Press Releases
Powerwave Technologies Reports Fourth Quarter ResultsSanta Ana, Calif., February 04, 2008 - Powerwave Technologies, Inc. (NASDAQ:PWAV) today reported preliminary results for its fourth quarter ended December 30, 2007. Powerwave had net sales of $230.6 million for its fourth quarter ended December 30, 2007, compared to fourth quarter fiscal 2006 revenues of $169.8 million. Powerwave also reported a fourth quarter net loss of $188.4 million, which includes a non-cash goodwill impairment charge of $150.6 million, $16.0 million of restructuring and impairment charges, $7.6 million of intangible asset amortization, and an in-process research and development charge of $0.2 million. For the fourth quarter of 2007, the net loss equates to a basic loss per share of $1.44. This compares to a net loss from continuing operations of $116.7 million, or a loss per share from continuing operations of 91 cents for the prior year period. For the fourth quarter of fiscal 2007, excluding the goodwill impairment charge, restructuring and impairment and in-process research and development charges, and intangible asset amortization, on a pro forma basis, Powerwave would have reported a net loss of $8.8 million, or a basic loss per share of 7 cents.For fiscal 2007, Powerwave reported total sales of $780.5 million compared with $716.9 million for fiscal 2006. Powerwave reported a total net loss for fiscal 2007 of $308.7 million, or a basic net loss per share of $2.37, compared to a net loss from continuing operations of $137.5 million or a basic loss per share from continuing operations of $1.19 for fiscal 2006. The results for fiscal 2007 include a goodwill impairment charge of $150.6 million and $77.3 million of restructuring and impairment and acquisition related charges and intangible asset amortization, and the results for fiscal 2006 include $110.7 million of such expenses. “We experienced growth in both the direct network operator and OEM markets during the fourth quarter,” stated Ronald Buschur, President and Chief Executive Officer of Powerwave Technologies. “During the fourth quarter, we continued to make progress in our ongoing restructuring efforts to further reduce our overall cost structure and we are continuing our focus on driving cost reductions throughout our business. At the end of the year we completed the sale of our Hungary manufacturing operations to Sanmina as part of our ongoing cost reduction efforts. We continue to believe that Powerwave is in an excellent position to build upon and capture the long-term growth opportunities in our markets throughout the world.” Summary of Significant Items impacting the Fourth Quarter Powerwave incurred acquisition, amortization, restructuring and impairment related charges during the fourth quarter of 2007. Restructuring activities during the fourth quarter included the sale and transfer of our Hungary manufacturing operations to Sanmina, as well as the consolidation of our Chinese manufacturing legal entities. For the fourth quarter of 2007, we incurred total restructuring and impairment charges of $16.0 million. This amount included an intangible asset impairment charge of approximately $2.7 million related to the decision to end of life certain products acquired as part of previous acquisitions as well as the reduction in the estimated intangible value of a customer list from a previous acquisition. Also included is approximately $9.1 million of inventory related charges associated with the restructuring of the company’s Hungary and Chinese manufacturing locations, approximately $0.6 million related to additional facility impairments, approximately $0.5 million for transition costs associated with the sale of the Hungary manufacturing operation, approximately $2.1 million in severance costs, approximately $1.0 million for fees associated with planned closures and consolidations. For the fourth quarter of 2007, we incurred approximately $0.2 million of in-process research and development charge related to the purchase accounting of the acquisition of Cognition Networks LLC during the fourth quarter. We also incurred approximately $7.6 million of intangible asset amortization. In addition, included in these charges and expenses for the fourth quarter of 2007 are the preliminary results of a SFAS 142 “step-two” impairment test that resulted in a non-cash goodwill impairment charge of $150.6 million. Due to the significant decline in the market value of Powerwave’s common stock during the fourth quarter of 2007, the Company determined that an indicator of goodwill impairment existed during the fourth quarter. We want to note that this goodwill impairment charge is preliminary and therefore is subject to change based upon the final results of the “step-two” impairment testing. The final results of such test will be included in our Form 10-K for the fiscal year ended December 30, 2007, to be filed with the Securities and Exchange Commission. The Company had approximately $502 million of goodwill as of September 30, 2007. Also for the fourth quarter, the Company’s GAAP reported cost of goods sold include a charge of approximately $10.8 million related to inventory determined to be excess and obsolete to the Company’s ongoing requirements. The following is a brief summary of the significant items impacting the comparability of per share amounts for the three months and fiscal year ended December 30, 2007. To calculate the per share impact of these significant items, an underlying effective tax rate of 0% was used for both periods and 130.8 million basic shares outstanding was used for the three month period and 130.4 million basic shares outstanding was used for the fiscal year period. Three Fiscal
Months Ended Year Ended
Summary of Significant Items Impacting Results Dec. 30, 2007 Dec. 30, 2007
(unaudited)
Intangible asset amortization ($0.06) ($0.23)
Equity compensation charge (SFAS 123R) ($0.01) ($0.04)
Restructuring and impairment charges ($0.12) ($0.36)
Non-cash goodwill impairment charge ($1.15) ($1.16)
Total ($1.34) ($1.79)
In addition, below is a brief summary of significant items impacting the
comparability of the gross margin percentage for the fourth quarter of
2007 on a GAAP, pro forma and non-GAAP basis.
