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Powerwave Technologies Reports Third Quarter Results

  Powerwave Technologies Reports Third Quarter Results

Business Wire

SANTA ANA, Calif. -- November 08, 2012

Powerwave Technologies, Inc. (Nasdaq:PWAV), a global supplier of end-to-end
wireless solutions for wireless communications networks, today reported
preliminary results for its third quarter ended September 30, 2012.

Net sales in the third quarter of fiscal 2012 were $42.1 million, compared
with $77.1 million in the third quarter of fiscal 2011. Powerwave also
reported a third quarter GAAP net loss of $52.7 million, which includes $0.3
million of non-cash equity based compensation expense and $1.5 million of
non-cash debt interest accretion and debt discount amortization, $0.5 million
of a loss on early extinguishment of debt and $0.6 million loss related to a
change in the fair value of derivatives related to warrants issued in
conjunction with our new senior term loan agreement, and $2.9 million of
restructuring and impairment charges. For the third quarter of 2012, the net
loss equates to a basic loss per share of $1.66. This compares to a net loss
of $35.1 million, or a loss per share of $1.09 for the third quarter of 2011.
For the third quarter of fiscal 2012, excluding the debt interest accretion
and debt discount amortization, the non-cash equity based compensation
expenses, the loss on the early extinguishment of debt, the change in fair
value of derivatives and restructuring charges, on a pro forma basis,
Powerwave would have reported a net loss of $36.6 million, or a basic loss per
share of $1.15.

For the first nine months of fiscal 2012, total revenue was $127.8 million
compared with $384.3 million for the first nine months of fiscal 2011.
Powerwave’s reported total net loss for the first nine months of 2012 was
$153.1 million, or a basic loss per share of $4.82, compared with a net loss
of $35.0 million, or a basic loss per share of $1.05 for the first nine months
of fiscal 2011. The results for the first nine months of 2012 include a total
of $1.8 million of non-cash equity based compensation expenses, $4.1 million
of non-cash debt interest accretion and debt discount amortization, $0.5
million of a loss on early extinguishment of debt, $0.6 million loss related
to a change in the fair value of derivatives related to warrants issued and
$16.8 million of restructuring and impairment charges. The results for the
first nine months of 2011 include a total of $5.8 million of non-cash equity
based compensation expenses and $3.6 million of non-cash debt discount
amortization, interest accretion and a net loss on the repurchase of
outstanding debt and $0.2 million of restructuring charges.

Summary of Significant Items Impacting the Third Quarter

During the third quarter of 2012, we incurred approximately $0.3 million of
non-cash equity based compensation expense, as well as $1.5 million of
non-cash debt interest accretion and debt discount amortization related to our
outstanding convertible notes which is included in interest expense for the
quarter. We also incurred a $0.5 million loss on early extinguishment of debt
and $0.6 million reduction in the fair value of derivatives related to
warrants issued in conjunction with our new senior term loan agreement, and
$2.9 million of restructuring and impairment charges.

During the third quarter of 2011, we incurred approximately $1.8 million of
non-cash equity based compensation expense, $0.1 million of restructuring and
impairment charges, $2.1 million of non-cash debt interest accretion and debt
discount amortization and a net loss on the repurchase of outstanding debt,
which is all included in interest expense for the quarter.

The following is a brief summary of the significant items impacting the
comparability of per share amounts for the three months ended September 30,
2012 and October 2, 2011. 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 fully diluted shares outstanding for each respective
period were used.

                                      Three Months Ended
                                           (unaudited)
        Summary of Significant Items       Sept. 30, 2012     Oct. 2, 2011
        Impacting Results
                                                                            
        Restructuring and impairment       ($0.09         )    -
        charges
        Non-cash ASC Topic 718             ($0.01         )    ($0.06       )
        compensation charge
        Debt discount amortization,
        interest accretion and a
        net loss on extinguishment of      ($0.06         )    ($0.07       )
        outstanding debt
        Reduction in fair value of         ($0.02         )    -            
        derivatives
                                                                            
        Total per share impact             ($0.18         )*   ($0.13       )*
                                                                            
        (Note: * this amount is rounded
        to the nearest whole cent.)

In addition, below is a brief summary of significant items impacting the
comparability of the gross margin percentage for the third quarter of 2012
versus the third quarter of 2011, on a GAAP and pro forma basis.

