Harmonic Announces Record Third Quarter Results - Company Financial Information

Cambridge Telcom Report, Oct 25, 1999

Harmonic Inc. (Nasdaq: HLIT) Wednesday announced its results for the quarter ended October 1, 1999.

For the third quarter of 1999, Harmonic reported net sales of $52.6 million, up 135% from $22.4 million for the third quarter of 1998. Net income for the third quarter of 1999 was $7.7 million or $0.23 per diluted share on 32,836,000 shares outstanding, compared to a net loss of $831,000 or ($0.04) per diluted share on 23,348,000 shares outstanding for the same period of the previous year. All shares outstanding and earnings per share data have been restated to reflect the Company's two-for-one stock split effective October 14, 1999.

For the first nine months of 1999, Harmonic reported net sales of $120.8 million, up 113% from $56.8 million for the same period of 1998. Net income for the first nine months was $12.9 million or $0.43 per diluted share, compared to a net loss of $22.1 million or ($0.95) per diluted share for the same period of the previous year. The loss for the first nine months of 1998 included a charge of $14.0 million or $0.60 per diluted share, resulting from the acquisition of Harmonic Data Systems Ltd. (HDS), previously named New Media Communication Ltd.

Harmonic experienced increased demand for its fiber optic products across its worldwide base of cable customers during the third quarter. Domestic sales increased 226% and international sales increased 30% from the third quarter of 1998. The Company continued to ship more of its METROLink dense wave division multiplexing systems to AT&T and a wide range of other customers. During the third quarter, Harmonic also shipped over 100 new multiplexing nodes for AT&T's LightWire field trial in Salt Lake City.

Harmonic continued to extend its digital product line, and introduced the MID 8000 for transmission of MPEG-2 video over IP and the IPG 8000 for the integration of IP data delivery in an MPEG-2 environment.

"We are very pleased with our growth in sales and profitability in the third quarter," said Anthony J. Ley, Chairman, President and Chief Executive Officer. "Domestic cable operators, backed by stronger financial resources and robust subscriber demand for bandwidth, continue to systematically and cost-effectively upgrade their networks to offer video-on-demand, high-speed Internet access, telephony and other advanced services."

"To capitalize on the strong growth in domestic cable industry spending, we continue to enhance our fiber optic and digital product lines. Growing interest in METROLink and the rapid development of our multiplexing node further demonstrates that Harmonic remains on the cutting edge of more powerful and cost-effective architectures for broadband communications."

Harmonic designs, manufactures and markets digital and fiber optic systems for delivering video, voice and data over cable, satellite and wireless networks. These advanced solutions enable cable television and other network operators to provide a range of broadcast and interactive broadband services that include high-speed Internet access, telephony, and video-on-demand.

Harmonic is headquartered in Sunnyvale, Calif., where it also operates an R&D center and a manufacturing facility. The company also operates its Harmonic Data Systems subsidiary and an R&D center in Israel. In addition, the company maintains several sales and support centers worldwide. Harmonic is ISO 9001-certified and employs approximately 400 people. For more information about Harmonic please visit the Company's website at www.harmonicinc.com.

                         Harmonic Inc.
         Condensed Consolidated Statements of Operations
              (In thousands, except per share data)
                           (Unaudited)

                        Three months ended      Nine months ended
                      October 1, October 2,  October 1, October 2,
                          1999       1998        1999       1998

Net sales               $ 52,624   $ 22,382    $120,789   $ 56,760
Cost of sales             29,528     13,948      69,326     36,574
                        --------   --------    --------   --------
Gross profit              23,096      8,434      51,463     20,186
                        --------   --------    --------   --------

Operating expenses:
 Research and development  4,798      3,507      11,971     10,173
 Sales and marketing       6,437      4,436      17,723     13,305
 General and
  administrative           2,536      1,535       6,248      5,234
 Acquired in-process
  technology                  --         --          --     14,000
                        --------   --------    --------   --------
Total operating expenses  13,771      9,478      35,942     42,712
                        --------   --------    --------   --------

Income (loss) from
 operations                9,325     (1,044)     15,521    (22,526)
Interest and other
 income, net                 931        213       1,674        445
                        --------   --------    --------   --------
Income (loss) before
 income taxes             10,256       (831)     17,195    (22,081)
Provision for income taxes 2,564         --       4,299         --
                        --------   --------    --------   --------
Net income (loss)       $  7,692   $   (831)   $ 12,896   $(22,081)
                        ========    ========   ========   ========

Net income (loss) per
 share
 Basic                  $   0.25   $  (0.04)   $   0.47   $  (0.95)
                        ========    ========   ========   ========
 Diluted                $   0.23   $  (0.04)   $   0.43   $  (0.95)
                        ========    ========   ========   ========

Weighted average shares
 Basic                    30,179     23,348      27,592     23,146
                        ========    ========   ========   ========
 Diluted                  32,836     23,348      30,264     23,146
                        ========    ========   ========   ========


                         Harmonic Inc.
              Condensed Consolidated Balance Sheets
                         (In thousands)

                                           October 1,  December 31,
                                              1999        1998
                                          (Unaudited)
Assets
Current assets:
 Cash and cash equivalents                 $  18,163    $   9,178
 Short-term investments                       34,656           --
 Accounts receivable, net                     35,239       17,646
 Inventories                                  30,496       22,385
 Prepaid expenses and other assets             2,842        1,175
                                           ---------    ---------
Total current assets                         121,396       50,384

Long-term marketable investments              22,839           --
Property and equipment, net                   13,163       10,726
Intangibles and other assets                   1,090        1,314
                                           ---------    ---------
                                           $ 158,488    $  62,424
                                           =========    =========

Liabilities and stockholders' equity
Current liabilities:
 Accounts payable                          $  15,075    $   7,534
 Accrued liabilities                          18,171       10,355
 Current portion of long term debt                --          177
                                           ---------    ---------
Total current liabilities                     33,246       18,066
                                           ---------    ---------

Long term debt, less current portion              --          400
Other non-current liabilities                    535          484

Stockholders' equity:
 Common stock                                139,151       70,936
 Accumulated deficit                         (14,576)     (27,472)
 Accumulated other comprehensive income          132           10
                                           ---------    ---------
Total stockholders' equity                   124,707       43,474
                                           ---------    ---------
                                           $ 158,488    $  62,424
                                           =========    =========