in the fourth fiscal quarter, measured on a non-GAAP(1) basis, totaled $15.9 million, or $0.32 per share, excluding the effects of amortization of intangible assets and deferred stock-based compensation and restructuring charges. This compares to a non-GAAP net loss in the fourth quarter of fiscal year 2003 of $8.2 million, or $0.28 per share, excluding the effects of amortization of intangible assets and deferred stock-based compensation, restructuring charges and loss from discontinued operations. Non-GAAP net income in the third quarter of fiscal year 2004 was $0.6 million, or $0.01 per share, excluding the effects of amortization of intangible assets and deferred stock-based compensation and restructuring charges.
"We achieved profitability for the quarter, and demand remains strong for our handheld and smartphone products," said Todd Bradley, palmOne chief executive officer. "We ended fiscal year 2004 with very good results across virtually every key financial metric, and we enter fiscal year 2005 with an optimistic outlook for accelerating growth and increasing profitability."
Bradley noted the following operational highlights:
- Revenue grew 23 percent year-over-year, marking the fourth consecutive quarter of year-over-year growth;
- Gross margin rose to 30.5 percent, compared to 28.9 percent last quarter and 26.5 percent in the year-ago quarter;
- Operating expenses were reduced year-over-year and sequentially;
- Operating margin was 6.0 percent, and non-GAAP operating margin was 7.0 percent;
- Net income was $13.3 million, and non-GAAP net income totaled $15.9 million;
- Inventory fell by $8.7 million from the year-ago quarter, and inventory turns rose to 36 from 28 in the comparable quarter a year ago; and
- The company generated positive cash flow of $12.5 million during the quarter, including $6.4 million from continuing operations.
Fiscal Year 2004 Results and Unit Shipments
Revenue for the full fiscal year 2004 was $949.7 million,
up 13 percent from the $837.6 million reported in fiscal
year 2003. Loss from continuing operations for fiscal year
2004 was $10.2 million, or $0.26 per share, compared with
a loss from continuing operations of $417.9 million, or
$14.38 per share, for fiscal year 2003. Non-GAAP income
from continuing operations for fiscal year 2004 -- excluding
the effects of amortization of intangible assets and deferred
stock-based compensation and restructuring charges -- was
$8.0 million, or $0.19 per share. That compares with a fiscal
year 2003 non- GAAP loss from continuing operations -- excluding
the effects of amortization of intangible assets and deferred
stock-based compensation, impairment charges, restructuring
charges and the change in the valuation allowance for deferred
tax assets -- of $55.6 million, or $1.91 per share.
palmOne shipped approximately 1.1 million Zire(TM), Tungsten(TM) and Treo(TM) devices during its fourth fiscal quarter, and approximately 4.1 million devices during fiscal year 2004 -- bringing the total number of devices shipped to-date by palmOne to more than 26.4 million.
INVESTOR'S NOTE: The company will hold a conference call for the public on June 21, 2004, at 2 p.m. Pacific/5 p.m. Eastern to discuss matters covered in this news release. The dial-in number for the call is 888.335.6680 in the United States and 973.321.1030 for international callers. No pass code is needed. A telephone call replay of the conference call will be available through July 5, 2004, beginning today at approximately 5 p.m. Pacific. The dial-in number for the replay is 877.519.4471 (PIN# 4818890) in the United States and 973.341.3080 (PIN# 4818890) for international callers. The live conference call also will be available over the Internet by logging onto the investor relations section of palmOne's website at http://ir.palmone.com. An audio replay and text transcript of the conference call also can be accessed at the same URL beginning today at approximately 5:30 p.m. Pacific.
