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Symmetricom Reports Second Quarter Fiscal Year 2013 Financial Results

January 23, 2013

SAN JOSE, Calif., Jan. 23, 2013 /PRNewswire/ — Symmetricom, Inc. (NASDAQ: SYMM), a worldwide leader in precision time and frequency technologies, today reported financial results for its second quarter of fiscal year 2013 ended December 30, 2012.

(Logo: http://photos.prnewswire.com/prnh/20110829/AQ59077LOGO)

Net revenue for the second quarter of fiscal 2013 was $49.2 million, down $9.1 million, or 15.6%, compared to the $58.3 million reported for the second quarter of fiscal 2012. Symmetricom reported a net loss of $1.8 million, or $0.04 per share, for the second quarter of fiscal 2013, compared to net income of $2.4 million, or $0.06 per share, in the second quarter of fiscal 2012. The loss for the second quarter of fiscal 2013 included $1.2 million of restructuring charges, principally related to the Company’s previously announced R&D consolidation activities.

The decrease in net revenue was due primarily to lower U.S. government spending and lower communications service provider spending on wireline-related equipment. Partially offsetting this weakness in the quarter was continued strength in shipments of the Company’s Quantum(TM) SA.45s Chip Scale Atomic Clock (CSAC), a key strategic initiative for the Company.

Non-GAAP net income for the second quarter of fiscal 2013 was $0.3 million, or $0.01 per share, compared to $4.2 million, or $0.10 per share, reported for the second quarter of fiscal 2012.

Cash, cash equivalents and short-term investments totaled $70.8 million as of December 30, 2012, a decrease of $0.8 million from the $71.6 million reported as of September 30, 2012. Net cash provided by operating activities in the second quarter was $2.3 million, and property, plant and equipment purchases were approximately $1.2 million, resulting in free cash flow of $1.1 million.

The Company also announced a restructuring action today to reduce operating costs while retaining focus on its strategic initiatives. Symmetricom plans to reduce the size of its workforce by approximately 20 positions. The reductions will begin in January and are expected to be complete by August 2013. In conjunction with the headcount reduction, the Company will further reduce the size of its facility presence in Santa Rosa, CA. Symmetricom expects to incur restructuring charges in the range of $1.5 million to $1.8 million in connection with the plan. Upon completion, Symmetricom expects these restructuring actions to reduce annual costs by approximately $4.0 million.

“The financial results of our second quarter were lower than we originally anticipated due to further softening of purchases by both U.S. government customers and wireline operators,” said Dave Cote, president and chief executive officer of Symmetricom. “As we manage through the near term environment, we are taking actions to tighten our operating cost model and enhance profitability. At the same time, we remain focused on building our product and customer portfolios, and we will continue to invest in our key initiatives, including Quantum(TM) CSAC, PackeTime® and Government Programs. I am enthusiastic about the progress we are making on these initiatives and their potential to fuel Symmetricom’s long-term growth.”

Business Segment Revenue Results
Revenue in the Communications Business in the second quarter of fiscal 2013 was $26.2 million, compared to $33.3 million reported in the second quarter of fiscal 2012. Revenue in the Government and Enterprise Business in the second quarter of fiscal 2013 was $23.0 million, compared to $25.0 million reported in the second quarter of fiscal 2012.

Third Quarter 2013 Guidance
Symmetricom’s guidance for the third quarter of fiscal 2013 is as follows:

  • Net revenue is expected to be in the range of $48 million to $54 million
  • GAAP earnings (loss) per share is expected to be in the range of $(0.07) to $0.01
  • Non-GAAP earnings per share is expected to be in the range of $0.00 to $0.05

A reconciliation of GAAP and non-GAAP guidance is provided at the end of this press release.

Investor Conference Call
As previously announced, management will hold a conference call to discuss these results today, at 1:30 p.m. Pacific Time. Investors are invited to join the conference call by dialing +1-212-547-0198 and referencing “Symmetricom.” A live webcast will also be available on the investor relations section of the Company’s website at www.symmetricom.com. An audio replay will be available for one week and can be accessed by dialing +1-203-369-1432.

