RESEARCH TRIANGLE PARK, N.C.,
May 5 /PRNewswire-FirstCall/ -- Aviat
Networks, Inc. (Nasdaq: AVNW), a wireless expert in advanced IP
network migration, today reported financial results for the third
quarter of fiscal year 2010, which ended April 2, 2010.
Revenue for the third quarter of fiscal 2010 was $120.0 million, compared with $158.0 million in the year ago period. The
net loss under U.S. GAAP was $25.7
million or $0.43 per share,
compared with U.S. GAAP net loss of $39.4
million or $0.67 per share in
the year ago quarter.
Non-GAAP Financial Results
The non-GAAP net loss for the quarter was $6.7 million, or $0.11 per share, compared with non-GAAP net
income of $2.9 million, or
$0.05 per diluted share in the year
ago quarter.
In Q3 of fiscal 2010, non-GAAP
results excluded $22.9 million of the following pre-tax
items:
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|
|
-- $16.9 million
related to discontinuing the final portion of our internal
manufacturing and the associated outsourcing of those products to a
US-based contract manufacturer. Of these impairments, $7.9 million
are charges related to provisions for associated product excess and
obsolete inventory and $5.5 million for the impairment of a
building and idle plant and equipment. The remaining $3.5 million
of this charge is related to inventory purchase commitments. These
impairment items are a result of our strategy to converge our
products onto a single product platform by the end of this fiscal
year. This will result in increased focus and efficiencies in
manufacturing, sales and support in FY 2011.
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|
|
-- $3.6 million
amortization of purchased intangibles.
|
|
|
-- $1.4 million of
expense associated with rebranding and expense incurred in
transitioning from a Harris Corporation subsidiary to an
independent company.
|
|
|
-- $1.0 million of
restructuring and stock compensation expense.
|
|
|
|
A reconciliation of GAAP to non-GAAP financial measures is
provided on Table 4 along with the accompanying notes.
As of the quarter ended April 2,
2010 cash and cash equivalents were $140.5 million, compared with $126.4 million as of the quarter ended
January 1, 2010.
Third Quarter Revenue by Business Segment
Revenue in the North America
segment was $39.6 million in the
third quarter of fiscal 2010, compared with $43.0 million in the year ago period.
International revenue was $80.4
million, compared with $115.0
million in the year ago period. Beginning in Q1 of
fiscal 2010, Network Operations revenue is now reported within the
North America and International
segments.
"We are seeing stabilizing trends in various regions with new
customer revenue coming on-stream in Asia
Pacific and some improvement in Africa. While we are maintaining our share
position with our top customers, their spending levels continue to
reflect the caution we have seen in recent quarters. Overall
gains this quarter were offset by the delay in capital spending in
Europe and seasonal weakness as
well as push-outs in North
America," said Harald Braun,
president and chief executive officer of Aviat Networks.
"Our cash and short-term investments reached a record
$140 million, ensuring the strength
of our balance sheet."
Outlook and Guidance
Due to the current macro-economic situation, it is difficult to
provide financial guidance, and it is likely that Aviat Networks'
actual results could differ materially from current expectations.
The Company's current expectation for the fourth quarter of
fiscal year 2010, based on current backlog, is for revenue in the
range of $120 million to $130
million.
Conference Call
Aviat Networks will host a conference call today at 4:30 p.m. Eastern Time to discuss the company's
financial results. Those wishing to join the call should dial
480-629-9771 (Conference ID: 4282240) at approximately
4:20 p.m. A replay of the call will
be available starting approximately one hour after the call's
completion until May 12. To access
the replay, dial 303-590-3030 (Conference ID: 4282240). A
live and archived webcast of the conference call will also be
available via the company's Web site at
www.AviatNetworks.com/investors.
Non-GAAP Measures and Comparative Financial
Information
Aviat Networks, Inc. reports information in accordance with U.S.
Generally Accepted Accounting Principles ("GAAP"). Management
of Aviat Networks monitors revenues, cost of product sales and
services, research and development expenses, selling and
administrative expenses, operating income or loss, tax expense or
benefit, net income or loss, and net income or loss per share on a
non-GAAP basis for planning and forecasting results in future
periods, and may use these measures for some management
compensation purposes. These measures exclude certain costs and
expenses as shown on the attached GAAP reconciliation table. As a
result, management is presenting these non-GAAP measures in
addition to results reported in accordance with GAAP to better
communicate underlying operational and financial performance in
each period. Management believes these non-GAAP measures provide
information that is useful to investors in understanding
period-over-period operating results separate and apart from items
that may, or could, have a disproportionate positive or negative
impact on results in any given period. Management also believes
that these non-GAAP measures enhance the ability of an investor to
analyze trends in Aviat Networks' business and to better understand
our performance.
