Powerwave Technologies, Inc. (Nasdaq:PWAVD), a global supplier
of end-to-end wireless solutions for wireless communications
networks, today reported preliminary results for its third quarter
ended October 2, 2011.
Net sales in the third quarter of fiscal 2011 were $77.1
million, compared with $156.8 million in the third quarter of
fiscal 2010. Powerwave also reported a third quarter GAAP net loss
of $35.1 million, which includes $1.8 million of non-cash equity
based compensation expense and $2.1 million of non-cash debt
discount amortization, interest accretion and a net loss on the
repurchase of debt, all associated with certain outstanding debt
and $0.1 million of restructuring charges. For the third quarter of
2011, the net loss equates to a basic loss per share of $1.09.
(Please note that the loss per share amount reflects the impact of
the 1-for-5 reverse stock split of Powerwave’s outstanding common
stock which was effective as of October 28, 2011.) This compares
with net income of $7.9 million, or diluted earnings per share of
24 cents in the prior year period. For the third quarter of fiscal
2011, excluding the debt discount amortization, interest accretion,
a net loss on the repurchase of outstanding debt and the non-cash
equity based compensation expenses and restructuring charges, on a
pro forma basis, Powerwave would have reported a net loss of $28.0
million, or basic and diluted loss per share of 87 cents.
For the first nine months of fiscal 2011, total revenue was
$384.3 million compared with $415.9 million for the first nine
months of fiscal 2010. Powerwave reported a total net loss for the
first nine months of 2011 of $35.0 million, or a basic loss per
share of $1.05, compared with a net loss of $2.7 million, or a
basic loss per share of 10 cents for the first nine months of
fiscal 2010. 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, and the results for
the first nine months of 2010 included $2.8 million of
restructuring and impairment charges, $2.4 million of non-cash
equity based compensation expenses and $2.4 million of non-cash
debt discount amortization net of a gain on the exchange of
outstanding long-term debt.
“As we have previously reported, our third quarter revenues were
impacted by several factors, which included significant slowdowns
in several of our markets, including North America, Western and
Eastern Europe and the Middle East, as well as our original
equipment manufacturing customers,” stated Ronald Buschur,
president and chief executive officer of Powerwave Technologies.
“From a global perspective, we believe that the current economic
environment has caused operators to reduce or postpone their
spending plans for the near term while they evaluate the
macro-economic pressures in each individual market. While near term
visibility remains difficult in our markets, we continue to believe
that the long-term demand for improvements in wireless
infrastructure remain strong, as global demand for data continues
and wireless network operators continue to promote their plans to
improve existing coverage and add additional capacity, in the form
of 4G capabilities, to wireless networks across the globe. We are
currently finalizing our restructuring plans in order to take the
steps we believe necessary to maintain Powerwave’s competitive
position and continue to position Powerwave for long-term
success.”
Summary of Significant Items Impacting the Third
Quarter
During the third quarter of 2011, we incurred approximately $1.8
million of non-cash equity based compensation expense, as well as
$0.4 million of non-cash debt discount amortization related to our
outstanding 1.875% Convertible Subordinated Notes due 2024 pursuant
to FASB Accounting Standards Codification (ASC) Topic 470-20, which
is included in interest expense for the quarter.
During the third quarter of 2011, we repurchased a total of
$46.6 million par value of our 1.875% Convertible Subordinated
Notes due 2024, resulting in a loss of $0.9 million due primarily
to the expensing of the unamortized debt discount. We also incurred
$0.9 million of non-cash bond accretion expense associated with our
2.75% Convertible Senior Subordinated Notes due 2041.
The following is a brief summary of the significant items
impacting the comparability of per share amounts for the three
months ended October 2, 2011 and October 3, 2010. 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
Oct. 2, 2011
Oct. 3, 2010
Restructuring and impairment charges -- ($0.04) Non-cash ASC
Topic 718 compensation charge ($0.06) ($0.02)
Debt discount amortization, interest
accretion and a net loss on repurchase of outstanding debt
($0.07) ($0.02) Total per share impact ($0.13)* ($0.09)*
(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 2011 versus the third quarter of 2010, on a GAAP
and pro forma basis.