About Symmetricom, Inc.
Symmetricom (NASDAQ:SYMM), a world leader in precise time solutions, sets the world’s standard for time. The Company generates, distributes and applies precise time for the communications, aerospace/defense, IT infrastructure and metrology industries. Symmetricom’s customers, from communications service providers and network equipment manufacturers to governments and their suppliers worldwide, are able to build more reliable networks and systems by using the Company’s advanced timing technologies, atomic clocks, services and solutions. All products support today’s precise timing standards, including GPS-based timing, IEEE 1588 (PTP), Network Time Protocol (NTP), Synchronous Ethernet and DOCSIS® timing. Symmetricom is based in San Jose, California, with offices worldwide. For more information, visit: http://www.symmetricom.com or join the dialogue at http://www.twitter.com/symmetricom.

Non-GAAP Information
Certain non-GAAP financial information is included in this press release. In the reconciliation of GAAP to non-GAAP results, Symmetricom excludes certain items related to non-cash equity-based compensation, acquisition-related costs, amortization of intangible assets, restructuring charges, and off-shore development transition costs that the Company does not consider indicative of its ongoing performance. The income tax effect after these non-GAAP adjustments is determined based upon Symmetricom’s estimate of its annual non-GAAP effective tax rate excluding these non-GAAP adjustments. Symmetricom believes that excluding such items provides investors, analysts and management with a representation of the Company’s core operating performance and with information useful in assessing, in conjunction with GAAP results, underlying trends in operating performance. Management uses such non-GAAP information to evaluate financial results and to establish operational goals. Non-GAAP information should not be considered superior to or as a substitute for data prepared in accordance with GAAP. A reconciliation of the non-GAAP results to the GAAP results is provided in the financial schedules portion of this press release.

Free cash flow is defined as net cash provided by or used in operating activities minus purchases of property, plant and equipment. Symmetricom believes this metric provides useful information to its investors, analysts, and management about the level of cash generated by or used in normal business operations, including the use of cash for the purchase of property, plant and equipment. Management also views it as a measure of cash available to pay debt and return cash to stockholders. Free cash flow is not a GAAP financial measure and should not be considered superior to or a substitute for operating cash flow or other cash flow data prepared in accordance with GAAP.

Safe Harbor
This press release contains forward-looking information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the safe harbor created by those sections. These forward-looking statements include statements concerning third quarter fiscal 2013 guidance and future performance as well as the information regarding the usefulness of the non-GAAP financial information. The statements in this press release are made as of the date of this press release, even if subsequently made available by Symmetricom on its website or otherwise. Symmetricom expressly disclaims any obligation to update or revise any forward-looking statement contained herein, whether as a result of a change in its expectations, a change in any events, conditions or circumstances on which a forward-looking statement is based, or otherwise. Symmetricom’s actual results could differ materially from those projected or suggested in these forward-looking statements. Factors that could cause future actual results to differ materially from the results projected in or suggested by such forward-looking statements include, but are not limited to, the extent and magnitude of customer orders received and shipped within the same quarter, risks relating to general economic conditions in the markets we address and the telecommunications and government markets in general, risks related to the development of our new products and services, reliance on our contract manufacturer, the effects of increasing competition and competitive pricing pressure, uncertainties associated with changing intellectual property laws or misappropriation of intellectual property, developments in and expenses related to litigation, the inability to obtain sufficient amounts of key components, the rescheduling or cancellation of key customer orders, the loss of a key customer, the effects of new and emerging technologies, the risk that excess inventory may result in write-offs, price erosion and decreased demand, fluctuations in the rate of exchange of foreign currency, changes in our effective tax rate, market acceptance of our new products and services, technological advancements, undetected errors, design flaws, defects in our products or start-up manufacturing difficulties, the risks associated with our international sales, potential short-term investment losses and other risks due to credit market dislocation, geopolitical risks and risk of terrorist activities, the risks associated with attempting to integrate other companies and businesses we acquire, and the risk factors listed from time to time in Symmetricom’s reports filed with the Securities and Exchange Commission, including the annual report on Form 10-K for the fiscal year ended July 1, 2012 and subsequent Forms 10-Q and 8-K.

