Table 1
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 First Quarter Summary
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Quarter Ended
September 28, September 29,
2007 2006
(In millions, except
per share amounts)
Revenue from product sales and services $172.3 $93.6
Cost of product sales and services (121.4) (62.8)
Amortization of purchased technology (1.8) -
Gross margin 49.1 30.8
Research and development expenses (12.4) (7.5)
Selling and administrative expenses (31.9) (16.4)
Amortization of intangible assets (1.8) -
Restructuring charges (4.0) -
Corporate allocations expense - (1.6)
Operating (loss) income (1.0) 5.3
Interest income 0.7 0.1
Interest expense (0.7) (0.2)
(Loss) income before income taxes (1.0) 5.2
Income tax benefit (expense) 0.2 (0.4)
Net (loss) income $(0.8) $4.8
Net Loss per Common Share
Basic and diluted $(0.01) *
Basic and diluted weighted average shares
outstanding 58.4 *
* Prior to January 26, 2007, the Company was not a public reporting entity
and there were no shares outstanding for purposes of earnings (loss) per
share calculations.
Table 2
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 First Quarter Summary
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 28, June 29,
2007 2007(1)
(In millions)
Assets
Cash and cash equivalents $64.2 $69.2
Short-term investments 15.1 20.4
Receivables 196.1 185.3
Inventories and unbilled costs 183.7 172.6
Current deferred taxes 7.9 4.1
Other current assets 20.7 21.7
Property, plant and equipment 79.2 80.0
Goodwill 314.0 323.6
Identifiable intangible assets 141.0 144.5
Non-current deferred taxes 0.6 0.5
Other assets 16.2 16.2
$1,038.7 $1,038.1
Liabilities and Shareholders' Equity
Short-term debt $0.0 $1.2
Current portion of long-term debt 9.2 10.7
Accounts payable 92.1 84.7
Accrued expenses and other current liabilities 95.9 96.1
Due to Harris Corporation 24.1 23.1
Long-term debt 7.5 8.8
Restructuring and other long-term liabilities 9.9 11.8
Warrants outstanding 3.4 3.9
Redeemable preference shares 8.3 8.3
Non-current deferred taxes 24.8 31.5
Shareholders' equity 763.5 758.0
$1,038.7 $1,038.1
(1) Derived from audited financial statements.
Table 3
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 First Quarter Summary
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Quarter Ended
September 28, September 30,
2007 2006
(In millions)
Operating Activities
Net (loss) income $(0.8) $4.8
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Amortization of identifiable intangible
assets acquired in the Stratex acquisition 3.6 -
Depreciation and amortization of property,
plant and equipment and capitalized software 5.3 3.3
Non-cash stock-based compensation expense 2.0 -
Decrease in fair value of warrants (0.5) -
Deferred income tax (benefit) expense (0.2) -
Changes in operating assets and liabilities,
net of effects from acquisition:
Receivables (10.1) (1.6)
Unbilled costs and inventories (11.0) (0.9)
Accounts payable and accrued expenses 8.5 (1.3)
Advance payments and unearned income - 4.0
Due to Harris Corporation 3.0 (9.5)
Other 2.3 0.2
Net cash provided by (used in) operating activities 2.1 (1.0)
Investing Activities
Purchases of short-term investments and
available for sale securities (4.0) -
Sales of short-term investments and available
for sale securities 9.3 -
Additions of property, plant and equipment (2.1) (0.2)
Additions of capitalized software (4.2) (1.1)
Net cash used in investing activities (1.0) (1.3)
Financing Activities
Decrease in short-term debt (1.2) (0.1)
Payments on long-term debt (2.8) -
Payments on long-term capital lease
obligation to Harris Corporation (2.0) -
Proceeds from exercise of former Stratex
stock options 0.9 -
Net cash and other transfers from Harris
Corporation prior to the Stratex acquisition - 2.7
Net cash (used in) provided by financing activities (5.1) 2.6
Effect of exchange rate changes on cash and
cash equivalents (1.0) 0.3
Net (decrease) increase in cash and cash
equivalents (5.0) 0.6
Cash and cash equivalents, beginning of year 69.2 13.8
Cash and cash equivalents, end of quarter $64.2 $14.4
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 First Quarter Summary
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 revenue, gross margin, operating income (loss), non-operating income (loss), cost of product sales and services, research and development expenses, selling and administrative expenses, income (loss) before income taxes, income taxes, net income (loss), and net income (loss) per basic and diluted share adjusted to exclude certain costs, expenses, gains and losses, including such amounts related to our merger with Stratex. Management of Harris Stratex Networks, Inc. (the "Company" or "Harris Stratex") believes that these non-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. Management also believes these non-GAAP measures enhance the ability of an investor to analyze trends in Harris Stratex business and better understand our performance. In addition, the Company may utilize non- GAAP financial measures as a guide in its 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
