SYMM Symmetricom, Inc. (MM)

Symmetricom, Inc. (NASDAQ: SYMM), a worldwide leader in precise time and frequency technologies that accelerate the deployment and enable the management of next generation networks, today reported preliminary financial results for its fourth quarter and fiscal year ended June 28, 2009.

Net revenue for the fourth quarter of fiscal 2009 grew to $60.4 million, an increase of 5.9% from $57.0 million in the fourth quarter of fiscal 2008. Symmetricom reported net income of $1.9 million, or $0.04 per share, for the fourth quarter of fiscal 2009, compared with a net loss of $13.5 million, or $0.31 per share, in the fourth quarter of fiscal 2008.

Net revenue for the fiscal year grew to $220.8 million, an increase of 6.1% from $208.1 million in fiscal 2008. Symmetricom reported a net loss of $40.7 million, or $0.93 per share, in fiscal 2009, compared with a net loss of $14.5 million, or $0.33 per share, in fiscal 2008. The net loss for fiscal 2009 was driven by $57.8 million of goodwill and intangible asset impairments and restructuring charges, as compared to $16.0 million of similar charges in fiscal 2008.

Non-GAAP net income in the fourth quarter was $3.7 million, or $0.08 per share, compared with $0.6 million, or $0.01 per share, in the same period of the prior year. Non-GAAP net income for the fiscal year was $17.1 million, or $0.39 per share, compared with $6.8 million, or $0.15 per share, for the prior year.

In the fourth fiscal quarter of 2009, as previously announced, we recorded approximately $3.0 million of restructuring charges for severance benefits, recognition of facility lease commitments without future benefit and accelerated depreciation on equipment reflecting shorter expected useful lives of these assets.

Cash, cash equivalents and short-term investments totaled $112.8 million as of June 28, 2009, an increase of $5.7 million from the $107.1 million reported as of March 29, 2009. Net cash provided by operating activities in the fourth quarter was $6.6 million and property, plant and equipment purchases were approximately $1.0 million, resulting in Free Cash Flow of $5.6 million. The Company used $0.6 million to buy back approximately 116,000 shares of common stock in the fourth quarter of 2009.

“I am pleased to have joined Symmetricom as the company closes out a strong revenue year with solid financial performance,” said Dave Côté, Symmetricom’s new president and CEO. “I look forward to working with the team to build on our current growth initiatives in the evolving wireless, cable and government markets. Our strong balance sheet and improved operating performance will enable us to aggressively pursue opportunities for profitable growth.”

Division Results

Telecom Solutions Division revenue in the fourth quarter was $36.7 million, a decrease of 2.4% from the $37.6 million reported in the same period of last year. For the fiscal year, revenue was $136.6 million, a 4.4% increase from the prior year. The year-over-year revenue increase was driven by increased sales of new cable products along with synchronization equipment into new international markets, somewhat offset by lighter capital expenditures from major wireline customers.

Timing, Test & Measurement Division revenue in the fourth quarter was $23.7 million, up 22.2% from the $19.4 million reported in the same period of last year. For the fiscal year, revenue was $84.3 million, a 9.1% increase from the prior year. Revenues in the TT&M Division improved based upon a broad mix of products, including strong sales of secure communications products for military applications.

“A strong fourth quarter helped us achieve growth and significantly improve our Non-GAAP operating results for the year in the face of a challenging economic environment,” said Justin Spencer, Chief Financial Officer. “As we enter fiscal 2010, we feel good about the market position we have built through new product initiatives, an expanded geographic focus, and a more streamlined cost structure.”

First Quarter and Fiscal 2010 Guidance

Symmetricom’s guidance for fiscal 2010 is as follows:

• Net revenue is expected to be in the range of $210 million to $230 million
• GAAP Earnings per share is expected to be in the range of $0.22 to $0.30
• Non-GAAP Earnings per share is expected to be in the range of $0.35 to $0.44

For the first quarter of fiscal 2010, Symmetricom guidance is as follows:

• Net revenue is expected to be in the range of $48 million to $55 million
• GAAP Earnings / (Loss) per share is expected to be in the range of $(0.03) to $0.01
• Non-GAAP Earnings per share is expected to be in the range of $0.01 to $0.06

GAAP EPS Guidance does not include the impact of the implementation of FASB Staff Position (“FSP”) APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)”. Under FSP APB 14-1, issuers of convertible debt instruments separately account for the liability and equity components of convertible instruments. We will adopt FSP APB 14-1 in the first quarter of fiscal 2010 and are currently in the process of evaluating the impact of adoption on our financial statements. In future financial statement reports, adoption of FSP APB 14-1 will be applied retrospectively to all prior periods presented in such reports. We expect the adoption to result in a material amount of additional non-cash interest expense.