NON-GAAP FINANCIAL MEASURES: To supplement the company's consolidated financial statements presented in accordance Palm Australia - Your Destination for Handhelds, Mobile Managers, Smartphones, Accessories and Software Titles with GAAP, palmOne uses non-GAAP measures of certain components of financial performance, including operating income (loss), net income (loss) and per share data, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses. These non-GAAP measures are provided to enhance investors' overall understanding of the company's current financial performance and the company's prospects for the future. Specifically, the company believes the non-GAAP results provide useful information to both management and investors by excluding certain expenses, gains and losses that may not be indicative of its core operating results. These non-GAAP results are among the primary indicators management uses as a basis for planning and forecasting of future periods and facilitating management's internal comparisons to the company's historical operating results and comparisons to competitors' operating results. In addition, because palmOne has historically reported certain non-GAAP results to investors, the company believes the inclusion of non-GAAP measures provides consistency in the company's financial reporting. These measures should be considered in addition to results prepared in accordance with generally accepted accounting principles, but should not be considered a substitute for, or superior to, GAAP results. These non-GAAP financial measures also may be different from non-GAAP financial measures used by other companies. Consistent with the company's practice, the non-GAAP measures included in this press release have been reconciled to the nearest GAAP measure.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements regarding our ability to grow our business, to increase profitability, to remain competitive and to continue to lead our industry. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially, including, without limitation, the following: fluctuations in the demand for palmOne's existing and future products and services and growth in palmOne's industries and markets; possible defects in products and technologies developed; palmOne's ability to timely and cost-effectively obtain components and elements of our technology from suppliers; and palmOne's ability to compete with existing and new competitors. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in palmOne's most recent filings with the Securities and Exchange Commission, including its Quarterly Report on Form 10-Q for the fiscal quarter ended Feb. 27, 2004. palmOne undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this press release.
About palmOne, Inc.
palmOne, Inc. delivers what matters most to customers -- whether a single consumer or company of thousands -- enabling users to improve their personal lives and professional productivity through mobile devices and solutions.
palmOne is the name adopted in October 2003 by Palm, Inc., when it spun off PalmSource, Inc., maker of the Palm OS(R) platform software, and acquired Handspring, Inc. Uniting the Zire(TM), Tungsten(TM) and Treo(TM) subbrands, the creation of palmOne launched a new, stronger market leader in handheld computer and communications hardware and software solutions.
More information about palmOne, WInc. is available at http://www.palmOne.com.
(1) GAAP stands for Generally Accepted Accounting Principles.
palmOne, Zire, Tungsten, Treo and Palm OS are among the
trademarks or registered trademarks owned by or licensed
to palmOne, Inc. or its subsidiaries. All other brand and
product names are or may be trademarks of, and are used
to identify products or services of, their respective owners.
palmOne, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended Years Ended
May 31, May 31, May 31, May 31,
2004 2003 2004 2003
Revenues $267,346 $217,146 $949,654 $837,637
Costs and operating expenses:
Cost of revenues (**) 185,659 159,617 676,791 624,980
Sales and marketing 35,201 36,473 152,070 160,001
Research and development 17,760 18,997 69,367 70,175
General and administrative 10,104 9,751 37,323 37,307
Amortization of intangible
assets and stock-based
compensation(*) 2,278 237 9,751 3,266
Impairment charges -- -- -- 102,540
Restructuring charges 322 1,952 8,432 37,300
Total costs and operating
expenses 251,324 227,027 953,734 1,035,569
Operating income (loss) 16,022 (9,881) (4,080) (197,932)
Interest and other income (expense),
net (1,009) 596 (44) 3,005
Income (loss) before income taxes 15,013 (9,285) (4,124) (194,927)
Income tax provision 1,676 1,070 6,091 222,928
Income (loss) from continuing
operations 13,337 (10,355) (10,215) (417,855)
Loss from discontinued operations
(net of taxes of $0, $518, $252
and $2,070, respectively) -- (4,666) (11,634) (24,727)
Net income (loss) $13,337 $(15,021) $(21,849) $(442,582)
Net income (loss) per share:
Basic:
Continuing operations $0.29 $(0.35) $(0.26) $(14.38)
Discontinued operations -- (0.16) (0.29) (0.85)
$0.29 $(0.51) $(0.55) $(15.23)
Diluted:
Continuing operations $0.27 $(0.35) $(0.26) $(14.38)
Discontinued operations -- (0.16) (0.29) (0.85)
$0.27 $(0.51) $(0.55) $(15.23)
Shares used in computing per share
amounts:
Basic 46,628 29,180 39,686 29,069
Diluted 49,358 29,180 39,686 29,069
(*)Amortization of intangible assets
and stock-based compensation:
Cost of revenues $243 $57 $574 $899
Sales and marketing 1,540 106 7,906 704
Research and development 102 57 234 1,245
General and administrative 393 17 1,037 418
$2,278 $237 $9,751 $3,266
Certain prior period balances have been reclassified to conform to the current period presentation.
