Stratex Networks Announces Third Quarter Fiscal 2005 Financial Results

Stratex Networks Announces Third Quarter Fiscal 2005 Financial Results SAN JOSE, Calif., Jan. 27 /PRNewswire-FirstCall/ -- Stratex Networks, Inc. (NASDAQ:STXN), a leading provider of wireless transmission solutions, today reported financial results for the third quarter of fiscal year 2005, ended December 31, 2004. Net sales in the third quarter of fiscal 2005 were $49.5 million, up 23 percent compared with $40.3 million in the year ago period. In accordance with generally accepted accounting principles (GAAP), the net loss in the third quarter of fiscal 2005 was $17.9 million, or a loss per share of $0.19, based on 94.7 million shares outstanding. This compares to a GAAP net loss of $9.9 million, or $0.12 per share in the third quarter of fiscal 2004 based on 83.8 million shares outstanding. On a non-GAAP basis, the net loss in the third quarter of fiscal 2005 was $7.9 million or $0.08 per share. The non-GAAP net loss excludes charges totaling $10.0 million associated with severance, the write-off of certain inventory and fixed assets, accruals related to vacated facilities and related charges as a result of the restructuring announced in December. Stratex Networks recorded $54.4 million in new orders during the third fiscal quarter, including more than $22 million of orders for the new Eclipse(TM) product line, representing an 83 percent sequential increase in Eclipse orders. The backlog for all product lines totaled $58.9 million as of December 31, 2004. "We are pleased with the continued rollout of Eclipse, our innovative wireless platform, and especially with the strong orders for Eclipse, which we expect will help drive the sales ramp for next quarter and beyond. We are also pleased with the continuation of gross margin improvements resulting from Eclipse," said Chuck Kissner, Chairman and CEO of Stratex Networks, Inc. "We remain on schedule to introduce our new, lower-cost version of Eclipse in our fiscal fourth quarter ending in March. This new product offering will expand our sales opportunities by enabling additional penetration of Eclipse into the lower speed portion of the wireless transmission market. "In December, as announced, we implemented a significant streamlining of our infrastructure, and expect to realize annualized savings of between $7 million and $8 million by mid-2005. We believe this reduced cost structure, combined with the continued successful ramp of Eclipse, will help us reach our financial goals." Conference Call Stratex Networks management will hold a conference call to discuss the company's financial results today, at 5:00 p.m. Eastern Time. Those wishing to join should dial 303-262-2130 (password: Stratex) at approximately 4:50 p.m. A replay of the call will be available starting one hour after the completion of the call until January 30, 2005. To access the replay, dial 303-590-3000 (pass code: 11021239 #). A live and an archived webcast of the conference call will also be available via the company's Web site at www.stratexnet.com About Stratex Networks With headquarters in San Jose, California, Stratex Networks, Inc. is one of the world's leading providers of high-speed wireless transmission solutions. Since it was founded in 1984, Stratex Networks has achieved international recognition for quality, innovation, and technical superiority in delivering data, voice, and video communication systems, including comprehensive service and support. Stratex Networks, with its broad product offering and worldwide sales and support organization, is strategically positioned to serve its customers' needs in wireless high-capacity transmission technology. Additional information is available at www.stratexnet.com . Use of Non-GAAP Financial Information To supplement the company's consolidated financial statements presented in accordance with GAAP, Stratex Networks, Inc. uses non-GAAP measures of certain components of financial performance, including operating income (loss), net income (loss) and per share data, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses. These non-GAAP measures are provided to enhance investors' overall understanding of the company's current financial performance and the company's prospects for the future. Specifically, the company believes the non-GAAP results provide useful information to both management and investors by excluding certain expenses, gains and losses that may not be indicative of its core operating results. These