SYMM Symmetricom, Inc. (MM)

Symmetricom, Inc. (NASDAQ:SYMM)

• Revenue of $56.4 million, up 9.5% from the third quarter of fiscal 2008
• Non-GAAP net income of $6.3 million, up $4.1 million, and Non-GAAP EPS of $0.14, up $0.09 per share from the third quarter of fiscal 2008
• Net loss of $46.7 million, driven by $54.0 million of goodwill impairment and restructuring charges
• Net loss of $1.08 per share, compared to $0.02 per share in the third quarter of fiscal 2008
• Free Cash Flow of $6.6 million

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 preliminary financial results for its third fiscal quarter ended March 29, 2009.

Revenue for the third quarter of fiscal 2009 was $56.4 million, an increase of 9.5% from $51.5 million in the third quarter of fiscal 2008. Symmetricom reported a preliminary net loss of $46.7 million, or $1.08 per share, compared with a net loss of $0.9 million, or $0.02 per share, in the third quarter of fiscal 2008.

Non-GAAP net income in the third quarter was $6.3 million, or $0.14 per share on a fully diluted basis, compared with $2.2 million, or $0.05 per share on a fully diluted basis, in the same period of the prior year.

The preliminary net loss for the third fiscal quarter of 2009 includes a non-cash goodwill impairment charge of $48.1 million, restructuring charges of $5.9 million, and $1.0 million of CEO post-employment compensation. Due to a decline in market capitalization and a moderated business outlook, we performed an evaluation of our goodwill assets and determined that goodwill was impaired. The analyses of the conditions driving the impairment are not complete and the impairment related estimate may change when the analyses are completed. The goodwill impairment is non-cash in nature and does not affect liquidity or cash flows from operations. The restructuring costs reflect charges for severance benefits, recognition of facility lease commitments without future benefit and accelerated depreciation on equipment reflecting shorter expected useful lives of these assets. Approximately $2.0 million of cash expenditures were made in the third quarter of fiscal 2009 associated with these restructuring charges.

Cash, cash equivalents and short-term investments totaled $107.1 million as of March 29, 2009, an increase of $5.2 million from $101.9 million as of December 28, 2008. Net cash provided by operating activities in the third quarter was $7.4 million and property, plant and equipment purchases were $0.8 million, resulting in free cash flow of $6.6 million. The Company used $1.1 million to buy back approximately 368,000 shares of common stock in the third quarter of 2009.

Division Results

Telecom Solutions Division revenue in the quarter was $33.6 million, an increase of 4.3% from $32.2 million in the same period of the prior year, due to increased sales of new cable products as well as synchronization equipment into new international markets. Timing, Test & Measurement Division revenue was $22.7 million, up 17.6% from $19.3 million in the same period of the prior year, driven by a broad mix of products, including strong sales of secure communications products for military applications.

�Symmetricom�s diversified market position and new products drove sales across a broad range of markets and geographies while our cost management efforts over the last year led to higher non-GAAP earnings year-to-year,� said Thomas Steipp, president and CEO. �We are encouraged by the progress of our growth initiatives. More than two dozen cable providers around the world are deploying our new cable timing product to enable increased capacity and performance in next generation cable networks. Likewise, sales of our 1588 PackeTime products, although relatively small from a revenue standpoint, are growing, with significant customer interest across the globe.�

�We continue to be focused on delivering solid earnings and cash flow,� said Justin Spencer, chief financial officer. �We anticipate that our strong market position and improved cost structure will enable us to continue to effectively compete in this economic climate.�

Fourth Quarter and Fiscal 2009 Guidance

Symmetricom�s guidance for fiscal 2009 is as follows:

• Net revenues are now expected to be in the range of $212 million to $219 million
• GAAP loss is now expected to be in the range of $(0.97) to $(0.93) per share
• Non-GAAP earnings are expected to be in the range of $0.35 to $0.40 per share

For the fourth fiscal quarter of 2009, Symmetricom guidance is as follows:

• Net revenues are now expected to be in the range of $51 million to $58 million
• GAAP earnings are now expected to be in the range of $0.01 to $0.06 per share
• Non-GAAP earnings are expected to be in the range of $0.05 to $0.10 per share

A reconciliation of GAAP and non-GAAP guidance is provided at the end of this press release.