SYMM-F

Contact:
Justin Spencer
Chief Financial Officer
+1-408-428-7801
jspencer@symmetricom.com

                                                                                      SYMMETRICOM, INC.
                                                                       CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                          (In thousands, except per share amounts)
                                                                                         (unaudited)

                                                 Three months ended                                             Six months ended
                                                 ------------------                                             ----------------
                                             December 30,                          September 30,                                 January 1,          December 30,           January 1,
                                                                 2012                                   2012                                   2012                   2012                 2012
                                                                 ----                                   ----                                   ----                   ----                 ----

    Net revenue                                               $49,151                                $56,391                                $58,294               $105,542             $114,672
    Cost of sales:
         Cost of products and services                         27,861                                 31,900                                 32,225                 59,761               62,055
         Acquisition-related costs                                248                                    234                                    185                    482                  371
         Restructuring charges                                     41                                    (45)                                   674                     (4)               1,091
                                                                  ---                                    ---                                    ---                    ---                -----
             Total cost of sales                               28,150                                 32,089                 -               33,084                 60,239               63,517
                                                               ------                                 ------               ---               ------                 ------               ------
             Gross profit                                      21,001                                 24,302                                 25,210                 45,303               51,155
             Gross margin                                        42.7%                                  43.1%                                  43.2%                  42.9%                44.6%
    Operating expenses:
         Research and development                               7,805                                  8,313                                  6,548                 16,118               13,446
         Selling, general and administrative                   14,778                                 16,227                                 14,864                 31,005               29,674
         Amortization of intangible assets                         86                                     86                                     52                    172                  104
         Restructuring charges                                  1,146                                     55                                    103                  1,201                  199
                                                                -----                                                                           ---                  -----                  ---
              Total operating expenses                         23,815                                 24,681                                 21,567                 48,496               43,423
                                                               ------                                 ------                                 ------                 ------               ------
              Operating income (loss)                          (2,814)                                  (379)                                 3,643                 (3,193)               7,732
    Interest income, net of amortization
     (accretion) of premium (discount) on
     investments                                                  178                                    (36)                                  (296)                   142                 (230)
                                                                  ---                                                                          ----                    ---                 ----
         Income (loss) before taxes                            (2,636)                                  (415)                                 3,347                 (3,051)               7,502
    Income tax provision (benefit)                               (861)                                  (212)                                   902                 (1,073)               2,308
                                                                 ----                                   ----                                    ---                 ------                -----
         Net income (loss)                                    $(1,775)                                 $(203)                                $2,445                $(1,978)              $5,194
                                                              =======                                  =====                                 ======                =======               ======

    Earnings (loss) per share:
         Basic                                                 $(0.04)                                $(0.01)                                 $0.06                 $(0.05)               $0.12
                                                               ======                                 ======                                  =====                 ======                =====
         Diluted                                               $(0.04)                                $(0.01)                                 $0.06                 $(0.05)               $0.12
                                                               ======                                 ======                                  =====                 ======                =====

    Shares used in computing earnings (loss)
     per share:
       Weighted average shares outstanding -
        basic                                                  40,356                                 40,510                                 42,292                 40,432               42,490
                                                               ======                                 ======                                 ======                 ======               ======
       Weighted average shares outstanding -
        diluted                                                40,356                                 40,510                                 42,762                 40,432               42,989
                                                               ======                                 ======                                 ======                 ======               ======

                                                        SYMMETRICOM, INC.
                                              CONDENSED CONSOLIDATED BALANCE SHEETS
                                                         (In thousands)
                                                           (unaudited)

                                                                                    December 30,            July 1,
                                                                                                      2012               2012
                                                                                                      ----               ----

    ASSETS
    Current assets:
                                          Cash and cash
                                          equivalents                                    $25,966            $27,659
                                         Short-term investments                                     44,789             39,280
                                          Accounts
                                          receivable, net                                 35,789             45,952
                                         Inventories                                                48,176             47,618
                                          Prepaids and
                                          other current
                                          assets                                          19,290             16,943

