Terayon Communication Systems, Inc. (Nasdaq: TERN), the world's second largest provider of cable broadband modems and headends, today reported revenues of $80.2 million for the fourth quarter 2001, an increase of 27% from $62.9 million for the fourth quarter 2000. Excluding $1.6 million of favorable changes in inventory reserves and vendor cancellation exposures, the pro forma loss in the fourth quarter 2001 was $9.7 million or $0.14 per share. Including these changes, the pro forma loss for the fourth quarter 2001 was $8.1 million or $0.12 per share, compared to a pro forma loss of $50.8 million or $0.77 per share for the same period in 2000.
The pro forma results exclude: (1) non-cash charges for in-process research and development in 2000, the amortization of intangible assets related to acquisitions, stock compensation, the cost of certain warrants to purchase common stock, and asset write-offs; (2) restructuring charges; and (3) the gain resulting from the retirement of debt.
The company recorded an extraordinary gain of $12.0 million from the retirement of debt in the fourth quarter. Including this gain and facilities-related restructuring charges of $3.5 million, the net loss for the fourth quarter of 2001 was $6.2 million, or $0.09 per share, versus a net loss of $91.6 million, or $1.38 per share for the fourth quarter in the prior year.
For the full fiscal year, revenues were $279.5 million, down 18% compared to $339.5 million for the previous year. Excluding $33.5 million in special charges related to inventory reserves and vendor cancellation exposures, the pro forma loss in fiscal year 2001 was $86.1 million or $1.26 per share, compared to a full year 2000 pro forma loss of $15.5 million or $0.25 per share. Including these special charges, the pro forma loss for the full year 2001 was $119.6 million or $1.75 per share versus a pro forma loss of $34.5 million or $0.56 per share in the prior year.
For the full year 2001, Terayon recorded an extraordinary gain of $185.3 million from the retirement of debt and a charge of $586.0 million related to restructuring costs and asset write-offs, including the impairment of goodwill. The net loss for the full year 2001 was $563.8 million, or $8.25 per share, versus a net loss of $180.8 million, or $2.95 per share, for the full year 2000.
At the end of December 2001, cash and short-term investments were $334 million. The convertible debt outstanding at the end of December 2001 was $174 million down from $500 million as of December 2000. The net cash position (cash less long term debt) improved to $160 million compared to $62 million at the end of 2000.
"The key to success in 2001 was focus," said Dr. Zaki Rakib, Terayon CEO. "We focused on strengthening our financial position while continuing to invest in technology. Terayon realized a return on its efforts when the S-CDMA technology was included in the completed DOCSIS(TM) 2.0 specification issued in December 2001. This opened a new window of opportunity for us in the U.S. market. Eight of the top nine U.S. MSOs are currently in different stages of testing our new TJ 615 DOCSIS 2.0-based modem and one of the top three already has indicated its intent to deploy the modem shortly."
Fiscal 2002 will be marked by the rollout of Terayon's new line of standards-based products developed in 2001. As Terayon goes through this product life cycle transition, the Company expects (excluding Imedia Semiconductor) full-year 2002 revenues to be in the range of $300 to $320 million, and pro forma income in the range of $1 to $5 million or $0.01 to $0.07 per share.
For the first quarter 2002, excluding Imedia Semiconductor, Terayon expects revenues of $64 to $66 million and a pro forma loss in the range of $4 to $6 million or $0.06 to $0.09 per share. For the first quarter 2002, including Imedia Semiconductor, which will not record any revenues, Terayon expects a pro forma loss in the range of $10 to 12 million or $0.14 to $0.17 per share. This decline in first quarter 2002 revenue is primarily due to shortages of specific components that are integral to Terayon products and are currently single sourced.