SYMM Symmetricom, Inc. (MM)

Symmetricom, Inc. (NASDAQ:SYMM), a worldwide leader in precise time and frequency technologies that accelerate the deployment and enable the management of next generation networks, today reported financial results for its fourth quarter and fiscal year ended June 29, 2008. Fiscal fourth quarter revenue was $57.0 million, a slight decrease from $57.4 million in the same period of the prior year. For the year ended June 29, 2008, revenue was $208.1 million, slightly below fiscal 2007 revenue of $208.4 million. The net loss from continuing operations in the fourth quarter was $13.6 million, or $0.31 per share on a fully diluted basis, compared with net income of $1.4 million, or $0.03 per share on a fully diluted basis, in the same period of the prior year. For the year, the net loss from continuing operations was $14.6 million, or $0.33 per share on a fully diluted basis, compared with net earnings of $6.1 million, or $0.13 per share on a fully diluted basis, in the prior year. Net loss for fiscal 2008 included an impairment charge of $14.3 million related to goodwill and intangible assets for the Company�s QoE business, pre-tax losses on investments of $3.7 million, a $700,000 gain on the sale of an asset, and restructuring and integration charges of $1.7 million. Non-GAAP net earnings in the fourth quarter were $0.6 million, or $0.01 per share on a fully diluted basis, compared with $3.8 million, or $0.08 per share on a fully diluted basis, in the same period of the prior year.�Fourth quarter non-GAAP net earnings include severance charges of approximately $1.2 million and costs related to the correction of prior period financial statements of approximately $0.8 million. For the year, non-GAAP net earnings were $6.8 million, or $0.15 per share on a fully diluted basis, compared with $17.6 million or $0.38 per share for the prior year. Non-GAAP net earnings exclude certain items related to non-cash compensation, amortization of acquired intangibles, integration and restructuring charges, discontinued operations, and unusual and non-recurring items. The major items impacting fiscal 2008 non-GAAP net earnings included increased expenses related to the QoE business and expenses incurred in the fourth quarter relating to severance and restatement costs. �Fiscal 2008 was a year of investment for Symmetricom,� said Thomas Steipp, president and CEO. �We anticipate that many of our operational investments, such as greater outsourcing of manufacturing and a new R&D center in China will result in greater efficiency as we move forward. Market development investments, such as those in the cable market, are expected to contribute to revenue growth in fiscal 2009. Our investment in the QoE segment has not met our expectations and we have consolidated this business into our Telecom Solutions Division and substantially reduced spending levels. I expect that our investment in new products and efficiencies in fiscal 2008 will result in much improved operating results for fiscal 2009.� Business Segment Results Telecom Solutions Division revenue in the quarter was $37.5 million, an increase of $1.4 million, or 3.9 percent, compared with revenue of $36.1 million in the same period of the prior year. For the fiscal year, revenue was $129.1 million, a decrease of 4.5 percent from the prior year. Timing, Test & Measurement Division revenue in the quarter was $19.4 million, a decrease of $1.8 million, or 8.4 percent, compared with revenue of $21.2 million in the same period of the prior year. Revenue for the year was $77.2 million, an increase of $4.6 million or 6.3 percent over the prior year revenue of $72.7 million. Quality of Experience Assurance Division revenue in the quarter was $92,000 compared to $131,000 in the fourth quarter a year ago. Revenue for the year was $1.7 million compared to $501,000 in the prior year. First Quarter and Fiscal 2009 Guidance Symmetricom anticipates revenue for fiscal year 2009 to be between $230 million and $240 million. GAAP earnings are expected to be in the range of $0.20 to $0.26 cents per share. Non-GAAP earnings are expected to be