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Sycamore Networks Inc. Reports Operating Results (10-Q)

May 26, 2010 | About:
10qk

10qk

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Sycamore Networks Inc. (SCMR) filed Quarterly Report for the period ended 2010-04-24.

Sycamore Networks Inc. has a market cap of $505 million; its shares were traded at around $17.76 with and P/S ratio of 7.5. SCMR is in the portfolios of Third Avenue Management, Martin Whitman of Third Avenue Value Fund, Jim Simons of Renaissance Technologies LLC, George Soros of Soros Fund Management LLC.

Highlight of Business Operations:

On December 15, 2009, the Company made a cash distribution to its stockholders of $1.00 per share of its common stock, par value $0.001, amounting to $284.3 million in the aggregate (or $10.00 per share of common stock after giving effect to the following reverse stock split) and, at the close of business on December 21, 2009, the Company effected a 1-for-10 reverse stock split of its common stock whereby every ten shares of its issued and outstanding common stock at the effective time were combined into one share of common stock. All periods presented in this report have been adjusted to give effect to the reverse stock split. As a result of having an accumulated deficit, the cash distribution has been recorded as a reduction to additional paid in capital.

General and administrative expenses decreased approximately $0.1 million for the three months ended April 24, 2010 and increased approximately $1.4 million the nine months ended April 24, 2010 when compared to the prior comparable year. General and administrative expenses decreased for the three months ended April 24, 2010 primarily due to lower personnel and discretionary expenses of approximately $0.6 million and reduced amortization of intangible assets of $0.3 million offset by the impact of an insurance recovery in the three months ended April 25, 2009 of $0.7 million. The increase in general and administrative expenses for the nine months ended April 24, 2010 compared to the same period ended April 25, 2009 was primarily due to an insurance recovery of $3.7 million in the prior year compared to $0.2 million in the nine months ended April 24, 2010. The impact of the lower insurance recoveries for the nine months ended April 24, 2010 was partially offset by a decrease in personnel expenses of $0.9 million resulting from the cost reductions initiated over the past year and a decrease in the amortization of intangible assets of $1.0 million due to the full write-off of such assets in the fourth quarter of fiscal 2009.

In conjunction with the workforce reduction and early lease termination plans initiated during the past year, certain additional actions were implemented in the first quarter of fiscal 2010. These actions were taken to further re-align our cost structure, pace our development more closely in line with customer requirements and to better position the Company for success in the longer-term. During the first quarter of fiscal 2010, the Company recorded a restructuring and related asset impairment charge of $6.4 million of which $6.3 million was charged to operating expense and $0.1 million to cost of product revenue. This charge relates to (i) employee separation packages including severance pay, benefits continuation and outplacement costs amounting to $3.4 million, of which $3.3 million was charged to operating expense and $0.1 million to cost of product revenue, (ii) a facility related termination agreement of $1.9 million, and (iii) a related asset impairment charge of $1.1 million. During the second quarter of fiscal 2010, the Company recorded an adjustment of $0.1 million for unused outplacement services.

The income tax expense for the three months ended April 24, 2010 was $0.1 million and the income tax benefit was $0.5 million for the nine months ended April 24, 2010. The recognized tax benefit reflects the tax effect of the November 2009 enactment of the Home Ownership and Business Assistance Act of 2009. The new law provides for the utilization of 100% (previously 90%) of certain net operating loss carrybacks against alternative minimum taxable income and results in an aggregate refund of alternative minimum tax paid of $0.8 million for fiscal 2006 and fiscal 2007. Income tax expense of $0.1 million and $0.2 million was recorded for the three and nine months ended April 25, 2009, primarily related to income tax expense in certain states and profitable foreign jurisdictions.

Net cash used in operating activities was $5.2 million for the nine months ended April 24, 2010. Net loss for the nine months ended April 24, 2010 was $15.3 million and included non-cash charges including share-based compensation of $2.5 million, an impairment charge of $1.1 million, and depreciation and amortization of $5.2 million. Accounts receivable decreased to $10.7 million at April 24, 2010 from $12.9 million at July 31, 2009. The decrease was primarily due to the timing of shipments and timing of support contract renewals. Our accounts receivable and days sales outstanding are impacted primarily by the timing of shipments, collections performance and timing of support contract renewals. Inventory levels decreased to $14.6 million at April 24, 2010 from $16.1 million at July 31, 2009. The decrease was primarily due to the sale of existing on-hand inventory. Deferred revenue increased to $16.8 million at April 24, 2010 from $15.5 million at July 31, 2009 due to the timing of service contract renewals and the revenue recognition of prior quarter product shipments. Accrued restructuring costs decreased to $0.6 million at April 24, 2010 from $2.5 million at July 31, 2009 due to severance payments related to our workforce reduction and rent payments related to facility consolidations.

Net cash used in financing activities was $284.1 million. On December 15, 2009, the Company made a cash distribution to its stockholders of $1.00 per share of its common stock, par value $0.001, amounting to $284.3 million in the aggregate (or $10.00 per share of common stock after giving effect to the following reverse stock split) and, at the close of business on December 21, 2009, the Company effected a 1-for-10 reverse stock split of its common stock whereby every ten shares of its issued and outstanding common stock at the effective time were combined into one share of common stock. All periods presented in this report have been adjusted to give effect to the reverse stock split. As a result of having an accumulated deficit, the cash distribution has been recorded as a reduction to additional paid in capital.

Read the The complete Report

About the author:

10qk
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 2.7/5 (3 votes)

Comments

hbs
Hbs - 4 years ago


Not very informative

Why is this a buy?

Is there a compelling reason to buy at this time?

Please leave your comment:


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