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Echelon Reports 2011 Third Quarter Results And Subsequent Developments

The financial statements that follow should be read in conjunction with the notes set forth in Echelon's Quarterly Report on Form 10-Q when filed with the Securities and Exchange Commission.

ECHELON CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)
 
 

September 30,2011
 

December 31,2010
ASSETS
 
Current Assets:
Cash and cash equivalents $ 23,685 $ 7,675
Short-term investments 36,998 56,957
Accounts receivable, net 27,051 25,102
Inventories 10,638 8,993
Deferred cost of goods sold 1,848 2,588
Other current assets   5,365   3,962
 
Total current assets 105,585 105,277
 
Property and equipment, net 28,161 31,020
Other long-term assets   9,023   9,273
 
$ 142,769 $ 145,570

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 
 
Current Liabilities:
Accounts payable $ 13,207 $ 10,399
Accrued liabilities 7,510 6,713
Current portion of lease financing obligations 1,835 1,731
Deferred revenues   6,965   9,175
 
Total current liabilities   29,517   28,018
 
Long-term liabilities 22,398 23,563
 
Total stockholders' equity   90,854   93,989
 
$ 142,769 $ 145,570

ECHELON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 (In thousands, except per share amounts)

(Unaudited)
 
  Three Months Ended

September 30,
  Nine Months Ended

September 30,
  2011       2010     2011       2010  
Revenues:
Product $ 43,010 $ 26,441 $ 113,215 $ 69,544
Service   817     683     2,737     2,683  
 
Total revenues   43,827     27,124     115,952     72,227  
 
Cost of revenues:
Cost of product (1) 25,419 14,083 63,037 38,397
Cost of service (1)   501     567     1,661     1,870  
 
Total cost of revenues   25,920     14,650     64,698     40,267  
 
Gross profit   17,907     12,474     51,254     31,960  
 
Operating expenses:
Product development (1) 7,533 8,438 26,005 24,598
Sales and marketing (1) 5,885 6,003 19,183 18,463
General and administrative (1)   3,747     4,756     13,408     13,115  
 
Total operating expenses   17,165     19,197     58,596     56,176  
 
Income (loss) from operations 742 (6,723 ) (7,342 ) (24,216 )
Interest and other income (expense), net 390 (559 ) (123 ) 380
Interest expense on lease financing obligations   (363 )   (390 )   (1,111 )   (1,188 )
 
Income (loss) before provision for income taxes 769 (7,672 ) (8,576 ) (25,024 )
Income tax expense   114     170     229     252  
 
Net income (loss) $ 655   $ (7,842 ) $ (8,805 ) $ (25,276 )
Net income (loss) per share:
Basic $ 0.02 $ (0.19 ) $ (0.21 ) $ (0.61 )
Diluted $ 0.02 $ (0.19 ) $ (0.21 ) $ (0.61 )
 
Shares used in computing net income (loss) per share:
Basic 42,232 41,560 42,040 41,311
Diluted 42,987 41,560 42,040 41,311
 
 

(1) Amounts include stock-based compensation costs as follows:
Cost of product $ 221 $ 320 $ 627 $ 882
Cost of service 29 31 62 94
Product development 1,017 1,104 2,811 3,171
Sales and marketing 307 642 1,510 2,227
General and administrative   (403 )   1,004     1,734     2,954  
 
Total stock-based compensation expenses $ 1,171   $ 3,101   $ 6,744   $ 9,328  

ECHELON CORPORATION

RECONCILIATION OF NON-GAAP TO GAAP RESULTS

Excluding adjustments itemized below

(In thousands, except per share amounts)

(Unaudited)
 

An itemized reconciliation between net earnings on a GAAP basis and non-GAAP basis is as follows:
 
 

Three Months EndedSeptember 30,
 

Nine Months EndedSeptember 30,
  2011     2010     2011       2010  
 
GAAP net income (loss) $ 655 $ (7,842 ) $ (8,805 ) $ (25,276 )
 
Stock-based compensation   1,171   3,101     6,744     9,328  
 
Total non-GAAP adjustments to earnings from operations 1,171 3,101 6,744 9,328
 
Income tax effect of reconciling items   --   --     --     --  
 
Non-GAAP net income (loss) $ 1,826 $ (4,741 ) $ (2,061 ) $ (15,948 )
Non-GAAP net income (loss) per share:
Diluted $ 0.04 $ (0.11 ) $ (0.05 ) $ (0.39 )
 
Shares used in computing net income (loss) per share:
Diluted 42,987 41,560 42,040 41,311

ECHELON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)
 
  Nine Months Ended

September 30,
  2011       2010  
Cash flows provided by (used in) operating activities:
Net loss $ (8,805 ) $ (25,276 )
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 4,530 5,021
Loss on disposal of fixed assets 92 5
Reduction of allowance for doubtful accounts (13 ) (12 )
Reduction of (increase in) accrued investment income 64 (28 )
Stock-based compensation 6,744 9,328
Change in operating assets and liabilities:
Accounts receivable (1,920 ) 8,947
Inventories (1,619 ) (1,200 )
Deferred cost of goods sold 762 806
Other current assets (1,147 ) 972
Accounts payable 2,998 (119 )
Accrued liabilities 892 1,303
Deferred revenues (1,975 ) (1,304 )
Deferred rent   (41 )   (59 )
 
Net cash provided by (used in) operating activities   562     (1,616 )
 
Cash flows provided by (used in) investing activities:
Purchase of available-for-sale short-term investments (38,978 ) (45,873 )
Proceeds from maturities and sales of available-for-sale short-term investments 58,862 56,885
Change in other long-term assets (10 ) 6
Capital expenditures   (1,965 )   (1,442 )
 
Net cash provided by investing activities   17,909     9,576  
 
Cash flows provided by (used in) financing activities:
Principal payments of lease financing obligations. (1,286 ) (1,180 )
Proceeds from exercise of stock options. 945 537
Repurchase of common stock from employees for payment of taxes on vesting of performance shares and upon exercise of stock options.   (2,093 )   (1,846 )
 
Net cash used in financing activities   (2,434 )   (2,489 )
 
Effect of exchange rates on cash:   (27 )   (341 )
 
Net increase in cash and cash equivalents 16,010 5,130
Cash and cash equivalents:
Beginning of period   7,675     17,206  
 
End of period $ 23,685   $ 22,336  

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