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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
November 8, 2005
Date of Report (Date of earliest event reported)
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SONUS NETWORKS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 000-30229 04-3387074
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
250 APOLLO DRIVE, CHELMSFORD, MASSACHUSETTS 01824
(Address of Principal Executive Offices) (Zip Code)
(978) 614-8100
(Registrant's telephone number, including area code)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
The information in this Current Report on Form 8-K and the exhibit attached
hereto shall not be deemed "filed" for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, or incorporated by reference in any filing
under the Securities Act of 1933, as amended, or the Exchange Act, except as
shall be expressly set forth by specific reference in such a filing.
Item 2.02. Results of Operations and Financial Condition.
On November 8, 2005, Sonus Networks, Inc. issued a press release reporting
its financial results for the quarter ended September 30, 2005. A copy of the
press release is attached as Exhibit 99.1 hereto.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibit
The following exhibit relating to Item 2.02 shall be deemed to be
furnished, and not filed:
99.1 Press release of Sonus Networks, Inc. dated November 8, 2005 reporting
financial results for the quarter ended September 30, 2005.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 8, 2005 SONUS NETWORKS, INC.
By: /s/ Ellen Richstone
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Ellen Richstone
Chief Financial Officer
Exhibit Index
99.1 Press release of Sonus Networks, Inc. dated November 8, 2005 reporting
financial results for the quarter ended September 30, 2005.
Exhibit 99.1
Sonus Networks Reports 2005 Third Quarter Financial Results; Year-to-Date Growth
Fueled By Wireless Demand and Recent Success in Europe; Strong Cash Flow from
Operations, Ending Quarter with $324.9 Million in Cash and Investments
CHELMSFORD, Mass.--(BUSINESS WIRE)--Nov. 8, 2005--Sonus Networks, Inc.
(Nasdaq: SONS), a leading supplier of service provider voice over IP (VoIP)
infrastructure solutions, today reported its financial results for the third
quarter ended September 30, 2005.
Revenues for the third quarter of fiscal 2005 were $45.7 million compared
with $58.1 million in the second quarter of fiscal 2005 and $46.8 million for
the third quarter of fiscal 2004. Net loss for the third quarter of fiscal 2005
was $2.7 million or $0.01 per diluted share compared with net income of $9.7
million or $0.04 per diluted share for the second quarter of fiscal 2005, and
compared with net income of $10.3 million or $0.04 per diluted share for the
third quarter of fiscal 2004.
Revenues for the first nine months of fiscal 2005 were $137.4 million
compared with $125.7 million in the same period last year. Net income for the
first nine months of fiscal 2005 was $3.3 million or $0.01 per diluted share
compared with net income for the first nine months of fiscal 2004 of $18.2
million or $0.07 per diluted share.
Third quarter revenue and earnings per share were lowered by $4.7 million
and approximately 2 cents per diluted share respectively, as a consequence of
the accounting treatment required for the renegotiation of certain customers'
bundled maintenance and support arrangements in the quarter. This revenue will
be recognized in subsequent periods as service revenue.
"While our reported financial results were lowered by the deferral of
revenue related to two of our Tier 1 customers based on our accounting policies,
our business in the third quarter expanded in several important ways," said
Hassan Ahmed, chairman and CEO, Sonus Networks. "Our global leadership in the
VoIP market resulted in the continued solid demand for Sonus' IP voice solutions
from network operators around the world. We extended our wireless business in
the U.S. and Japan, announced our first IMS-based consumer voice service in the
U.S., achieved strong order activity in Europe, and delivered significant cash
flow from operations."
In the third quarter, Sonus continued to broaden its customer base with the
addition of several new customers and expansions of existing deployments. In
September at this year's Fall Voice on the Net (VON) Conference, Sonus announced
that Internet Service Provider (ISP) EarthLink selected Sonus Networks as the
framework for its complete suite of consumer voice services. EarthLink is
deploying key components in the Sonus Networks IP Multi-media Subsystem
(IMS)-ready architecture, including the ASX(TM) Access Server, PSX(TM) Call
Routing Server, and the Sonus Insight(TM) Management System. With the Sonus ISP
solution, service providers like EarthLink are able simultaneously to deliver
high quality telephony service and enriched communication applications.
Sonus and AOL announced the rollout of AOL's TotalTalk(TM), the first
IMS-based consumer voice product to launch in the U.S. The two companies, which
announced the first phase of their deployment in March 2005, announced that they
are working together to deliver the next generation of enhanced consumer voice
services that integrate voice, instant messaging and multi-media, as well as
solutions that incorporate services based on VoIP/mobile integration.
Intrado, a leader in VoIP E9-1-1 solutions, also deployed Sonus solutions
in the third quarter. Intrado is expanding its network coverage to support its
VoIP service provider customers in meeting the functional requirements of the
recent Federal Communications Commission ruling, which mandates E9-1-1
capabilities for VoIP service offerings. Intrado is leveraging a full suite of
Sonus products to support the delivery of VoIP E9-1-1 calls using the Intrado(R)
V9-1-1 Mobility Service, offering carriers both the security and point of
demarcation functionality critical to delivering emergency services.