Aviat Networks' management does not, nor does it suggest that
investors should, consider such non-GAAP financial measures in
isolation from, or as a substitute for, financial information
prepared in accordance with GAAP. Aviat Networks presents
such non-GAAP financial measures in reporting its financial results
to provide investors with an additional tool to evaluate the
Company's financial performance. Reconciliations of these non-GAAP
financial measures with the most directly comparable financial
measures calculated in accordance with GAAP are included in the
tables below.
About Aviat Networks, Inc.
Aviat Networks, Inc. (NASDAQ: AVNW), previously known as Harris
Stratex Networks, Inc. is a leading wireless expert in advanced IP
network migration, building the foundation for the 4G/LTE broadband
future. We offer best-of-breed transformational wireless solutions,
including LTE-ready microwave backhaul, WiMAX access and a complete
portfolio of essential service options that enable wireless public
and private telecommunications operators to deliver advanced data,
voice and video and mobility services around the world. Aviat is
agile and adaptive to anticipate what's coming to help our
customers make the right choices, and our products and services are
designed for flexible evolution, no matter what the future brings.
With global reach and local presence on the ground we work by the
side of our customers, allowing them to quickly and cost
effectively seize new market and service opportunities, while
managing migration toward an all- IP future. For more
information, please visit www.aviatnetworks.com or join the
dialogue at www.twitter.com/aviatnetworks.
Forward-Looking Statements
The information contained in this document includes
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, Section 21E of the
Securities Exchange Act and Section 27A of the Securities Act. All
statements, trend analyses and other information contained herein
about the markets for the services and products of Aviat Networks
and trends in revenue, as well as other statements identified by
the use of forward-looking terminology, including "anticipate",
"believe", "plan", "estimate", "expect", "goal", "will", "see",
"continues", "delivering", "view", and "intend", or the
negative of these terms or other similar expressions, constitute
forward-looking statements. These forward-looking statements are
based on estimates reflecting the current beliefs of the senior
management of Aviat Networks. These forward-looking statements
involve a number of risks and uncertainties that could cause actual
results to differ materially from those suggested by the
forward-looking statements. Forward-looking statements should
therefore be considered in light of various important factors,
including those set forth in this document. Important factors that
could cause actual results to differ materially from estimates or
projections contained in the forward-looking statements include the
following:
- continued weakness in the global economy affecting customer
spending;
- continued price erosion as a result of increased competition
in the microwave transmission industry;
- the volume, timing and customer, product and geographic mix
of our product orders may have an impact on our operating
results;
- the ability to achieve business plans for Aviat
Networks;
- the ability to manage and maintain key customer
relationships;
- the ability to maintain projected product rollouts, product
functionality, anticipated cost reductions or market acceptance of
planned products;
- future costs or expenses related to litigation;
- the ability of our subcontractors to perform or our key
suppliers to manufacture or deliver material;
- customers may not pay for products or services in a timely
manner, or at all;
- the failure of Aviat Networks to protect its intellectual
property rights and its ability to defend itself against
intellectual property infringement claims by others;
- currency and interest rate risks;
- the impact of political, economic and geographic risks on
international sales;
- uncertain economic conditions in the telecommunications
sector combined with operator and supplier consolidation which
makes it difficult to estimate growth.
For more information regarding the risks and uncertainties
for our business, see "Risk Factors" in our form 10-K filed with
the U.S. Securities and Exchange Commission ("SEC") on September 4, 2009 as well as other reports filed
by Aviat Networks, Inc., previously known as Harris Stratex
Networks, Inc., with the SEC from time to time. Aviat
Networks undertakes no obligation to update publicly any
forward-looking statement for any reason, except as required by
law, even as new information becomes available or other events
occur in the future.
Table 1
AVIAT NETWORKS,
INC.