in the range of $0.35 to $0.41 cents per share. Non-GAAP earnings per share exclude aggregate expenses of $0.15 per share comprised of $0.09 per share for equity-based compensation expense, $0.03 per share for amortization of intangible assets, $0.03 per share for integration and restructuring charges and $0.01 per share for net loss on the purchase of $63.1 million of our $120 million 3.25% Convertible Notes which occurred on July 30, 2008. For the first fiscal quarter, Symmetricom expects revenues to be between $55 million and $60 million. GAAP earnings are expected to be in the range of $0.01 to $0.05 cents per share. Non-GAAP earnings are expected to be in the range of $0.06 to $0.10 cents per share. Non-GAAP earnings per share exclude aggregate expenses of $0.05 per share comprised of $0.02 per share for equity-based compensation expense, $0.01 per share for amortization of intangible assets, $0.02 per share for integration and restructuring charges and $0.01 per share for net loss on the purchase of $63.1 million of our $120 million 3.25% Convertible Notes which occurred on July 30, 2008. Investor Conference Call As previously announced, management will hold a conference call to discuss these results today, at 1:30 p.m. Pacific Time. Investors are invited to join the conference call by dialing 1-210-234-0003 and referencing �Symmetricom.� A live webcast will also be available on the investor relations section of the company�s website at www.symmetricom.com. An audio replay will be available for one week and can be accessed by dialing 203-369-3317. About Symmetricom, Inc. As a worldwide leader in precise time and frequency products and services, Symmetricom provides �Perfect Timing� to customers around the world. Since 1985, the company�s solutions have helped define the world�s time and frequency standards, delivering precision, reliability and efficiency to wireline and wireless networks, instrumentation and testing applications and network time management. Deployed in more than 90 countries, the company�s synchronization solutions include primary reference sources, building integrated timing supplies (BITS), GPS timing receivers, time and frequency distribution systems, network time servers and ruggedized oscillators. Symmetricom also incorporates technologies including Universal Timing Interface (UTI), Network Time Protocol (NTP), Precision Time Protocol (IEEE 1588), and others supporting the world�s migration to Next-Generation-Networks (NGN). Symmetricom is based in San Jose, Calif., with offices worldwide. For more information, visit www.symmetricom.com. Non-GAAP Information Certain non-GAAP financial information is included in this press release. In the Reconciliation of GAAP to Non-GAAP Results, Symmetricom excludes certain items related to non-cash compensation, amortization of acquired intangibles, impairment of goodwill and other intangibles, integration and restructuring charges and unusual and non-recurring items. Symmetricom believes that excluding such items provides investors and management with a representation of the company�s core operating performance and with information useful in assessing our prospects for the future and underlying trends in Symmetricom�s operating performance. Management uses such non-GAAP information to evaluate financial results and to establish operational goals. Non-GAAP information is not determined using GAAP and should not be considered superior to or as a substitute for data prepared in accordance with GAAP. A reconciliation of the non-GAAP results to the GAAP results is provided in the financial schedules portion of this press release. Safe Harbor This press release contains forward-looking information 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, and is subject to the safe harbor created by those sections. These forward-looking statements include statements concerning first quarter and fiscal 2009 guidance, our expectation of lower manufacturing costs and greater operational efficiencies in 2009, progress made in developing product for the cable industry, increased penetration of international markets, as well