PWAV - Powerwave Technologies Reports Fourth Quarter Results
Fourth Quarter and Fiscal 2008 Highlights
Last update: 4:05 p.m. EST Feb. 5, 2009
SANTA ANA, Calif., Feb 05, 2009 (BUSINESS WIRE) -- --Fiscal Year 2008 revenue increased to $890.2 million, up 14.1 percent from $780.5 million in 2007
--Fourth quarter 2008 revenue was $180.3 million
--On a pro forma basis, excluding goodwill impairment charge and intangible asset amortization and restructuring and impairment charges, net income per share for the fourth quarter was 1 cent
Powerwave Technologies, Inc. (PWAV:Powerwave Technologies Inc
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PWAV 0.49, +0.03, +6.3%) , a global supplier of end-to-end wireless solutions for wireless communications networks, today reported preliminary results for its fourth quarter ended December 28, 2008.
Net sales in the fourth quarter were $180.3 million, compared with $230.6 million reported in the fourth quarter of fiscal 2007. Powerwave also reported a fourth quarter GAAP net loss of $322.8 million, which includes a non-cash goodwill impairment charge of $315.9 million, $34.7 million of restructuring and impairment charges, and $4.4 million of intangible asset amortization charges partially offset by a gain of $32.2 million from the repurchase of outstanding long-term debt during the quarter. For the fourth quarter of 2008, the GAAP net loss equates to a basic loss per share of $2.46. This compares with a net loss of $189.3 million, or a loss per share of $1.45 in the prior year period. For the fourth quarter of fiscal 2008, excluding the goodwill impairment charge, restructuring and impairment charges, intangible asset amortization and the gain on the repurchase of outstanding debt, on a pro forma basis, Powerwave would have reported net income of $1.1 million, or a basic net income per share of 1 cent.
Total revenue for fiscal 2008 was $890.2 million, an increase of 14.1 percent, compared with $780.5 million reported for fiscal 2007. Powerwave reported a total net loss for fiscal year 2008 of $349.1 million, or a basic net loss per share of $2.66, compared with a net loss of $309.5 million, or a basic loss per share of $2.37 for fiscal 2007. The results for fiscal 2008 include a goodwill impairment charge of $315.9 million and $81.1 million of restructuring and impairment charges and intangible asset amortization, while the results for fiscal 2007 included a goodwill impairment charge of $151.7 million and $77.3 million of restructuring and impairment charges and intangible asset amortization.
"We are proud to have recorded the highest annual revenue in the history of our company in 2008," said Ronald Buschur, president and chief executive officer of Powerwave Technologies. "During the fourth quarter, we continued to execute on our restructuring activities and exceeded our operating expense reduction targets, in spite of the difficult macro-economic environment."
"We remain committed to driving additional cost reductions throughout our business to further improve our operating performance during these difficult economic times. In addition, we continue to believe that we are positioned to benefit from future long-term growth opportunities within the global wireless infrastructure market place," he said.
Summary of Significant Items Impacting the Fourth Quarter
During the fourth quarter of 2008, Powerwave incurred total restructuring and impairment charges of $34.7 million, which consisted of $29.5 million related to the impairment of intangible assets from prior acquisitions. The remaining $5.2 million consists of severance and impairment charges primarily related to the announced closure of our Finland manufacturing activities, as well as charges related to additional site consolidations. The Company also incurred approximately $4.4 million of intangible asset amortization from previous acquisitions.
In addition, included in the expenses for the fourth quarter of 2008 are the preliminary results of a SFAS 142 "step-two" impairment test that resulted in a non-cash goodwill impairment charge of $315.9 million. Due to the significant decline in the market value of Powerwave's common stock during the fourth quarter of 2008, the Company determined that an indicator of goodwill impairment existed during the fourth quarter. We note that this goodwill impairment charge is preliminary and therefore is subject to change based upon the final results of the "step-two" impairment testing. The final results of such test will be included in our Form 10-K for the fiscal year ended December 28, 2008, to be filed with the Securities and Exchange Commission. The Company will have no remaining goodwill based upon this preliminary goodwill impairment charge.
During the fourth quarter, the Company repurchased a total of $43.7 million par value of its 1.875% Convertible Subordinated Notes due November 2024, resulting in a gain of $32.2 million.
Also during the fourth quarter, the Company's GAAP reported cost of goods sold included a charge of approximately $7.9 million related to both inventory determined to be excess and obsolete to the Company's ongoing operations, as well as inventory cancellation charges due to the reductions in demand given the current macro-economic environment.
The following is a brief summary of the significant items impacting the comparability of per share amounts for the three months ended December 28, 2008 and December 30, 2007. 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 basic shares outstanding for each respective period was used.
