Financial Tables for Q3 Fiscal 2008 Results
Table 1
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 Third Quarter Summary
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Quarter Ended Three Quarters Ended
March 28, March 30, March 28, March 30,
2008 2007 2008 2007
(In millions, except per share amounts)
Revenue from product sales
and services $178.2 $139.0 $531.6 $333.8
Cost of product sales
and services (123.4) (101.8) (374.9) (230.9)
Amortization of purchased
technology (1.8) (1.2) (5.3) (1.2)
Gross margin 53.0 36.0 151.4 101.7
Research and development
expenses (11.5) (11.1) (34.8) (26.8)
Selling and administrative
expenses (30.4) (27.7) (95.2) (62.2)
Acquired in-process research
and development - (15.3) - (15.3)
Amortization of intangible
assets (1.9) (3.0) (5.6) (3.0)
Restructuring charges - (1.3) (8.4) (2.0)
Corporate allocations
expense
- (0.3) - (3.7)
Operating income (loss) 9.2 (22.7) 7.4 (11.3)
Interest income 0.3 0.9 1.4 1.2
Interest expense (0.7) (1.1) (2.2) (1.5)
Income (loss) before income
taxes 8.8 (22.9) 6.6 (11.6)
Income tax (expense) benefit (1.5) (0.3) (1.1) (1.0)
Net income (loss) $7.3 $(23.2) $5.5 $(12.6)
Net income (loss) per common
share of Class A and Class B
common stock (1):
Basic $0.12 $(0.58) $0.09 $(0.93)
Diluted $0.09(2) $(0.58) $0.05(2) $(0.93)
Basic weighted average shares
outstanding 58.4 40.3(3) 58.4 13.5(3)
Diluted weighted average
shares outstanding 58.7 40.3(3) 58.9 13.5(3)
(1) The net income (loss) per common share amounts are the same for Class
A and Class B because the holders of each class are legally entitled
to equal per share distributions whether through dividends or in
liquidation.
(2) For the quarter and three quarters ended March 28, 2008, the
calculations of diluted earnings per share include a potential
deduction to net income of $2.1 million and $2.7 million for the
assumed after-tax effect of the change in fair value of warrants using
the "treasury stock" method.
(3) 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. Basic and diluted weighted average shares
outstanding are calculated based on the daily outstanding shares,
reflecting the fact that no shares were outstanding prior to January
26, 2007.
Table 2
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 Third Quarter Summary
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 28, June 29,
2008 2007 (1)
(In millions)
Assets
Cash and cash equivalents $97.0 $69.2
Short-term investments 3.4 20.4
Receivables 199.0 185.3
Inventories and unbilled costs 161.0 172.6
Current deferred taxes 6.5 4.1
Other current assets 17.5 21.7
Property, plant and equipment 74.4 80.0
Goodwill 315.4 323.6
Identifiable intangible assets 133.2 144.5
Other assets 16.0 16.7
$1,023.4 $1,038.1
Liabilities and Shareholders' Equity
Short-term debt $-- $1.2
Current portion of long-term debt 6.0 10.7
Accounts payable 81.8 84.7
Accrued expenses and other current liabilities 94.3 96.1
Due to Harris Corporation 23.7 23.1
Long-term debt 5.0 8.8
Restructuring and other long-term liabilities 6.2 11.8
Redeemable preference shares 8.3 8.3
Warrants outstanding 0.6 3.9
Non-current deferred taxes 21.2 31.5
Shareholders' equity 776.3 758.0
$1,023.4 $1,038.1
(1) Derived from audited financial statements.