                                             Three Months Ended
                                               (unaudited)
                                               Sept. 30, 2012  Oct. 2, 2011
  
  GAAP reported gross margin (loss)%           (25.5    %)      7.5     %
  Add: Pro Forma adjustments
  Non-cash ASC Topic 718 compensation charge   0.1      %       0.3     %
  Restructuring and impairment charges         1.9      %       -       
  Pro Forma gross margin (loss)%               (23.5    %)      7.8     %

As an additional note, for the third quarter of fiscal 2012, Powerwave
incurred additional inventory related charges which totaled approximately $8.5
million, which are included in the pro forma gross margin (loss).

During the third quarter of 2012, the Company continued to implement its
ongoing restructuring plan, and initiated personnel reductions in both its
domestic US and foreign locations across all functions. The Company’s
operating expenses for the third quarter of 2012 decreased by $3.8 million, on
a GAAP basis, when compared to the third quarter of 2011. On a pro forma
basis, excluding equity based compensation expense and restructuring and
impairment charges, pro forma operating expenses decreased by $4.4 million to
$28.4 million for the third quarter of 2012 when compared with the third
quarter of 2011 with similar pro forma adjustments.

Third Quarter 2012 Revenue Summary

In the third quarter of 2012, total Americas revenue was $22.0 million or
approximately 52 percent of revenue, compared with $32.5 million or
approximately 42 percent of revenue in the third quarter of 2011. Total sales
to customers based in the Asia Pacific region accounted for approximately 12
percent of revenue or $4.8 million in the third quarter of 2012, compared with
19 percent of revenue or $14.6 million in the third quarter of 2011. Total
Europe, Africa and Middle East revenue in the third quarter of 2012 was $15.3
million or approximately 36 percent of revenue, compared with $30.0 million or
approximately 39 percent of revenue in the third quarter of 2011.

Sales of products within the antenna systems group totaled $29.5 million or 70
percent of total revenue, sales of products in the base station systems group
totaled $7.7 million or 18 percent of revenue and revenue from the coverage
solutions group totaled $4.9 million or 12 percent of revenue in the third
quarter of 2012.

In the third quarter of 2012, Powerwave’s largest customer was Samsung, which
accounted for approximately 11 percent of revenue. In terms of customer
profile, total OEM sales accounted for approximately 31 percent of total
revenue, and total direct and operator sales accounted for approximately 69
percent of revenue. For the third quarter of 2012, we recorded approximately
$0.8 million of revenue in the government, military and homeland security
market.

In terms of transmission standards, 2G and 2.5G standards accounted for
approximately 34 percent of total revenue, 3G standards accounted for
approximately 41 percent of total revenue and 4G standards accounted for
approximately 25 percent of total revenue during the third quarter of 2012.

Balance Sheet

At September 30, 2012, Powerwave had total cash and cash equivalents of $22.3
million, which includes restricted cash of $6.0 million. Powerwave also had
restricted deposits of $5.6 million. Total net inventories were $54.7 million,
and net accounts receivable were $62.4 million.

Debt Financing

On September 11, 2012, Powerwave entered into a new senior secured credit
agreement with P-Wave Holdings, LLC (an affiliate of The Gores Group, LLC),
which replaced the Company’s revolving credit agreement. Under the credit
agreement the lenders provided an initial $35 million senior secured term loan
to the Company and agreed to loan to the Company additional secured term loans
of up to $15 million, subject to satisfaction of certain conditions.

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 restructuring and impairment charges related to
the consolidation of our manufacturing and engineering facilities as well as
severance costs related to facility closures and personnel reductions. In
addition, excluded is the non-cash amortization of the debt discount and
interest accretion associated with certain of our debt. Also excluded are the
non-cash equity compensation expenses related to ASC Topic 718 as well as
gains on the exchange of a portion of the Company’s outstanding long-term debt
and valuation adjustments on the fair value of warrants valued as derivatives.
Management of Powerwave believes that these items should 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 amortization of the debt discount and interest accretion are non-cash
expenses, the gain on the exchange of long-term debt will not impact future
operating results and the equity compensation expenses and valuation
adjustments are also non-cash expenses.

