Powerwave Technologies, Inc. (Nasdaq:PWAV), a global supplier of
end-to-end wireless solutions for wireless communications networks,
today reported preliminary results for its third quarter ended
September 30, 2012.
Net sales in the third quarter of fiscal 2012 were $42.1
million, compared with $77.1 million in the third quarter of fiscal
2011. Powerwave also reported a third quarter GAAP net loss of
$52.7 million, which includes $0.3 million of non-cash equity based
compensation expense and $1.5 million of non-cash debt interest
accretion and debt discount amortization, $0.5 million of a loss on
early extinguishment of debt and $0.6 million loss related to a
change in the fair value of derivatives related to warrants issued
in conjunction with our new senior term loan agreement, and $2.9
million of restructuring and impairment charges. For the third
quarter of 2012, the net loss equates to a basic loss per share of
$1.66. This compares to a net loss of $35.1 million, or a loss per
share of $1.09 for the third quarter of 2011. For the third quarter
of fiscal 2012, excluding the debt interest accretion and debt
discount amortization, the non-cash equity based compensation
expenses, the loss on the early extinguishment of debt, the change
in fair value of derivatives and restructuring charges, on a pro
forma basis, Powerwave would have reported a net loss of $36.6
million, or a basic loss per share of $1.15.
For the first nine months of fiscal 2012, total revenue was
$127.8 million compared with $384.3 million for the first nine
months of fiscal 2011. Powerwave’s reported total net loss for the
first nine months of 2012 was $153.1 million, or a basic loss per
share of $4.82, compared with a net loss of $35.0 million, or a
basic loss per share of $1.05 for the first nine months of fiscal
2011. The results for the first nine months of 2012 include a total
of $1.8 million of non-cash equity based compensation expenses,
$4.1 million of non-cash debt interest accretion and debt discount
amortization, $0.5 million of a loss on early extinguishment of
debt, $0.6 million loss related to a change in the fair value of
derivatives related to warrants issued and $16.8 million of
restructuring and impairment charges. The results for the first
nine months of 2011 include a total of $5.8 million of non-cash
equity based compensation expenses and $3.6 million of non-cash
debt discount amortization, interest accretion and a net loss on
the repurchase of outstanding debt and $0.2 million of
restructuring charges.
Summary of Significant Items Impacting the Third
Quarter
During the third quarter of 2012, we incurred approximately $0.3
million of non-cash equity based compensation expense, as well as
$1.5 million of non-cash debt interest accretion and debt discount
amortization related to our outstanding convertible notes which is
included in interest expense for the quarter. We also incurred a
$0.5 million loss on early extinguishment of debt and $0.6 million
reduction in the fair value of derivatives related to warrants
issued in conjunction with our new senior term loan agreement, and
$2.9 million of restructuring and impairment charges.
During the third quarter of 2011, we incurred approximately $1.8
million of non-cash equity based compensation expense, $0.1 million
of restructuring and impairment charges, $2.1 million of non-cash
debt interest accretion and debt discount amortization and a net
loss on the repurchase of outstanding debt, which is all included
in interest expense for the quarter.
The following is a brief summary of the significant items
impacting the comparability of per share amounts for the three
months ended September 30, 2012 and October 2, 2011. To calculate
the per share impact of these significant items, an underlying
effective tax rate of zero percent was used for both periods and
the fully diluted shares outstanding for each respective period
were used.
Three Months Ended (unaudited)
Summary of
Significant Items Impacting Results
Sept. 30,
2012
Oct. 2,
2011
Restructuring and impairment charges ($0.09 ) - Non-cash ASC
Topic 718 compensation charge ($0.01 ) ($0.06 ) Debt discount
amortization, interest accretion and a net loss on extinguishment
of outstanding debt ($0.06 ) ($0.07 ) Reduction in fair value of
derivatives ($0.02 ) - Total per share impact
($0.18
)*
($0.13
)*
(Note: * this amount is rounded to the
nearest whole cent.)
In addition, below is a brief summary of significant items
impacting the comparability of the gross margin percentage for the
third quarter of 2012 versus the third quarter of 2011, on a GAAP
and pro forma basis.