Fiscal Year 2010 Third Quarter
Summary
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
Quarter
Ended
|
Three Quarters
Ended
|
|
|
April 2,
2010
|
April 3,
2009
|
April 2,
2010
|
April 3,
2009
|
|
|
(In millions,
except per share amounts)
|
|
Revenue from product sales and
services
|
$
120.0
|
$
158.0
|
$
362.6
|
$
544.7
|
|
Cost
of product sales and services
|
(82.8)
|
(109.9)
|
(241.2)
|
(382.8)
|
|
Charges for product
transition
|
(16.9)
|
(29.8)
|
(16.9)
|
(29.8)
|
|
Amortization of purchased
technology
|
(2.1)
|
(1.8)
|
(6.3)
|
(5.4)
|
|
Gross
margin
|
18.2
|
16.5
|
98.2
|
126.7
|
|
Research and development
expenses
|
(10.2)
|
(9.9)
|
(31.0)
|
(29.6)
|
|
Selling and administrative
expenses
|
(35.0)
|
(34.6)
|
(101.2)
|
(104.0)
|
|
Amortization of intangible
assets
|
(1.3)
|
(1.4)
|
(4.3)
|
(4.2)
|
|
Acquired in-process research and
development
|
—
|
(2.4)
|
—
|
(2.4)
|
|
Software impairment charges
|
—
|
(2.9)
|
—
|
(2.9)
|
|
Goodwill impairment charges
|
—
|
—
|
—
|
(279.0)
|
|
Trade
name impairment charges
|
—
|
—
|
—
|
(22.0)
|
|
Restructuring charges
|
(0.7)
|
(0.5)
|
(3.3)
|
(4.9)
|
|
Operating loss
|
(29.0)
|
(35.2)
|
(41.6)
|
(322.3)
|
|
Interest income
|
—
|
0.2
|
0.1
|
0.9
|
|
Interest expense
|
(0.6)
|
(0.8)
|
(1.5)
|
(2.2)
|
|
Loss
before income taxes
|
(29.6)
|
(35.8)
|
(43.0)
|
(323.6)
|
|
Income
tax benefit (expense)
|
3.9
|
(3.6)
|
1.6
|
(28.0)
|
|
Net
loss
|
$
(25.7)
|
$
(39.4)
|
$
(41.4)
|
$
(351.6)
|
|
Net
loss per common share of Class A and Class B common stock (Note
1):
|
|
|
|
|
|
Basic
and diluted
|
$
(0.43)
|
$
(0.67)
|
$
(0.70)
|
$
(5.99)
|
|
Basic
and diluted weighted average shares outstanding
|
59.7
|
58.8
|
59.3
|
58.7
|
|
____________
(1) The net loss per common
share amounts were the same for Class A and Class B in the quarter
and three quarters ended April 3, 2009 because the holders of each
class were legally entitled to equal per share distributions
whether through dividends or in liquidation. There were no shares
of Class B common stock outstanding during the quarter and three
quarters ended April 2, 2010. Effective November 19, 2009, under a
change to our certificate of incorporation approved by
shareholders, all shares of our Class A common stock were
reclassified on a one-to-one basis to shares Common Stock without a
class designation; we no longer have Class A or Class B common
stock authorized, issued or outstanding.
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|
|
|
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|
Table 2
AVIAT NETWORKS,
INC.
Fiscal Year 2010 Third Quarter
Summary
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
|
|
|
April 2,
2010
|
July 3,
2009(1)
|
|
|
(In
millions)
|
|
Assets
|
|
|
|
Cash
and cash equivalents
|
$
140.5
|
$
136.8
|
|
Short-term investments
|
—
|
0.3
|
|
Receivables
|
115.2
|
142.9
|
|
Inventories and unbilled
costs
|
100.1
|
126.4
|
|
Other
current assets
|
33.8
|
29.7
|
|
Property, plant and
equipment
|
52.6
|
57.4
|
|
Goodwill
|
6.2
|
3.2
|
|
Identifiable intangible
assets
|
74.0
|
84.1
|
|
Non-current deferred taxes
|
8.2
|
8.0
|
|
Other
assets
|
10.5
|
11.4
|
|
|
$
541.1
|
$
600.2
|
|
Liabilities and Shareholders'
Equity
|
|
|
|
Short-term debt
|
$
10.0
|
$
10.0
|
|
Accounts payable
|
57.1
|
69.6
|
|
Accrued expenses and other current
liabilities
|
106.1
|
114.8
|
|
Restructuring and other long-term
liabilities
|
1.9
|
4.3
|
|
Redeemable preference
shares
|
8.3
|
8.3
|
|
Non-current deferred taxes and reserve
for uncertain tax positions
|
6.3
|
5.3
|
|
Shareholders' equity
|
351.4
|
387.9
|
|
|
$
541.1
|
$
600.2
|
|
____________
(1) Derived from
audited financial statements.
|
|
|
|
|
Table 3
AVIAT NETWORKS,
INC.