Three Months Ended (unaudited) Oct. 2, 2011 Oct. 3,
2010 GAAP reported gross margin % 7.5% 29.4% Add: Pro Forma
adjustments Non-cash ASC Topic 718 compensation charge 0.3% 0.1%
Restructuring and impairment charges - 0.7% Pro Forma gross margin
% 7.8% 30.2%
Third Quarter 2011 Revenue Summary
In the third quarter of 2011, total Americas revenue was $32.5
million or approximately 42 percent of revenue, compared with $71.5
million or approximately 46 percent of revenue in the third quarter
of 2010. Total sales to customers based in the Asia Pacific region
accounted for approximately 19 percent of revenue or $14.6 million
in the third quarter of 2011, compared with 21 percent of revenue
or $33.7 million in the third quarter of 2010. Total Europe, Africa
and Middle East revenue in the third quarter of 2011 was $30.0
million or approximately 39 percent of revenue, compared with $51.6
million or approximately 33 percent of revenue in the third quarter
of 2010.
Sales of products within the antenna systems group totaled $45.3
million or 59 percent of total revenue, sales of products in the
base station systems group totaled $19.2 million or 25 percent of
revenue and revenue from the coverage solutions group totaled $12.6
million or 16 percent of revenue in the third quarter of 2011.
In the third quarter of 2011, Powerwave’s largest customers
included Ericsson and one of our Eastern European resellers, which
each accounted for approximately 11 percent of revenue. In terms of
customer profile, total OEM sales accounted for approximately 32
percent of total revenue, and total direct and operator sales
accounted for approximately 68 percent of revenue.
In terms of transmission standards, 2G and 2.5G standards
accounted for approximately 28 percent of total revenue, 3G
standards accounted for approximately 57 percent of total revenue
and 4G standards accounted for approximately 15 percent of total
revenue during the third quarter of 2011.
Balance Sheet
At October 2, 2011, Powerwave had total cash and cash
equivalents of $46.6 million, which includes restricted cash of
$0.9 million. Total net inventories were $84.5 million, and net
accounts receivable were $147.9 million.
Sale and Leaseback Financing
On October 21, 2011, Powerwave completed the previously
announced sale and leaseback of its corporate headquarters facility
located in Santa Ana, California. We received net proceeds from the
transaction of $49.1 million and entered into a 15-year lease of
the facility.
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 associated with certain of our debt. Also
excluded are the non-cash equity compensation expenses related to
ASC Topic 718 as well as gains and losses on the exchange and
repurchase of a portion of the Company’s outstanding long-term
debt. 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 a non-cash expense, the gain
and loss on the exchange and repurchase of long-term debt will not
impact future operating results and the equity compensation
expenses 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
October 2, 2011.
Conference Call
Powerwave is providing a simultaneous webcast and live dial-in
number of its third quarter fiscal 2011 financial results
conference call on Tuesday, November 1, 2011 at 2:00 pm Pacific
time. To access the audio webcast, select the Investor Relations
page at www.powerwave.com and select the Powerwave Technologies Q3
earnings conference call. The call will last for approximately 1
hour. To listen to the live call, please call (617) 847-8705 and
enter reservation number 10668670. A replay of the webcast will be
available beginning approximately 3 hours after completion of the
initial webcast. Additionally, an audio playback of the conference
call will be available at approximately 5:00 pm Pacific time on
November 1, 2011 through November 7, 2011 by calling (617) 801-6888
and entering reservation number 46992600.