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 +1-517-308-9168 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 +1-203-369-0284 and the passcode 48613.

About Symmetricom, Inc.

As a worldwide leader in precise time and frequency products and services, Symmetricom provides “Perfect Timing” to customers around the world. Since 1985, the Company’s solutions have helped define the world’s time and frequency standards, delivering precision, reliability and efficiency to wireline and wireless networks, instrumentation and testing applications and network time management. Deployed in more than 90 countries, the Company’s synchronization solutions include primary reference sources, building integrated timing supplies (BITS), GPS timing receivers, time and frequency distribution systems, network time servers and ruggedized oscillators. Symmetricom also incorporates technologies including Universal Timing Interface (UTI), Network Time Protocol (NTP), IEEE 1588 (Precision Time Protocol), and others supporting the world’s migration to Next Generation Networks (NGN). Symmetricom’s QoE video quality management solutions provide the tools necessary to accurately monitor and analyze video quality and bring higher satisfaction levels to the end user. Symmetricom is based in San Jose, California, with offices worldwide. For more information, visit http://www.symmetricom.com.

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, amortization of acquired intangibles, integration and restructuring charges, impairment of goodwill and other intangibles, gains and losses on asset sales, investments and repayment of convertible notes, and unusual or infrequent items, such as the cost of internal investigations and the CEO’s post-employment compensation. The income tax effect after these Non-GAAP adjustments is determined based upon the Company’s estimate of its annual Non-GAAP effective tax rate excluding these Non-GAAP adjustments. Symmetricom believes that excluding such items provides investors and management with a representation of the Company’s core operating performance and with information useful in assessing our prospects for the future and underlying trends in Symmetricom’s 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 operating activities minus purchases of property, plant and equipment. We believe this metric provides useful information to our investors, analysts, and management about the level of cash generated by 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 first quarter and fiscal 2010 guidance and our expectations of operating performance in fiscal 2010, 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'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: reduced rates of demand for telecommunication products, cable products or test and measurement products, our customers' ability and need to upgrade existing equipment, our ability to maintain or reduce manufacturing and operating costs, timing of orders, cancellation or delay of customer orders, loss of customers, customer acceptance of new products, recessionary pressures, geopolitical risks such as terrorist acts 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 June 29, 2008 and subsequent Form 10-Q's and Form 8-K's.

SYMM-F

SYMMETRICOM, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (unaudited)           Three months ended Twelve months ended June 28, March 29, June 29, June 28,

June 29,

2009 2009 2008 2009 2008   Net revenue $ 60,356 $ 56,370 $ 57,005 $ 220,831 $ 208,052 Cost of sales: Cost of products and services 31,057 29,070 31,373 111,707 113,771 Amortization of purchased technology 369 368 846 1,474 3,343 Impairment of intangible assets - - 5,658 - 5,658 Integration and restructuring charges   1,591     2,275     148     3,866     634   Total cost of sales   33,017     31,713     38,025     117,047     123,406   Gross profit 27,339 24,657 18,980 103,784 84,646 Gross margin 45.3 % 43.7 % 33.3 % 47.0 % 40.7 % Operating expenses: Research and development 7,421 5,256 7,212 26,429 27,887 Selling, general and administrative 16,708 13,638 18,709 58,856 65,693 Amortization of intangible assets 103 102 233 411 958 Integration and restructuring charges 1,368 3,635 659 5,840 1,094 Impairment of goodwill - 48,144 6,513 48,144 6,513 Impairment of intangible assets   -     -     2,104     -     2,104   Total operating expenses   25,600     70,775     35,430     139,680     104,249  

Operating income (loss)