Fiscal Year 2010 Third Quarter
Summary
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
Three Quarters
Ended
|
|
|
April
2,
2010
|
April
3,
2009
|
|
|
(In
millions)
|
|
Operating Activities
|
|
|
|
Net
loss
|
$
(41.4)
|
$
(351.6)
|
|
Adjustments to reconcile net loss to
net cash provided by operating activities:
|
|
|
|
Amortization of identifiable
intangible assets
|
10.6
|
10.0
|
|
Depreciation and amortization of
property, plant and equipment and capitalized software
|
15.8
|
17.6
|
|
Non-cash share-based compensation
expense
|
1.8
|
1.8
|
|
Goodwill impairment charges
|
—
|
279.0
|
|
Trade
name impairment charges
|
—
|
22.0
|
|
Charges for product transition and
related impairments, including software
|
13.5
|
29.3
|
|
Acquired in-process research and
development
|
—
|
2.4
|
|
Decrease in fair value of
warrants
|
—
|
(0.5)
|
|
Deferred income tax expense
|
0.9
|
19.9
|
|
Changes in operating assets and
liabilities:
|
|
|
|
Receivables
|
28.1
|
60.7
|
|
Unbilled costs and
inventories
|
18.3
|
(15.3)
|
|
Accounts payable and accrued
expenses
|
(17.1)
|
(30.0)
|
|
Advance payments and unearned
income
|
1.0
|
4.8
|
|
Refundable income taxes and income taxes
payable
|
(4.4)
|
4.5
|
|
Restructuring liabilities and
other
|
(5.3)
|
(9.3)
|
|
Net
cash provided by operating activities
|
21.8
|
45.3
|
|
Investing Activities
|
|
|
|
Cash
paid related to acquisition of Telsima in prior fiscal
year
|
(4.2)
|
(4.0)
|
|
Purchases of short-term investments
and available for sale securities
|
—
|
(1.2)
|
|
Sales
of short-term investments and available for sale
securities
|
0.3
|
3.7
|
|
Additions of property, plant and
equipment
|
(13.7)
|
(11.2)
|
|
Additions of capitalized
software
|
(2.1)
|
(3.1)
|
|
Net
cash used in investing activities
|
(19.7)
|
(15.8)
|
|
Financing Activities
|
|
|
|
Proceeds from exercise of stock
options
|
0.1
|
—
|
|
Increase in short-term debt
|
—
|
10.0
|
|
Payments on long-term debt
|
—
|
(9.8)
|
|
Payments on capital lease
obligations
|
(0.4)
|
(0.8)
|
|
Net
cash used in financing activities
|
(0.3)
|
(0.6)
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
1.9
|
(8.3)
|
|
Net
increase in cash and cash equivalents
|
3.7
|
20.6
|
|
Cash and cash equivalents, beginning
of year
|
136.8
|
95.0
|
|
Cash and cash equivalents, end of
quarter
|
$
140.5
|
$
115.6
|
|
|
|
|
|
|
Table 3
(Continued)
AVIAT NETWORKS,
INC.
Fiscal Year 2010 Third Quarter
Summary
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
Quarter
Ended
|
|
|
April
2,
2010
|
April
3,
2009
|
|
|
(In
millions)
|
|
Operating Activities
|
|
|
|
Net
loss
|
$
(25.7)
|
$
(39.4)
|
|
Adjustments to reconcile net loss to
net cash provided by operating activities:
|
|
|
|
Amortization of identifiable
intangible assets
|
3.4
|
3.6
|
|
Depreciation and amortization of
property, plant and equipment and capitalized software
|
5.0
|
5.9
|
|
Non-cash share-based compensation
expense
|
0.3
|
0.4
|
|
Charges for product transition and
related impairments, including software
|
13.5
|
29.3
|
|
Acquired in-process research and
development
|
—
|
2.4
|
|
Decrease in fair value of
warrants
|
—
|
(0.2)
|
|
Deferred income tax benefit
|
(0.4)
|
(2.7)
|
|
Changes in operating assets and
liabilities:
|
|
|
|
Receivables
|
18.2
|
40.1
|
|
Unbilled costs and
inventories
|
10.4
|
10.9
|
|
Accounts payable and accrued
expenses
|
(0.9)
|
(30.0)
|
|
Advance payments and unearned
income
|
3.5
|
2.0
|
|
Refundable income taxes and income taxes
payable
|
(4.4)
|
4.5
|
|
Restructuring liabilities and
other
|
(5.0)
|
2.1
|
|
Net
cash provided by operating activities
|
17.9
|
28.9
|
|
Investing Activities
|
|
|
|
Cash
paid related to acquisition of Telsima in prior fiscal
year
|
—
|
(4.0)
|
|
Purchases of short-term investments
and available for sale securities
|
—
|
—
|
|
Sales
of short-term investments and available for sale
securities
|
—
|
1.0
|
|
Additions of property, plant and
equipment
|
(4.3)
|
(4.0)
|
|
Additions of capitalized
software
|
(0.6)
|
(0.9)
|
|
Net
cash used in investing activities
|
(4.9)
|
(7.9)
|
|
Financing Activities
|
|
|
|
Proceeds from exercise of stock
options
|
0.1
|
—
|
|
Increase in short-term debt
|
—
|
—
|
|
Payments on long-term debt
|
—
|
(1.0)
|
|
Payments on capital lease
obligations
|
(0.2)
|
(0.3)
|
|
Net
cash used in financing activities
|
(0.1)
|
(1.3)
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
1.2
|
(1.8)
|
|
Net
increase in cash and cash equivalents
|
14.1
|
17.9
|
|
Cash and cash equivalents, beginning
of quarter
|
126.4
|
97.7
|
|
Cash and cash equivalents, end of
quarter
|
$
140.5
|
$
115.6
|
|
|
|
|
|
|
AVIAT NETWORKS, INC. (FORMERLY HARRIS STRATEX
NETWORKS, INC.)
