Palm Reports Fourth Quarter Revenue of $165 Million; Fiscal 2001 Revenue Of $1.56 Billion, Up 47% from Prior Year
Fourth Quarter Charges Taken to Right-size Company; $150 Million Credit Line Obtained
SANTA CLARA, Calif., Jun 26, 2001 /PRNewswire via COMTEX/ -- Palm, Inc. (Nasdaq: PALM chart, msgs), a pioneer in mobile and wireless Internet solutions and a leading provider of handheld computers, today reported revenue of $165.3 million for its fourth quarter of fiscal 2001, ended June 1, 2001, exceeding the company's revised guidance of $140 million to $160 million set on May 17. Palm reported revenue of $350.2 million in the fourth quarter of fiscal 2000.
Pro forma operating loss was $153.6 million for the fourth quarter of fiscal 2001. Pro forma operating loss excludes the effects of amortization of goodwill and intangible assets, purchased in-process technology, legal settlements, separation costs, and three additional charges recorded in the fourth quarter -- an excess inventory charge, a restructuring charge, and an asset impairment charge. Details on the three additional fourth quarter charges totaling $436.5 million are found later in this news release. Palm had said earlier that it expected a fourth quarter pro forma operating loss between $170 million and $190 million. Palm's pro forma operating income in the fourth quarter of fiscal 2000 was $13.4 million.
Pro forma net loss was $89.2 million, or $0.16 per share, for the fourth quarter of fiscal 2001. This compares to pro forma net income of $17.2 million, or $0.03 per share, for the fourth quarter of fiscal 2000.
Actual net loss for the fourth quarter was $392.1 million, or $0.69 per share, compared to net income of $12.4 million, or $0.02 per share, for the comparable quarter last year.
Palm Actions Leading to Signs of Improvement
"This has been a demanding quarter for Palm, our shareholders and our employees, but thankfully not for our customers, who continued to receive the best handheld solutions and services on the market," said Carl Yankowski, Palm's chief executive officer. "We entered the quarter knowing that the slowing economy would affect the handheld computing market on the eve of the largest product transition in Palm's history. We exited the quarter a leaner and more focused organization and with our new m500 series being well received around the world. We've moved quickly to improve operational efficiency, reduce expenses and headcount, and bolster our executive team. Volume shipment of the m500 series and close collaboration with our channel partners helped spur end-user demand, resulting in an overall reduction in channel inventory levels during the fourth quarter. These accomplishments, and other initiatives underway, position us to return to profitability in the second quarter of the new fiscal year, and to build on our leadership in this early and promising market."
Fiscal Year 2001 Results, Cash and Unit Shipments
Revenue for the full year was $1.56 billion, up 47 percent from the $1.06 billion reported in fiscal 2000. Pro forma net loss for fiscal 2001 was $28.5 million, or $0.05 per share, compared with pro forma net income of $58.4 million, or $0.11 per share, in fiscal 2000. Actual net loss for fiscal 2001 was $356.5 million, or $0.63 per share, compared with a net income of $45.9 million, or $0.09 per share, for fiscal 2000.
Palm ended its fourth fiscal quarter of 2001 with $513.8 million in cash and cash equivalents, reflecting strong balance sheet management. Palm also announced that it had obtained a $150 million asset-backed, borrowing-base credit facility from a group of financial institutions. The Lead Agent and Arranger is Foothill Capital Corporation, a wholly owned subsidiary of Wells Fargo & Company (NYSE: WFC chart, msgs). Heller Financial, Inc. (NYSE: HF chart, msgs) will serve as Syndication Agent and The CIT Group/Business Credit, Inc., a wholly owned subsidiary of Tyco International Ltd. (NYSE: TYC chart, msgs), will act as Documentation Agent. The company has not drawn on this line of credit.
Palm shipped 6.4 million Palm(TM) handhelds during fiscal year 2001, bringing the total number of Palm-branded handhelds shipped to-date to approximately 13.7 million. Over 16 million Palm Powered(TM) handhelds, including those sold by Palm licensees, have been shipped to date, vs. Microsoft's reported estimate of more than 1.25 million Pocket PC devices.
"In spite of the challenges we faced in fiscal 2001, there were significant accomplishments," said Yankowski. "There was a 47 percent increase in year-over-year revenue, a 75 percent increase in unit shipments, an increase of about 105 percent in the number of registered developers of our OS, and the fact that we remain the leader in a marketplace that has attracted significant new competitors. In addition, our m100 series expanded the market beyond mobile professionals and early adopters to include more students, non-professionals and women. We entered new regions of the world, such as the Indian subcontinent, and set the stage for penetration in Greater China with our new licensee Acer. We launched the slimmest and lightest color handheld with the dual-expansion m505 handheld, and through our Palm Economy partner Kyocera, we expanded our participation in the U.S. smart phone space.
