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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
March 15, 2005
Date of Report (Date of earliest event reported)
------------------------------------------------
SONUS NETWORKS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 000-30229 04-3387074
___________ _________ __________
(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)
- --------------------------------------------------------------------------------
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 exhibits
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 March 15, 2005, Sonus Networks, Inc. issued a press release reporting
its financial results for the quarter and year ended December 31, 2004. A copy
of the press release is attached as Exhibit 99.1 hereto.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits
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 March 15, 2005
reporting financial results for the quarter and year ended
December 31, 2004.
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: March 15, 2005 SONUS NETWORKS, INC.
By:
/s/ Ellen Richstone
-------------------
Ellen Richstone
Chief Financial Officer
Exhibit Index
99.1 Press release of Sonus Networks, Inc. dated March 15, 2005 reporting
financial results for the quarter and year ended December 31, 2004.
Exhibit 99.1
Sonus Networks Reports 2004 Fourth Quarter and Annual Financial Results;
2004 Revenues Grow 83% Year Over Year, 2004 EPS of $0.10
CHELMSFORD, Mass.--(BUSINESS WIRE)--March 15, 2005--Sonus Networks
(Nasdaq:SONS), a leading supplier of service provider voice over IP
(VoIP) infrastructure solutions, today reported its financial results
for its fourth quarter and fiscal year ended December 31, 2004.
Revenues for the fourth quarter of fiscal 2004 were $45.1 million
compared with $46.4 million in the same period last year, a decrease
of 3%. Net income for the fourth quarter of fiscal 2004 was $6.3
million or $0.02 per diluted share, compared with net income for the
fourth quarter of fiscal 2003 of $6.9 million, or $0.03 per diluted
share.
Revenues for fiscal year 2004 were $170.7 million compared with
$93.2 million for fiscal year 2003, an increase of 83%. Net income for
fiscal year 2004 was $24.5 million, or $0.10 per diluted share,
compared with a net loss for fiscal year 2003 of $15.1 million, or
$0.07 per diluted share.
"Our 2004 financial results represent record performance by our
team around the world. Revenue grew 83%, we were profitable on an
annual basis, and we generated positive cash flow," said Hassan Ahmed,
chairman and CEO, Sonus Networks. "As we continue to focus on growing
the company, we are equally focused on improving our financial
controls and infrastructure. We are pleased to have timely filed our
Form 10-K for 2004 and to have completed the assessment of internal
control over financial reporting under the new Sarbanes-Oxley 404
requirements."
Fourth Quarter 2004 Summary
Further broadening its customer base in the fourth quarter, Sonus
announced that NetVision, Israel's largest Internet Service Provider,
is deploying Sonus infrastructure to build a new network for global
inter-connect. Additionally, Sonus announced that Interoute, owner and
operator of one of Europe's most advanced telecommunications networks,
is expanding its Sonus platform to meet growing demand for its
successful Virtual Voice Network (VVN).
Collaborating with the National Communications System (NCS), an
agency of the Department of Homeland Security, Sonus demonstrated
critical emergency services features for the Government Emergency
Telecommunications Service (GETS) at the Global MSF Interoperability
(GMI) 2004 event. In support of the NCS participation at GMI 2004,
Sonus developed a critical software application that enables priority
routing of emergency calls via the use of the Session Initiation
Protocol (SIP) Resource Priority Header (RPH).
During the quarter, Sonus continued to build its sales presence
around the world. In October, Sonus expanded its direct sales
operations in its Europe, Middle East and Africa (EMEA) region to
support its increasing business focus in the region. Sonus also
launched a new channel partnership with Marconi Corporation plc. In
addition, Sonus continued to invest in sales by developing its
presence in Asia Pacific, including a partnership agreement with
Putian Capitel Group, a subsidiary of China Putian Corporation. Under
the agreement, Putian Capitel will resell the full range of Sonus'
VoIP infrastructure solutions, as well as provide support and
consultation to customers in China. These investments reflect the
momentum in the market as service providers globally look to deploy
new VoIP services in both the core of the network and at the access
edge.
In December, leading industry research firms issued quarterly
reports showing that Sonus continued its leadership in the
carrier-class packet voice equipment market. Dell'Oro Group,
Infonetics Research, In-Stat/MDR and Synergy Research Group all named
Sonus as the market share leader in several segments of the carrier
voice over IP (VoIP) equipment market, according to quarterly market
share reports for Q3 2004.