Quarter and Three Quarters Ended April 2, 2010
Summaries
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND
REGULATION G DISCLOSURE
|
|
|
|
To supplement our consolidated financial statements
presented in accordance with accounting principles generally
accepted in the United States (GAAP), we provide additional
measures of revenue, cost of product sales and services, gross
margin, research and development expenses, selling and
administrative expenses, operating income (loss), income (loss)
before income taxes, income taxes, net income (loss), and net
income (loss) per basic and diluted share adjusted to exclude
certain costs, charges, expenses and losses, including such amounts
related to our merger with Stratex Networks. Aviat Networks, Inc.
(\"we" or "our") believes that these non-GAAP financial measures,
when considered together with the GAAP financial measures provide
information that is useful to investors in understanding
period-over-period operating results separate and apart from items
that may, or could, have a disproportionate positive or negative
impact on results in any particular period. We also believe these
non-GAAP measures enhance the ability of investors to analyze
trends in our business and to understand our performance. In
addition, we may utilize non-GAAP financial measures as a guide in
our forecasting, budgeting and long-term planning process and to
measure operating performance for some management compensation
purposes. Any analysis of non-GAAP financial measures should be
used only in conjunction with results presented in accordance with
GAAP. A reconciliation of these non-GAAP financial measures with
the most directly comparable financial measures calculated in
accordance with GAAP follows.
|
|
|
Table 4
AVIAT NETWORKS,
INC.
Fiscal Year 2010 Third Quarter
Summary
RECONCILIATION OF
NON-GAAP
FINANCIAL MEASURES
Condensed Consolidated
Statements of Operations
(Unaudited)
|
|
|
Quarter
Ended
|
|
|
April 2,
2010
|
April 3,
2009
|
|
|
As
Reported
|
Non-GAAP
Adjustments
|
Non-GAAP
|
%
of
Sales
|
As
Reported
|
Non-GAAP
Adjustments
|
Non-GAAP
|
%
of
Sales
|
|
|
(In millions,
except per share amounts)
|
|
Revenue from product sales and
services
|
$
120.0
|
$
—
|
$
120.0
|
|
$
158.0
|
$
—
|
$
158.0
|
|
|
Cost
of product sales and services (A)
|
(82.8)
|
0.1
|
(82.7)
|
|
(109.9)
|
—
|
(109.9)
|
|
|
Charges for product transition
(B)
|
(16.9)
|
16.9
|
—
|
|
(29.8)
|
29.8
|
—
|
|
|
Amortization of purchased technology
(C)
|
(2.1)
|
2.1
|
—
|
|
(1.8)
|
1.8
|
—
|
|
|
Gross
margin
|
18.2
|
19.1
|
37.3
|
31.1%
|
16.5
|
31.6
|
48.1
|
30.4%
|
|
Research and development expenses
(D)
|
(10.2)
|
0.1
|
(10.1)
|
8.4%
|
(9.9)
|
0.2
|
(9.7)
|
6.1%
|
|
Selling and administrative expenses
(E)
|
(35.0)
|
1.7
|
(33.3)
|
27.8%
|
(34.6)
|
0.6
|
(34.0)
|
21.5%
|
|
Amortization of intangible assets
(F)
|
(1.3)
|
1.3
|
—
|
|
(1.4)
|
1.4
|
—
|
|
|
Acquired in-process research and
development (G)
|
—
|
—
|
—
|
|
(2.4)
|
2.4
|
—
|
|
|
Software impairment charges
(H)
|
—
|
—
|
—
|
|
(2.9)
|
2.9
|
—
|
|
|
Restructuring charges (I)
|
(0.7)
|
0.7
|
—
|
|
(0.5)
|
0.5
|
—
|
|
|
Operating (loss) income
|
(29.0)
|
22.9
|
(6.1)
|
(5.1)%
|
(35.2)
|
39.6
|
4.4
|
2.8%
|
|
Interest income
|
—
|
—
|
—
|
|
0.2
|
—
|
0.2
|
|
|
Interest expense
|
(0.6)
|
—
|
(0.6)
|
|
(0.8)
|
—
|
(0.8)
|
|
|
(Loss)
income before income taxes
|
(29.6)
|
22.9
|
(6.7)
|
Tax rate
|
(35.8)
|
39.6
|
3.8
|
Tax rate
|
|
Income
tax benefit (expense) (J)
|
3.9
|
(3.9)
|
—
|
0%
|
(3.6)
|
2.7
|
(0.9)
|
24%
|
|
Net
(loss) income
|
$
(25.7)
|
$
19.0
|
$
(6.7)
|
|
$
(39.4)
|
$
42.3
|
$
2.9
|
|
|
Net
(loss) income per common share:
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
$
(0.43)
|
|
$
(0.11)
|
|
$
(0.67)
|
|
$
0.05
|
|
|
Basic
and diluted weighted average shares outstanding
|
59.7
|
|
59.7
|
|
58.8
|
|
58.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Table 4:
Note A - Cost of sales and services - Includes adjustment
to cost of product sales and services for the third quarter of
fiscal 2010 to remove purchase accounting adjustments for the
amortization of the step-up in the value of fixed assets
($0.1 million).