1,739 (46,118 ) (16,450 ) (35,896 ) (19,603 ) Gain on sale of asset - - - 700 Loss on repayment of convertible notes, net - - - (522 ) - Loss on short-term investments, net - - (2,018 ) (1,368 ) (3,728 ) Interest income 226 322 991 1,807 7,123 Interest expense   (507 )   (537 )   (1,126 )   (2,352 )   (4,747 ) Earnings (loss) before income taxes 1,458 (46,333 ) (18,603 ) (38,331 ) (20,255 ) Income tax provision (benefit)   (477 )   330     (5,044 )   2,340     (5,666 ) Net earnings (loss) from continuing operations 1,935 (46,663 ) (13,559 ) (40,671 ) (14,589 ) Gain from discontinued operations, net of tax   -     -     30     -     121   Net income (loss) $ 1,935   $ (46,663 ) $ (13,529 ) $ (40,671 ) $ (14,468 )   Earnings (loss) per share - basic: Income (loss) from continuing operations $ 0.04 $ (1.08 ) $ (0.31 ) $ (0.93 ) $ (0.33 ) Gain from discontinued operations   -     -     -     -     -   Net earnings (loss) $ 0.04   $ (1.08 ) $ (0.31 ) $ (0.93 ) $ (0.33 ) Weighted average shares outstanding - basic   43,028     43,326     43,914     43,500     44,461     Earnings (loss) per share - diluted: Income (loss) from continuing operations $ 0.04 $ (1.08 ) $ (0.31 ) $ (0.93 ) $ (0.33 ) Gain from discontinued operations   -     -     -     -     -   Net earnings (loss) $ 0.04   $ (1.08 ) $ (0.31 ) $ (0.93 ) $ (0.33 ) Weighted average shares outstanding - diluted   43,619     43,326     43,914     43,500     44,461     SYMMETRICOM, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (unaudited)     June 28, June 29, 2009 2008   ASSETS Current assets: Cash and cash equivalents $ 72,064 $ 142,419 Short-term investments 40,737 21,910 Accounts receivable, net 42,389 36,682 Inventories, net 38,566 38,273 Prepaids and other current assets   16,143     14,402   Total current assets 209,899 253,686 Property, plant and equipment, net 20,749 25,036 Goodwill, net - 48,144 Other intangible assets, net 5,308 7,191 Deferred taxes and other assets   40,486     44,512   Total assets $ 276,442   $ 378,569     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 8,116 $ 9,018 Accrued compensation 19,093 13,582 Accrued warranty 3,737 3,801 Other accrued liabilities 9,810 11,233 Current maturities of long-term obligations   -     64,515   Total current liabilities 40,756 102,149 Long-term obligations 62,248 59,855 Deferred income taxes   334     426   Total liabilities 103,338 162,430 Stockholders' equity: Common stock 179,633 182,201 Accumulated other comprehensive income (loss) 144 (60 ) Retained earnings (accumulated deficit)   (6,673 )   33,998   Total stockholders' equity   173,104     216,139   Total liabilities and stockholders' equity $ 276,442   $ 378,569     SYMMETRICOM, INC. RECONCILIATION OF GAAP TO NON-GAAP RESULTS (In thousands, except per share amounts) (unaudited)           Three months ended Twelve months ended June 28, March 29, June 29, June 28, June 29, 2009 2009 2008 2009 2008 Reconciliation from GAAP to Non-GAAP GAAP net earnings (loss) from continuing operations $ 1,935 $ (46,663 ) $ (13,559 ) $ (40,671 ) $ (14,589 )   Equity-based compensation expense: Cost of products and services 182 153 164 630 823 Research and development 193 (20 ) 173 627 1,446 Selling, general and administrative   641     723     635     2,035     2,687   Total equity-based compensation expense 1,016 856 972 3,292 4,956 Amortization of intangible assets: Cost of products and services 369 368 846 1,474 3,343 Operating expenses   103     102     233     411     958   Total amortization of intangible assets 472 470 1,079 1,885 4,301   Integration and restructuring charges 2,959 5,910 807 9,706 1,728 Impairment of goodwill - 48,144 6,513 48,144 6,513 Impairment of intangibles - - 7,762 - 7,762 Loss on repayment of convertible notes, net - - - 522 - Loss on short-term investments, net - - 2,018 1,368 3,728 Gain on sale of asset - - - - (700 ) Cost of internal investigation - - 247 - 1,479 CEO post-employment compensation - 1,007 - 1,007 - Income tax effect of Non-GAAP adjustments   (2,721 )   (3,461 )   (5,257 )   (8,144 )   (8,335 ) Non-GAAP net earnings from continuing operations $ 3,661   $ 6,263   $ 582   $ 17,109   $ 6,843     Earnings from continuing operations per share-diluted: GAAP income (loss) from continuing operations $ 0.04 $ (1.08 ) $ (0.31 ) $ (0.93 ) $ (0.33 ) Non-GAAP income from continuing operations $ 0.08 $ 0.14 $ 0.01 $ 0.39 $ 0.15 Shares used in diluted shares calculation 43,619 43,790 44,483 44,046 44,972   SYMMETRICOM, INC. RECONCILIATION OF GAAP TO NON-GAAP RESULTS (In thousands, except per share amounts) (unaudited)           Three months ended Twelve months ended June 28, March 29, June 29, June 28,

