Financial Tables Attached.
Table 1
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 Second Quarter Summary
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Quarters Ended Two Quarters Ended
December 28, December 29, December 28, December 29,
2007 2006 2007 2006
(In millions, except net loss per share)
Revenue from product
sales and services $181.1 $101.2 $353.4 $194.8
Cost of product sales
and services (130.1) (66.4) (251.5) (129.2)
Amortization of
purchased technology (1.7) - (3.5) -
Gross margin 49.3 34.8 98.4 65.6
Research and development
expenses (10.9) (8.3) (23.3) (15.7)
Selling and administrative
expenses (32.9) (18.5) (64.8) (35.0)
Amortization of intangible
assets (1.9) - (3.7) -
Restructuring charges (4.4) - (8.4) -
Corporate allocations
expense - (1.8) - (3.4)
Operating (loss) income (0.8) 6.2 (1.8) 11.5
Interest income 0.4 0.2 1.1 0.3
Interest expense (0.8) (0.3) (1.5) (0.5)
(Loss) income before income
taxes (1.2) 6.1 (2.2) 11.3
Income tax benefit
(expense) 0.2 (0.3) 0.4 (0.7)
Net (loss) income $(1.0) $5.8 $(1.8) $10.6
Net loss per common share:
Basic and diluted $(0.02) * $(0.03) *
Basic and diluted
weighted average
shares outstanding 58.4 * 58.4 *
* Prior to January 26, 2007, the Company was a division of Harris
Corporation and there were no shares outstanding for purposes of income
or loss calculations.
Table 2
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 Second Quarter Summary
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 28, June 29,
2007 2007 (1)
(In millions)
Assets
Cash and cash equivalents $73.0 $69.2
Short-term investments 10.0 20.4
Receivables 207.6 185.3
Inventories and unbilled costs 168.4 172.6
Current deferred taxes 7.1 4.1
Other current assets 22.0 21.7
Property, plant and equipment 78.2 80.0
Goodwill 314.6 323.6
Identifiable intangible assets 137.2 144.5
Other assets 17.5 16.7
$1,035.6 $1,038.1
Liabilities and Shareholders' Equity
Short-term debt $0.0 $1.2
Current portion of long-term debt 7.6 10.7
Accounts payable 96.5 84.7
Accrued expenses and other current liabilities 92.9 96.1
Due to Harris Corporation 20.5 23.1
Long-term debt 6.3 8.8
Restructuring and other long-term liabilities 8.3 11.8
Redeemable preference shares 8.3 8.3
Warrants outstanding 3.1 3.9
Non-current deferred taxes 23.6 31.5
Shareholders' equity 768.5 758.0
$1,035.6 $1,038.1
(1) Derived from audited financial statements.
Table 3
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 Second Quarter Summary
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Two Quarters Ended
December 28, December 29,
2007 2006
(In millions)
Operating Activities
Net (loss) income $(1.8) $10.6
Adjustments to reconcile net loss to net cash (used
in) provided by operating activities:
Amortization of identifiable intangible assets
acquired in the Stratex acquisition 7.2 -
Depreciation and amortization of property, plant and
equipment and capitalized software 9.4 6.2
Non-cash stock-based compensation expense 3.6 -
Non-cash charges for restructuring and inventory
write-downs 7.8 -
Decrease in fair value of warrants (0.8) -
Deferred income tax (benefit) expense (3.5) -
Changes in operating assets and liabilities, net of
effects from acquisition:
Receivables (20.9) 15.4
Unbilled costs and inventories 0.6 (23.7)
Accounts payable and accrued expenses 7.1 (4.5)
Advance payments and unearned income 5.5 6.4
Due to Harris Corporation 0.5 (12.3)
Other (2.6) (3.8)
Net cash provided by (used in) operating activities 12.1 (5.7)
Investing Activities
Purchases of short-term investments and available for
sale securities (4.4) -
Sales of short-term investments and available for
sale securities 14.8 -
Additions of property, plant and equipment (3.6) (1.9)
Additions of capitalized software (6.5) (3.1)
Net cash provided by (used in) investing activities 0.3 (5.0)
Financing Activities
Decrease in short-term debt (1.2) (0.1)