Table 3
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 Third Quarter Summary
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Quarters Ended
March 28, March 30,
2008 2007
(In millions)
Operating Activities
Net income (loss) $5.5 $(12.6)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Amortization of identifiable
intangible assets acquired in the
Stratex acquisition 10.9 19.4
Other noncash charges related to
the Stratex Acquisition - 5.4
Depreciation and amortization of
property, plant and equipment and
capitalized software 15.2 12.2
Non-cash stock-based compensation expense 5.3 1.0
Non-cash charges for restructuring and
inventory write-downs 7.8 -
Decrease in fair value of warrants (3.2) -
Deferred income tax (benefit) expense (0.2) 1.0
Changes in operating assets and liabilities,
net of effects from acquisition:
Receivables (11.7) 2.7
Unbilled costs and inventories 8.0 (32.0)
Accounts payable and accrued expenses (1.4) (0.7)
Advance payments and unearned income 4.3 4.8
Due to Harris Corporation 4.6 (3.7)
Decrease in restructuring liabilities
and other (9.7) (9.0)
Net cash provided by (used in) operating
activities 35.4 (11.5)
Investing Activities
Cash acquired from the Stratex
Acquisition, net of acquisition costs
of $12.7 million - 20.4
Purchases of short-term investments and
available for sale securities (8.3) (33.2)
Sales of short-term investments and
available for sale securities 25.3 17.8
Additions of property, plant and equipment (6.3) (4.4)
Additions of capitalized software (7.9) (2.8)
Net cash provided by (used in) investing
activities 2.8 (2.2)
Financing Activities
Decrease in short-term debt (1.2) -
Proceeds from issuance of redeemable
preference shares - 8.3
Payments on long-term debt (8.4) (2.6)
Proceeds from issuance of Class B common
stock to Harris Corporation - 26.9
Payments on long-term capital lease
obligation to Harris Corporation (3.2) -
Proceeds from exercise of former Stratex
stock options 1.5 1.4
Registration costs for Class A common
stock issued in Stratex Acquisition - (1.1)
Proceeds from exercise of former Stratex
warrants - 0.2
Net cash and other transfers from Harris
Corporation prior to the Stratex acquisition - 24.1
Net cash (used in) provided by financing
activities (11.3) 57.2
Effect of exchange rate changes on cash and
cash equivalents 0.9 (2.9)
Net increase in cash and cash equivalents 27.8 40.6
Cash and cash equivalents, beginning of year 69.2 13.8
Cash and cash equivalents, end of quarter $97.0 $54.4
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 Third Quarter Summary
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND REGULATION G DISCLOSURE
To supplement our condensed 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 Third Quarter Summary
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Condensed Consolidated Statements of Operations
(Unaudited)
Quarter Ended
March 28, 2008 March 30, 2007
Non-GAAP Non-GAAP
As Adjust- Non- As Adjust-
Reported ments GAAP Reported ments Non-GAAP
(In millions, except per share amounts)
Revenue from product
sales and services
(A) $178.2 $ - $178.2 $139.0 $7.8 $146.8
Cost of product sales
and services (B) (123.4) 0.5 (122.9) (101.8) (0.5) (102.3)
Amortization of
purchased
technology © (1.8) 1.8 - (1.2) 1.2 -
Gross margin 53.0 2.3 55.3 36.0 8.5 44.5
Research and
development
expenses (D) (11.5) 0.4 (11.1) (11.1) 0.3 (10.8)
Selling and
administrative
expenses (E) (30.4) 2.7 (27.7) (27.7) (0.1) (27.8)
Acquired in-process
research and
development (F) - - - (15.3) 15.3 -
Amortization of
intangible
assets (G) (1.9) 1.9 - (3.0) 3.0 -
Restructuring
charges (H) - - - (1.3) 1.3 -
Corporate
allocations
expense - - - (0.3) - (0.3)
Operating income
(loss) 9.2 7.3 16.5 (22.7) 28.3 5.6
Interest income 0.3 - 0.3 0.9 - 0.9
Interest expense (A) (0.7) - (0.7) (1.1) (0.1) (1.2)
Income (loss) before
income taxes 8.8 7.3 16.1 (22.9) 28.2 5.3
Income tax (expense)
benefit (J) (1.5) (2.7) (4.2) (0.3) (1.3) (1.6)
Net income (loss) $7.3 $4.6 $11.9 $(23.2) $26.9 $3.7
Net income (loss) per
common share of
Class A
and Class B common
stock (1):
Basic $0.12 $0.20 $(0.58) (3)
Diluted (2)$0.09 (2)$0.20 $(0.58) (3)
Basic weighted
average
shares
outstanding 58.4 58.4 (3)40.3 (3)
Diluted weighted
average
shares
outstanding 58.7 58.7 (3)40.3 (3)
(1) The net income (loss) per common share amounts are the same for Class
A and Class B because the holders of each class are legally entitled
to equal per share distributions whether through dividends or in
liquidation.
(2) For the quarter ended March 28, 2008, the "As Reported" calculations
of diluted earnings per share include a potential deduction to net
income of $2.1 million for the assumed after-tax effect of the change
in fair value of warrants using the "treasury stock" method. The "Non-
GAAP" calculations exclude the effects of this potential deduction.
(3) 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. Basic and diluted weighted average
shares outstanding are calculated based on the daily outstanding
shares, reflecting the fact that no shares were outstanding prior to
January 26, 2007. Non-GAAP earnings per share for the quarter ended
March 30, 2007 is not reported because it is not meaningful due to the
merger date occurring during the quarter.