                                              Total current assets                                 174,010            177,452
    Property, plant and equipment, net                                                              23,075             22,702
    Intangible assets, net                                                                           3,364              3,458
    Deferred taxes and other assets                                                                 28,200             27,413
                                                   Total assets                                   $228,649           $231,025

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
                                         Accounts payable                                          $12,715             $9,300
                                         Accrued compensation                                       12,606             14,574
                                         Accrued warranty                                            1,492              1,722
                                         Other accrued liabilities                                  10,409             11,841

                                              Total current
                                               liabilities                                37,222             37,437
    Long-term obligations                                                                            5,239              5,472
    Deferred income taxes                                                                              334                334
                                                                                                       ---
                                              Total liabilities                                     42,795             43,243
    Stockholders' equity:
                                         Common stock                                              193,408            193,478
                                          Accumulated other
                                          comprehensive
                                          loss                                              (112)              (232)
                                         Accumulated deficit                                        (7,442)            (5,464)

                                              Total
                                               stockholders'
                                               equity                                    185,854            187,782

                                                   Total liabilities and
                                                    stockholders' equity                          $228,649           $231,025

                                                                           SYMMETRICOM, INC.
                                                               RECONCILIATION OF GAAP TO NON-GAAP RESULTS
                                                                (In thousands, except per share amounts)
                                                                              (unaudited)

                                   Three months ended                                 Six months ended
                                   ------------------                                 ----------------
                                December 30,             September 30,                                    January 1,         December 30,          January 1,
                                                   2012                       2012                                     2012                  2012               2012
                                                   ----                       ----                                     ----                  ----               ----
    Reconciliation from
     GAAP to Non-GAAP
    GAAP Net income (loss)                      $(1,775)                     $(203)                                  $2,445               $(1,978)            $5,194

    Non-GAAP adjustments:
    Equity-based
     compensation expense:
         Cost of products and
          services                                  250                        291                                      215                   541                334
         Research and
          development                               316                        361                                      295                   677                584
         Selling, general and
          administrative                          1,121                      1,120                                    1,170                 2,241              1,925
                                                  -----                      -----                                    -----                 -----              -----
    Total equity-based
     compensation expense                         1,687                      1,772                                    1,680                 3,459              2,843

    Acquisition-related
     costs and
     amortization of
     intangible assets:
         Cost of products and
          services                                  248                        234                                      185                   482                371
         Operating expenses                          86                         86                                       52                   172                104
                                                    ---                        ---                                      ---                   ---                ---
    Total acquisition-
     related costs and
     amortization of
     intangible assets                              334                        320                                      237                   654                475

    Restructuring charges                         1,187                         10                                      777                 1,197              1,290
    Off-shore development
     transition costs                                 -                        729                                        -                   729                  -
    Income tax effect of
     Non-GAAP adjustments                        (1,154)                    (1,070)                                    (934)               (2,224)            (1,470)
                                                 ------                     ------                                                                            ------
    Non-GAAP Net income                            $279                     $1,558                                   $4,205                $1,837             $8,332
                                                   ====                     ======                                   ======                ======             ======

    Earnings (loss) per
     share -diluted:
         GAAP Net income (loss)                  $(0.04)                    $(0.01)                                   $0.06                $(0.05)             $0.12
         Non-GAAP Net income                      $0.01                      $0.04                                    $0.10                 $0.04              $0.19

    Weighted average
     shares outstanding -
     diluted                                     41,464                     41,675                                   42,762                41,514             42,989

                                                                                                                        SYMMETRICOM, INC.