For the third quarter of fiscal 2009, includes adjustment to
cost of product sales and services to remove purchase accounting
adjustments for the amortization of the step-up in the value of
fixed assets ($0.1 million) and
adjustment to remove a credit to non-cash share-based compensation
expense ($0.1 million).
Note B — Charges for product transition — Adjustments for
the third quarter of fiscal 2010 to converge our products onto a
single platform by the end of fiscal year 2010. These charges
included $7.9 million related to
provisions for legacy product excess and obsolete inventory, and
$5.5 million for impairment of a
building and idle equipment. Additionally, $3.5 million in charges were recorded for
inventory purchase commitments.
Adjustments for the third quarter of fiscal 2009 to remove
charges for an accelerated transition towards a common IP-based
platform. These charges included $26.4 million related to provisions for
legacy product excess and obsolete inventory, and write-downs of
property, plant, manufacturing and test equipment. Additionally,
$3.4 million in charges were
recorded for inventory purchase commitments.
Note C - Amortization of purchased technology -
Adjustment for the third quarter of fiscal 2010 and 2009 to remove
amortization of purchased intangibles.
Note D - Research and development expenses - Adjustment
for the third quarter of fiscal 2010 to remove non-cash share-based
compensation expense of $0.1
million.
For the third quarter of fiscal 2009, adjustment is to remove
non-cash share-based compensation expense of $0.2 million.
Note E - Selling and administrative expenses - Includes
adjustment for the third quarter of fiscal 2010 to remove purchase
accounting adjustments related to the amortization of the step-up
in the value of fixed assets ($0.1
million), to remove non-cash share-based compensation
expense ($0.2 million). Also includes
adjustments to remove expenses related to rebranding in connection
with the change in Company name required by the license agreement
termination notice from Harris Corporation ($0.7 million) and expenses related to
implementing new internal information systems required to provide
services currently being phased out under the Transitional Services
Agreement with Harris ($0.1 million).
Also includes $0.6 million in
severance costs to move certain executive positions to our
California office.
For the third quarter of fiscal 2009, includes adjustment to
remove purchase accounting adjustments related to the amortization
of the step-up in the value of fixed assets ($0.2 million) and non-cash share-based
compensation expense ($0.4
million).
Note F - Amortization of intangible assets - Adjustment
for the third quarter of fiscal 2010 and 2009 to remove
amortization of purchased intangibles.
Note G — Acquired in-process research and development —
Adjustment to remove charges incurred during the third quarter of
fiscal 2009 from the Telsima acquisition.
Note H — Software impairment charges — Adjustments for
the third quarter of fiscal 2009 to remove charges for impairment
of software.
Note I - Goodwill and Trade name impairment charges -
Adjustment to remove charges for impairment incurred during the
third quarter of fiscal 2009.
Note I - Restructuring charges - Adjustment to remove
charges for restructuring incurred during the third quarter of
fiscal 2010 and 2009.
Note J - Provision for income taxes - Adjustment to
reflect a zero percent pro forma tax rate for the third quarter of
fiscal 2010 and a pro forma 24 percent tax rate for the third
quarter of fiscal 2009. We estimate zero tax expense for the third
quarter of fiscal 2010 due to recording net losses in third quarter
of fiscal 2010 and the first three quarters of fiscal 2010.
Table 5
AVIAT NETWORKS,
INC.
Fiscal Year-to-Date 2010
Summary
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES
Condensed Consolidated
Statements of Operations
(Unaudited)
|
|
|
Three Quarters
Ended
|
|
|
April 2,
2010
|
April 3,
2009
|
|
|
As
Reported
|
Non-GAAP
Adjustments
|
Non-GAAP
|
%
of
Sales
|
As
Reported
|
Non-GAAP
Adjustments
|
Non-GAAP
|
%
of
Sales
|
|
|
(In millions,
except per share amounts)
|
|
Revenue from product sales and
services
|
$
362.6
|
$
—
|
$
362.6
|
|
$
544.7
|
$
—
|
$
544.7
|
|
|
Cost
of product sales and services (A)
|
(241.2)
|
0.4
|
(240.8)
|
|
(382.8)
|
0.7
|
(382.1)
|
|
|
Charges for product transition
(B)
|
(16.9)
|
16.9
|
—
|
|
(29.8)
|
29.8
|
—
|
|
|
Amortization of purchased technology
(C)
|
(6.3)
|
6.3
|
—
|
|
(5.4)
|
5.4
|
—
|
|
|
Gross
margin
|
98.2
|
23.6
|
121.8
|
33.6%
|
126.7
|
35.9
|
162.6
|
29.9%
|
|
Research and development expenses