Payments on long-term debt (5.6) -
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 - 8.5
Net cash (used in) provided by financing activities (7.9) 8.4
Effect of exchange rate changes on cash and cash
equivalents (0.7) 0.7
Net (decrease) increase in cash and cash equivalents 3.8 (1.6)
Cash and cash equivalents, beginning of year 69.2 13.8
Cash and cash equivalents, end of quarter $73.0 $12.2
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 Second 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 Second Quarter Summary
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Condensed Consolidated Statements of Operations
(Unaudited)
Quarter Ended
December 28, 2007 December 29, 2006
MCD and
Non- Stratex Non-
GAAP Combined GAAP
As Adjust- Non- as Adjust- Non-
Reported ments GAAP Reported ments GAAP
(In millions, except per share amounts)
Revenue from product sales
and services $181.1 $ - $181.1 $171.9 $ - $171.9
Cost of product sales and
services (A) (130.1) 5.3 (124.8) (113.9) 0.2 (113.7)
Amortization of purchased
technology (B) (1.7) 1.7 - - - -
Gross margin 49.3 7.0 56.3 58.0 0.2 58.2
Research and development
expenses © (10.9) 0.2 (10.7) (12.3) 0.6 (11.7)
Selling and administrative
expenses (D) (32.9) 4.1 (28.8) (33.5) 5.2 (28.3)
Amortization of intangible
assets (E) (1.9) 1.9 - - - -
Restructuring charges (F) (4.4) 4.4 - - - -
Corporate allocations
expense(G) - - - (1.8) 1.8 -
Operating (loss) income (0.8) 17.6 16.8 10.4 7.8 18.2
Interest income 0.4 - 0.4 1.2 - 1.2
Interest expense (0.8) - (0.8) (1.4) - (1.4)
(Loss) income before income
taxes (1.2) 17.6 16.4 10.2 7.8 18.0
Income tax benefit
(expense) (H) 0.2 (4.5) (4.3) (0.6) (4.8) (5.4)
Net (loss) income $(1.0) $13.1 $12.1 $9.6 $3.0 $12.6
Net (loss) income per
common share:
Basic and diluted $(0.02) $0.21 * *
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.
Table 4 (Continued)
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 Second Quarter Summary
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Condensed Consolidated Statements of Operations
(Unaudited)
Two Quarters Ended
December 28, 2007 December 29, 2006
MCD and
Non- Stratex Non-
GAAP Combined GAAP
As Adjust- Non- as Adjust- Non-
Reported ments GAAP Reported ments GAAP
(In millions, except per share amounts)
Revenue from product sales
and services $353.4 $ - $353.4 $332.8 $ - $332.8
Cost of product sales and
services (A) (251.5) 6.3 (245.2) (223.2) 0.4 (222.8)
Amortization of purchased
technology (B) (3.5) 3.5 - - - -
Gross margin 98.4 9.8 108.2 109.6 0.4 110.0
Research and development
expenses © (23.3) 0.7 (22.6) (23.3) 1.3 (22.0)
Selling and administrative
expenses (D) (64.8) 9.3 (55.5) (65.3) 8.8 (56.5)
Amortization of intangible
assets (E) (3.7) 3.7 - - - -
Restructuring charges (F) (8.4) 8.4 - - - -
Corporate allocations
expense(G) - - - (3.4) 3.4 -
Operating (loss) income (1.8) 31.9 30.1 17.6 13.9 31.5
Interest income 1.1 - 1.1 2.0 - 2.0
Interest expense (1.5) - (1.5) (2.6) - (2.6)
(Loss) income before income
taxes (2.2) 31.9 29.7 17.0 13.9 30.9
Income tax benefit
(expense) (H) 0.4 (8.1) (7.7) (1.0) (8.3) (9.3)
Net (loss) income $(1.8) $23.8 $22.0 $16.0 $5.6 $21.6
Net (loss) income per
common share:
Basic and diluted $(0.03) $0.38 * *
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 adjustments to cost of
product sales and services for the second quarter and first two quarters
of fiscal 2008 to remove purchase accounting adjustments for the
amortization of the step-up in the value of fixed assets ($0.2 million and
$0.4 million), adjustments to remove merger integration costs ($0.9
million and $1.5 million) and adjustments to remove FAS 123R expense ($0.5
million and $0.7 million). Also includes adjustments to remove $3.7
million in write-downs of inventory related to restructuring actions for
the second quarter of fiscal 2008.