"2004 will be remembered as the year that VoIP became a mainstream
technology, with many of the world's largest carriers announcing plans
to deliver VoIP services. In 2005, we are confident in our ability to
grow through innovation and our ability to deliver value to our
customers. Sonus has taken a leading role in driving the adoption of
VoIP technology and is well positioned to continue to lead the
market," concluded Ahmed.
Sarbanes-Oxley Update
In connection with the company's 2004 year-end financial
statements review, the company has tested its internal control over
financial reporting, as required by Section 404 of the Sarbanes-Oxley
Act of 2002. Company management has concluded that it had material
weaknesses in its internal controls as of December 31, 2004. The
company's independent auditors have issued an audit report wherein
they concur with management's assessment that the company's internal
control over financial reporting was not effective as of December 31,
2004. The reports of management and of the company's independent
auditors are included in the company's Annual Report on Form 10-K.
Conference Call and Webcast Information
Sonus Networks will host a conference call Tuesday, March 15,
2005, beginning at 8:00 a.m. Eastern time. To listen via telephone,
the dial-in number is (800) 633-8680 or (212) 231-6032. Sonus will
also host a live webcast of the conference call. To access the
webcast, visit www.sonusnet.com, Corporate, Investor Relations. A
telephone playback of the call will be available following the
conference and can be accessed by calling (800) 633-8284 or (402)
977-9140. The reservation number for the replay is 21235464. The
telephone playback will be available through Monday, March 28, 2005.
The webcast will also be available on the Sonus Networks Investor
Relations site through Wednesday, March 15, 2006. To access the replay
of the webcast, visit www.sonusnet.com, Corporate, Investor Relations.
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 Open Services Architecture (OSA), Sonus delivers end-to-end
solutions addressing a full range of carrier applications, including
trunking and tandem switching, residential and business access,
network border switching and enhanced services. Sonus' voice
infrastructure solutions, including media gateways, softswitches and
network management systems, are deployed in service provider networks
worldwide. Sonus, founded in 1997, 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 for the year ended December 31, 2004 filed with
the SEC, which identifies 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; risks associated with the investigation of the company by
the SEC; 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. Open Services
Architecture, GSX9000, Insignus and Sonus Insight are trademarks of
Sonus Networks. All other trademarks, service marks, registered
trademarks, or registered service marks are the property of their
respective owners.
SONUS NETWORKS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three Three Three
Months Months Months
Ended Ended Ended
Dec. 31, Sept. 30, Dec. 31,
2004 2004 2003
--------- --------- ---------
Revenues $ 45,083 $ 46,762 $ 46,384
Cost of revenues 13,757 10,469 17,295
-------- -------- --------
Gross profit 31,326 36,293 29,089
-------- -------- --------
Gross profit % 69.5% 77.6% 62.7%
Operating expenses:
Research and development 9,348 8,975 7,945
Sales and marketing 8,935 10,539 6,990
General and administrative 7,385 6,638 6,338
Stock-based compensation 65 91 802
Amort. of goodwill and purchased
intangible assets 601 601 602
-------- -------- --------
Total operating expenses 26,334 26,844 22,677
-------- -------- --------
Income from operations 4,992 9,449 6,412
-------- -------- --------
Interest expense (119) (117) (204)
Interest income 1,477 1,150 897
-------- -------- --------
Income before provision for
income taxes 6,350 10,482 7,105
-------- -------- --------
Provision for income taxes 89 214 204
-------- -------- --------
Net income $ 6,261 $ 10,268 $ 6,901
======== ======== ========
Net income per share:
Basic $ 0.03 $ 0.04 $ 0.03
Diluted $ 0.02 $ 0.04 $ 0.03
Shares used in computation:
Basic 247,134 246,198 242,983
Diluted 256,443 251,707 258,607
SONUS NETWORKS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Year Year
Ended Ended
Dec. 31, Dec. 31,
2004 2003
--------- ---------
Revenues $170,738 $ 93,210
Cost of revenues 50,567 37,909
-------- --------
Gross profit 120,171 55,301
-------- --------
Gross profit % 70.4% 59.3%
Operating expenses:
Research and development 36,174 32,190
Sales and marketing 34,969 23,169
General and administrative 24,595 10,475
Stock-based compensation 671 3,418
Amort. of goodwill and purchased intangible
assets 2,402 2,408
-------- --------
Total operating expenses 98,811 71,660
-------- --------
Income (loss) from operations 21,360 (16,359)
-------- --------
Interest expense (479) (610)
Interest income 4,283 2,135
-------- --------
Income (loss) before provision for income taxes 25,164 (14,834)
-------- --------
Provision for income taxes 687 302
-------- --------
Net income (loss) $ 24,477 $(15,136)
======== ========
Net income (loss) per share:
Basic $ 0.10 $ (0.07)
Diluted $ 0.10 $ (0.07)
Shares used in computation:
Basic 245,830 220,696
Diluted 253,816 220,696
SONUS NETWORKS, INC.