(D)
|
(31.0)
|
0.4
|
(30.6)
|
8.4%
|
(29.6)
|
0.5
|
(29.1)
|
5.3%
|
|
Selling and administrative expenses
(E)
|
(101.2)
|
4.7
|
(96.5)
|
26.6%
|
(104.0)
|
2.3
|
(101.7)
|
18.7%
|
|
Amortization of intangible assets
(F)
|
(4.3)
|
4.3
|
—
|
|
(4.2)
|
4.2
|
—
|
|
|
Acquired in-process research and
development (G)
|
—
|
—
|
—
|
|
(2.4)
|
2.4
|
—
|
|
|
Software impairment charges
(H)
|
—
|
—
|
—
|
|
(2.9)
|
2.9
|
—
|
|
|
Goodwill impairment charges
(I)
|
—
|
—
|
—
|
|
(279.0)
|
279.0
|
—
|
|
|
Trade
name impairment charges (I)
|
—
|
—
|
—
|
|
(22.0)
|
22.0
|
—
|
|
|
Restructuring charges (J)
|
(3.3)
|
3.3
|
—
|
|
(4.9)
|
4.9
|
—
|
|
|
Operating (loss) income
|
(41.6)
|
36.3
|
(5.3)
|
(1.5)%
|
(322.3)
|
354.1
|
31.8
|
5.8%
|
|
Interest income
|
0.1
|
—
|
0.1
|
|
0.9
|
—
|
0.9
|
|
|
Interest expense
|
(1.5)
|
—
|
(1.5)
|
|
(2.2)
|
—
|
(2.2)
|
|
|
(Loss)
income before income Taxes
|
(43.0)
|
36.3
|
(6.7)
|
Tax rate
|
(323.6)
|
354.1
|
30.5
|
Tax rate
|
|
Income
tax benefit (expense) (K)
|
1.6
|
(1.6)
|
—
|
0%
|
(28.0)
|
20.7
|
(7.3)
|
24%
|
|
Net
(loss) income
|
$
(41.4)
|
$
34.7
|
$
(6.7)
|
|
$
(351.6)
|
$
374.8
|
$
23.2
|
|
|
Net
(loss) income per common share:
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
$
(0.70)
|
|
$
(0.11)
|
|
$
(5.99)
|
|
$
0.40
|
|
|
Basic
and diluted weighted average shares outstanding
|
59.3
|
|
59.3
|
|
58.7
|
|
58.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Table 5:
Note A - Cost of sales and services - Includes adjustment
to cost of product sales and services for the three quarters ended
April 2, 2010 to remove purchase
accounting adjustments for the amortization of the step-up in the
value of fixed assets ($0.3 million)
and adjustment to remove non-cash share-based compensation expense
($0.1 million).
For the three quarters ended April 3,
2009, includes adjustment to cost of product sales and
services to remove purchase accounting adjustments for the
amortization of the step-up in the value of fixed assets
($0.5 million) and adjustment to
remove non-cash share-based compensation expense ($0.2 million).
Note B — Charges for product transition — Adjustments for
the three quarters ended April 2,
20010 to converge our products onto a single platform by the end of
fiscal year 2010. These charges included $7.9 million related to provisions for
legacy product excess and obsolete inventory, and $5.5 million for impairment of a building and
idle equipment. Additionally, $3.5 million in charges were recorded for
inventory purchase commitments.
Adjustments for the three quarters ended April 3, 2009 to remove charges for an
accelerated transition towards a common IP-based platform. These
charges included $26.4 million
related to provisions for legacy product excess and obsolete
inventory, and write-downs of property, plant, manufacturing and
test equipment. Additionally, $3.4 million in charges were recorded for
inventory purchase commitments.
Note C - Amortization of purchased technology -
Adjustment for the three quarters ended April 2, 2010 and April 3,
2009 to remove amortization of purchased intangibles.
Note D - Research and development expenses - Adjustment
for the three quarters ended April 2,
2010 to remove non-cash share-based compensation expense of
$0.4 million.
For the three quarters ended April 3,
2009, adjustment is to remove non-cash share-based
compensation expense of $0.5
million.
Note E - Selling and administrative expenses - Includes
adjustment for the three quarters ended April 2, 2010 to remove purchase accounting
adjustments related to the amortization of the step-up in the value
of fixed assets ($0.3 million), to
remove non-cash share-based compensation expense ($1.4 million). Also includes adjustments to
remove expenses related to rebranding in connection with the change
in Company name required by the license agreement termination
notice from Harris Corporation ($1.3
million) and expenses related to implementing new internal
information systems required to provide services currently being
phased out under the Transitional Services Agreement with Harris
($1.1 million). Also includes
$0.6 million in severance costs to
move certain executive positions to our California office.
For the three quarters ended April 3,
2009, includes adjustment to remove purchase accounting
adjustments related to the amortization of the step-up in the value
of fixed assets ($1.0 million) and
non-cash share-based compensation expense ($1.3 million).
Note F - Amortization of intangible assets - Adjustment
for the three quarters ended April 2,
2010 and April 3, 2009 to
remove amortization of purchased intangibles.