palmOne's fiscal quarters are generally 13 weeks in length and end on a Friday. For presentation purposes, the periods are presented as ending on May 31.
(**) Cost of revenues does not include that portion of
amortization of intangible assets and stock-based compensation
related to cost of revenues.
palmOne, Inc. Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of
Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended Three Months Ended
May 31, 2004 May 31, 2003
Adjust- Non- Adjust- Non-
GAAP ments GAAP GAAP ments GAAP
Revenues $267,346 $-- $267,346 $217,146 $-- $217,146
Costs and operating
expenses:
Cost of
revenues (**) 185,659 -- 185,659 159,617 -- 159,617
Sales and
marketing 35,201 -- 35,201 36,473 -- 36,473
Research and
development 17,760 -- 17,760 18,997 -- 18,997
General and
administrative 10,104 -- 10,104 9,751 -- 9,751
Amortization of
intangible assets
and stock-based
compensation(*) 2,278 (2,278) -- 237 (237) --
Restructuring
charges 322 (322) -- 1,952 (1,952) --
Total costs and
operating
expenses 251,324 (2,600) 248,724 227,027 (2,189) 224,838
Operating income
(loss) 16,022 2,600 18,622 (9,881) 2,189 (7,692)
Interest and other
income (expense),
net (1,009) -- (1,009) 596 -- 596
Income (loss) before
income taxes 15,013 2,600 17,613 (9,285) 2,189 (7,096)
Income tax provision 1,676 -- 1,676 1,070 -- 1,070
Income (loss) from
continuing
operations 13,337 2,600 15,937 (10,355) 2,189 (8,166)
Loss from discontinued
operations (net of
taxes of $0 and
$518, respectively) -- -- -- (4,666) 4,666 --
Net income (loss) $13,337 $2,600 $15,937 $(15,021) $6,855 $(8,166)
Net income (loss)
per share:
Basic:
Continuing
operations $0.29 $0.05 $0.34 $(0.35) $0.07 $(0.28)
Discontinued
operations -- -- -- (0.16) 0.16 --
$0.29 $0.05 $0.34 $(0.51) $0.23 $(0.28)
Diluted:
Continuing
operations $0.27 $0.05 $0.32 $(0.35) $0.07 $(0.28)
Discontinued
operations -- -- -- (0.16) 0.16 --
$0.27 $0.05 $0.32 $(0.51) $0.23 $(0.28)
Shares used in
computing per
share amounts:
Basic 46,628 -- 46,628 29,180 -- 29,180
Diluted 49,358 -- 49,358 29,180 -- 29,180
(*)Amortization of
intangible assets
and stock-based
compensation:
Cost of
revenues $243 $(243) $-- $57 $(57) $--
Sales and
marketing 1,540 (1,540) -- 106 (106) --
Research and
development 102 (102) -- 57 (57) --
General and
administrative 393 (393) -- 17 (17) --
$2,278 $(2,278) $-- $237 $(237) $--
The above non-GAAP amounts have been adjusted to eliminate amortization of intangible assets and stock-based compensation, restructuring charges and loss from discontinued operations.