June 29,

2009 2009 2008 2009 2008

Reconciliation from GAAP to Non-GAAP Gross Margin:

GAAP Revenue $ 60,356 $ 56,370 $ 57,005 $ 220,831 $ 208,052   GAAP Gross profit $ 27,339 $ 24,657 $ 18,980 $ 103,784 $ 84,646 GAAP Gross margin 45.3 % 43.7 % 33.3 % 47.0 % 40.7 %   Add Non-GAAP Items: Equity-based compensation expense 182 153 164 630 823 Amortization of intangible assets 369 368 846 1,474 3,343 Impairment of intangible assets - - 5,658 - 5,658 Integration and restructuring charges   1,591     2,275     148     3,866     634     Non-GAAP Gross profit $ 29,481 $ 27,453 $ 25,796 $ 109,754 $ 95,104 Non-GAAP Gross margin 48.8 % 48.7 % 45.3 % 49.7 % 45.7 %     Reconciliation from GAAP to Non-GAAP Operating Expense: GAAP Revenue $ 60,356 $ 56,370 $ 57,005 $ 220,831 $ 208,052   GAAP Operating expenses $ 25,600 $ 70,775 $ 35,430 $ 139,680 $ 104,249 Operating expenses % to revenue 42.4 % 125.6 % 62.2 % 63.3 % 50.1 %   Add Non-GAAP Items: Equity-based compensation expense 834 703 808 2,662 4,133 Amortization of intangible assets 103 102 233 411 958 Integration and restructuring charges 1,368 3,635 659 5,840 1,094 Impairment of goodwill - 48,144 6,513 48,144 6,513 Impairment of intangible assets - - 2,104 - 2,104 Cost of internal investigation - - 247 - 1,479 CEO post-employment compensation   -     1,007     -     1,007     -     Non-GAAP operating expenses $ 23,295 $ 17,184 $ 24,866 $ 81,616 $ 87,968 Non-GAAP operating expenses % to revenue 38.6 % 30.5 % 43.6 % 37.0 % 42.3 %   Symmetricom, Inc. RECONCILIATION OF FORWARD-LOOKING GUIDANCE FOR NON-GAAP FINANCIAL MEASURES TO PROJECTED GAAP REVENUE AND EPS (In thousands, except per share amounts) (Unaudited)           Three Months Ending September 27, 2009 Revenue Earnings / (Loss) Per Share From To From To   GAAP Guidance 1 $ 48,000 $ 55,000 $ (0.03 ) $ 0.01   Estimated Non-GAAP Adjustments Equity-based compensation expense 0.02 0.03 Amortization of intangible assets 0.01 0.01 Integration and restructuring charges 0.03 0.04 Income tax effect of non-GAAP adjustments         (0.02 )     (0.03 ) Total Non-GAAP Adjustments 0.04 0.05             Non-GAAP Guidance $ 48,000   $ 55,000 $ 0.01     $ 0.06          

Twelve Months Ending June 27, 2010

Revenue Earnings Per Share From To From To   GAAP Guidance 1 $ 210,000 $ 230,000 $ 0.22 $ 0.30   Estimated Non-GAAP Adjustments Equity-based compensation expense 0.10 0.11 Amortization of intangible assets 0.03 0.03 Integration and restructuring charges 0.07 0.08 Income tax effect of non-GAAP adjustments         (0.07 )     (0.08 ) Total Non-GAAP Adjustments 0.13 0.14             Non-GAAP Guidance $ 210,000   $ 230,000 $ 0.35     $ 0.44       1 GAAP EPS Guidance does not include the impact of the implementation of FASB Staff Position ("FSP") APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)". Under FSP APB 14-1, issuers of convertible debt instruments separately account for the liability and equity components of convertible instruments. We will adopt FSP APB 14-1 in the first quarter of fiscal 2010 and are currently in the process of evaluating the impact of adoption on our financial statements. In future financial statement reports, adoption of FSP APB 14-1 will be applied retrospectively to all prior periods presented in such reports. We expect the adoption to result in a material amount of additional non-cash interest expense.