Three Months Ended (unaudited) Sept. 30, 2012
Oct. 2, 2011 GAAP reported gross margin (loss)% (25.5 %) 7.5
% Add: Pro Forma adjustments
Non-cash ASC Topic 718 compensation
charge
0.1 % 0.3 % Restructuring and impairment charges 1.9 % - Pro
Forma gross margin (loss)% (23.5 %) 7.8 %
As an additional note, for the third quarter of fiscal 2012,
Powerwave incurred additional inventory related charges which
totaled approximately $8.5 million, which are included in the pro
forma gross margin (loss).
During the third quarter of 2012, the Company continued to
implement its ongoing restructuring plan, and initiated personnel
reductions in both its domestic US and foreign locations across all
functions. The Company’s operating expenses for the third quarter
of 2012 decreased by $3.8 million, on a GAAP basis, when compared
to the third quarter of 2011. On a pro forma basis, excluding
equity based compensation expense and restructuring and impairment
charges, pro forma operating expenses decreased by $4.4 million to
$28.4 million for the third quarter of 2012 when compared with the
third quarter of 2011 with similar pro forma adjustments.
Third Quarter 2012 Revenue Summary
In the third quarter of 2012, total Americas revenue was $22.0
million or approximately 52 percent of revenue, compared with $32.5
million or approximately 42 percent of revenue in the third quarter
of 2011. Total sales to customers based in the Asia Pacific region
accounted for approximately 12 percent of revenue or $4.8 million
in the third quarter of 2012, compared with 19 percent of revenue
or $14.6 million in the third quarter of 2011. Total Europe, Africa
and Middle East revenue in the third quarter of 2012 was $15.3
million or approximately 36 percent of revenue, compared with $30.0
million or approximately 39 percent of revenue in the third quarter
of 2011.
Sales of products within the antenna systems group totaled $29.5
million or 70 percent of total revenue, sales of products in the
base station systems group totaled $7.7 million or 18 percent of
revenue and revenue from the coverage solutions group totaled $4.9
million or 12 percent of revenue in the third quarter of 2012.
In the third quarter of 2012, Powerwave’s largest customer was
Samsung, which accounted for approximately 11 percent of revenue.
In terms of customer profile, total OEM sales accounted for
approximately 31 percent of total revenue, and total direct and
operator sales accounted for approximately 69 percent of revenue.
For the third quarter of 2012, we recorded approximately $0.8
million of revenue in the government, military and homeland
security market.
In terms of transmission standards, 2G and 2.5G standards
accounted for approximately 34 percent of total revenue, 3G
standards accounted for approximately 41 percent of total revenue
and 4G standards accounted for approximately 25 percent of total
revenue during the third quarter of 2012.
Balance Sheet
At September 30, 2012, Powerwave had total cash and cash
equivalents of $22.3 million, which includes restricted cash of
$6.0 million. Powerwave also had restricted deposits of $5.6
million. Total net inventories were $54.7 million, and net accounts
receivable were $62.4 million.
Debt Financing
On September 11, 2012, Powerwave entered into a new senior
secured credit agreement with P-Wave Holdings, LLC (an affiliate of
The Gores Group, LLC), which replaced the Company’s revolving
credit agreement. Under the credit agreement the lenders provided
an initial $35 million senior secured term loan to the Company and
agreed to loan to the Company additional secured term loans of up
to $15 million, subject to satisfaction of certain conditions.
Non-GAAP Financial Information
This press release includes certain non-GAAP financial
information as defined by the U.S. Securities and Exchange
Commission Regulation G. Pursuant to the requirements of this
regulation, a reconciliation of this non-GAAP financial information
to our financial statements as prepared under generally accepted
accounting principles in the United States (GAAP) is included in
this press release. Powerwave’s management believes that the
presentation of this non-GAAP financial information is useful to
our investors and the investment community since it excludes
restructuring and impairment charges related to the consolidation
of our manufacturing and engineering facilities as well as
severance costs related to facility closures and personnel
reductions. In addition, excluded is the non-cash amortization of
the debt discount and interest accretion associated with certain of
our debt. Also excluded are the non-cash equity compensation
expenses related to ASC Topic 718 as well as gains on the exchange
of a portion of the Company’s outstanding long-term debt and
valuation adjustments on the fair value of warrants valued as
derivatives. Management of Powerwave believes that these items
should be excluded when comparing our current operating results
with those of prior periods as the restructuring and impairment
charges will not impact future operating results, and the
amortization of the debt discount and interest accretion are
non-cash expenses, the gain on the exchange of long-term debt will
not impact future operating results and the equity compensation
expenses and valuation adjustments are also non-cash expenses.
