Aviat Networks Announces Fiscal Third Quarter 2012 Financial Results

Table 1

AVIAT NETWORKS, INC.

Fiscal Year 2012 Third Quarter Summary

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Quarter Ended

Three Quarters Ended

March 30, 2012

April 1,

2011

March 30, 2012

April 1,
2011 (1)

(In millions, except per share amounts)

Revenue from product sales and services

$

111.6

$

115.5

$

328.0

$

331.2

Cost of product sales and services

77.1

83.7

228.6

235.4

Amortization of purchased technology

0.2

0.2

0.5

0.5

Gross margin

34.3

31.6

98.9

95.3

Research and development expenses

8.9

9.9

26.7

30.8

Selling and administrative expenses

25.1

26.7

75.0

80.2

Amortization of intangible assets

0.1

0.7

1.5

2.1

Goodwill impairment charges

—

—

5.6

—

Restructuring charges

0.4

4.4

1.4

13.4

Operating loss

(0.2)

(10.1)

(11.3)

(31.2)

Loss on sale of NetBoss assets

—

—

—

(4.4)

Other expenses

(0.3)

—

(0.6)

(0.5)

Interest income

—

0.2

0.3

0.3

Interest expense

(0.2)

(0.4)

(1.0)

(1.7)

Loss from continuing operations before income taxes

(0.7)

(10.3)

(12.6)

(37.5)

Provision for (benefit from) income taxes

0.1

15.2

1.9

15.0

Loss from continuing operations

(0.8)

(25.5)

(14.5)

(52.5)

Loss from discontinued operations, net of tax

(2.4)

(11.4)

(8.3)

(18.2)

Net loss

$

(3.2)

$

(36.9)

$

(22.8)

$

(70.7)

Basic and diluted net loss per common share:

Continuing operations

$

(0.01)

$

(0.44)

$

(0.25)

$

(0.90)

Discontinued operations

$

(0.04)

$

(0.19)

$

(0.14)

$

(0.31)

Net loss per common share

$

(0.05)

$

(0.63)

$

(0.39)

$

(1.21)

Basic and diluted weighted average shares outstanding

59.2

58.6

59.0

58.5

(1)

Beginning in the third quarter of fiscal 2011, the results of the WiMAX business are presented as discontinued operations in our consolidated financial statements. Prior year three-quarters period results are reclassified to conform to current period presentation.

Table 2

AVIAT NETWORKS, INC.

Fiscal Year 2012 Third Quarter Summary

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

March 30, 2012

July 1,2011

(In millions)

Assets

Cash and cash equivalents

$

90.5

$

98.2

Receivables, net

106.7

133.0

Unbilled costs

29.1

24.8

Inventories

49.7

50.6

Customer service inventories

19.3

21.2

Other current assets

20.0

22.5

Property, plant and equipment, net

21.7

21.6

Goodwill

—

5.6

Identifiable intangible assets, net

2.1

4.1

Other assets

1.7

2.3

$

340.8

$

383.9

Liabilities and Stockholders' Equity

Short-term debt

$

6.0

$

6.0

Current portion of long-term debt

4.1

—

Accounts payable

55.0

70.3

Redeemable preference shares

—

8.3

Accrued expenses and other current liabilities

104.6

112.5

Long-term debt

3.8

—

Reserve for uncertain tax positions

     and other long-term liabilities

8.9

9.1

Stockholders' equity

158.4

177.7

$

340.8

$

383.9

Table 3

AVIAT NETWORKS, INC.

Fiscal Year 2012 Third Quarter Summary

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Quarters Ended

March 30, 2012

April 1, 2011 (1)

(In millions)

Net loss

$

(22.8)

$

(70.7)

Adjustments to reconcile net loss to net cash used in operating activities:

Amortization of identifiable intangible assets

2.0

2.6

Goodwill impairment charges

5.6

—

Depreciation and amortization of property, plant and equipment

     and capitalized software

3.5

6.8

Bad debt expenses

2.9

2.2

Share-based compensation expense

3.7

3.4

Deferred income tax (benefit) expense

—

11.2

Inventory write-downs

3.0

19.0

Loss on held for sale assets, net

1.9

0.8

Loss on sale of NetBoss assets

—

4.4

Changes in operating assets and liabilities:

Receivables

23.4

(36.8)

Unbilled costs

(4.3)

3.2

Inventories

(0.4)

(16.8)

Customer service inventories

0.2

(2.4)

Accounts payable

(15.2)

2.2

Accrued expenses

(3.0)

13.0

Advance payments and unearned income

(3.4)

12.2

Income taxes payable or receivable

1.2

1.5

Restructuring liabilities and other assets and liabilities

0.9

(1.2)