Table 4 (Continued)
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 Third Quarter Summary
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Condensed Consolidated Statements of Operations
(Unaudited)
Three Quarters Ended
March 28, 2008 March 30, 2007
Non-GAAP Non-GAAP
As Adjust- Non- As Adjust-
Reported ments GAAP Reported ments Non-GAAP
(In millions, except per share amounts)
Revenue from
product sales
and services (A) $531.6 $ - $531.6 $333.8 $145.8 $479.6
Cost of product
sales and
services (B) (374.9) 6.8 (368.1) (230.9) (94.1) (325.0)
Amortization of
purchased
technology © (5.3) 5.3 - (1.2) 1.2 -
Gross margin 151.4 12.1 163.5 101.7 52.9 154.6
Research and
development
expenses (D) (34.8) 1.1 (33.7) (26.8) 1.6 (25.2)
Selling and
administrative
expenses (E) (95.2) 12.0 (83.2) (62.2) (29.2) (91.4)
Acquired in-process
research and
development (F) - - - (15.3) 15.3 -
Amortization of
intangible
assets (G) (5.6) 5.6 - (3.0) 3.0 -
Restructuring
charges (H) (8.4) 8.4 - (2.0) 1.3 (0.7)
Corporate
allocations
expense (I) - - - (3.7) 3.4 (0.3)
Operating
income (loss) 7.4 39.2 46.6 (11.3) 48.3 37.0
Interest
income (A) 1.4 - 1.4 1.2 1.8 3.0
Interest
expense (A) (2.2) - (2.2) (1.5) (2.3) (3.8)
Income (loss)
before income
taxes 6.6 39.2 45.8 (11.6) 47.8 36.2
Income tax
expense (J) (1.1) (10.8) (11.9) (1.0) (9.9) (10.9)
Net income (loss) $5.5 $28.4 $33.9 $(12.6) $37.9 $25.3
Net income (loss)
per common share
of Class A and
Class B common
stock (4):
Basic $0.09 $0.58 $(0.93) (6)
Diluted (5) $0.05 (5)$0.58 $(0.93) (6)
Basic weighted
average shares
outstanding 58.4 58.4 (6) 13.5 (6)
Diluted weighted
average shares
outstanding 58.9 58.9 (6) 13.5 (6)
(4) The net income (loss) per common share amounts are the same for
Class A and Class B because the holders of each class are legally
entitled to equal per share distributions whether through dividends or
in liquidation.
(5) For the three quarters ended March 28, 2008, the "As Reported"
calculations of diluted earnings per share include a potential
deduction to net income of $2.7 million for the assumed after-tax
effect of the change in fair value of warrants using the "treasury
stock" method. The "Non-GAAP" calculations exclude the effects of this
potential deduction.
(6) 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. Basic and diluted weighted average
shares outstanding are calculated based on the daily outstanding
shares, reflecting the fact that no shares were outstanding prior to
January 26, 2007. Non-GAAP earnings per share for the three quarters
ended March 30, 2007 is not reported because it is not meaningful due
to the merger date occurring during the quarter.
Notes to tables 4 and 6:
Note A - Revenue, Interest income and Interest expense - Adjustment to revenue for the quarter and first three quarters of fiscal 2007 to add Stratex Networks, Inc. revenue prior to the merger. For Interest income and Interest expense, adjustment is to add Stratex Networks, Inc. amounts for both the quarter and first three quarters of fiscal 2007.
Note B - Cost of sales and services - Includes adjustments to cost of product sales and services for the third quarter and first three 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 $0.6 million), adjustments to remove merger integration costs ($0.0 million and $1.5 million) and adjustments to remove FAS 123R expense ($0.3 million and $1.0 million). Also includes adjustments to remove $3.7 million in mark-downs of inventory related to restructuring actions for the first three quarters of fiscal 2008.
Includes adjustments to cost of product sales and services for the third quarter and the first three quarters of fiscal 2007 to add $6.3 million and $100.3 million for Stratex Networks cost of product sales and services prior to the merger. Also includes adjustments to remove merger related charges including amortization of the step-up in inventory ($5.4 million) and fixed assets ($0.2 million) and write off of deferred revenue ($0.1 million) for the third quarter of fiscal 2007 and adjustments for the quarter and the first three quarters of fiscal 2007 to remove FAS 123R expense ($0.1 million for the third quarter and $0.5 million for the first three quarters of fiscal 2007).
Note C - Amortization of purchased technology - Adjustments for the third quarter and first three quarters of fiscal 2008 and fiscal 2007 to remove amortization of purchased intangibles incurred in connection with the merger.
Note D - Research and development expenses - Adjustments for the third quarter and first three quarters of fiscal 2008 to remove FAS 123R expense ($0.4 million and $1.1 million). Adjustments for the third quarter and first three quarters of fiscal 2007 to remove FAS 123R expense ($0.3 million and $1.6 million).