Three
Months Ended
December 30, 2007
(unaudited)
GAAP reported gross margin % 10.4%
Add: Pro Forma adjustments
Intangible asset amortization 2.1%
Restructuring and impairment charges 4.6%
Add: Inventory excess and obsolete charge 4.7%
Non-GAAP gross margin % 21.8%
UNAUDITED - PRELIMINARY
POWERWAVE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Three Months Ended Fiscal Years Ended
(unaudited) (unaudited)
December 30, December 31, December 30, December 31,
2007 2006 2007 2006
Net sales $230,572 $ 169,752 $ 780,517 $ 716,886
Cost of sales:
Cost of goods 191,182 144,582 638,487 573,975
Intangible asset amortization 4,893 11,009 19,609 20,603
Acquired inventory incremental costs (1) - 2,179 - 2,414
Restructuring and impairment charges 10,513 29,003 35,170 29,003
Total cost of sales 206,588 186,773 693,266 625,995
Gross profit 23,984 (17,021) 87,251 90,891
Operating expenses:
Sales and marketing 12,639 12,070 52,991 38,836
Research and development 19,027 25,249 84,992 71,193
General and administrative 18,969 18,452 75,267 58,016
Intangible asset amortization 2,721 2,854 11,033 9,592
In-process research and development 208 25,100 208 25,100
Restructuring and impairment charges 5,514 2,968 11,296 23,993
Goodwill impairment charge 150,643 - 150,643 -
Total operating expenses 209,721 86,693 386,430 226,730
Operating loss (185,737) (103,714) (299,179) (135,839)
Other income (expense), net 1,418 (1,516) (2,065) 2,908
Loss from continuing operations before
income taxes (184,319) (105,230) (301,244) (132,931)
Provision for income taxes 4,071 11,451 7,415 4,615
Loss from continuing operations (188,390) (116,681) (308,659) (137,546)
Income from discontinued operations, net
of income taxes - - - 2,107
Loss on sale of subsidiary - 1,807 - (23,464)
Total disconinuted operations, net of
income taxes - 1,807 - (21,357)
Net loss $(188,390) $(114,874) $ (308,659) $ (158,903)
Loss per share from continuing operations:
- basic: ($1.44) ($.91) ($2.37) ($1.19)
- diluted:(2) ($1.44) ($.91) ($2.37) ($1.19)
Loss per share from discontinued operations:
- basic: $.00 $.01 $.00 ($.18)
- diluted:(2) $.00 $.01 $.00 ($.18)
Net loss per share:
- basic: ($1.44) ($.90) ($2.37) ($1.37)
- diluted:(2) ($1.44) ($.90) ($2.37) ($1.37)
Weighted average common shares used in
computing per share amounts - basic: 130,806 127,542 130,396 115,918
- diluted: 130,806 127,542 130,396 115,918
(1) This represents costs related to the write-up of acquired VersaFlex finished goods
inventory to fair value in the second quarter of 2006.
(2) Diluted earnings per share do not include the add back of interest expense costs
associated with the assumed conversion of the Company's outstanding convertible
subordinated notes as the effect would be anti-dilutive.
POWERWAVE TECHNOLOGIES, INC.