Sonus also announced three additional service providers as new Sonus
customers in the third quarter: RANGER Wireless, which offers a patented 611
roaming service that enables wireless operators to route roaming calls back to
home calling centers; ANI Networks, Inc., which offers wholesale long distance
voice service for facilities and non-facilities based communications providers;
and Vistula Communications Services, Inc., which provides hosted and managed
VoIP services to carriers, service providers and transit network operators
throughout the world.
In the third quarter, Sonus, which announced the unveiling of its IMS
architecture in June 2005, was honored with a 2005 Frost & Sullivan Award for
Technology Innovation in recognition of its achievements in building the
industry's most advanced IMS solutions. The award is presented to the company
that has demonstrated technological superiority within its industry, reflecting
Sonus' early focus on building and deploying carrier-class distributed
architectures that enable network operators to leverage new efficiencies and to
provide a solid framework for the delivery of innovative new subscriber-centric
services.
Further reinforcing Sonus technology leadership, at Fall VON Sonus
demonstrated a variety of services that leverage the Company's award-winning IMS
platform, such as its pre-WiMAX wireless Voice over Broadband solution. Using
Motorola's Canopy(TM) wireless broadband system with Sonus' wireless VoBB
architecture, service providers are able to architect a carrier class network
that meets the growing demand for wireless broadband services.
In tandem with Belkin Corporation, Sonus showcased a new ring tone service
that leverages the seamless interoperability between the Sonus-branded line of
Belkin's VoIP broadband phone adapters and Sonus' industry leading ASX(TM)
Access Server. Sonus uses Session Initiation Protocol (SIP) to communicate with
solutions from other market-leading vendors and has built one of the largest
interoperability programs in the industry.
"This is an exciting juncture in the evolution of the telecommunications
industry. Service providers globally are focused on deploying innovative network
architectures that not only deliver cost-efficiencies, but also change the way
consumers communicate. This is the industry dynamic that Sonus' solutions were
designed to address. As a pioneer and industry leader, Sonus is well positioned
to capitalize on the momentum in the market and continue to expand its
business," concluded Ahmed.
About Sonus Networks
Sonus Networks, Inc. is a leading provider of voice over IP (VoIP)
infrastructure solutions for wireline and wireless service providers. With its
comprehensive IP Multimedia Subsystem (IMS) solution, Sonus addresses the full
range of carrier applications, including residential and business voice
services, wireless voice and multimedia, trunking and tandem switching, carrier
interconnection and enhanced services. Sonus' voice infrastructure solutions are
deployed in service provider networks worldwide. Founded in 1997, Sonus is
headquartered in Chelmsford, Massachusetts. Additional information on Sonus is
available at http://www.sonusnet.com.
This release may contain forward-looking statements regarding future events
that involve risks and uncertainties. Readers are cautioned that these
forward-looking statements are only predictions and may differ materially from
actual future events or results. Readers are referred to the "Risk Factors"
section of Sonus' Annual Report on Form 10-K, dated March 15, 2005, and the
"Cautionary Statements" section of Sonus' Quarterly Report on Form 10-Q, dated
August 8, 2005, both filed with the SEC, which identify important risk factors
that could cause actual results to differ from those contained in the
forward-looking statements. Risk factors include among others: the impact of
material weaknesses in our disclosure controls and procedures and our internal
control over financial reporting on our ability to report our financial results
timely and accurately; the unpredictability of our quarterly financial results;
risks associated with our international expansion and growth; consolidation in
the telecommunications industry; and potential costs resulting from pending
securities litigation against the company. Any forward-looking statements
represent Sonus' views only as of today and should not be relied upon as
representing Sonus' views as of any subsequent date. While Sonus may elect to
update forward-looking statements at some point, Sonus specifically disclaims
any obligation to do so.
Sonus is a registered trademark of Sonus Networks, Inc. The Sonus PSX Call
Routing Server, ASX Call Management Server and the Sonus Insight Management
System are all trademarks of Sonus Networks. All other company and product names
may be trademarks of the respective companies with which they are associated.
