EX-99.1 2 dex991.htm PRESS RELEASE OF PALMONE, INC. Press release of palmOne, Inc.

Exhibit 99.1

 

CONTACTS:

 

Dave Vadasz, investor relations

408.503.7200

dave.vadasz@palmOne.com

 

Marlene Somsak, media relations

408.503.2592

marlene.somsak@palmOne.com

 

palmOne Reports Q2 FY05 Results

 

Revenue Up 39%; Operating Margin is 8.1%

 

MILPITAS, Calif., Dec. 16, 2004 — palmOne, Inc. (Nasdaq: PLMO) today reported revenue of $376.2 million for the second quarter of fiscal year 2005, ended Nov. 26, which is up approximately 39 percent from the $271.2 million reported during the comparable quarter a year ago.

 

Net income was $24.7 million, or $0.48 per diluted share. This compares to income from continuing operations in the year-ago period of $2.6 million, or $0.07 per diluted share.

 

Net income in the second quarter of fiscal year 2005, measured on a non-GAAP(1) basis, totaled $27.2 million, or $0.53 per diluted share, excluding the effects of amortization of intangible assets and deferred stock-based compensation. This compares to a non-GAAP net income in the second quarter of fiscal year 2004 of $5.5 million, or $0.14 per diluted share, which excluded the effects of amortization of intangible assets and deferred stock-based compensation, restructuring charges, and loss from discontinued operations. Operating income was $30.4 million compared with $2.6 million in the year ago quarter.

 

“Our strategy is working, and this quarter’s excellent growth in revenue and a more than tenfold increase in operating income from the year-ago quarter demonstrate we executed well,” said Todd Bradley, palmOne chief executive officer. “Our fall products raised the bar for competitors and earned widespread acclaim. And we grew our handheld-computer market share domestically and abroad.”

 

Bradley noted the following financial highlights:

 

  • Revenue grew approximately 39 percent, marking the sixth consecutive quarter of year-over-year growth;

 

  • Gross margin rose to 29.1 percent in the quarter from 27.1 percent in the comparable quarter a year ago;

 

  • Operating margin was 8.1 percent, and non-GAAP operating margin was 8.8 percent;

 

  • Net income was $24.7 million, and non-GAAP net income totaled $27.2 million;

 

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  • For the quarter, inventory turns rose to 44 times compared with 26 times in the year-ago period; and

 

  • The company generated $23.7 million in cash from operations in the quarter.

 

During the quarter, palmOne announced the following:

 

  • The Tungsten(TM) T5 handheld computer, which features 256MB of memory and doubles as a USB drive. Its new non-volatile file structure means data and applications are preserved, even if the battery runs down, and customers can place documents in file folders;

 

  • The Treo(TM) 650 smartphone, which features non-volatile memory, a higher-resolution screen and removable battery. Sprint began carrying this new member of the Treo family, and GSM carriers are expected to begin carrying it in the new year; and

 

  • Integration of the Exchange Server ActiveSync® protocol for out-of-the-box compatibility with Microsoft Exchange Server 2003, including wireless email and calendar, for the Treo 650 smartphone and successors.(2)

 

palmOne shipped approximately 1.6 million Zire(TM), Tungsten and Treo family devices during its second fiscal quarter. Unit shipments to date total approximately 29 million.

 

Investor’s Note

 

The company will provide a detailed description of its financial results in a conference call and webcast with investors today at 2 p.m. Pacific Time. The dial-in number for the call is 877.825.5811 in the United States and 973.582.2767 for international callers. No pass code is needed. A telephone call replay of the conference call will be available through Dec. 31, 2004, beginning today at approximately 5 p.m. Pacific. The dial-in number for the replay is 877.519.4471 (PIN # 5435468 ) in the United States and 973.341.3080 (PIN #5435468 ) 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

 

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results. These non-GAAP financial measures may also 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.

 

About palmOne, Inc.

 

palmOne, Inc. — the leader in handheld computing and communications solutions — strives to put the power of computing in people’s hands so they can access and share their most important information. The company’s products include Zire(TM) and Tungsten(TM) handhelds and Treo(TM) smartphones, software and accessories.