Note E - Selling and administrative expenses - Includes adjustments for the third quarter and first three 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 $1.5 million), merger integration costs ($0.9 million and $5.4 million), lease impairment costs ($0.0 million and $0.9 million) and FAS 123R expense ($1.3 million and $4.2 million).
For the third quarter and first three quarters of fiscal 2007, includes adjustments to add $3.6 million and $41.5 million for Stratex Networks Selling and administrative expenses for the month of January 2007 prior to the merger. Also includes adjustments to the Microwave Communications Division of Harris Corporation's selling and administrative expenses to remove FAS 123R expense ($0.4 million and $1.1 million), adjustments to the Stratex selling and administrative expenses to remove FAS 123R expense ($0.7 million and $3.9 million) and to remove merger integration costs incurred by Stratex associated with the merger ($0.0 million and $3.2 million). Also includes adjustment to remove merger integration costs incurred by the Microwave Communications Division of Harris ($2.2 million and $3.9 million) and to remove $0.2 million merger related charges for the amortization of the step-up in fixed assets for both the third quarter and first three quarters of fiscal 2007.
Note F - Adjustment for the quarter and first three quarters of fiscal 2007 to remove write off of in-process research and development incurred in connection with the merger.
Note G - Amortization of intangible assets - Adjustment for the third quarter and first three quarters of fiscal 2008 and fiscal 2007 to remove amortization of purchased intangibles incurred in connection with the merger.
Note H - Restructuring charges - Adjustment to remove charges for restructuring incurred during the first three quarters of fiscal 2008. For the third quarter and first three quarters of fiscal 2007, adjustment is to remove restructuring charges incurred subsequent to the merger.
Note I - Corporate allocation expenses - Adjustment for the third quarter and first three quarters of fiscal 2007 to remove corporate allocation expenses from Harris Corporation, which did not continue after the merger with Stratex.
Note J - Income tax benefit (expense) - Adjustment to reflect a pro forma 26 percent tax rate for the third quarter and first three quarters of fiscal 2008, and a pro forma 30 percent tax rate for the third quarter and first three quarters of fiscal 2007.
Table 5
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 Third Quarter Summary
GAAP REVENUE BY Segment Information
(Unaudited)
Quarter Ended Three Quarters Ended
March 28, March 30, March 28, March 30,
2008 2007 2008 2007
(In millions)
North America microwave $56.9 $48.9 $177.3 $157.5
International microwave 117.1 84.9 337.1 161.6
Network operations 4.2 5.2 17.2 14.7
$178.2 $139.0 $531.6 $333.8
Table 6
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 Third Quarter Summary
SUPPLEMENTAL SCHEDULE OF REVENUE BY GEOGRAPHICAL AREA
(Unaudited)
Quarter Ended Quarter Ended
March 28, March 30,
2008 2007
(In millions)
Non-GAAP Non-GAAP
As Adjust- Non- As Adjust-
Reported ments GAAP Reported ments Non-GAAP
North America $56.9 $- $56.9 $48.9 $0.2 $49.1
International:
Africa 55.9 - 55.9 35.2 2.4 37.6
Europe, Middle
East, and
Russia 39.2 - 39.2 30.8 2.7 33.5
Latin America
and AsiaPac 22.0 - 22.0 18.9 2.5 21.4
Total International 117.1 - 117.1 84.9 7.6 92.5
Network Operations 4.2 - 4.2 5.2 - 5.2
$178.2 $ - $178.2 $ 139.0 $7.8 $146.8
Table 6 (Continued)
HARRIS STRATEX NETWORKS, INC.
Fiscal Year 2008 Third Quarter Summary
SUPPLEMENTAL SCHEDULE OF REVENUE BY GEOGRAPHICAL AREA
(Unaudited)
Three Quarters Ended Three Quarters Ended
March 28, March 30,
2008 2007
(In millions)
Non-GAAP Non-GAAP
As Adjust- Non- As Adjust-
Reported ments GAAP Reported ments Non-GAAP
North America $177.3 $- $177.3 $157.5 $7.0 $164.5
International:
Africa 149.3 - 149.3 85.2 44.2 129.4
Europe, Middle
East, and
Russia 103.9 - 1 03.9 42.7 59.3 102.0
Latin America
and AsiaPac 83.9 - 83.9 33.7 35.3 69.0
Total International 337.1 - 337.1 161.6 138.8 300.4
Network Operations 17.2 - 17.2 14.7 - 14.7
$531.6 $- $531.6 $333.8 $145.8 $479.6
|