Net cash used in operating activities

(0.8)

(45.4)

Investing Activities

Cash received from sale of NetBoss assets

—

3.8

Cash disbursed related to sale of WiMAX business

(1.1)

—

Additions of property, plant and equipment

(4.4)

(5.2)

Additions of capitalized software

—

(0.8)

Net cash used in investing activities

(5.5)

(2.2)

Financing Activities

Proceeds from short-term debt arrangement

—

6.0

Proceeds from long-term debt

8.3

—

Payments on short-term debt arrangement

—

(5.0)

Payments on long-term debt

(0.4)

—

Proceeds from stock-based compensation awards

—

0.2

Redemption of preference shares

(8.3)

—

Net cash provided by (used in) financing activities

(0.4)

1.2

Effect of exchange rate changes on cash and cash equivalents

(1.0)

0.4

Net decrease in cash and cash equivalents

(7.7)

(46.0)

Cash and cash equivalents, beginning of period

98.2

141.7

Cash and cash equivalents, end of period

$

90.5

$

95.7

(1)

   Certain prior year period amounts are reclassified to conform to current period presentation.

AVIAT NETWORKS, INC.

Quarter Ended March 30, 2012 Summaries

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND REGULATION G DISCLOSURE

To supplement our consolidated financial statements presented in accordance with accounting principles generally accepted in the United States ("GAAP"), we provide additional measures of gross margin, research and development expenses, selling and administrative expenses, operating income or loss, other income or loss, income tax provision or benefit, income or loss from continuing operations, and basic and diluted income or loss per share from continuing operations, adjusted to exclude certain costs, charges, gains and losses. Aviat Networks, Inc. ("we" or "our") believes that these non-GAAP financial measures, when considered together with the GAAP financial measures provide information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionate positive or negative impact on results in any particular period. We also believe these non-GAAP measures enhance the ability of investors to analyze trends in our business and to understand our performance. In addition, we may utilize non-GAAP financial measures as a guide in our forecasting, budgeting and long-term planning process and to measure operating performance for some management compensation purposes. Any analysis of non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP. A reconciliation of these non-GAAP financial measures with the most directly comparable financial measures calculated in accordance with GAAP follows.

Table 4

AVIAT NETWORKS, INC.

Fiscal Year 2012 Third Quarter Summary

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (2)

Condensed Consolidated Statements of Operations

(Unaudited)

Quarter Ended

Three Quarters Ended

March 30,

 2012

% of

Revenue

April 1,
2011

% of

Revenue

March 30,

 2012

% of

Revenue

April 1,
2011 (1)

% of

Revenue

(In millions, except per share amounts)

GAAP gross margin

$

34.3

30.7

%

$

31.6

32.4

%

$

98.9

29.9

%

$

95.3

29.5

%

Share-based compensation

0.2

0.1

0.5

0.3

Write-off of deferred inventory and E&O costs

—

3.3

1.0

3.3

Amortization of purchased technology

0.2

0.2

0.5

0.5

Non-GAAP gross margin

34.7

31.1

%

35.2

32.6

%

100.9

30.5

%

99.4

29.8

%

GAAP research and development expenses

$

8.9

8.0

%

$

9.9

9.7

%

$

26.7

8.2

%

$

30.8

9.7

%

Share-based compensation

(0.2)

(0.5)

(0.7)

(1.5)

Non-GAAP research and development expenses

8.7

7.8

%

9.4

8.1

%

26.0

7.9

%

29.3

8.8

%

GAAP selling and administrative expenses

$

25.1

22.5

%

$

26.7

21.8

%

$

75.0

23.1

%

$

80.2

24.8

%

Share-based compensation

(1.0)

(0.7)

(2.5)

(1.6)

Rebranding and transitional services

—

—

—

(0.9)

NetBoss bad debt expenses and other

(0.5)

—

(0.9)

—

Non-GAAP selling and administrative expenses

23.6

21.1

%

26.0

22.5

%

71.6

21.8

%

77.7

23.5

%

GAAP operating loss

$

(0.2)

(0.2)

%

$

(10.1)

(2.6)

%

$

(11.3)

(5.1)

%

$

(31.2)

(9.8)

%

Share-based compensation

1.4

1.3

3.7

3.4

Write-off of deferred inventory and E&O costs

—

3.3

1.0

3.3

Amortization of purchased technology

0.2

0.2

0.5

0.5

Rebranding and transitional services

—

—

—

0.9

NetBoss bad debt expenses and other

0.5

—

0.9

—

Amortization of intangible assets

0.1

0.7

1.5

2.1

Goodwill impairment charges

—

—

5.6

—

Restructuring charges

0.4

4.4

1.4

13.4

Non-GAAP operating income (loss)