PERCENTAGE OF NET SALES
Three Months Ended Fiscal Years Ended
(unaudited) (unaudited)
December 30, December 31, December 30, December 31,
Statement of Operations Data: 2007 2006 2007 2006
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales:
Cost of goods 82.9 85.2 81.8 80.1
Intangible asset amortization 2.1 6.5 2.5 2.9
Acquired inventory incremental costs - 1.3 - 0.3
Restructuring and impairment charges 4.6 17.1 4.5 4.0
Total cost of sales 89.6 110.0 88.8 87.3
Gross profit 10.4 (10.0) 11.2 12.7
Operating expenses:
Sales and marketing 5.5 7.1 6.8 5.4
Research and development 8.3 14.9 10.9 9.9
General and administrative 8.2 10.9 9.6 8.1
Intangible asset amortization 1.2 1.7 1.4 1.4
In-process research and development 0.1 14.8 0.0 3.5
Restructuring and impairment charges 2.4 1.7 1.4 3.3
Goodwill impairment charge 65.3 - 19.3 -
Total operating expenses 91.0 51.1 49.5 31.6
Operating loss (80.6) (61.1) (38.3) (18.9)
Other income (expense), net 0.6 (0.9) (0.3) 0.4
Loss from continuing operations before
income taxes (80.0) (62.0) (38.6) (18.5)
Provision (benefit) for income taxes 1.7 6.7 0.9 0.7
Loss from Continuing Operations (81.7) (68.7) (39.5) (19.2)
Income from discontinued operations,
net of income taxes - - - 0.3
Loss on sale of subsidiary - 1.0 - (3.3)
Total disconinuted operations, net of
income taxes - 1.0 - (3.0)
Net loss (81.7%) (67.7%) (39.5%) (22.2%)
POWERWAVE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
RECONCILIATION OF PRO FORMA RESULTS
(in thousands, except per share amounts)
Three Months Ended
(unaudited) Pro Forma
December 30, December 30,
2007 Adustments 2007
Net sales $ 230,572 $ 230,572
Cost of sales:
Cost of goods 191,182 191,182
Intangible asset amortization 4,893 (4,893) (1) -
Restructuring and impairment charges 10,513 (10,513) (2) -
Total cost of sales 206,588 (15,406) 191,182
Gross profit 23,984 15,406 39,390
Operating expenses:
Sales and marketing 12,639 12,639
Research and development 19,027 19,027
General and administrative 18,969 18,969
Intangible asset amortization 2,721 (2,721) (1) -
In-process research and development 208 (208) (3) -
Restructuring and impairment charges 5,514 (5,514) (2) -
Goodwill impairment charge 150,643 (150,643) (4) -
Total operating expenses 209,721 (159,086) 50,635
Operating loss (185,737) 174,492 (11,245)
Other income (expense), net 1,418 1,418
Loss before income taxes (184,319) 174,492 (9,827)
Provision (benefit) for income taxes 4,071 (5,054) (5) (983)
Net loss $ (188,390) 179,546 $ (8,844)
Net loss per share:
- basic: ($1.44) ($.07)
- diluted:(6) ($1.44) ($.07)
Weighted average common shares used in
computing per share amounts - basic 130,806 130,806
- diluted 130,806 130,806
Fiscal Years Ended
(unaudited) Pro Forma
December 30, December 30,
2007 Adustments 2007
Net sales $ 780,517 $ 780,517
Cost of sales:
Cost of goods 638,487 638,487
Intangible asset amortization 19,609 (19,609) (1) -
Restructuring and impairment charges 35,170 (35,170) (2) -
Total cost of sales 693,266 (54,779) 638,487
Gross profit 87,251 54,779 142,030
Operating expenses:
Sales and marketing 52,991 52,991
Research and development 84,992 84,992
General and administrative 75,267 75,267
Intangible asset amortization 11,033 (11,033) (1) -
In-process research and development 208 (208) (3) -
Restructuring and impairment charges 11,296 (11,296) (2) -
Goodwill impairment charge 150,643 (150,643) (4) -
Total operating expenses 386,430 (173,180) 213,250
Operating loss (299,179) 227,959 (71,220)
Other income (expense), net (2,065) (2,065)
Loss before income taxes (301,244) 227,959 (73,285)
Provision (benefit) for income taxes 7,415 (14,743) (5) (7,328)
Net loss $(308,659) 242,702 $ (65,957)
Net loss per share:
- basic: ($2.37) ($.51)
- diluted:(6) ($2.37) ($.51)
Weighted average common shares used in
computing per share amounts - basic 130,396 130,396
- diluted 130,396 130,396
(1) This represents costs related to the amortization of acquired technology and
other identified intangible assets included in
cost of goods sold and operating expenses, resepectively.
(2) This represents restructuring and impairment charges related to the current
restructuring plans included in cost of goods
sold and operating expenses, respectively.
(3) This represents the charge for the acquired in-process research and development
associated with the Cognition Acquisition.
(4) This represents the charge for the impairment of goodwill in the fourth quarter
of 2007.
(5) This represents the change in the provision for income taxes related to the
preceding pro forma adjustments to
arrive at an assumed effective benefit tax rate of 10% for the 2007 periods.
(6) Diluted loss per share do not include the add back of interest expense costs as
the effect would be anti-dilutive.
UNAUDITED - PRELIMINARY
POWERWAVE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 30, 2007 December 31, 2006
ASSETS: (unaudited)(1) (see note) (2)
Cash and cash equivalents $ 58,151 $ 41,544
Restricted cash 7,366 6,292
Accounts Receivable, net 237,657 211,421
Inventories, net 94,310 163,752
Property, plant and equipment, net 113,094 138,672
Other assets 469,551 654,051
Total assets $ 980,129 $1,215,732
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable $ 128,088 $ 115,966
Short-term debt 13,621 -
Long-term debt 350,000 330,000
Accrued expenses and other liabilities 105,146 118,168
Total shareholders' equity 383,274 651,598
Total liabilities and
shareholders' equity $ 980,129 $1,215,732
(1) December 30, 2007 balances are preliminary and subject to reclassification adjustments.
(2) December 31, 2006 balances were derived from the audited consolidated financial statements.
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