measures should be considered in addition to results prepared in accordance with generally accepted accounting principles, but should not be considered a substitute for, or superior to, GAAP results. These non-GAAP measures included in this press release have been reconciled to the nearest GAAP measure. Safe Harbor Statement This press release contains statements that qualify as "forward-looking statements" under the Private Securities Litigation Reform Act of 1995, including statements relating to the Company's expectations regarding the continued rollout, orders and future sales and revenues resulting from, Eclipse; revenues and gross margins including gross margin improvements resulting from Eclipse; expected timing of the introduction of the Company's new, lower-cost version of Eclipse; the expectation that the new, lower-cost version of Eclipse will expand the Company's sales opportunities; the expectation that as a result of efforts to streamline the Company's infrastructure, the Company will realize annualized savings of between $7 million and $8 million by mid-2005; and the Company's future financial performance. These forward-looking statements are based on current expectations and the Company assumes no obligation to update this information. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of significant risks and uncertainties including unexpected delays in the schedule for shipments of Eclipse, negative trends in the general economic condition of the worldwide economy, order cancellations, postponements in product deliveries resulting in delayed revenue recognition, increased competition, downward pressures on the price of the Company's products and services and the introduction of competing products and technologies. In addition, orders and backlog are not necessarily indicative of revenue in any future period. For a further discussion of these and other factors that impact the Company's business in general, see the information provided under the heading "Factors That May Affect Future Financial Results" in the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2004, on file with the Securities and Exchange Commission. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) December 31, March 31, 2004 2004 Assets Cash and short-term investments $52,344 $49,963 Accounts receivable, net 40,945 34,295 Inventories 36,340 33,101 Other current assets 11,157 10,932 Total current assets 140,786 128,291 Property & equipment, net 29,744 31,175 Other assets 1,042 3,778 Total assets $171,572 $163,244 Liabilities and Stockholders' Equity Accounts payable $31,030 $40,033 Short-term debt 6,250 -- Other current liabilities 27,020 21,718 Total current liabilities 64,300 61,751 Long-term debt 15,104 -- Other long-term liabilities 19,692 20,311 Total liabilities 99,096 82,062 Stockholders' equity 72,476 81,182 Total liabilities and stockholders' equity $171,572 $163,244 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited) Three Months Ended Nine Months Ended December 31, December 31, 2004 2003 2004 2003 Net sales $49,519 $40,250 $139,175 $113,099 Cost of sales 39,434 34,151 113,736 92,591 Inventory valuation charges 2,581 -- 2,581 -- Gross profit 7,504 6,099 22,858 20,508 Operating expenses: Research and development 4,363 4,396 12,915 12,264 Selling, general and administrative 12,219 10,873 32,105 31,318 Amortization of intangible assets 791 407 1,581 407 Restructuring and other charges (credit) 7,423 -- 7,147 (3,550) Total operating expenses 24,796 15,676 53,748 40,439 Operating loss (17,292) (9,577) (30,890) (19,931) Other income (expense) (523) (196) (1,333) (7) Loss before income taxes (17,815) (9,773) (32,223) (19,938) Provision for income taxes 119 128 473 340 Net loss $(17,934) $(9,901) $(32,696) $(20,278) Basic and diluted net loss per share ($0.19) ($0.12) ($0.37) ($0.24) Basic and diluted weighted average shares outstanding 94,706 83,801 87,933 83,151 UNAUDITED NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) Three Months Ended Three Months Ended December 31, 2004 December 31, 2003 GAAP Adjust- Non- GAAP Adjust- Non- (As ments GAAP (As ments GAAP Reported) Reported) Net sales $49,519 $49,519 $40,250 $40,250 Cost of sales 39,434 39,434 34,151 34,151 Inventory Valuation Charges 2,581 (2,581) -- -- -- Gross profit 7,504 2,581 10,085 6,099 6,099 Operating expenses: Research and development 4,363 4,363 4,396 4,396 Selling, general and administrative 12,219 12,219 10,873 10,873 Amortization of Intangible assets 791 791 407 407 Restructuring charges 