SAN JOSE, Calif., April 20 /PRNewswire-FirstCall/ -- Foundry
Networks(TM), Inc. (NASDAQ:FDRY), today reported financial results
for its first quarter ended March 31, 2006. Foundry's revenue for
the first quarter of 2006 was $114.0 million, up 35% from $84.6
million in the first quarter of 2005, and slightly lower compared
to $116.1 million in the fourth quarter of 2005. Net income was
$11.4 million or $0.08 per diluted share, compared to net income of
$9.9 million, or $0.07 per diluted share in the first quarter of
2005, and net income of $20.6 million, or $0.14 per diluted share
in the fourth quarter of 2005. Included in Foundry's results for
the first quarter of 2006 was $9.0 million of non-cash stock-based
compensation expense as a result of our adoption of SFAS 123R on
January 1, 2006. Net income in the first quarter and fourth quarter
of 2005 did not include stock-based compensation expense. Excluding
this non-cash stock-based compensation expense and the related tax
effect, non-GAAP net income in the first quarter of 2006 was $17.4
million and earnings per diluted share were $0.12 per share. Please
refer to the table below for a reconciliation of GAAP to non-GAAP
net income. Foundry's first quarter results reflect typical
seasonal patterns. Activity from Foundry's Japanese and European
customers increased modestly from the fourth quarter while the U.S.
Federal Government vertical market declined slightly, representing
approximately 19% of Foundry's total net revenue in the first
quarter of 2006. "We are excited about our strong start in 2006,"
said Bobby Johnson, President and CEO of Foundry Networks. "The
seasonally slow business trend we typically experience in the first
quarter was mitigated by increased sales of our newly introduced
products, as well as improved productivity of our recent sales
force additions. "Sales of our XMR MPLS router, having completed a
full quarter of revenue shipments in the March period, as well as
our newest Metro router, the MLX which began shipping for revenue
in February 2006, had good initial demand from service providers
and large enterprise customers. In addition, our BigIron RX family
of Layer 2/3 switches continued to increase in both the enterprise
and service provider markets and we began revenue shipments of our
Layer 4-7 traffic management SSL and security products. Outlook
"Looking ahead, we plan to introduce several significant new
platforms addressing both enterprise and service provider markets
in the second quarter of 2006. Given current capital expenditure
trends that we have seen within large enterprise and service
provider accounts, we believe that as our product portfolio
continues to expand, Foundry will be well positioned for continued
growth in 2006," concluded Johnson. Conference Call Foundry
Networks will host a conference call today to further discuss these
results at 2:00 p.m. Pacific Time. The call can be accessed via a
webcast at http://www.foundrynetworks.com/. A Web replay will also
be available for approximately 90 days at this same Web address.
About Foundry Networks Foundry Networks, Inc. is a leading provider
of high-performance enterprise and service provider switching,
routing, security and Web traffic management solutions including
Layer 2/3 LAN switches, Layer 3 Backbone switches, Layer 4-7
application switches, wireless LAN and access points, access
routers and Metro routers. Foundry's 9,700 customers include the
world's premier ISPs, Metro service providers, and enterprises
including e-commerce sites, universities, entertainment, health and
wellness, government, financial, and manufacturing companies. For
more information about Foundry and its products, call
1-888-TURBOLAN or visit http://www.foundrynetworks.com/. Safe
Harbor Statement This release includes non-GAAP measures which are
not in accordance with generally accepted accounting principles. In
the first quarter of 2006, Foundry adopted Financial Accounting
Standards Board Statement No. 123R,or SFAS 123R, which requires
companies to recognize the compensation cost associated with
stock-based awards in their financial statements. As a result, our
financial statements for the first quarter of 2006 include
stock-based compensation expense, but our financial results for the
first quarter of 2005 do not include stock-based compensation
expense because periods prior to January 1, 2006 are not required
to be restated. Foundry has provided the non-GAAP financial
information below, which is adjusted to exclude stock-based
compensation expense, as well as a reconciliation of GAAP net
income to non-GAAP net income. As Foundry begins to apply SFAS
123R, it believes that it is useful to investors to understand how
the expenses associated with the application of SFAS 123R are
reflected on its statements of operations. For its internal
budgets, Foundry's management uses financial statements that do not
include stock-based compensation expense related to its stock-based
awards. Foundry's management also uses these non-GAAP measures, in
addition to the corresponding GAAP measures, in reviewing the
financial results of Foundry. The non-GAAP information should not
be considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP. This press release
contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, and is subject to the
safe harbor created by that section. These forward-looking
statements include, without limitation, the statement that our new
products will enable continued growth. Other forward-looking
statements include statements by Mr. Johnson regarding upcoming new
products, capital expenditure trends, and Foundry's positioning for
continued growth as a result of its expanding product portfolio.
The forward-looking statements in this press release are only
predictions and are subject to a number of risks and uncertainties
which could cause actual results to differ materially, including,
without limitation, the difficulty of predicting quarterly
financial results, our dependence on large purchases of products
from certain customers/resellers, the staging and amounts of U.S.
government contract awards, risks associated with international
sales, results of ongoing litigation, the strength of the overall
economy and the high-technology market in particular, competition,
product development efforts, acceptance of Foundry's current and
future products, and other factors listed in Foundry's most recent
reports on Form 10-K, 10-Q, and 8-K. Actual results could differ
materially from those projected in our forward-looking statements.