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 First Quarter Summary
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Condensed Consolidated Statements of Operations
(Unaudited)
Quarter Ended
September 28, 2007 September 29, 2006
As Non-GAAP Non- MCD and Non-
Reported Adjust- GAAP Stratex GAAP Non-GAAP
ments Combined Adjust-
as ments
Reported
(In millions, except per share amounts)
Revenue from
product sales
and services $172.3 $- $172.3 $160.9 $- $160.9
Cost of product
sales and
services (A) (121.4) 1.0 (120.4) (109.3) 0.2 (109.1)
Amortization
of purchased
technology (B) (1.8) 1.8 - - - -
Gross margin 49.1 2.8 51.9 51.6 0.2 51.8
Research and
development
expenses © (12.4) 0.5 (11.9) (11.8) 0.7 (11.1)
Selling and
administrative
expenses (D) (31.9) 5.2 (26.7) (31.0) 3.6 (27.4)
Amortization
of intangible
assets (E) (1.8) 1.8 - - - -
Restructuring
charges (F) (4.0) 4.0 - - - -
Corporate
allocations
expense(G) - - - (1.6) 1.6 -
Operating (loss)
income (1.0) 14.3 13.3 7.2 6.1 13.3
Interest
income 0.7 - 0.7 0.8 - 0.8
Interest
expense (0.7) - (0.7) (1.2) - (1.2)
(Loss) income
before income
taxes (1.0) 14.3 13.3 6.8 6.1 12.9
Income tax
benefit
(expense) (H) 0.2 (3.6) (3.4) (0.4) (3.5) (3.9)
Net (loss)
income $(0.8) $10.7 $9.9 $6.4 $2.6 $9.0
Net (loss) income
per common share:
Basic and
diluted $(0.01) $0.17 * *
Basic and diluted
weighted average
shares outstanding:
Basic and
diluted 58.4 58.4 * *
* Prior to January 26, 2007, the Company was not a public reporting entity
and there were no shares outstanding for purposes of earnings (loss) per
share calculations.
Notes to tables 4 and 6:
Note A - Cost of sales and services - Includes adjustment to cost of
product sales and services for the first quarter of fiscal 2008
to remove purchase accounting adjustments for the amortization of
the step-up in the value of fixed assets ($0.2 million),
adjustment to remove integration costs ($0.6 million) and
adjustment to remove FAS 123R expense ($0.2 million).
For the first quarter of fiscal 2007, adjustment to Stratex
Networks, Inc. cost of product sales and services to remove $0.2
million of FAS 123R expense.
Note B - Amortization of purchased technology - Adjustment for the first
quarter of fiscal 2008 to remove amortization of purchased
intangibles incurred in connection with the merger.
Note C - Research and development expenses - Adjustment for the first
quarter of fiscal 2008 to remove FAS 123R expense of $0.5
million. Adjustment for the first quarter of fiscal 2007 to
remove FAS 123R expense recorded by Stratex of $0.7 million.
Note D - Selling and administrative expenses - Includes adjustment for the
first quarter of fiscal 2008 to remove purchase accounting
adjustments related to the amortization of the step-up in the
value of fixed assets ($0.5 million), integration costs and lease
impairment costs ($3.0 million) and FAS 123R expense ($1.7
million).
For the first quarter of fiscal 2007, includes adjustment to the
Microwave Communications Division of Harris Corporation's selling
and administrative expenses for the first quarter of fiscal 2007
to remove $0.4 million of FAS 123R expense and adjustment to the
Stratex selling and administrative expenses to remove $1.7
million of FAS 123R expense and to remove $1.5 million of
integration costs incurred by Stratex associated with the merger.
Note E - Amortization of intangible assets - Adjustment for the first
quarter of fiscal 2008 to remove amortization of purchased
intangibles incurred in connection with the merger.
Note F - Restructuring charges - Adjustment to remove charges for
restructuring incurred during the first quarter of fiscal 2008.
Note G - Corporate allocation expenses - Adjustment for the first quarter
of fiscal 2007 to remove corporate allocation expenses from
Harris Corporation, which did not continue after the merger with
Stratex.
Note H - Income tax benefit (expense) - Adjustment to reflect a pro forma
26 percent tax rate for the first quarter of fiscal 2008 and a
pro forma 30 percent tax rate for the first quarter of fiscal
2007.
Table 5
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 First Quarter Summary
GAAP REVENUE BY Segment Information
(Unaudited)
Quarter Ended
September 28, September 29,
2007 2006
(In millions)
North America microwave $56.6 $49.9
International microwave 109.2 39.3
Network operations 6.5 4.4
$172.3 $93.6
Table 6
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 First Quarter Summary
SUPPLEMENTAL SCHEDULE OF REVENUE BY GEOGRAPHICAL AREA
(Unaudited)
Quarter Ended Quarter Ended
September 28, 2007 September 29, 2006
(In millions)
As Non-GAAP Non- MCD Stratex Combined
Reported Adjust- GAAP Actual Actual Non-GAAP
ments
North America $56.6 $- $56.6 $49.9 $2.7 $52.6
International:
Africa 52.4 - 52.4 24.7 27.8 52.5
Europe, Middle
East, and
Russia 32.7 - 32.7 8.7 20.0 28.7
Latin America
and
AsiaPac 24.1 - 24.1 5.9 16.8 22.7
Total
International 109.2 - 109.2 39.3 64.6 103.9
Network
Operations 6.5 - 6.5 4.4 - 4.4
$172.3 $- $172.3 $93.6 $67.3 $160.9
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Source: Harris Stratex Networks, Inc.
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