SONUS NETWORKS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Three Three
Months Months Months
Ended Ended Ended
September June September
30, 30, 30,
2005 2005 2004
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Revenues:
Product $29,107 $41,339 $36,064
Service 16,550 16,754 10,698
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Total revenues 45,657 58,093 46,762
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Cost of revenues:
Product 17,410 15,404 6,296
Service 6,073 5,651 4,173
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Total cost of revenues 23,483 21,055 10,469
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Gross profit 22,174 37,038 36,293
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Gross profit %:
Product 40.2% 62.7% 82.5%
Service 63.3% 66.3% 61.0%
Total gross profit 48.6% 63.8% 77.6%
Operating expenses:
Research and development 11,787 11,098 8,975
Sales and marketing 10,834 11,504 10,539
General and administrative 5,455 6,477 6,638
Stock-based compensation 11 4 91
Amortization of purchased
intangible assets - - 601
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Total operating expenses 28,087 29,083 26,844
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(Loss) income from operations (5,913) 7,955 9,449
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Interest expense (121) (121) (117)
Interest income 2,690 2,222 1,150
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(Loss) income before income taxes (3,344) 10,056 10,482
(Benefit) provision for income taxes (640) 311 214
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Net (loss) income $(2,704) $9,745 $10,268
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Net (loss) income per share:
Basic $(0.01) $0.04 $0.04
Diluted $(0.01) $0.04 $0.04
Weighted average shares outstanding:
Basic 248,801 248,249 246,198
Diluted 248,801 250,651 251,707
SONUS NETWORKS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Nine Months Nine Months
Ended Ended
September 30, September 30,
2005 2004
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Revenues:
Product $92,904 $92,896
Service 44,456 32,759
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Total revenues 137,360 125,655
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Cost of revenues:
Product 39,657 24,151
Service 16,993 12,659
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Total cost of revenues 56,650 36,810
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Gross profit 80,710 88,845
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Gross profit %:
Product 57.3% 74.0%
Service 61.8% 61.4%
Total gross profit 58.8% 70.7%
Operating expenses:
Research and development 33,902 26,826
Sales and marketing 31,365 26,034
General and administrative 18,732 17,210
Stock-based compensation 15 606
Amortization of purchased intangible
assets - 1,801
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Total operating expenses 84,014 72,477
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(Loss) income from operations (3,304) 16,368
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Interest expense (370) (360)
Interest income 6,787 2,806
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Income before income taxes 3,113 18,814
(Benefit) provision for income taxes (233) 598
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Net income $3,346 $18,216
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Net income per share:
Basic $0.01 $0.07
Diluted $0.01 $0.07
Weighted average shares outstanding:
Basic 248,312 245,394
Diluted 253,221 252,776
SONUS NETWORKS, INC.
Condensed Consolidated Balance Sheets
(In thousands)
September 30, December 31,
2005 2004
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(Unaudited)
Assets
Current assets:
Cash and cash equivalents $134,789 $121,931
Marketable debt securities 182,735 170,145
Accounts receivable, net 42,690 32,486
Inventory, net 30,288 28,346
Other current assets 12,637 10,891
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Total current assets 403,139 363,799
Property and equipment, net 14,894 8,217
Long-term investments 7,363 21,029
Other assets 720 783
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$426,116 $393,828
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $12,697 $8,654
Accrued expenses 14,489 18,240
Accrued restructuring expenses 193 186
Current portion of deferred revenue 80,968 65,105
Convertible subordinated note 10,000 -
Current portion of long-term
liabilities 45 30
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Total current liabilities 118,392 92,215
Long-term deferred revenue, less current
portion 32,392 25,960
Long-term liabilities, less current portion 538 613
Convertible subordinated note - 10,000
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Total liabilities 151,322 128,788
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Commitments and contingencies
Stockholders' equity:
Common stock 252 250
Additional paid-in capital 1,055,548 1,049,142
Accumulated deficit (780,739) (784,085)
Treasury stock (267) (267)
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Total stockholders' equity 274,794 265,040
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$426,116 $393,828
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SONUS NETWORKS, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Three Three
Months Months Months
Ended Ended Ended
September June September
30, 30, 30,
2005 2005 2004
--------- --------- ---------
Cash flows from operating activities:
Net (loss) income $(2,704) $9,745 $10,268
Adjustments to reconcile net (loss)
income to net cash provided by
(used in) operating activities:
Depreciation 2,154 1,626 1,276
Tax benefit from stock options
exercised (225) 225 -
Stock-based compensation 11 4 91
Amortization of purchased intangible
assets - - 601
Changes in current assets and
liabilities:
Accounts receivable 19,372 (34,431) (3,492)
Inventory 258 710 (7,365)
Other current assets (26) (367) 1,698
Accounts payable 715 1,994 2,473
Accrued expenses and restructuring
expenses (3,374) 314 (3,950)
Deferred revenue (1,501) 22,848 (5,017)
--------- --------- ---------
Net cash provided by (used in) operating
activities 14,680 2,668 (3,417)
--------- --------- ---------
Cash flows from investing activities:
Purchases of property and equipment (3,898) (3,070) (2,015)
Maturities (purchases) of marketable
securities, net 1,016 (2,917) (5,649)
Increase in restricted cash (591) - -
Other assets 102 42 102
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Net cash used in investing activities (3,371) (5,945) (7,562)
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Cash flows from financing activities:
Sales of common stock in connection with
employee stock purchase plan 2,203 - 925
Proceeds from exercise of stock options 996 461 704
Payments of long-term liabilities (10) (8) (40)
--------- --------- ---------
Net cash provided by financing activities 3,189 453 1,589
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Net increase (decrease) in cash and cash
equivalents 14,498 (2,824) (9,390)
--------- --------- ---------
Cash and cash equivalents, beginning of
period 120,291 123,115 126,235
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Cash and cash equivalents, end of period $134,789 $120,291 $116,845
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CONTACT: Sonus Networks, Inc.
Investor Relations:
Jocelyn Philbrook, 978-614-8672
jphilbrook@sonusnet.com
or
Media Relations:
Sarah McAuley, 212-699-1836
smcauley@sonusnet.com