For the second quarter and first two quarters of fiscal 2007, adjustments
to Stratex Networks, Inc. cost of product sales and services to remove FAS
123R expense ($0.2 million and $0.4 million).
Note B - Amortization of purchased technology - Adjustments for the second
quarter and first two quarters of fiscal 2008 to remove amortization of
purchased intangibles incurred in connection with the merger.
Note C - Research and development expenses - Adjustments for the second
quarter and first two quarters of fiscal 2008 to remove FAS 123R expense
($0.2 million and $0.7 million). Adjustments for the second quarter and
the first two quarters of fiscal 2007 to remove FAS 123R expense recorded
by Stratex ($0.6 million and $1.3 million).
Note D - Selling and administrative expenses - Includes adjustments for
the second quarter and first two quarters 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 and $1.0 million), merger
integration costs ($2.3 million and $4.5 million), lease impairment costs
($0.1 million and $0.9 million) and FAS 123R expense ($1.2 million and
$2.9 million).
For the second quarter and first two quarters of fiscal 2007, includes
adjustments to the Microwave Communications Division of Harris
Corporation's selling and administrative expenses to remove FAS 123R
expense ($0.3 million and $0.7 million), adjustments to the Stratex
selling and administrative expenses to remove FAS 123R expense ($1.5
million and $3.2 million) and to remove $1.5 million of merger integration
costs incurred by Stratex associated with the merger ($1.7 million and
$3.2 million). Also includes adjustment to remove $1.7 million of merger
integration costs incurred by the Microwave Communications Division of
Harris during the second quarter of fiscal 2007.
Note E - Amortization of intangible assets - Adjustment for the second
quarter and first two quarters 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 second quarter and first two quarters of
fiscal 2008.
Note G - Corporate allocation expenses - Adjustment for the second quarter
and first two quarters 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 second quarter and first two quarters of
fiscal 2008, and a pro forma 30 percent tax rate for the second quarter
and first two quarters of fiscal 2007.
Table 5
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 Second Quarter Summary
GAAP REVENUE BY SEGMENT INFORMATION
(Unaudited)
Quarter Ended Two Quarters Ended
December 28, December 29, December 28, December 29,
2007 2006 2007 2006
(In millions)
North America microwave $63.8 $58.7 $120.4 $108.6
International microwave 110.8 37.5 220.0 76.7
Network operations 6.5 5.0 13.0 9.5
$181.1 $101.2 $353.4 $194.8
Table 6
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 Second Quarter Summary
SUPPLEMENTAL SCHEDULE OF REVENUE BY GEOGRAPHICAL AREA
(Unaudited)
Quarter Ended Quarter Ended
December 28, 2007 December 29, 2006
(In millions)
As Non-
Reported GAAP MCD Combined
Adjust- Non- As Stratex Non-
ments GAAP Reported Actual GAAP
North America $63.8 $ - $63.8 $58.7 $4.2 $62.9
International:
Africa 41.0 - 41.0 25.5 13.9 39.4
Europe, Middle
East, and Russia 32.0 - 32.0 3.5 36.5 40.0
Latin America and
AsiaPac 37.8 - 37.8 8.5 16.1 24.6
Total International 110.8 - 110.8 37.5 66.5 104.0
Network Operations 6.5 - 6.5 5.0 - 5.0
$181.1 $ - $181.1 $101.2 $70.7 $171.9
Table 6 (Continued)
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 Second Quarter Summary
SUPPLEMENTAL SCHEDULE OF REVENUE BY GEOGRAPHICAL AREA
(Unaudited)
Two Quarters Ended Two Quarters Ended
December 28, 2007 December 29, 2006
(In millions)
As Non-
Reported GAAP MCD Combined
Adjust- Non- As Stratex Non-
ments GAAP Reported Actual GAAP
North America $120.4 $ - $120.4 $108.6 $6.8 $115.4
International:
Africa 93.4 - 93.4 50.2 41.7 91.9
Europe, Middle East, and
Russia 64.7 - 64.7 12.2 56.4 68.6
Latin America and
AsiaPac 61.9 - 61.9 14.3 33.1 47.4
Total International 220.0 - 220.0 76.7 131.2 207.9
Network Operations 13.0 - 13.0 9.5 - 9.5
$353.4 $ - $353.4 $194.8 $138.0 $332.8
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