Company Background
Powerwave Technologies, Inc., is a global supplier of end-to-end
wireless solutions for wireless communications networks. Powerwave
designs, manufactures and markets a comprehensive suite of wireless
solutions, including antennas, base station products and advanced
coverage solutions, utilized in all major wireless network
protocols and frequencies, including Next Generation Networks in 4G
technology, such as LTE and WiMAX. Corporate headquarters are
located at 1801 E. St. Andrew Place, Santa Ana, Calif. 92705. For
more information on Powerwave’s advanced wireless coverage and
capacity solutions, please call (888)-PWR-WAVE (797-9283) or visit
our web site at www.powerwave.com. Powerwave, Powerwave
Technologies and the Powerwave logo are registered trademarks of
Powerwave Technologies, Inc.
Attached to this news release are preliminary unaudited
consolidated financial statements for the third quarter ended
September 30, 2012.
UNAUDITED - PRELIMINARY
POWERWAVE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share
amounts)
Three Months Ended Nine Months
Ended Sept. 30, Oct. 2, Sept. 30,
Oct. 2, 2012 2011
2012 2011 Net
sales $ 42,125 $ 77,078 $ 127,766 $ 384,343 Cost of sales: Cost of
goods 52,101 71,282 155,990 294,895 Restructuring and impairment
charges 782 - 11,341
- Total cost of sales 52,883
71,282 167,331 294,895
Gross profit (loss) (10,758 ) 5,796 (39,565 ) 89,448
Operating expenses: Sales and marketing 10,365 7,544 23,021 24,695
Research and development 8,383 15,315 31,980 47,666 General and
administrative 9,928 11,597 30,379 34,920 Restructuring and
impairment charges 2,098 147
5,486 189 Total operating expenses
30,774 34,603 90,866
107,470 Operating loss (41,532 ) (28,807 ) (130,431 )
(18,022 ) Other income (expense), net (4,909 )
(6,435 ) (13,012 ) (13,271 ) Loss before
income taxes (46,441 ) (35,242 ) (143,443 ) (31,293 ) Income tax
provision 6,287 (158 ) 9,657
3,745 Net loss $ (52,728 ) $ (35,084 ) $ (153,100 ) $
(35,038 )
Net loss per share:
- basic:
$ (1.66 ) $ (1.09 ) $ (4.82 ) $ (1.05 )
- diluted: 1
$ (1.66 ) $ (1.09 ) $ (4.82 ) $ (1.05 )
Weighted average common shares used in
computing per share amounts:
- basic:
31,761
32,189
31,741
33,265
- diluted:
31,761 32,189 31,741 33,265
1The diluted earnings and loss per share does not include an 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 Nine Months Ended
(unaudited) (unaudited) Sept. 30,
Oct. 2, Sept. 30, Oct. 2,
2012 2011 2012
2011 Net sales 100.0 % 100.0 % 100.0 % 100.0 % Cost
of sales: Cost of goods 123.7 92.5 122.1 76.7 Restructuring and
impairment charges 1.8 - 8.9 - Total
cost of sales 125.5 92.5 131.0 76.7
Gross profit (loss) (25.5 ) 7.5 (31.0 ) 23.3
Operating expenses: Sales and marketing 24.6 9.8 18.0 6.4 Research
and development 19.9 19.9 25.0 12.4 General and administrative 23.6
15.0 23.8 9.1 Restructuring and impairment charges 5.0 0.2
4.3 0.0 Total operating expenses 73.1
44.9 71.1 28.0 Operating loss (98.6 )
(37.4 ) (102.1 ) (4.7 ) Other income (expense), net (11.6 )
(8.3 ) (10.2 ) (3.4 ) Loss before income taxes (110.2 )
(45.7 ) (112.3 ) (8.1 ) Income tax provision 15.0 (0.2 ) 7.5
1.0 Net loss (125.2 )% (45.5 )% (119.8 )% (9.1 )%
POWERWAVE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
RECONCILIATION OF PRO FORMA
RESULTS
(In thousands, except per share