 

palmOne products are sold at The palmOne Store (http://store.palmOne.com/) and palmOne Retail Stores, and through select Internet, retail, reseller and wireless operator partners throughout the world.

 

More information about palmOne, Inc. is available at http://www.palmOne.com.

 

# # #

(1) GAAP stands for Generally Accepted Accounting Principles.
(2) Requires Exchange Server 2003 and access enabled by IT administrator. An Internet service provider account, data service and carrier subscription may be required for Internet and email access. These services may need to be purchased separately. Access available within network coverage areas only.

 

palmOne, Zire, Tungsten and Treo 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
     Six Months Ended
  
     Nov. 30, 2004
    Nov. 30, 2003
     Nov. 30, 2004
    Nov. 30, 2003
  

Revenues

    $ 376,180    $ 271,215     $ 649,325    $ 439,823  

Costs and operating expenses:

                               

Cost of revenues (*)

      266,478      197,739       448,281      318,963  

Sales and marketing

      45,048      43,709       82,603      78,287  

Research and development

      20,407      14,948       38,975      31,776  

General and administrative

      11,312      9,355       21,111      18,049  

Amortization of intangible assets and deferred stock-based compensation (**)

      2,527      1,938       4,866      2,059  

Restructuring charges

      —        918       —        3,588  
    
  
 
  

Total costs and operating expenses

      345,772      268,607       595,836      452,722  
    
  
 
  

Operating income (loss)

      30,408      2,608       53,489      (12,899 )

Interest and other income (expense), net

      611      1,608       577      1,451  
    
  
 
  

Income (loss) before income taxes

      31,019      4,216       54,066      (11,448 )

Income tax provision

      6,328      1,584       9,781      2,782  
    
  
 
  

Income (loss) from continuing operations

      24,691      2,632       44,285      (14,230 )

Loss from discontinued operations (net of taxes of $0, $4, $0 and $252, respectively )

      —        (6,750 )     —        (11,634 )
    
  
 
  

Net income (loss)

    $ 24,691    $ (4,118 )   $ 44,285    $ (25,864 )
    
  
 
  

Net income (loss) per share:

                               

Basic:

                               

Continuing operations

    $ 0.51    $ 0.07     $ 0.92    $ (0.43 )

Discontinued operations

      —        (0.18 )     —        (0.35 )
    
  
 
  
     $ 0.51    $ (0.11 )   $ 0.92    $ (0.78 )
    
  
 
  

Diluted:

                               

Continuing operations

    $ 0.48    $ 0.07     $ 0.86    $ (0.43 )

Discontinued operations

      —        (0.18 )     —        (0.35 )
    
  
 
  
     $ 0.48    $ (0.11 )   $ 0.86    $ (0.78 )
    
  
 
  

Shares used in computing per share amounts:

                               

Basic

      48,381      36,696       48,005      33,022  

Diluted

      51,442      38,743       51,223      33,022  

(*)    Cost of revenues does not include that portion of amortization of intangible assets and deferred stock-based compensation related to cost of revenues.

(**)  Amortization of intangible assets and deferred stock-based compensation:

         

Cost of revenues

    $ 351    $ 84     $ 663    $ 88  

Sales and marketing

      1,714      1,599       3,368      1,657  

Research and development

      64      37       128      64  

General and administrative

      398      218       707      250  
    
  
 
  
     $ 2,527    $ 1,938     $ 4,866    $ 2,059  
    
  
 
  

 

Certain prior quarter balances have been reclassified to conform to the current quarter presentation.

 

palmOne’s fiscal periods are generally 13 weeks in length and end on a Friday. For presentation purposes, the periods are presented as ending on Aug. 31, Nov. 30, Feb. 28 and May 31.