Foundry's results of operations for the three months ended March
31, 2006 are not necessarily indicative of Foundry's operating
results for any future periods. Investors should review the risk
factors described in more detail in our most recent Annual Report
on Form 10-K, 10-Q and other SEC reports available free of charge
from Foundry at http://www.foundrynetworks.com/ or from the SEC at
http://www.sec.gov/. Any projections in this release are based on
limited information currently available to Foundry. Foundry assumes
no obligation to update the forward-looking statements contained in
this press release. FOUNDRY NETWORKS, INC. CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per
share data) Three Months Ended March 31, 2006 2005 Net revenues:
Product $96,063 $68,432 Service 17,938 16,204 Total net revenues
114,001 84,636 Cost of revenues: Product 42,151 28,622 Service
2,287 3,313 Total cost of revenues* 44,438 31,935 Gross profit
69,563 52,701 Operating expenses: Research and development 16,887
12,427 Sales and marketing 30,505 24,582 General and administrative
10,558 5,163 Total operating expenses* 57,950 42,172 Income from
operations 11,613 10,529 Interest and other income, net 6,947 3,873
Income before provision for income taxes 18,560 14,402 Provision
for income taxes 7,160 4,465 Net income $11,400 $9,937 Basic net
income per share $0.08 $0.07 Weighted average shares used in
computing basic net income per share 142,477 137,908 Diluted net
income per share $0.08 $0.07 Weighted average shares used in
computing diluted net income per share 149,208 141,758 * Includes
stock-based compensation by category: Cost of product revenue $228
$-- Cost of service revenue 331 -- Research and development 2,784
-- Sales and marketing 3,890 -- General and administrative 1,759 --
$8,992 $-- FOUNDRY NETWORKS, INC. RECONCILIATION OF GAAP TO
NON-GAAP NET INCOME (unaudited) (in thousands, except per share
data) Three Months Ended March 31, 2006 2005 GAAP net income
$11,400 $9,937 Adjustments: Stock-based compensation 8,992 --
Income tax effect (2,979) -- Non-GAAP net income $17,413 $9,937
Non-GAAP net income per share - basic $0.12 $0.07 Non-GAAP net
income per share - diluted $0.12 $0.07 Shares used in per share
calculation-basic 142,477 137,908 Shares used in per share
calculation-diluted 149,208 141,758 FOUNDRY NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) March 31,
December 31, 2006 2005 (unaudited) (2) ASSETS Assets: Cash and
investments (1) $789,614 $746,367 Accounts receivable, net 84,208
78,351 Inventories 36,051 32,309 Prepaid expenses and other current
assets 12,132 7,824 Deferred tax assets 42,101 39,619 Property and
equipment, net 11,283 10,986 Other long-term assets 5,976 6,468
$981,365 $921,924 LIABILITIES AND STOCKHOLDERS' EQUITY Current
Liabilities: Accounts payable $23,392 $22,307 Accrued payroll and
related expenses 17,131 23,410 Other accrued expenses 13,581 9,545
Income taxes payable 6,887 10,161 Deferred support revenue 46,268
38,653 Total current liabilities 107,259 104,076 Deferred support
revenue 22,707 21,828 Stockholders' equity 851,399 796,020 $981,365
$921,924 (1) Includes $176.9 million and $174.0 million of
long-term marketable securities at March 31, 2006 and December 31,
2005, respectively. (2) Derived from audited condensed consolidated
financial statements as of December 31, 2005. FOUNDRY NETWORKS,
INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands) Three Months Ended March 31, 2006 2005 CASH FLOWS
FROM OPERATING ACTIVITIES: Net income $11,400 $9,937 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,617 1,948 Stock-based compensation
8,992 -- Inventory provisions 2,733 5,404 Deferred tax assets
(2,482) 57 Tax benefit from stock option exercises 3,946 1,081
Changes in operating assets and liabilities: Accounts receivable
(5,857) 25,240 Inventories (6,279) (7,647) Prepaid expenses and
other assets (4,274) (294) Accounts payable 1,085 (1,072) Accrued
payroll and related expenses (6,279) (8,031) Income taxes payable
(3,274) 7,903 Other accrued expenses 4,036 (499) Deferred support
revenue 8,494 (2,176) Net cash provided by operating activities
14,858 31,851 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of
available-for-sale investments (19,050) (38,350) Sales of
available-for-sale investments 46,050 75,200 Purchases of
held-to-maturity investments (188,610) (61,657) Maturities of
held-to-maturity investments 38,238 2,999 Purchases of property and
equipment, net (2,456) (1,325) Net cash used in investing
activities (125,828) (23,133) CASH FLOWS FROM FINANCING ACTIVITIES:
Excess tax benefit from stock-based compensation 4,235 -- Issuances
of common stock under employee stock plans 26,692 8,429 Net cash
provided by financing activities 30,927 8,429 INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS (80,043) 17,147 Effect of exchange
rate changes on cash (82) 130 CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 291,511 112,274 CASH AND CASH EQUIVALENTS, END OF PERIOD
$211,386 $129,551 SUPPLEMENTAL CASH FLOW INFORMATION; Cash (paid
for) refund from income taxes, net ($4,740) $4,919 DATASOURCE:
Foundry Networks, Inc. CONTACT: Tim Heffner, Chief Financial
Officer, +1-408-207-1700, or , or Michael Iburg, Treasurer,
+1-408-207-1305, or , both of Foundry Networks, Inc.; or investors,
Jason Golz of Financial Dynamics, +1-415-439-4532, or , for Foundry
Networks Web site: http://www.foundrynetworks.com/
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