as the information regarding the usefulness of the non-GAAP financial information. Symmetricom's actual results could differ materially from those projected or suggested in these forward-looking statements. Factors that could cause future actual results to differ materially from the results projected in or suggested by such forward-looking statements include: reduced rates of demand for telecommunication products, cable products or test and measurement products, our customers� ability and need to upgrade existing equipment, our ability to attract cable service providers as new customers for our products, our ability to successfully move some manufacturing to a third party provider, our ability to successfully move some R&D work to lower cost areas, our ability to negotiate contracts with our customers, our ability to maintain gross margins, timing of orders, cancellation or delay of customer orders, loss of customers, difficulties in manufacturing products to specification or customer volume requirements, our ability to develop, market and sell products into the QOE market, challenges in integrating acquired businesses, customer acceptance of new products, geopolitical risks such as terrorist acts and the risk factors listed from time to time in Symmetricom's reports filed with the Securities and Exchange Commission, including the annual report on Form 10-K, as amended, for the fiscal year ended July 1, 2007 and subsequent Form 10-Q�s and Form 8-K�s. Note: Financial schedules attached. SYMMETRICOM, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (unaudited) � � � Three months ended � Twelve months ended June 29, July 1, June 29, July 1, � 2008 � � 2007 � � 2008 � � 2007 � � Net revenue $ 57,005 $ 57,416 $ 208,052 $ 208,380 Cost of products and services 31,373 30,199 113,771 109,837 Amortization of purchased technology 846 776 3,343 3,317 Integration and restructuring charges 148 36 634 224 Impairment of purchased technology � 5,658 � � - � � 5,658 � � - � Gross profit 18,980 26,405 84,646 95,002 Gross margin 33.3 % 46.0 % 40.7 % 45.6 % Operating expenses: Research and development 7,212 7,524 27,887 23,692 Selling, general and administrative 18,709 17,493 65,693 60,543 Acquired in-process research and development - - - 188 Amortization of intangible assets 233 258 958 792 Integration and restructuring charges 659 353 1,094 549 Impairment of goodwill 6,513 - 6,513 - Impairment of intangible assets � 2,104 � � - � � 2,104 � � - � Operating income (loss) (16,450 ) 777 (19,603 ) 9,238 Gain on sale of asset - - 700 - Loss on short term investments (2,018 ) - (3,728 ) - Interest income 991 2,255 7,123 9,231 Interest expense � (1,126 ) � (1,182 ) � (4,747 ) � (4,823 ) Earnings (loss) before income taxes (18,603 ) 1,850 (20,255 ) 13,646 Income tax provision (benefit) � (5,044 ) � 443 � � (5,666 ) � 7,588 � Net earnings (loss) from continuing operations (13,559 ) 1,407 (14,589 ) 6,058 Gain (loss) from discontinued operations, net of tax � 30 � � (143 ) � 121 � � 242 � Net earnings (loss) $ (13,529 ) $ 1,264 � $ (14,468 ) $ 6,300 � � Earnings (loss) per share - basic: Earnings (loss) from continuing operations $ (0.31 ) 0.03 $ (0.33 ) $ 0.13 Gain (loss) from discontinued operations � - � � - � � - � � 0.01 � Net earnings (loss) $ (0.31 ) $ 0.03 � $ (0.33 ) $ 0.14 � Weighted average shares outstanding - basic � 43,914 � � 45,601 � � 44,461 � � 45,572 � � Earnings (loss) per share - diluted: Earnings (loss) from continuing operations $ (0.31 ) 0.03 $ (0.33 ) $ 0.13 Gain (loss) from discontinued operations � - � � - � � - � � 0.01 � Net earnings (loss) $ (0.31 ) $ 0.03 � $ (0.33 ) $ 0.14 � Weighted average shares outstanding - diluted � 43,914 � � 46,499 � � 44,461 � � 46,389 � SYMMETRICOM, INC. RECONCILIATION OF GAAP TO NON-GAAP RESULTS (In thousands, except per share amounts) (unaudited) � � � Three months ended � Twelve months ended June 29, July 1, June 29, July 1, � 2008 � � 2007 � � 2008 � � 2007 � Reconciliation from GAAP to Non-GAAP GAAP net earnings (loss) from continuing operations $ (13,559 ) $ 1,407 $ (14,589 ) $ 6,058 � Equity-based compensation expense: Cost of products and