Certain prior period balances have been reclassified to conform to the current period presentation.
palmOne's fiscal quarters are generally 13 weeks in length and end on a Friday. For presentation purposes, the periods are presented as ending on May 31.
(**) Cost of revenues does not include that portion of
amortization of intangible assets and stock-based compensation
related to cost of revenues.
palmOne, Inc. Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of
Operations
(In thousands, except per share data)
(Unaudited)
Year Ended Year Ended
May 31, 2004 May 31, 2003
Adjust- Non- Adjust- Non-
GAAP ments GAAP GAAP ments GAAP
Revenues $949,654 $-- $949,654 $837,637 $-- $837,637
Costs and operating
expenses:
Cost of
revenues (**) 676,791 -- 676,791 624,980 -- 624,980
Sales and
marketing 152,070 -- 152,070 160,001 -- 160,001
Research and
development 69,367 -- 69,367 70,175 -- 70,175
General and
administrative 37,323 -- 37,323 37,307 -- 37,307
Amortization of
intangible assets
and stock-based
compensation(*) 9,751 (9,751) -- 3,266 (3,266) --
Impairment charges -- -- -- 102,540 (102,540) --
Restructuring
charges 8,432 (8,432) -- 37,300 (37,300) --
Total costs and
operating
expenses 953,734 (18,183) 935,551 1,035,569 (143,106) 892,463
Operating income
(loss) (4,080) 18,183 14,103 (197,932) 143,106 (54,826)
Interest and other
income (expense),
net (44) -- (44) 3,005 -- 3,005
Income (loss)
before
income taxes (4,124) 18,183 14,059 (194,927) 143,106 (51,821)
Income tax
provision 6,091 -- 6,091 222,928 (219,141) 3,787
Income (loss) from
continuing
operations (10,215) 18,183 7,968 (417,855) 362,247 (55,608)
Loss from
discontinued
operations (net of
taxes of $252 and
$2,070,
respectively) (11,634) 11,634 -- (24,727) 24,727 --
Net income
(loss) $(21,849) $29,817 $7,968 $(442,582)$386,974 $(55,608)
Net income
(loss) per
share:
Basic
Continuing
operations $(0.26) $0.46 $0.20 $(14.38) $12.47 $(1.91)
Discontinued
operations (0.29) 0.29 -- (0.85) 0.85 --
$(0.55) $0.75 $0.20 $(15.23) $13.32 $(1.91)
Diluted
Continuing
operations $(0.26) $0.45 $0.19 $(14.38) $12.47 $(1.91)
Discontinued
operations (0.29) 0.29 -- (0.85) 0.85 --
$(0.55) $0.74 $0.19 $(15.23) $13.32 $(1.91)
Shares used in
computing per
share amounts:
Basic 39,686 -- 39,686 29,069 -- 29,069
Diluted 39,686 1,570 41,256 29,069 -- 29,069
(*) Amortization
of intangible
assets and
stock-based
compensation:
Cost of
revenues $574 $(574) $-- $899 $(899) $--
Sales and
marketing 7,906 (7,906) -- 704 (704) --
Research and
development 234 (234) -- 1,245 (1,245) --
General and
admini-
strative 1,037 (1,037) -- 418 (418) --
$9,751 $(9,751) $-- $3,266 $(3,266) $--
The above non-GAAP amounts have been adjusted to eliminate amortization of intangible assets and stock-based compensation, impairment charges, restructuring charges, the change in the valuation allowance for deferred tax assets and the related income tax provision and loss from discontinued operations.
Certain prior period balances have been reclassified to conform to the current period presentation.
palmOne's fiscal quarters are generally 13 weeks in length and end on a Friday. For presentation purposes, the periods are presented as ending on May 31.