 

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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 Nov. 30, 2004
    Three Months Ended Nov. 30, 2003
     GAAP
    Adjustments
     Non-GAAP
    GAAP
     Adjustments
     Non-GAAP

Revenues

    $ 376,180    $ —       $ 376,180    $ 271,215     $ —       $ 271,215

Costs and operating expenses:

                                             

Cost of revenues (*)

      266,478      —         266,478      197,739       —         197,739

Sales and marketing

      45,048      —         45,048      43,709       —         43,709

Research and development

      20,407      —         20,407      14,948       —         14,948

General and administrative

      11,312      —         11,312      9,355       —         9,355

Amortization of intangible assets and deferred stock-based compensation (**)

      2,527      (2,527 )     —        1,938       (1,938 )     —  

Restructuring charges

      —        —         —        918       (918 )     —  
    
  
 
  
 
 

Total costs and operating expenses

      345,772      (2,527 )     343,245      268,607       (2,856 )     265,751
    
  
 
  
 
 

Operating income (loss)

      30,408      2,527       32,935      2,608       2,856       5,464

Interest and other income (expense), net

      611      —         611      1,608       —         1,608
    
  
 
  
 
 

Income (loss) before income taxes

      31,019      2,527       33,546      4,216       2,856       7,072

Income tax provision

      6,328      —         6,328      1,584       —         1,584
    
  
 
  
 
 

Income (loss) from continuing operations

      24,691      2,527       27,218      2,632       2,856       5,488

Loss from discontinued operations (net of taxes of $0 and $4, respectively)

      —        —         —        (6,750 )     6,750       —  
    
  
 
  
 
 

Net income (loss)

    $ 24,691    $ 2,527     $ 27,218    $ (4,118 )   $ 9,606     $ 5,488
    
  
 
  
 
 

Net income (loss) per share:

                                             

Basic:

                                             

Continuing operations

    $ 0.51    $ 0.05     $ 0.56    $ 0.07     $ 0.08     $ 0.15

Discontinued operations

      —        —         —        (0.18 )     0.18       —  
    
  
 
  
 
 
     $ 0.51    $ 0.05     $ 0.56    $ (0.11 )   $ 0.26     $ 0.15
    
  
 
  
 
 

Diluted:

                                             

Continuing operations

    $ 0.48    $ 0.05     $ 0.53    $ 0.07     $ 0.07     $ 0.14

Discontinued operations

      —        —         —        (0.18 )     0.18       —  
    
  
 
  
 
 
     $ 0.48    $ 0.05     $ 0.53    $ (0.11 )   $ 0.25     $ 0.14
    
  
 
  
 
 

Shares used in computing per share amounts:

                                             

Basic

      48,381      —         48,381      36,696       —         36,696

Diluted

      51,442      —         51,442      38,743       —         38,743

(*)    Cost of revenues does not include that portion of amortization of intangible assets and deferred stock-based compensation related to cost of revenues.

(**)  Amortization of intangible assets and deferred stock-based compensation:

Cost of revenues

    $ 351    $ (351 )   $ —      $ 84     $ (84 )   $ —  

Sales and marketing

      1,714      (1,714 )     —        1,599       (1,599 )     —  

Research and development

      64      (64 )     —        37       (37 )     —  

General and administrative

      398      (398 )     —        218       (218 )     —  
    
  
 
  
 
 
     $ 2,527    $ (2,527 )   $ —      $ 1,938     $ (1,938 )   $ —  
    
  
 
  
 
 

 

The above non-GAAP amounts have been adjusted to eliminate amortization of intangible assets and deferred stock-based compensation, restructuring charges and loss from discontinued operations.

 

Certain prior quarter balances have been reclassified to conform to the current quarter presentation.

 

palmOne’s fiscal periods are generally 13 weeks in length and end on a Friday. For presentation purposes, the periods are presented as ending on Aug. 31, Nov. 30, Feb. 28 and May 31.

 

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palmOne, Inc.

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

(In thousands, except per share data)

(Unaudited)

 

     Six Months Ended Nov. 30, 2004
    Six Months Ended Nov. 30, 2003
  
     GAAP
    Adjustments
     Non-GAAP
    GAAP
     Adjustments
     Non-GAAP
  

Revenues

    $ 649,325    $ —       $ 649,325    $ 439,823     $ —       $ 439,823  

Costs and operating expenses:

                                               

Cost of revenues (*)

      448,281      —         448,281      318,963       —         318,963  

Sales and marketing

      82,603      —         82,603      78,287       —         78,287  

Research and development

      38,975      —         38,975      31,776       —         31,776  

General and administrative

      21,111      —         21,111      18,049       —         18,049  

Amortization of intangible assets and deferred stock-based compensation (**)