Three Months Ended
(unaudited)
Summary of Significant Items Dec. 28, 2008 Dec. 30, 2007
Impacting Results
Intangible asset amortization ($0.03 ) ($0.06 )
Restructuring and impairment charges ($0.04 ) ($0.10 )
Impairment of intangible assets ($0.23 ) ($0.02 )
Non-cash SFAS 123R compensation charge ($0.01 ) ($0.01 )
Non-cash goodwill impairment charge ($2.41 ) ($1.16 )
Gain on repurchase of long-term debt $0.25 $0.02
Total per share impact ($2.47 ) ($1.33 )
In addition, below is a brief summary of significant items impacting the comparability of the gross margin percentage for the fourth quarter of 2008 on a GAAP, pro forma and non-GAAP basis.
Three Months Ended
(unaudited)
Dec. 28, 2008 Dec. 30, 2007
GAAP reported gross margin % 3.0 % 10.4 %
Add: Pro Forma adjustments
Intangible asset amortization 1.5 % 2.1 %
Restructuring and impairment charges 12.4 % 4.6 %
Pro Forma gross margin % 16.9 % 17.1 %
Add: Inventory excess & obsolete and cancellation charges 4.4 % 4.7 %
Non-GAAP gross margin % 21.3 % 21.8 %
Fourth Quarter 2008 Revenue Summary
In the fourth quarter of 2008, total Americas revenue was $41.9 million or approximately 23 percent of revenue, compared with $62.6 million, or approximately 27 percent of revenue in the fourth quarter of 2007. Total sales to customers based in Asia accounted for approximately 37 percent of revenue or $66.5 million in the fourth quarter of 2008, compared with approximately 27 percent of revenue, or $62.6 million in the fourth quarter of 2007. Total Europe, Africa and Middle East revenue in the fourth quarter of 2008 was $71.9 million, or approximately 40 percent of revenue, compared with $105.4 million or approximately 46 percent of revenue in the fourth quarter of 2007.
Sales of products within the antenna systems group totaled $37.3 million or 21 percent of total revenue, sales of products in the base station systems group totaled $127.3 million, or 70 percent of revenue and revenue from the coverage solutions group totaled $15.7 million, or 9 percent of revenue in the fourth quarter of 2008.
In the fourth quarter of 2008, Powerwave's largest customers included Nokia Siemens Networks, which accounted for approximately 38 percent of revenue, and Alcatel-Lucent, which accounted for approximately 15 percent of revenue in the quarter. In terms of customer profile, total OEM sales accounted for approximately 70 percent of total revenue, and total direct and operator sales accounted for approximately 30 percent of revenue.
In terms of transmission standards, 2G and 2.5G standards accounted for approximately 54 percent of total revenue, 3G standards accounted for approximately 42 percent of total revenue and WiMAX accounted for approximately 4 percent of total revenue during the fourth quarter of 2008.
Equity Compensation Expense
In accordance with SFAS 123R, share-based payment, the results reported herein include approximately $1.0 million of pre-tax compensation expense in the fourth quarter of 2008, and $4.8 million for fiscal 2008, the majority of which is included in operating expenses. This had the effect of increasing the loss per share in the fourth quarter of 2008 by 1 cent and increased the loss per share in fiscal 2008 by 4 cents. The impact in the fourth quarter of 2007 increased the loss per share by 1 cent and increased the loss per share in fiscal 2007 by 4 cents.
Balance Sheet
At December 28, 2008, Powerwave had total cash and cash equivalents of $50.3 million, which includes restricted cash of $3.4 million. In addition, during the fourth quarter, Powerwave paid approximately $10.9 million to purchase approximately $43.7 million par value of its outstanding 1.875% Convertible Subordinated Notes due November 2024. Total net inventories were $81.1 million, and net accounts receivable were $213.9 million.
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 certain non-cash charges and expenses arising from the acquisitions the Company has made, including the amortization of certain intangible assets resulting from the purchase accounting valuation of these acquisitions. Also excluded are restructuring and impairment charges related to the consolidation of our manufacturing and engineering facilities as well as the severance costs related to facility closures. In addition, excluded is the goodwill impairment charge related to the SFAS 142 impairment test as well as the gain on the repurchase of the Company's outstanding long-term debt. Management of Powerwave believes that these items should all 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 goodwill impairment charge along with the intangible asset impairment charge and the amortization of intangible assets are all non-cash expenses, and the repurchase of long-term debt will not impact future operating results.
Company Background
Powerwave Technologies, Inc., is a global supplier of end-to-end wireless solutions for wireless communications networks. Powerwave designs, manufactures and markets antennas, boosters, combiners, filters, repeaters, multi-carrier RF power amplifiers and tower-mounted amplifiers and advanced coverage solutions, all for use in cellular, PCS, 3G and WiMAX networks throughout the world. 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 December 28, 2008.
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