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 1-415-228-4875 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 1-203-369-3793.

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), IEEE 1588 (Precision Time Protocol), and others supporting the world�s migration to Next Generation Networks (NGN). Symmetricom�s QoE video quality management solutions provide the tools necessary to accurately monitor and analyze video quality and bring higher satisfaction levels to the end user. Symmetricom is based in San Jose, California, with offices worldwide. For more information, visit http://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 equity-based compensation, amortization of acquired intangibles, integration and restructuring charges, impairment of goodwill and other intangibles, gains and losses on asset sales, investments and repayment of convertible notes, and unusual or infrequent items, such as the cost of internal investigations and the CEO�s post-employment compensation. The income tax effect after these Non-GAAP adjustments is determined based upon the Company�s estimate of its annual Non-GAAP effective tax rate excluding these Non-GAAP adjustments. 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 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.

Free Cash Flow is defined as net cash provided by operating activities minus purchases of property, plant and equipment. We believe this metric provides useful information to our investors, analysts, and management about the level of cash generated by normal business operations, including the use of cash for the purchase of property, plant and equipment. Management also views it as a measure of cash available to pay debt and return cash to stockholders. Free Cash Flow is not a GAAP financial measure and should not be considered superior to or a substitute for operating cash flow or other cash flow data prepared in accordance with GAAP.

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 fourth quarter and fiscal 2009 guidance and our expectations of operating performance in fiscal 2009, as well as the information regarding the usefulness of the non-GAAP financial information. The statements in this press release are made as of the date of this press release, even if subsequently made available by Symmetricom on its website or otherwise. 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 maintain or reduce manufacturing and operating costs, timing of orders, cancellation or delay of customer orders, loss of customers, customer acceptance of new products, recessionary pressures, 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 for the fiscal year ended June 28, 2008 and subsequent Form 10-Q's and Form 8-K's.

SYMM-F

SYMMETRICOM, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (unaudited) � � � � � � � Three months ended � Nine months ended March 29, December 28, March 30, March 29, March 30, 2009 2008 2008 � 2009 2008 � Net revenue $ 56,370 $ 48,207 $ 51,469 $ 160,475 $ 151,047 Cost of sales: Cost of products and services 29,070 24,971 28,348 80,650 82,397 Amortization of purchased technology 368 369 832 1,105 2,498 Integration and restructuring charges � 2,275 � � - � � 319 � � 2,275 � � 486 � Total cost of sales � 31,713 � � 25,340 � � 29,499 � � 84,030 � � 85,381 � Gross profit 24,657 22,867 21,970 76,445 65,666 Gross margin 43.7 % 47.4 % 42.7 % 47.6 % 43.5 % Operating expenses: Research and development 5,256 6,448 6,801 19,008 20,674 Selling, general and administrative 13,638 12,831 15,937 42,148 46,984 Amortization of intangible assets 102 103 232 308 725 Integration and restructuring charges 3,635 252 135 4,472 435 Impairment of goodwill � 48,144 � � - � � - � � 48,144 � � - � Total operating expenses � 70,775 � � 19,634 � � 23,105 � � 114,080 � � 68,818 � Operating (income) loss (46,118 ) 3,233 (1,135 ) (37,635 ) (3,152 ) Gain on sale of asset - -