"During the past year, we continued to innovate within our operating system and solutions businesses. We invested $160 million in research and development. This was 116 percent higher than the prior year, enabling us to refresh our entire product line in calendar year 2001, and drive new product innovation with a global wireless focus. Our R&D investment resulted in 196 U.S. patent applications filed in fiscal 2001, three times the prior year."
Detail on Palm's Fourth Quarter Charges
Charges in the fourth quarter included:
-- A restructuring charge of $60.9 million relating primarily to real
estate consolidation costs and employee severance expenses. Real estate
consolidation charges included costs related to halting construction of a
new corporate campus as well as exiting certain facilities. The severance
charges were related to the employees impacted by two previously
announced reductions in force involving over 500 employee and contract
worker positions. The cutbacks reflected approximately 25 percent of the
company's work force, as of the end of the third fiscal quarter of 2001.
-- Impairment charges totaling $106.7 million reflected two items: the
decline in market value associated with the 39-acre property that the
company previously planned to use for its corporate headquarters and a
write-off of certain intangibles relating to the reduced expectations for
the company's web calendaring business associated with its AnyDay.com
acquisition.
-- Inventory and related costs of $268.9 million relating to the
write-off of components, work-in-process, and finished goods not expected
to be used or sold. On May 17, the company said that this charge would be
approximately $300 million.
About Palm, Inc.
Palm, Inc. is a pioneer in the field of mobile and wireless Internet solutions and a leading provider of handheld computers, according to IDC (December 2000). Based on the Palm OS(R) platform, Palm's handheld solutions allow people to carry and access their most critical information with them wherever they go. Palm(TM) handhelds address the needs of individuals, enterprises and educational institutions through thousands of application solutions.
The Palm OS platform is also the foundation for products from Palm's licensees and strategic partners, such as Franklin Covey, HandEra (formerly TRG), Handspring, IBM, Kyocera, Sony, and Symbol Technologies. Platform licensees also include Acer, Garmin, Nokia and Samsung. The Palm Economy is a growing global community of industry-leading licensees, world-class OEM customers, and more than 160,000 innovative developers and solution providers that have registered to develop solutions based on the Palm OS platform. Palm went public on March 2, 2000. Its stock is traded on the Nasdaq national market under the symbol PALM. More information is available at www.palm.com.
Safe Harbor Statement
This release contains forward-looking statements, including a statement about returning to profitability in the second quarter of fiscal 2002. These statements are subject to many risks and uncertainties, including demand for Palm's products, the development and consumer acceptance of new products, general economic conditions, and success of Palm's competitors. Other risks are explained in detail in Palm's filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K filed on August 16, 2000 and its most recent Form 10-Q filed on April 11, 2001.
NOTE: Palm OS is a registered trademark and Palm and Palm Powered are trademarks of Palm, Inc. or its subsidiaries.
INVESTOR'S NOTE: The company will be holding a conference call for press and analysts at 2 p.m. PDT to discuss matters covered in this press release. The dial-in number for the call is 888-335-6680 in the United States and 973-633-1010 for international callers. A telephone call replay of the conference call will be available through July 10, 2001, beginning today at approximately 5 p.m. PDT. The dial-in number for the replay is 877-519-4471 -- passcode 2678389; in the United States and International: 973-341-3080 -- passcode 2678389 for international callers. The conference call will also be available over the Internet by logging onto ir.palm.com .
Palm, Inc.
Pro Forma Condensed Consolidated Statements of Operations
Excluding excess inventory and related costs (included in cost of
revenues), amortization of goodwill and intangible assets, purchased
in-process technology, legal settlements, separation costs, impairment
charges and restructuring charges
(In thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
June 1, June 2, June 1, June 2,
2001 2000 2001 2000
Revenues $165,295 $350,245 $1,559,312 $1,057,597
Cost of revenues 165,438 213,262 1,064,044 613,083
Pro forma gross
profit (loss) (143) 136,983 495,268 444,514
Operating expenses:
Sales and marketing 89,250 76,400 337,029 236,275
Research and development 45,085 25,394 160,265 74,276
General and
administrative 19,139 21,758 87,842 50,916
Pro forma operating
expenses 153,474 123,552 585,136 361,467
Pro forma operating
income (loss) (153,617) 13,431 (89,868) 83,047
Interest and other
income, net 9,924 15,732 47,331 16,364
Pro forma income (loss)
before income taxes (143,693) 29,163 (42,537) 99,411
Pro forma income tax
provision (benefit) (54,499) 11,957 (14,037) 40,984
Pro forma net income
(loss) $(89,194) $17,206 $(28,500) $58,427
Pro forma net income
(loss) per share:
Basic $(0.16) $0.03 $(0.05) $0.11
Diluted $(0.16) $0.03 $(0.05) $0.11
Shares used in computing
per share amounts:
Basic 566,971 562,956 566,132 539,739
Diluted 566,971 563,402 566,132 539,851
The above pro forma amounts for the three months ended and the year ended
June 1, 2001 have been adjusted to eliminate excess inventory and related
costs (included in cost of revenues), amortization of goodwill and
intangible assets, purchased in-process technology, legal settlements,
separation costs, impairment charges and restructuring charges.The above
pro forma amounts for the three months ended and the year ended
June 2, 2000 have been adjusted to eliminate amortization of goodwill and
intangible assets and separation costs.