Company Background

Powerwave Technologies, Inc., is a global supplier of end-to-end wireless
solutions for wireless communications networks. Powerwave designs,
manufactures and markets a comprehensive suite of wireless solutions,
including antennas, base station products and advanced coverage solutions,
utilized in all major wireless network protocols and frequencies, including
Next Generation Networks in 4G technology, such as LTE and WiMAX. 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 September 30, 2012.

UNAUDITED - PRELIMINARY

POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)
                                                   
                          Three Months Ended         Nine Months Ended
                          Sept. 30,    Oct. 2,       Sept. 30,     Oct. 2,
                           2012        2011        2012         2011    
Net sales                 $ 42,125      $ 77,078      $ 127,766      $ 384,343
Cost of sales:
Cost of goods               52,101        71,282        155,990        294,895
Restructuring
and impairment             782         -           11,341       -       
charges
Total cost of              52,883      71,282      167,331      294,895 
sales
                                                                     
Gross profit                (10,758 )     5,796         (39,565  )     89,448
(loss)
                                                                     
Operating
expenses:
Sales and                   10,365        7,544         23,021         24,695
marketing
Research and                8,383         15,315        31,980         47,666
development
General and                 9,928         11,597        30,379         34,920
administrative
Restructuring
and impairment             2,098       147         5,486        189     
charges
Total
operating                  30,774      34,603      90,866       107,470 
expenses
                                                                     
Operating loss              (41,532 )     (28,807 )     (130,431 )     (18,022 )
                                                                     
Other income               (4,909  )    (6,435  )    (13,012  )    (13,271 )
(expense), net
                                                                     
Loss before                 (46,441 )     (35,242 )     (143,443 )     (31,293 )
income taxes
Income tax                 6,287       (158    )    9,657        3,745   
provision
Net loss                  $ (52,728 )   $ (35,084 )   $ (153,100 )   $ (35,038 )
                                                                     
                                                                     
Net loss per   - basic:   $ (1.66   )   $ (1.09   )   $ (4.82    )   $ (1.05   )
share:
               -
              diluted:   $ (1.66   )   $ (1.09   )   $ (4.82    )   $ (1.05   )
               ^1
                                                                     
Weighted
average common
shares used in - basic:     31,761        32,189        31,741         33,265

computing per
share amounts:
              -            31,761        32,189        31,741         33,265
               diluted:
                                                                               

^1The diluted earnings and loss per share does not include an add back of
interest expense costs associated with the assumed conversion of the Company’s
outstanding convertible subordinated notes as the effect would be
anti-dilutive.

POWERWAVE TECHNOLOGIES, INC.

PERCENTAGE OF NET SALES
                                                        
                                  Three Months Ended      Nine Months Ended
                                  (unaudited)            (unaudited)
                                  Sept. 30,  Oct. 2,     Sept. 30,  Oct. 2,
                                  2012       2011       2012       2011  
Net sales                         100.0  %    100.0 %     100.0  %    100.0 %
Cost of sales:
Cost of goods                     123.7       92.5        122.1       76.7
Restructuring and impairment      1.8        -          8.9        -     
charges
Total cost of sales               125.5      92.5       131.0      76.7  
                                                                      
Gross profit (loss)               (25.5  )    7.5         (31.0  )    23.3
                                                                      
Operating expenses:
Sales and marketing               24.6        9.8         18.0        6.4
Research and development          19.9        19.9        25.0        12.4
General and administrative        23.6        15.0        23.8        9.1
Restructuring and impairment      5.0        0.2        4.3        0.0   
charges
Total operating expenses          73.1       44.9       71.1       28.0  
                                                                      
Operating loss                    (98.6  )    (37.4 )     (102.1 )    (4.7  )
                                                                      
Other income (expense), net       (11.6  )    (8.3  )     (10.2  )    (3.4  )
                                                                      
Loss before income taxes          (110.2 )    (45.7 )     (112.3 )    (8.1  )
Income tax provision              15.0       (0.2  )     7.5        1.0   
Net loss                          (125.2 )%   (45.5 )%    (119.8 )%   (9.1  )%
                                                                            

POWERWAVE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

RECONCILIATION OF PRO FORMA RESULTS

(In thousands, except per share amounts)