      4,866      (4,866 )     —        2,059       (2,059 )     —    

Restructuring charges

      —        —         —        3,588       (3,588 )     —    
    
  
 
  
 
 

Total costs and operating expenses

      595,836      (4,866 )     590,970      452,722       (5,647 )     447,075  
    
  
 
  
 
 

Operating income (loss)

      53,489      4,866       58,355      (12,899 )     5,647       (7,252 )

Interest and other income (expense), net

      577      —         577      1,451       —         1,451  
    
  
 
  
 
 

Income (loss) before income taxes

      54,066      4,866       58,932      (11,448 )     5,647       (5,801 )

Income tax provision

      9,781      —         9,781      2,782       —         2,782  
    
  
 
  
 
 

Income (loss) from continuing operations

      44,285      4,866       49,151      (14,230 )     5,647       (8,583 )

Loss from discontinued operations (net of taxes of $0 and $252, respectively)

      —        —         —        (11,634 )     11,634       —    
    
  
 
  
 
 

Net income (loss)

    $ 44,285    $ 4,866     $ 49,151    $ (25,864 )   $ 17,281     $ (8,583 )
    
  
 
  
 
 

Net income (loss) per share:

                                               

Basic:

                                               

Continuing operations

    $ 0.92    $ 0.10     $ 1.02    $ (0.43 )   $ 0.17     $ (0.26 )

Discontinued operations

      —        —         —        (0.35 )     0.35       —    
    
  
 
  
 
 
     $ 0.92    $ 0.10     $ 1.02    $ (0.78 )   $ 0.52     $ (0.26 )
    
  
 
  
 
 

Diluted:

                                               

Continuing operations

    $ 0.86    $ 0.10     $ 0.96    $ (0.43 )   $ 0.17     $ (0.26 )

Discontinued operations

      —        —         —        (0.35 )     0.35       —    
    
  
 
  
 
 
     $ 0.86    $ 0.10     $ 0.96    $ (0.78 )   $ 0.52     $ (0.26 )
    
  
 
  
 
 

Shares used in computing per share amounts:

                                               

Basic

      48,005      —         48,005      33,022       —         33,022  

Diluted

      51,223      —         51,223      33,022       —         33,022  

(**)  Cost of revenues does not include that portion of amortization of intangible assets and deferred stock-based compensation related to cost of revenues.

(*)    Amortization of intangible assets and deferred stock-based compensation:

     

      

        
 

Cost of revenues

    $ 663    $ (663 )   $ —      $ 88     $ (88 )   $ —    

Sales and marketing

      3,368      (3,368 )     —        1,657       (1,657 )     —    

Research and development

      128      (128 )     —        64       (64 )     —    

General and administrative

      707      (707 )     —        250       (250 )     —    
    
  
 
  
 
 
     $ 4,866    $ (4,866 )   $ —      $ 2,059     $ (2,059 )   $ —    
    
  
 
  
 
 

 

The above non-GAAP amounts have been adjusted to eliminate amortization of intangible assets and deferred stock-based compensation, restructuring charges and loss from discontinued operations.

 

Certain prior quarter balances have been reclassified to conform to the current quarter presentation.

 

palmOne’s fiscal periods are generally 13 weeks in length and end on a Friday. For presentation purposes, the periods are presented as ending on Aug. 31, Nov. 30, Feb. 28 and May 31.

 

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palmOne, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except par value amounts)

(Unaudited)

 

     November 30, 2004
     May 31, 2004
  

ASSETS

                 

Current assets:

                 

Cash and cash equivalents

    $ 236,146     $ 203,069  

Short-term investments

      76,737       49,382  

Accounts receivable, net of allowance for doubtful accounts of $8,702 and $8,317, respectively

      219,427       120,757  

Inventories

      29,119       14,030  

Investment for committed tenant improvements

      6,956       7,197  

Prepaids and other

      9,970       8,067  
    
 