-

- 700 Loss on repayment of convertible notes, net - - - (522 ) - Loss on short-term investments, net - (895 ) (1,090 ) (1,368 ) (1,710 ) Interest income 322 491 1,775 1,581 6,132 Interest expense � (537 ) � (543 ) � (1,241 ) � (1,845 ) � (3,621 ) Earnings (loss) before income taxes (46,333 ) 2,286 (1,691 ) (39,789 ) (1,651 ) Income tax provision (benefit) � 330 � � 827 � � (773 ) � 2,817 � � (623 ) Net earnings (loss) from continuing operations (46,663 ) 1,459 (918 ) (42,606 ) (1,028 ) Gain from discontinued operations, net of tax � - � � - � � 7 � � - � � 90 � Net income (loss) $ (46,663 ) $ 1,459 � $ (911 ) $ (42,606 ) $ (938 ) � Earnings (loss) per share - basic: Income (loss) from continuing operations $ (1.08 ) $ 0.03 $ (0.02 ) $ (0.98 ) $ (0.02 ) Gain (loss) from discontinued operations � - � � - � � - � � - � � - � Net earnings (loss) $ (1.08 ) $ 0.03 � $ (0.02 ) $ (0.98 ) $ (0.02 ) Weighted average shares outstanding - basic � 43,326 � � 43,684 � � 43,923 � � 43,658 � � 44,643 � � Earnings (loss) per share - diluted: Income (loss) from continuing operations $ (1.08 ) $ 0.03 $ (0.02 ) $ (0.98 ) $ (0.02 ) Gain (loss) from discontinued operations � - � � - � � - � � - � � - � Net earnings (loss) $ (1.08 ) $ 0.03 � $ (0.02 ) $ (0.98 ) $ (0.02 ) Weighted average shares outstanding - diluted � 43,326 � � 44,139 � � 43,923 � � 43,658 � � 44,643 � SYMMETRICOM, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (unaudited) � � � � March 29, June 29, 2009 2008 � ASSETS Current assets: Cash and cash equivalents $ 80,248 $ 142,419 Short-term investments 26,805 21,910 Accounts receivable, net 35,043 36,682 Inventories, net 40,036 38,273 Prepaids and other current assets � 16,512 � � 14,402 � Total current assets 198,644 253,686 Property, plant and equipment, net 21,783 25,036 Goodwill, net - 48,144 Other intangible assets, net 5,779 7,191 Deferred taxes and other assets � 40,895 � � 44,512 � Total assets $ 267,101 � $ 378,569 � � LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,770 $ 9,018 Accrued compensation 14,923 13,582 Accrued warranty 3,600 3,801 Other accrued liabilities 10,002 11,233 Current maturities of long-term obligations � 189 � � 64,515 � Total current liabilities 34,484 102,149 Long-term obligations 61,976 59,855 Deferred income taxes � 426 � � 426 � Total liabilities 96,886 162,430 Stockholders' equity: Common stock 178,918 182,201 Accumulated other comprehensive loss (95 ) (60 ) Retained earnings (accumulated deficit) � (8,608 ) � 33,998 � Total stockholders' equity � 170,215 � � 216,139 � Total liabilities and stockholders' equity $ 267,101 � $ 378,569 � SYMMETRICOM, INC. RECONCILIATION OF GAAP TO NON-GAAP RESULTS (In thousands, except per share amounts) (unaudited) � � � � � Three months ended Nine months ended March 29, December 28, March 30, March 29, March 30, 2009 2008 2008 2009 2008 Reconciliation from GAAP to Non-GAAP GAAP net earnings (loss) from continuing operations $ (46,663 ) $ 1,459 $ (918 ) $ (42,606 ) $ (1,028 ) � Equity-based compensation expense: Cost of products and services 153 90 206 448 658 Research and development (20 ) 125 350 434 1,273 Selling, general and administrative � 723 � � 199 � � 813 � � 1,394 � � 2,052 � Total equity-based compensation expense 856 414 1,369 2,276 3,983 Amortization of intangible assets: Cost of products and services 368 369 832 1,105 2,498 Operating expenses � 102 � � 103 � � 232 � � 308 � � 725 � Total amortization of intangible assets 470 472 1,064 1,413 3,223 � Integration and restructuring charges 5,910 252 454 6,747 921 Impairment of goodwill 48,144 - - 48,144 - Loss on repayment of convertible notes, net - - - 522 - Loss on short-term investments, net - 895 1,090 1,368 1,710 Gain on sale of asset - - - - (700 ) Cost of internal investigation - - 1,230 - 1,230 CEO post-employment compensation 1,007 - - 1,007 - Income tax effect of Non-GAAP adjustments � (3,461 ) � (773 ) � (2,130 ) � (5,423 ) � (3,636 ) Non-GAAP net earnings from continuing operations $ 6,263 � $ 2,719 � $ 2,159 � $ 13,448 � $ 5,703 � � Earnings from continuing operations per share-diluted: GAAP income (loss) from continuing operations $ (1.08 ) $ 0.03 $ (0.02 ) $ (0.98 ) $ (0.02 ) Non-GAAP income from continuing operations $ 0.14 $ 0.06 $ 0.05 $ 0.30 $ 0.13 Shares used in diluted shares calculation 43,790 44,139 44,332 44,199 45,127 SYMMETRICOM, INC. RECONCILIATION OF GAAP TO NON-GAAP RESULTS (In thousands, except per share amounts) (unaudited) � � � � � � Three months ended Nine months ended March 29, December 28, March 30, March 29, March 30, 2009 2008 2008 2009 2008 Reconciliation from GAAP to Non-GAAP Gross Margin: GAAP Revenue