2.4

2.2

%

(0.2)

(0.2)

%

3.3

1.0

%

(7.6)

(2.3)

%

GAAP other expense, net

$

(0.5)

(0.4)

%

$

(0.2)

(0.2)

%

$

(1.3)

(0.4)

%

$

(6.3)

(1.9)

%

Loss on sale of NetBoss assets

—

—

—

4.4

Transactional tax assessments and other

0.3

—

0.6

0.5

Non-GAAP other expense, net

(0.2)

(0.2)

%

(0.2)

(0.2)

%

(0.7)

(0.2)

%

(1.4)

(0.4)

%

GAAP income tax provision (benefit)

$

0.1

0.1

%

$

15.2

13.2

%

$

1.9

0.6

%

$

15.0

4.5

%

Adjustment to reflect zero percent pro forma tax rate

(0.1)

(15.2)

(1.9)

(15.0)

Non-GAAP income tax provision

—

—

%

—

—

%

—

—

%

—

—

%

GAAP loss from continuing operations

$

(0.8)

(0.7)

%

$

(25.5)

(22.1)

%

$

(14.5)

(4.4)

%

$

(52.5)

(15.9)

%

Share-based compensation

1.4

1.3

3.7

3.4

Write-off of deferred inventory and E&O costs

—

3.3

1.0

3.3

Amortization of purchased technology

0.2

0.2

0.5

0.5

Rebranding and transitional services

—

—

—

0.9

NetBoss bad debt expenses and other

0.5

—

0.9

—

Amortization of intangible assets

0.1

0.7

1.5

2.1

Goodwill impairment charges

—

—

5.6

—

Restructuring charges

0.4

4.4

1.4

13.4

Loss on sale of NetBoss assets

—

—

—

4.4

Transactional tax assessments and other

0.3

—

0.6

0.5

Adjustment to reflect zero percent pro forma tax rate

0.1

15.2

1.9

15.0

Non-GAAP income (loss) from continuing operations

$

2.2

2.0

%

$

(0.4)

(0.3)

%

$

2.6

0.8

%

$

(9.0)

(2.7)

%

Basic and diluted income (loss) per share from continuing operations

GAAP

$

(0.01)

$

(0.44)

$

(0.25)

$

(0.90)

Non-GAAP

$

0.04

$

(0.01)

$

0.04

$

(0.15)

Shares used in computing income (loss) per share from continuing operations, basic and diluted

GAAP

59.2

58.6

59.0

58.5

Non-GAAP

61.3

60.6

60.9

60.2

Notes to Table 4:

(1)

In the third quarter of fiscal 2011, the WiMAX business met the criteria to be considered held for sale. Beginning in the third quarter of fiscal 2011, the results of the WiMAX business are presented as a discontinued operation in our consolidated financial statements. Prior year three-quarters period results have been reclassified to conform to current period presentation.

(2)

The adjustments above reconcile our GAAP financial results to the non-GAAP financial measures used by us. Our non-GAAP financial measures exclude share-based compensation, write-off of deferred inventory and excess and obsolete inventory, amortization of purchased technology, rebranding and transitional services, NetBoss bad debt expenses, amortization of intangible assets, goodwill impairment charges, restructuring charges, loss on sale of NetBoss assets, transactional tax assessments and adjustment to reflect zero percent pro forma tax rate. We believe that the presentation of these non-GAAP items provides meaningful supplemental information to investors, when viewed in conjunction with, and not in lieu of, our GAAP results. However, the non-GAAP financial measures have not been prepared under a comprehensive set of accounting rules or principles. Non-GAAP information should not be considered in isolation from, or as a substitute for, information prepared in accordance with GAAP. Moreover, there are material limitations associated with the use of non-GAAP financial measures.

Table 5

AVIAT NETWORKS, INC.

Fiscal Year 2012 Third Quarter Summary

SUPPLEMENTAL SCHEDULE OF REVENUE BY GEOGRAPHICAL AREA

(Unaudited)

Quarter Ended

Three Quarters Ended

March 30, 2012

April 1, 2011

March 30, 2012

April 1, 2011

(In millions)

North America

$

42.6

$

42.5

$

123.8

$

118.1

International:

Africa and Middle East

33.9

34.3

100.7

93.4

Europe and Russia

11.8

16.1

39.9

62.2

Latin America and AsiaPac

23.3

22.6

63.6

57.5

Total International

69.0

73.0

204.2

213.1

$

111.6

$

115.5

$

328.0

$

331.2