amounts)
Three Months Ended Nine Months
Ended (Unaudited) (Unaudited)
Pro Forma Pro Forma Sept. 30,
Sept. 30, Sept. 30, Sept. 30, 2012
Adjustments 2012 2012
Adjustments 2012 Net sales $ 42,125 $
42,125 $ 127,766 $ 127,766 Cost of sales: Cost of goods sold 52,101
(61
)1
52,040 155,990 (243
)1
155,747 Restructuring and impairment charges 782
(782
)2
- 11,341 (11,341
)2
- Total cost of sales 52,883
(843
)
52,040 167,331 (11,584 )
155,747 Gross profit (loss) (10,758 ) 843
(9,915 ) (39,565 ) 11,584 (27,981 ) Operating expenses:
Sales and marketing 10,365
50
1
10,415 23,021 (112
)1
22,909 Research and development 8,383
23
1
8,406 31,980 (286
)1
31,694 General and administrative 9,928 (322
)1
9,606 30,379 (1,179
)1
29,200 Restructuring and impairment charges 2,098
(2,098
)2
- 5,486 (5,486
)2
- Total operating expenses 30,774
(2,347 ) 28,427 90,866
(7,063 ) 83,803 Operating income
(loss) (41,532 ) 3,190 (38,342 ) (130,431 ) 18,647 (111,784 )
Other income (expense), net (4,909 )
2,619
3
(2,290 ) (13,012 )
5,173
3
(7,839 ) Income (loss) before income taxes
(46,441 ) 5,809 (40,632 ) (143,443 ) 23,820 (119,623 ) Income tax
provision (benefit) 6,287
(10,350
) 4
(4,063 ) 9,657 (21,619
)4
(11,962 ) Net income (loss) $ (52,728 ) 16,159
$ (36,569 ) $ (153,100 ) 45,439
$ (107,661 )
Net loss per share:
- basic:
$ (1.66 ) $ (1.15 ) $ (4.82 ) $ (3.39 )
- diluted:5
$ (1.66 ) $ (1.15 ) $ (4.82 ) $ (3.39 ) Weighted average
common shares used in
computing per share amounts:
- basic:
31,761 31,761 31,741 31,741
- diluted:
31,761 31,761 31,741 31,741
1This represents the equity compensation expense allocation
pursuant to ASC Topic 718.
2This cost includes restructuring and impairment charges related
to the current restructuring plans included in cost of goods sold
and operating expenses, respectively.
3This represents the amortization of the debt discount and
interest accretion on outstanding debt during the fiscal
periods.
4This represents the change in the provision for income taxes
related to the preceding pro forma adjustments to arrive at an
assumed effective income tax benefit rate of 10.0% for the third
quarter of 2012 and year to date for 2012.
5Diluted earnings per share do not include the add back of
interest expense costs associated with the assumed conversion of
the Company’s outstanding convertible notes as the effect would be
anti-dilutive.
POWERWAVE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
September 30, January 1, 2012
2012
(unaudited) 1
(see note) 2
ASSETS: Cash and cash equivalents $ 16,318 $ 64,121
Restricted cash 6,001 6,162 Restricted deposits 5,610 - Accounts
receivable, net 62,449 96,777 Inventories, net 54,677 88,627
Property, plant and equipment, net 12,322 27,771 Other assets
56,078 58,872 Total assets $ 213,455
$ 342,330
LIABILITIES AND
SHAREHOLDERS' EQUITY: Accounts payable $ 46,815 $ 71,094
Current portion of long-term debt - - Long-term debt 290,405
252,190 Accrued expenses and other liabilities 58,833 51,744 Total
shareholders' deficit (182,598 ) (32,698 ) Total
liabilities and shareholders’ equity $ 213,455 $ 342,330
1September 30, 2012 balances are preliminary and subject to
reclassification adjustments.
2January 1, 2012 balances were derived from the audited
consolidated financial statements.
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