Total current assets

      578,355       402,502  

Restricted investments

      775       1,175  

Land not in use

      60,000       60,000  

Property and equipment, net

      18,620       19,425  

Goodwill

      253,372       257,363  

Intangible assets, net

      7,104       10,979  

Deferred income taxes

      34,800       34,800  

Other assets

      1,575       1,694  
    
 

Total assets

    $ 954,601     $ 787,938  
    
 

LIABILITIES AND STOCKHOLDERS’ EQUITY

                 

Current liabilities:

                 

Accounts payable

    $ 184,548     $ 112,772  

Accrued restructuring

      20,909       27,156  

Provision for committed tenant improvements

      6,956       7,197  

Other accrued liabilities

      155,360       112,679  
    
 

Total current liabilities

      367,773       259,804  

Non-current liabilities:

                 

Long-term convertible debt

      35,000       35,000  

Other non-current liabilities

      1,300       1,600  

Stockholders’ equity:

                 

Preferred stock, $.001 par value, 125,000 shares authorized; none outstanding

      —         —    

Common stock, $.001 par value, 2,000,000 shares authorized; outstanding: 48,723 shares and 47,032 shares, respectively

      49       47  

Additional paid-in capital

      1,399,346       1,383,630  

Unamortized deferred stock-based compensation

      (3,576 )     (1,995 )

Accumulated deficit

      (846,353 )     (890,638 )

Accumulated other comprehensive income

      1,062       490  
    
 

Total stockholders’ equity

      550,528       491,534  
    
 

Total liabilities and stockholders’ equity

    $ 954,601     $ 787,938  
    
 

 

Certain prior year balances have been reclassified to conform to the current quarter presentation.

 

palmOne’s fiscal periods are generally 13 weeks in length and end on a Friday. For presentation purposes, the periods are presented as ending on Aug. 31, Nov. 30, Feb. 28 and May 31.

 

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palmOne, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

     Three Months Ended
  
     Nov. 30, 2004
     Nov. 30, 2003
  

Cash flows from operating activities:

                 

Income from continuing operations

    $ 24,691     $ 2,632  

Adjustments to reconcile income from continuing operations to net cash provided by (used in) operating activities:

                 

Depreciation

      3,728       5,701  

Amortization

      2,527       2,411  

Changes in assets and liabilities, net of effect of business acquisition:

                 

Accounts receivable

      (85,802 )     (67,372 )

Inventories

      (9,967 )     (8,238 )

Prepaids and other

      (2,095 )     1,585  

Accounts payable

      56,217       30,214  

Accrued restructuring

      (1,174 )     (4,517 )

Other accrued liabilities

      35,550       8,370  
    
 

Net cash provided by (used in) operating activities

      23,675       (29,214 )
    
 

Cash flows from investing activities:

                 

Purchase of property and equipment

      (4,853 )     (1,818 )

Acquisition of a business, net of cash acquired

      —         16,114  

Spin-off of PalmSource

      —         (6,000 )

Purchase of short-term investments

      (13,029 )     —    

Sale of short-term investments

      15,062       —    

Sale of restricted investments

      —         1,896  
    
 

Net cash provided by (used in) investing activities

      (2,820 )     10,192  
    
 

Cash flows from financing activities:

                 

Proceeds from issuance of common stock; employee stock plans

      4,325       9,516  
    
 

Net cash provided by financing activities

      4,325       9,516  
    
 

Change in cash and cash equivalents

      25,180       (9,506 )

Cash and cash equivalents, beginning of period

      210,966       227,701  
    
 

Cash and cash equivalents, end of period

    $ 236,146     $ 218,195  
    
 

Other cash flow information:

                 

Cash paid for income taxes

    $ (2,005 )   $ (731 )
    
 

Cash paid for interest

    $ (33 )   $ (21 )
    
 

Fair value of stock options and warrants assumed in business acquisition

    $ —       $ 28,064  
    
 

Common stock issued for a business combination

    $ —       $ 209,173  
    
 

 

Certain prior quarter balances have been reclassified to conform to the current quarter presentation.

 

palmOne’s fiscal periods are generally 13 weeks in length and end on a Friday. For presentation purposes, the periods are presented as ending on Aug. 31, Nov. 30, Feb. 28 and May 31.

 

# # #

 

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