                                                                                                           RECONCILIATION OF GAAP TO NON-GAAP RESULTS

                                                                                                            (In thousands, except per share amounts)

                                                                                                                           (unaudited)

                                                                                                                                                             Three months ended                      Six months ended
                                                                                                                                                             ------------------                     ----------------
                                                                                                                                   December 30,                September 30,             January 1,           December 30,            January 1,
                                                                                                                                                         2012                      2012                 2012                    2012               2012
                                                                                                                                                         ----                      ----                 ----                    ----               ----

    GAAP Revenue                                                                                                     $49,151                          $56,391                   $58,294             $105,542                $114,672

    Reconciliation from GAAP to Non-GAAP Gross Profit:
    GAAP Gross profit                                                                         (A)                                            $21,001                 $24,302                $25,210                $45,303               $51,155
                                                                  GAAP Gross margin                                                                      42.7%                     43.1%                43.2%                   42.9%              44.6%

    Non-GAAP adjustments:
                                                                  Equity-based compensation expense                                                       250                       291                  215                     541                334
                                                                  Acquisition-related costs                                                               248                       234                  185                     482                371
                                                                  Restructuring charges                                                                    41                       (45)                 674                      (4)             1,091

    Non-GAAP Gross profit                                                                     (B)                                            $21,540                 $24,782                $26,284                $46,322               $52,951
                                                                                              ===
                                                                  Non-GAAP Gross margin                                                                  43.8%                     43.9%                45.1%                   43.9%              46.2%

    Reconciliation from GAAP to Non-GAAP Operating Expense:
    GAAP Operating expenses                                                                   (C)                                            $23,815                 $24,681                $21,567                $48,496               $43,423
                                                                  Operating expense % to revenue                                                         48.5%                     43.8%                37.0%                   45.9%              37.9%

    Non-GAAP adjustments:
                                                                  Equity-based compensation expense                                                    (1,437)                   (1,481)              (1,465)                 (2,918)            (2,509)
                                                                  Amortization of intangible assets                                                       (86)                      (86)                 (52)                   (172)              (104)
                                                                  Restructuring charges                                                                (1,146)                      (55)                (103)                 (1,201)              (199)
                                                                  Off-shore development transition costs                                                    -                      (729)                   -                    (729)                 -

    Non-GAAP operating expenses                                                               (D)                                            $21,146                 $22,330                $19,947                $43,476               $40,611
                                                                                              ===
                                                                  Non-GAAP operating expenses % to revenue                                               43.0%                     39.6%                34.2%                   41.2%              35.4%

    Reconciliation from GAAP to Non-GAAP Operating Income (loss):
    GAAP Operating income (loss)                                                           (A) - (C)                                         $(2,814)                  $(379)                $3,643                $(3,193)               $7,732
                                                                                           ========
                                                                  Operating income % to revenue                                                          -5.7%                     -0.7%                 6.2%                   -3.0%               6.7%

    Non-GAAP Operating income                                                              (B) - (D)                                            $394                  $2,452                 $6,337                 $2,846               $12,340
                                                                                           ========
                                                                  Operating income % to revenue                                                           0.8%                      4.3%                10.9%                    2.7%              10.8%

                                                                       SYMMETRICOM, INC.
                                              RECONCILIATION OF FORWARD-LOOKING GUIDANCE FOR GAAP REVENUE AND EPS
                                                           TO NON-GAAP GUIDANCE FOR REVENUE AND EPS
                                                           (In thousands, except per share amounts)
                                                                          (Unaudited)

                                                       Three Months Ending March 31, 2013
                                                       ----------------------------------
                                                                     Revenue                                                  Earnings Per Share
                                                                   -------                                                ------------------
                                                                    From                                    To                         From       To

    GAAP Guidance                                                                 $48,000                         $54,000                 $(0.07)    $0.01

    Estimated Non-GAAP Adjustments
             Equity-based compensation expense                                                                                              0.04      0.04
             Amortization of intangible assets                                                                                              0.01      0.01
              Integration and restructuring
              charges                                                                                                                       0.07      0.06
              Income tax effect of non-GAAP
              adjustments                                                                                                                  (0.05)    (0.07)
                                                                                                                                                     -----
             Total Non-GAAP Adjustments                                                                                                     0.07      0.04

    Non-GAAP Guidance                                                             $48,000                         $54,000                  $0.00     $0.05
                                                                                  =======                         =======                  =====     =====

SOURCE Symmetricom, Inc.


Source: PR Newswire