A reconciliation of pro forma net income (loss) presented above with
Palm's net income (loss) as determined in conformity with generally
accepted accounting principles is presented on the following page.
Palm, Inc.
Reconciliation of Pro Forma Net Income (Loss) to Reported Results
(In thousands)
(Unaudited)
Three Months Ended Year Ended
June 1, June 2, June 1, June 2,
2001 2000 2001 2000
Pro forma net income
(loss) $(89,194) $17,206 $(28,500) $58,427
Excess inventory and
related costs (included
in cost of revenues) 268,930 -- 268,930 --
Amortization of goodwill
and intangible assets 12,385 507 33,186 2,028
Purchased in-process
technology 210 -- 1,063 --
Legal settlements (800) -- 5,450 --
Separation costs 674 7,587 5,468 19,570
Impairment charges 106,669 -- 106,669 --
Restructuring charges 60,888 -- 60,888 --
Related income tax
benefit (146,076) (3,325) (153,678) (9,081)
Net income (loss) $(392,074) $12,437 $(356,476) $45,910
Palm, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
June 1, June 2, June 1, June 2,
2001 2000 2001 2000
Revenues $165,295 $350,245 $1,559,312 $1,057,597
Cost of revenues 434,368 213,262 1,332,974 613,083
Gross profit (loss) (269,073) 136,983 226,338 444,514
Operating expenses:
Sales and marketing 89,250 76,400 337,029 236,275
Research and development 45,085 25,394 160,265 74,276
General and administrative 19,139 21,758 87,842 50,916
Amortization of goodwill
and intangible assets 12,385 507 33,186 2,028
Purchased in-process
technology 210 -- 1,063 --
Legal settlements (800) -- 5,450 --
Separation costs 674 7,587 5,468 19,570
Impairment charges 106,669 -- 106,669 --
Restructuring charges 60,888 -- 60,888 --
Total operating expenses 333,500 131,646 797,860 383,065
Operating income (loss) (602,573) 5,337 (571,522) 61,449
Interest and other
income, net 9,924 15,732 47,331 16,364
Income (loss) before
income taxes (592,649) 21,069 (524,191) 77,813
Income tax provision
(benefit) (200,575) 8,632 (167,715) 31,903
Net income (loss) $(392,074) $12,437 $(356,476) $45,910
Net income (loss) per share:
Basic $(0.69) $0.02 $(0.63) $0.09
Diluted $(0.69) $0.02 $(0.63) $0.09
Shares used in computing
per share amounts:
Basic 566,971 562,956 566,132 539,739
Diluted 566,971 563,402 566,132 539,851
Palm, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except par value amounts)
(Unaudited)
June 1, June 2,
2001 2000
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $513,769 $1,062,128
Accounts receivable, net of allowance
for doubtful accounts of $14,899 and
$6,810, respectively 115,342 122,276
Inventories 107,813 24,057
Deferred income taxes 154,362 34,907
Prepaids and other 12,867 9,590
Total current assets 904,153 1,252,958
Property and equipment, net 223,422 13,013
Goodwill and intangibles, net, and other assets 79,020 14,330
Deferred income taxes 90,656 2,375
Total assets $1,297,251 $1,282,676
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $238,235 $123,106
Accrued restructuring 32,399 --
Other accrued liabilities 282,851 117,376
Total current liabilities 553,485 240,482
Non-current liabilities:
Deferred revenue and other 9,614 13,006
Stockholders' equity:
Preferred stock, $.001 par value,
125,000 shares authorized; none outstanding -- --
Common stock, $.001 par value,
2,000,000 shares authorized;
outstanding: June 1, 2001, 567,215;
June 2, 2000, 564,963 567 565
Additional paid-in capital 1,092,329 1,032,449
Unamortized deferred stock-based
compensation (14,929) (16,053)
Retained earnings (deficit) (344,039) 12,437
Accumulated other comprehensive income (loss) 224 (210)
Total stockholders' equity 734,152 1,029,188
Total liabilities and stockholders' equity $1,297,251 $1,282,676
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Source: Palm, Inc.
Contact:
Dave Allen, Investor Relations, 408-878-2775, or
dave.allen@corp.palm.com, or Marlene Somsak, Media Relations, 408-878-2592, or
marlene.somsak@corp.palm.com
URL: ir.palm.com
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