Forward-Looking Statements
The foregoing statements regarding long-term growth
opportunities within the wireless communications infrastructure
market and Powerwave’s ability to build upon and capitalize on such
opportunities are “forward looking statements” within the meaning
of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
These forward looking statements are intended to qualify for the
safe harbor from liability established by the Private Securities
Reform Act of 1995. The forward-looking statements contained in
this press release are based on information available to Powerwave
as of the date of this press release and management’s views and
assumptions regarding future events and business performance as of
the date of this press release and are subject to risks and
uncertainties which could cause the outcome of future events,
including our actual results, to differ materially from those
assumed, intended, projected or implied. Such potential risks and
uncertainties include, but are not limited to, in no particular
order: our ability to increase sales; our reliance on a limited
number of customers; our ability to control operating costs; delays
or cancellations of wireless network capacity expansions and
buildouts for both existing 2G, 2.5G, 3G and 4G networks;
macroeconomic factors that may negatively influence demand for
wireless communications infrastructure and thereby reduce demand
for our products; future consolidation of our customers may reduce
demand for our products; our ability to achieve manufacturing cost
reductions and operating expense reductions; our ability to
generate positive cash flow; wireless network operators may decide
to not continue to deploy infrastructure equipment in the
quantities that we expect; we require continued success in the
design of new wireless infrastructure products and such products
must be manufacturable and of good quality and reliability;
component shortages or difficulties in obtaining components in the
quantities required to meet customer demands may cause us to miss
revenue targets and or lose customers to competitors; we are not
able to increase our prices to cover our exposure to raw material
and freight price increases; our dependence on single source
suppliers for certain key components used in our products exposes
us to potential material shortages; our business requires continued
favorable business conditions and growth in the wireless
communications market. Powerwave also notes that its reported
financial performance and period to period comparisons are not
necessarily indicative of the results that may be expected in the
future and Powerwave believes that such comparisons cannot be
relied upon as indicators of future performance. Powerwave also
notes that the market price of its Common Stock has exhibited high
levels of volatility and therefore may not be suitable for all
investors. Additional risks and uncertainties include those
described in Powerwave’s Form 10-K, for the fiscal year ended
January 2, 2011, and its Form 10-Q for the quarterly period ended
July 3, 2011, both of which were filed with the Securities and
Exchange Commission, and other risks and uncertainties detailed
from time to time in Powerwave’s reports filed with the Securities
and Exchange Commission. Powerwave urges all interested parties to
read these reports to gain a better understanding of the many
business and other risks that Powerwave faces. Powerwave expressly
disclaims any intent or obligation to update any forward looking
statements, whether as a result of new information, future events
or otherwise, after the date of this press release to conform such
statements to actual results or to changes in our opinions or
expectations except as required by applicable law or rules of the
NASDAQ Stock Market.
UNAUDITED - PRELIMINARY POWERWAVE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands,
except per share amounts) Three Months
Ended Nine Months Ended Oct. 2,
Oct. 3, Oct. 2, Oct. 3,
2011 2010 2011
2010 Net sales $ 77,078 $
156,813 $ 384,343 $ 415,866 Cost of sales: Cost of goods 71,282
109,608 294,895 296,135 Restructuring and impairment charges
- 1,175 - 1,901
Total cost of sales 71,282 110,783
294,895 298,036
Gross profit 5,796 46,030 89,448 117,830 Operating expenses:
Sales and marketing 7,544 7,315 24,695 25,073 Research and
development 15,315 15,662 47,666 45,623 General and administrative
11,597 11,741 34,920 34,316 Restructuring and impairment charges
147 312 189 872
Total operating expenses 34,603 35,030
107,470 105,884
Operating income (loss) (28,807 ) 11,000 (18,022 ) 11,946
Other income (expense), net (6,435 ) (1,025 )
(13,271 ) (9,163 ) Income (loss) before income taxes
(35,242 ) 9,975 (31,293 ) 2,783 Income tax provision (benefit)
(158 ) 2,041 3,745 5,442
Net income (loss) $ (35,084 ) $ 7,934 $ (35,038 ) $
(2,659 )
Net earnings (loss) per share:
- basic:
$ (1.09 ) $ 0.30 $ ($1.05 ) $ (0.10 )
- diluted: 1
$ (1.09 ) $ 0.24 $ ($1.05 ) $ (0.10 )
Weighted average common shares used in
computing per share amounts:
- basic:
32,189
26,583
33,265
26,530
- diluted: 32,189 34,260 33,265 26,530
1 The diluted earnings and loss per share
does not include an add back of interest expense costs associated
with the assumed conversion of certain of the Company’s outstanding
convertible subordinated notes as the effect would be
anti-dilutive. In addition, the amounts per share reflect the
1-for-5 reverse stock split of Powerwave’s outstanding common stock
which was effective as of October 28, 2011.
POWERWAVE TECHNOLOGIES, INC. PERCENTAGE OF NET
SALES Three Months Ended Nine
Months Ended (unaudited) (unaudited)
Oct. 2, Oct. 3, Oct. 2, Oct.