$

56,370

$

48,207

$

51,469

$

160,475

$

151,047 � GAAP Gross profit

$

24,657

$

22,867

$

21,970

$

76,445

$

65,666 GAAP Gross margin 43.7 % 47.4 % 42.7 % 47.6 % 43.5 % � Add Non-GAAP Items: Equity-based compensation expense 153 90 206 448 658 Amortization of intangible assets 368 369 832 1,105 2,498 Integration and restructuring charges � 2,275 � � - � � 319 � � � 2,275 � � � 486 � � Non-GAAP Gross profit $ 27,453 $ 23,326 $ 23,327 $ 80,273 $ 69,308 Non-GAAP Gross margin 48.7 % 48.4 % 45.3 % 50.0 % 45.9 % � Reconciliation from GAAP to Non-GAAP Operating Expense: GAAP Revenue $ 56,370 $ 48,207 $ 51,469 $ 160,475 $ 151,047 � GAAP Operating expenses

$

70,775

$

19,634

$

23,105

$

114,080

$

68,818 Operating expenses % to revenue 125.6 % 40.7 % 44.9 % 71.1 % 45.6 % � Add Non-GAAP Items: Equity-based compensation expense

�

703

�

324

�

1,163

�

1,828

�

3,325 Amortization of intangible assets 102 103 232 308 725 Integration and restructuring charges 3,635 252 135 4,472 435 Impairment of goodwill 48,144 - - 48,144 - Cost of internal investigation - - 1,230 - 1,230 CEO post-employment compensation � 1,007 � � - � � - � � 1,007 � � - � � Non-GAAP operating expenses $ 17,184 $ 18,955 $ 20,345 $ 58,321 $ 63,103 Non-GAAP operating expenses % to revenue 30.5 % 39.3 % 39.5 % 36.3 % 41.8 % Symmetricom, Inc. RECONCILIATION OF FORWARD-LOOKING GUIDANCE FOR NON-GAAP FINANCIAL MEASURES TO PROJECTED GAAP REVENUE AND EPS (In thousands, except per share amounts) (Unaudited) � � � � � � � Three Months Ending June 28, 2009 Revenue Earnings Per Share From To From To � GAAP Guidance $ 51,000 $ 58,000 $ 0.01 $ 0.06 � Estimated Non-GAAP Adjustments Equity-based compensation expense 0.02 0.03 Amortization of intangible assets 0.01 0.01 Integration and restructuring charges 0.02 0.03 Income tax effect of non-GAAP adjustments � � � � (0.02 ) � � (0.03 ) Total Non-GAAP Adjustments 0.04 0.04 � � � � � � Non-GAAP Guidance $ 51,000 � $ 58,000 $ 0.05 � � $ 0.10 � � � � � Twelve Months Ending June 28, 2009 Revenue Earnings (Loss) Per Share From To From To � GAAP Guidance $ 212,000 $ 219,000 $ (0.97 ) $ (0.93 ) � Estimated Non-GAAP Adjustments Equity-based compensation expense 0.08 0.08 Amortization of intangible assets 0.04 0.04 Integration and restructuring charges 0.18 0.19 Impairment of goodwill 1.10 1.10 Loss on repayment of convertible notes 0.01 0.01 Loss on short-term investments, net 0.03 0.03 CEO post-employment compensation 0.02 0.02 Income tax effect of non-GAAP adjustments � � � � (0.15 ) � � (0.15 ) Total Non-GAAP Adjustments 1.32 1.33 � � � � � � Non-GAAP Guidance $ 212,000 � $ 219,000 $ 0.35 � � $ 0.40 