                           Three Months Ended                       Nine Months Ended
                            (Unaudited)                               (Unaudited)
                                                      Pro Forma                                Pro Forma
                            Sept. 30,                   Sept. 30,     Sept. 30,                    Sept. 30,
                            2012         Adjustments  2012         2012          Adjustments  2012
Net sales                   $ 42,125                    $ 42,125      $ 127,766                    $ 127,766
Cost of sales:
Cost of goods                 52,101      (61     )^1     52,040        155,990      (243    )^1     155,747
sold
Restructuring
and impairment               782       (782    )^2   -           11,341     (11,341 )^2   -        
charges
Total cost of                52,883    (843    )     52,040      167,331    (11,584 )     155,747  
sales
Gross profit                  (10,758 )   843             (9,915  )     (39,565  )   11,584          (27,981  )
(loss)
                                                                                                   
Operating
expenses:
Sales and                     10,365      50      ^1      10,415        23,021       (112    )^1     22,909
marketing
Research and                  8,383       23      ^1      8,406         31,980       (286    )^1     31,694
development
General and                   9,928       (322    )^1     9,606         30,379       (1,179  )^1     29,200
administrative
Restructuring
and impairment               2,098     (2,098  )^2   -           5,486      (5,486  )^2   -        
charges
Total
operating                    30,774    (2,347  )     28,427      90,866     (7,063  )     83,803   
expenses
Operating                     (41,532 )   3,190           (38,342 )     (130,431 )   18,647          (111,784 )
income (loss)
                                                                      
Other income                 (4,909  )  2,619   ^3    (2,290  )    (13,012  )  5,173   ^3    (7,839   )
(expense), net
                                                                                                   
Income (loss)
before income                 (46,441 )   5,809           (40,632 )     (143,443 )   23,820          (119,623 )
taxes
Income tax                                        )
provision                    6,287     (10,350 ^4    (4,063  )    9,657      (21,619 )^4   (11,962  )
(benefit)
Net income                  $ (52,728 )  16,159      $ (36,569 )   $ (153,100 )  45,439      $ (107,661 )
(loss)
                                                                                                   
Net loss per   - basic:     $ (1.66   )                 $ (1.15   )   $ (4.82    )                 $ (3.39    )
share:
              -            $ (1.66   )                 $ (1.15   )   $ (4.82    )                 $ (3.39    )
               diluted:^5
                                                                                                   
Weighted
average common
shares used in                                                      

computing per
share amounts:
              - basic:       31,761                      31,761        31,741                       31,741
              - diluted:     31,761                      31,761        31,741                       31,741
                                                                                                              

^1This represents the equity compensation expense allocation pursuant to ASC
Topic 718.

^2This cost includes restructuring and impairment charges related to the
current restructuring plans included in cost of goods sold and operating
expenses, respectively.

^3This represents the amortization of the debt discount and interest accretion
on outstanding debt during the fiscal periods.

^4This represents the change in the provision for income taxes related to the
preceding pro forma adjustments to arrive at an assumed effective income tax
benefit rate of 10.0% for the third quarter of 2012 and year to date for 2012.

^5Diluted earnings per share do not include the add back of interest expense
costs associated with the assumed conversion of the Company’s outstanding
convertible notes as the effect would be anti-dilutive.

POWERWAVE TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)
                                                           
                                             September 30,    January 1,
                                             2012            2012        
                                             (unaudited) ^1   (see note) ^ 2
ASSETS:
                                                              
Cash and cash equivalents                    $   16,318       $  64,121
Restricted cash                                  6,001           6,162
Restricted deposits                              5,610           -
Accounts receivable, net                         62,449          96,777
Inventories, net                                 54,677          88,627
Property, plant and equipment, net               12,322          27,771
Other assets                                    56,078        58,872   
Total assets                                 $   213,455     $  342,330  
                                                              
                                                              
LIABILITIES AND SHAREHOLDERS' EQUITY:
                                                              
Accounts payable                             $   46,815       $  71,094
Current portion of long-term debt                -               -
Long-term debt                                   290,405         252,190
Accrued expenses and other liabilities           58,833          51,744
Total shareholders' deficit                     (182,598 )     (32,698  )
Total liabilities and shareholders’ equity   $   213,455     $  342,330  
                                                                          

^1September 30, 2012 balances are preliminary and subject to reclassification
adjustments.

^2January 1, 2012 balances were derived from the audited consolidated
financial statements.

Contact:

Powerwave Technologies, Inc.
Kevin Michaels, (714) 466-1608
 
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