3, 2011 2010 2011 2010 Net
sales 100.0 % 100.0 % 100.0 % 100.0 % Cost of sales: Cost of goods
92.5 69.9 76.7 71.2 Restructuring and impairment charges -
0.7 - 0.5 Total cost of sales 92.5 70.6
76.7 71.7 Gross profit 7.5 29.4 23.3
28.3 Operating expenses: Sales and marketing 9.8 4.7 6.4 6.0
Research and development 19.9 10.0 12.5 11.0 General and
administrative 15.0 7.5 9.1 8.2 Restructuring and impairment
charges 0.2 0.2 0.0 0.2 Total operating
expenses 44.9 22.4 28.0 25.4
Operating income (loss) (37.4 ) 7.0 (4.7 ) 2.9 Other income
(expense), net (8.3 ) (0.6 ) (3.4 ) (2.2 ) Income (loss)
before income taxes (45.7 ) 6.4 (8.1 ) 0.7 Income tax provision
(benefit) (0.2 ) 1.3 1.0 1.3 Net income (loss)
(45.5 %) 5.1 % (9.1 %) (0.6 %)
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 Oct. 2, Oct. 2, Oct. 2,
Oct. 2, 2011 Adjustments
2011 2011
Adjustments 2011 Net sales $
77,078 - $ 77,078 $ 384,343 - $ 384,343 Cost of sales: Cost of
goods sold 71,282
(192
)
1
71,090 294,895
(601
)
1
294,294 Total cost of sales 71,282
(192 ) 71,090
294,895 (601 ) 294,294
Gross profit 5,796 192 5,988 89,448 601 90,049 Operating
expenses: Sales and marketing 7,544
(165
)
1
7,379 24,695
(449
)
1
24,246 Research and development 15,315
(342
)
1
14,973 47,666
(1,191
)
1
46,475 General and administrative 11,597
(1,126
)
1
10,471 34,920
(3,527
)
1
31,393 Restructuring and impairment charges 147
(147
)
2
- 189
(189
)
2
- Total operating expenses 34,603
(1,780 ) 32,823
107,470 (5,356 ) 102,114
Operating income (loss) (28,807 ) 1,972 (26,835 ) (18,022 ) 5,957
(12,065 ) Other income (expense), net (6,435 )
2,136
3
(4,299 ) (13,271 )
3,571
3
(9,700 ) Income before income taxes (35,242 )
4,108 (31,134 ) (31,293 ) 9,528 (21,765 ) Income tax provision
(benefit) (158 )
(2,955
)
4
(3,113 ) 3,745
(5,083
)
4
(1,338 ) Net income (loss) $ (35,084 ) 7,063
$ (28,021 ) $ (35,038 ) 14,611
$ (20,427 )
Net earnings per share:
- basic:
$ (1.09 ) $ (0.87 ) $ (1.05 ) $ (0.61 )
- diluted:5
$ (1.09 ) $ (0.87 ) $ (1.05 ) $ (0.61 )
Weighted average common shares used in
computing per share amounts:
- basic: 32,189 32,189 33,265 33,265 - diluted: 32,189 32,189
33,265 33,265
1 This represents the equity compensation
expense allocation pursuant to ASC Topic 718.
2 This cost includes restructuring and
impairment charges related to the current restructuring plans
included in operating expenses.
3 This represents the amortization of the
non-cash debt discount amortization and interest accretion on
outstanding debt and a net loss on the repurchase of outstanding
debt during the fiscal period.
4 This represents the change in the
provision for income taxes related to the preceding pro forma
adjustments to arrive at an assumed effective income tax rate of
10% for the third quarter of 2011 period and an assumed effective
income tax rate of approximately 6% for the first nine months of
2011.
5 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 notes
as the effect would be anti-dilutive.
POWERWAVE TECHNOLOGIES, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS (In thousands)
Oct. 2, January 2, 2011 2011
(unaudited) 1
(see note) 2
ASSETS: Cash and cash equivalents $ 45,619 $ 61,601
Restricted cash 931 930 Accounts receivable, net 147,920 186,960
Inventories, net 84,484 50,417 Property, plant and equipment, net
72,474 76,276 Other assets 61,287 49,400 Total assets
$ 412,715 $ 425,584
LIABILITIES AND SHAREHOLDERS'
EQUITY: Accounts payable $ 100,669 $ 112,906 Current
portion of long-term debt 11,228 55,371 Long-term debt 250,890
150,000 Accrued expenses and other liabilities 40,789 46,028 Total
shareholders' equity 9,139 61,279 Total liabilities
and shareholders’ equity $ 412,715 $ 425,584
1 October 2, 2011 balances are preliminary
and subject to reclassification adjustments.
2 January 2, 2011 balances were derived
from the audited consolidated financial statements.
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