(**) Cost of revenues does not include that portion of
amortization of intangible assets and stock-based compensation
related to cost of revenues.
palmOne, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except par value amounts)
(Unaudited)
May 31, 2004 May 31, 2003
ASSETS
Current assets:
Cash and cash equivalents $203,069 $204,967
Short-term investments 49,382
Accounts receivable, net of allowance for
doubtful accounts of $8,317 and $4,635,
respectively 120,757 96,784
Inventories 14,030 22,748
Investment for committed tenant improvements 7,197 --
Prepaids and other 8,067 9,039
Current assets of discontinued operations -- 37,485
Total current assets 402,502 371,023
Restricted investments 1,175 948
Land not in use 60,000 60,000
Property and equipment, net 19,425 31,204
Goodwill 257,363 13,815
Intangible assets, net 10,979 --
Deferred income taxes 34,800 34,800
Other assets 1,694 1,720
Non-current assets of discontinued operations -- 63,116
Total assets $787,938 $576,626
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $112,772 $89,371
Accrued restructuring 27,156 34,886
Provision for committed tenant improvements 7,197 --
Other accrued liabilities 112,679 100,519
Current liabilities of discontinued operations -- 12,570
Total current liabilities 259,804 237,346
Non-current liabilities:
Long-term convertible debt 35,000 35,000
Other non-current liabilities 1,600 165
Non-current liabilities of discontinued operations -- 48,329
Stockholders' equity:
Preferred stock, $.001 par value, 125,000 shares
authorized; none outstanding -- --
Common stock, $.001 par value, 2,000,000 shares
authorized; outstanding May 31, 2004,
47,032 shares; May 31, 2003, 29,230 shares 47 29
Additional paid-in capital 1,383,630 1,123,819
Unamortized deferred stock-based compensation (1,995) (508)
Accumulated deficit (890,638) (868,789)
Accumulated other comprehensive income 490 1,235
Total stockholders' equity 491,534 255,786
Total liabilities and stockholders' equity $787,938 $576,626
Certain prior year balances have been reclassified to conform to the current year presentation.
palmOne's fiscal quarters are generally 13 weeks in length
and end on a Friday. For presentation purposes, the periods
are presented as ending on May 31.
palmOne, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
May 31, May 31,
2004 2003
Cash flows from operating activities:
Income (loss) from continuing operations $13,337 $(10,355)
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by (used in)
operating activities:
Depreciation 4,931 6,423
Amortization 2,400 557
Recognised loss on equity investments -- 3,747
Changes in assets and liabilities:
Accounts receivable (19,080) (6,553)
Inventories 13,012 545
Prepaids and other 1,959 (1,266)
Accounts payable 1,739 1,999
Accrued restructuring (7,955) (13,051)
Other accrued liabilities (3,984) (2,712)
Net cash provided by (used in) operating activities 6,359 (20,666)
Cash flows from investing activities:
Purchase of property and equipment (1,547) (1,173)
Purchase of short-term investments (25,299) --
Sale of short-term investments 24,762 5,063
Cash distributions from PalmSource -- 819
Net cash provided by (used in) investing activities (2,084) 4,709
Cash flows from financing activities:
Proceeds from issuance of common stock; employee stock
plans 8,244 1,171
Net cash provided by financing activities 8,244 1,171
Change in cash and cash equivalents 12,519 (14,786)
Cash and cash equivalents, beginning of period 190,550 219,753
Cash and cash equivalents, end of period $203,069 $204,967
Other cash flow information:
Cash paid for income taxes $(2,052) $(1,088)
Cash paid for interest $(88) $(37)
Additional information:
Change in cash and cash equivalents $12,519 $(14,786)
Change in short-term investments 121 (5,063)
Change in cash and cash equivalents and short-term
investments $12,640 $(19,849)
Certain prior period balances have been reclassified to conform to the current period presentation.
palmOne's fiscal quarters are generally 13 weeks in length and end on a Friday. For presentation purposes, the periods are presented as ending on May 31.
SOURCE palmOne, Inc.