Note G — Acquired in-process research and development —
Adjustment to remove charges incurred during the three quarters
ended April 3, 2009 from the Telsima
acquisition, which occurred on February 27, 2009.
Note H — Software impairment charges — Adjustments for
the three quarters ended April 3,
2009 to remove charges for impairment of software.
Note I — Goodwill and Trade name impairment charges —
Adjustment to remove charges for impairment incurred during the
three quarters ended April 3,
2009.
Note J - Restructuring charges - Adjustment to remove
charges for restructuring incurred during the three quarters ended
April 2, 2010 and April 3, 2009.
Note K - Provision for income taxes - Adjustment to
reflect a zero percent pro forma tax rate for the three quarters
ended April 2, 2010 and a pro forma
24 percent tax rate for the three quarters ended April 3, 2009. The adjustment in the three
quarters ended April 3, 2009
primarily consisted of removing the effect of a $20.8 million increase in the valuation allowance
on certain deferred tax assets.
Table 6
AVIAT NETWORKS,
INC.
Fiscal Year 2010 Third Quarter
Summary
SUPPLEMENTAL SCHEDULE OF
REVENUE BY GEOGRAPHICAL AREA
(Unaudited)
|
|
|
Quarter
Ended
|
|
|
April 2,
2010
|
April 3,
2009
|
|
|
(In
millions)
|
|
|
As
Reported
|
Non-GAAP
Adjustments
|
Non-GAAP
|
As
Reported
|
Non-GAAP
Adjustments
|
Non-GAAP
|
|
North America (1)
|
$
39.6
|
$
—
|
$
39.6
|
$
43.0
|
$
—
|
$
43.0
|
|
International (1):
|
|
|
|
|
|
|
|
Africa
|
37.7
|
—
|
37.7
|
63.6
|
—
|
63.6
|
|
Europe, Middle East, and
Russia
|
22.9
|
—
|
22.9
|
33.0
|
—
|
33.0
|
|
Latin
America and AsiaPac
|
19.8
|
—
|
19.8
|
18.4
|
—
|
18.4
|
|
Total International
|
80.4
|
—
|
80.4
|
115.0
|
—
|
115.0
|
|
|
$
120.0
|
$
—
|
$
120.0
|
$
158.0
|
$
—
|
$
158.0
|
|
____________
(1) We previously reported three
operating segments in our public filings: North America Microwave,
International Microwave and Network Operations. During the first
quarter of fiscal 2010, we realigned the management structure of
our Network Operations segment to geographically integrate with our
North America Microwave and International Microwave segments to
gain cost efficiencies. As a result, we eliminated the Network
Operations segment as a separate reporting unit and consolidated
this segment into our remaining two segments that are based on the
geographical location where revenue is recognized. Additionally, we
have dropped the word "Microwave" from the name of our North
America and International segments. Segment information in the
table above has been adjusted to reflect this change.
|
|
|
|
|
|
|
|
|
Table 7
AVIAT NETWORKS,
INC.
Fiscal Year-to-Date Third
Quarter 2010 Summary
SUPPLEMENTAL SCHEDULE OF
REVENUE BY GEOGRAPHICAL AREA
(Unaudited)
|
|
|
Three Quarters
Ended
|
|
|
April 2,
2010
|
April 3,
2009
|
|
|
(In
millions)
|
|
|
As
Reported
|
Non-GAAP
Adjustments
|
Non-GAAP
|
As
Reported
|
Non-GAAP
Adjustments
|
Non-GAAP
|
|
North America (1)
|
$
137.0
|
$
—
|
$
137.0
|
$
172.6
|
$
—
|
$
172.6
|
|
International (1):
|
|
|
|
|
|
|
|
Africa
|
86.2
|
—
|
86.2
|
181.1
|
—
|
181.1
|
|
Europe, Middle East, and
Russia
|
71.4
|
—
|
71.4
|
119.6
|
—
|
119.6
|
|
Latin
America and AsiaPac
|
68.0
|
—
|
68.0
|
71.4
|
—
|
71.4
|
|
Total International
|
225.6
|
—
|
225.6
|
372.1
|
—
|
372.1
|
|
|
$
362.6
|
$
—
|
$
362.6
|
$
544.7
|
$
—
|
$
544.7
|
|
____________
(1) We previously
reported three operating segments in our public filings: North
America Microwave, International Microwave and Network Operations.
During the first quarter of fiscal 2010, we realigned the
management structure of our Network Operations segment to
geographically integrate with our North America Microwave and
International Microwave segments to gain cost efficiencies. As a
result, we eliminated the Network Operations segment as a separate
reporting unit and consolidated this segment into our remaining two
segments that are based on the geographical location where revenue
is recognized. Additionally, we have dropped the word "Microwave"
from the name of our North America and International segments.
Segment information in the table above has been adjusted to reflect
this change.
|
|
|
|
|
|
|
|
|
SOURCE Aviat Networks, Inc.