services 164 299 823 1,034 Research and development 173 580 1,446 1,345 Selling, general and administrative � 635 � � 1,105 � � 2,687 � � 4,013 � Total equity-based compensation expense 972 1,984 4,956 6,392 Amortization of intangible assets: Cost of products and services 846 776 3,343 3,317 Operating expenses � 233 � � 258 � � 958 � � 792 � Total amortization of intangible assets 1,079 1,034 4,301 4,109 � Integration and restructuring charges 807 389 1,728 773 Write-off of non collectable sublease contract - - - 298 Acquired in-process research and development - - - 188 Gain on sale of asset - - (700 ) - Loss, other than temporary, on investments 2,018 - 3,728 - Cost of internal investigation 247 - 1,479 - Income tax effect of QoSmetrics liquidation - - - 3,412 Impairment of goodwill 6,513 - 6,513 - Impairment of intangibles 7,762 - 7,762 - Income tax effect of Non-GAAP adjustments � (5,257 ) � (1,043 ) $ (8,335 ) � (3,599 ) Non-GAAP net earnings from continuing operations $ 582 � $ 3,771 � $ 6,843 � $ 17,631 � � Earnings from continuing operations per share-diluted: GAAP earnings (loss) from continuing operations $ (0.31 ) $ 0.03 $ (0.33 ) $ 0.13 Non-GAAP earnings from continuing operations $ 0.01 $ 0.08 $ 0.15 $ 0.38 Shares used in diluted shares calcuation 44,483 46,499 44,972 46,389 SYMMETRICOM, INC. RECONCILIATION OF GAAP TO NON-GAAP RESULTS (In thousands, except per share amounts) (unaudited) � � � � Three months ended Twelve months ended June 29, July 1, June 29, July 1, � 2008 � � 2007 � � 2008 � � 2007 � Reconciliation from GAAP to Non-GAAP Gross Margin: GAAP Revenue $ 57,005 $ 57,416 $ 208,052 $ 208,380 GAAP Gross profit 18,980 26,405 84,646 95,002 GAAP Gross margin 33.3 % 46.0 % 40.7 % 45.6 % � Add Non-GAAP Items: Equity-based compensation expense 164 299 823 1,034 Amortization of intangible assets 846 776 3,343 3,317 Integration and restructuring charges 148 36 634 224 Impairment of purchased technology � 5,658 � � � - � � � 5,658 � � - � � Non-GAAP Gross profit $ 25,796 $ 27,516 $ 95,104 $ 99,577 Non-GAAP Gross margin 45.3 % 47.9 % 45.7 % 47.8 % Reconciliation from GAAP to Non-GAAP Operating Expense: GAAP Revenue $ 57,005 $ 57,416 $ 208,052 $ 208,380 GAAP Operating expenses 35,430 25,628 104,249 85,764 Operating expenses % to revenue 62.2 % 44.6 % 50.1 % 41.2 % � Add Non-GAAP Items: Cost of internal investigation $ 247 $ - $ 1,479 $ - Equity-based compensation expense 808 1,685 4,133 5,358 Uncollectable sublease payment - - - 298 Amortization of intangible assets 233 258 958 792 Acquired in-process research and development - - - 188 Impairment of goodwill 6,513 - 6,513 - Impairment of intangible assets 2,104 - 2,104 - Integration and restructuring charges � 659 � � � 353 � � � 1,094 � � � 549 � � Non-GAAP operating expenses $ 24,866 $ 23,332 $ 87,968 $ 78,579 Non-GAAP operating expenses % to revenue 43.6 % 40.6 % 42.3 % 37.7 % SYMMETRICOM, INC. CONSOLIDATED BALANCE SHEETS (In thousands) (unaudited) � � � June 29, July 1, � 2008 � � 2007 � ASSETS Current assets: Cash and cash equivalents $ 142,419 $ 37,587 Short-term investments 21,910 138,559 Accounts receivable, net 36,682 37,368 Inventories, net 38,273 38,957 Note receivable from employee - 500 Prepaids and other current assets � 14,402 � � 11,094 Total current assets 253,686 264,065 Property, plant and equipment, net 25,036 26,626 Goodwill, net 48,144 54,706 Other intangible assets, net 7,191 17,730 Deferred taxes and other assets � 44,512 � � 46,060 Total assets $ 378,569 � $ 409,187 � LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 9,018 $ 12,949 Accrued compensation 13,582 13,936 Accrued warranty 3,801 3,374 Other accrued liabilities 11,233 15,161 Current maturities of long-term obligations � 64,515 � � 1,547 Total current liabilities 102,149 46,967 Long-term obligations 59,855 125,550 Deferred income taxes � 426 � � 334 Total liabilities 162,430 172,851 Stockholders' equity: Common stock 182,201 187,070 Accumulated other comprehensive income (60 ) 403 Retained earnings � 33,998 � � 48,863 Total stockholders' equity � 216,139 � � 236,336 Total liabilities and stockholders' equity $ 378,569 � $ 409,187