7,423 (7,423) -- -- -- Total operating expenses 24,796 (7,423) 17,373 15,676 15,676 Operating loss (17,292) 10,004 (7,288) (9,577) (9,577) Other income (expense) (523) (523) (196) (196) Loss before income taxes (17,815) 10,004 (7,811) (9,773) (9,773) Provision for income taxes 119 119 128 128 Net loss $(17,934) 10,004 $(7,930) $(9,901) $(9,901) Basic and diluted loss per share ($0.19) ($0.08) ($0.12) ($0.12) Basic and diluted weighted average shares outstanding 94,706 94,706 83,801 83,801 The above non-GAAP amounts have been adjusted to eliminate restructuring charges for severance, write-off of certain inventory and fixed assets, accruals related to vacated facilities and related charges. To supplement the company's consolidated financial statements presented in accordance with GAAP, Stratex Networks, Inc. uses non-GAAP measures of certain components of financial performance, including operating income (loss), net income (loss) and per share data, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses. These non-GAAP measures are provided to enhance investors' overall understanding of the company's current financial performance and the company's prospects for the future. Specifically, the company believes the non-GAAP results provide useful information to both management and investors by excluding certain expenses, gains and losses that may not be indicative of its core operating results. These measures should be considered in addition to results prepared in accordance with generally accepted accounting principles, but should not be considered a substitute for, or superior to, GAAP results. These non-GAAP measures included in this press release have been reconciled to the nearest GAAP measure. UNAUDITED NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) Nine Months Ended Nine Months Ended December 31, 2004 December 31, 2003 GAAP Adjust- Non- GAAP Adjust- Non- (As ments GAAP (As ments GAAP Reported) Reported) Net sales $139,175 $139,175 $113,099 $113,099 Cost of sales 113,736 113,736 92,591 92,591 Inventory Valuation Charges 2,581 (2,581) -- -- -- Gross profit 22,858 2,581 25,439 20,508 20,508 Operating expenses: Research and development 12,915 12,915 12,264 12,264 Selling, general and administrative 32,105 32,105 31,318 31,318 Amortization of Intangible assets 1,581 1,581 407 407 Restructuring charges 7,147 (7,147) -- (3,550) 3,550 -- Total operating expenses 53,748 (7,147) 46,601 40,439 3,550 43,989 Operating loss (30,890) 9,728 (21,162) (19,931) (3,550)(23,481) Other income (expense) (1,333) (1,333) (7) (7) Loss before income taxes (32,223) 9,728 (22,495) (19,938) (3,550)(23,488) Provision for income taxes 473 473 340 340 Net loss $(32,696) 9,728 $(22,968) $(20,278) $(23,828) Basic and diluted loss per share ($0.37) ($0.26) ($0.24) ($0.29) Basic and diluted weighted average shares outstanding 87,933 87,933 83,151 83,151 The above non-GAAP amounts for the nine months ended December 31, 2004 have been adjusted to eliminate restructuring charges for severance, write-off of certain inventory and fixed assets, accruals related to vacated facilities and related charges. The above non-GAAP amounts for the nine months ended December 31, 2003 have been adjusted to reflect reserves related to an accrual for legal claims. To supplement the company's consolidated financial statements presented in accordance with GAAP, Stratex Networks, Inc. uses non-GAAP measures of certain components of financial performance, including operating income (loss), net income (loss) and per share data, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses. These non-GAAP measures are provided to enhance investors' overall understanding of the company's current financial performance and the company's prospects for the future. Specifically, the company believes the non-GAAP results provide useful information to both management and investors by excluding certain expenses, gains and losses that may not be indicative of its core operating results. These measures should be considered in addition to results prepared in accordance with generally accepted accounting principles, but should not be considered a substitute for, or superior to, GAAP results. These non-GAAP measures included in this press release have been reconciled to the nearest GAAP measure. Source: Stratex Networks, Inc. CONTACT: Mary McGowan of Summit IR Group Inc., +1-408-404-5401, or mary@summitirgroup.com, for Stratex Networks, Inc. Web site: http://www.stratexnet.com/ ------- Profile: International Entertainment