Condensed Consolidated Balance Sheets
(In thousands)
Dec. 31, Dec. 31,
2004 2003
----------- -----------
Assets
Current assets:
Cash, cash equivalents and marketable
securities $ 292,076 $ 305,392
Accounts receivable, net 32,486 23,754
Inventory, net 28,346 13,739
Other current assets 10,891 6,935
---------- ----------
Total current assets 363,799 349,820
---------- ----------
Property and equipment, net 8,217 5,009
Purchased intangible assets, net - 2,402
Long-term marketable securities 21,029 -
Other assets 783 1,193
---------- ----------
$ 393,828 $ 358,424
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 26,894 $ 25,413
Accrued restructuring expenses 186 565
Current portion of deferred revenue 65,105 62,698
Current portion of long-term liabilities 30 182
---------- ----------
Total current liabilities 92,215 88,858
---------- ----------
Long-term deferred revenue, less current
portion 25,960 24,302
Long-term liabilities, less current portion 613 829
Convertible subordinated note 10,000 10,000
Stockholders' equity:
Common stock 250 247
Capital in excess of par value 1,049,142 1,043,581
Accumulated deficit (784,085) (808,562)
Deferred compensation - (564)
Treasury stock (267) (267)
---------- ----------
Total stockholders' equity 265,040 234,435
---------- ----------
$ 393,828 $ 358,424
========== ==========
SONUS NETWORKS, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
Three Three Three
Months Months Months
Ended Ended Ended
Dec. 31, Sept. 30, Dec.31,
2004 2004 2003
Cash flows from operating activities:
Net income $ 6,261 $ 10,268 $ 6,901
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation 1,617 1,276 2,065
Tax benefit from stock options
exercised 67 - -
Stock-based compensation 65 91 802
Amortization of purchased intangible
assets 601 601 602
Changes in current assets and
liabilities
Accounts receivable 2,916 (3,492) (15,418)
Inventory (780) (7,365) 2,683
Other current assets 1,970 1,698 552
Accounts payable (2,445) 2,473 339
Accrued expenses 38 (3,950) 4,370
Deferred revenue 3,076 (5,017) 1,837
-------- -------- ---------
Net cash provided by (used in)
operating activities 13,386 (3,417) 4,733
-------- -------- ---------
Cash flows from investing activities:
Purchase of property and equipment (2,696) (2,015) (141)
Purchases of marketable securities, net (8,118) (5,649) (125,802)
Other assets (20) 102 (894)
-------- -------- ---------
Net cash used in
investing activities (10,834) (7,562) (126,837)
-------- -------- ---------
Cash flows from financing activities:
Net proceeds from sale of common stock
to public - - 63
Sales of common stock in connection
with employee stock purchase plan - 925 -
Proceeds from exercise of stock options 2,565 704 2,792
Payments of long-term liabilities (31) (40) (2,095)
-------- -------- ---------
Net cash provided by
financing activities 2,534 1,589 760
-------- -------- ---------
Net increase (decrease) in cash and
cash equivalents 5,086 (9,390) (121,344)
-------- -------- ---------
Cash and cash equivalents, beginning of
period 116,845 126,235 255,059
-------- -------- ---------
Cash and cash equivalents, end of
period $121,931 $116,845 $ 133,715
======== ======== =========
CONTACT: Sonus Networks
Investor Relations:
Jocelyn Philbrook, 978-589-8672
jphilbrook@sonusnet.com
Media Relations:
Sarah McAuley, 617-894-2807
smcauley@greenoughcom.com