EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

CONTACTS:

  

PR2004-CORP10

 

Dave Vadasz, investor relations

408.503.7200

dave.vadasz@palmOne.com

 

Marlene Somsak, media relations

408.503.2592

marlene.somsak@palmOne.com

 

palmOne Reports Q4 Results

 

Revenue Up 23%; Operating Margin 6.0%

 

MILPITAS, Calif., June 21, 2004 — 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

 

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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 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.

 

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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, Inc. 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.

 

# # #

 

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palmOne, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

 

     Three Months Ended
     Years Ended
  
     May 31,
2004
     May 31,
2003
     May 31,
2004
     May 31,
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.

 

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palmOne, Inc.

Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

 

     Three Months Ended May 31, 2004
     Three Months Ended May 31, 2003
  
     GAAP
     Adjustments
     Non-GAAP
     GAAP
     Adjustments
     Non-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.

 

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palmOne, Inc.

Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

 

     Year Ended May 31, 2004
     Year Ended May 31, 2003
  
     GAAP
     Adjustments
     Non-GAAP
     GAAP
     Adjustments
     Non-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 administrative

      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.

 

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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.

 

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palmOne, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

     Three Months Ended
  
     May 31, 2004
     May 31, 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  

Recognized 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.

 

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