SYMM Symmetricom, Inc. (MM)

Symmetricom, Inc. (NASDAQ:SYMM), a world leader in precise time solutions, today reported financial results for its fourth quarter and the fiscal year ended June 27, 2010.

Net revenue for the fourth quarter of fiscal 2010 was $55.7 million, compared to the $60.3 million reported for the fourth quarter of fiscal 2009. Symmetricom reported a loss from continuing operations of $3.6 million, or $0.08 per share, for the fourth quarter of fiscal 2010, compared to income from continuing operations of $2.0 million, or $0.05 per share, in the fourth quarter of fiscal 2009. The loss from continuing operations in the fourth quarter of fiscal 2010 was principally driven by a $7.0 million non-cash charge related to the repayment of convertible notes and $6.0 million of restructuring charges.

Net revenue for fiscal 2010 was $221.3 million, compared to $219.7 million for fiscal 2009. Symmetricom reported income from continuing operations of $2.5 million, or $0.06 per share, in fiscal 2010, compared with a loss from continuing operations of $43.8 million, or $1.01 per share, in fiscal 2009. The income from continuing operations for fiscal 2010 included $10.3 million of restructuring charges and $7.0 million of non-cash charges related to the repayment of convertible notes, while the loss from continuing operations for fiscal 2009 included $48.1 million of goodwill impairments, $9.7 million of restructuring charges, and $5.6 million of non-cash charges related to the repayment of convertible notes.

In the fourth quarter of fiscal 2010, Symmetricom used $56.9 million of cash, cash equivalents and short-term investments to repurchase all outstanding convertible notes at par prior to their maturity, ending the fiscal year with no remaining debt outstanding.

Also in the fourth quarter of fiscal 2010, as previously announced, the Company initiated its expansion of its outsourcing relationship with Sanmina-SCI and began the transition of its product fabrication processes from its Aguadilla, Puerto Rico facility to Sanmina-SCI facilities. In conjunction with these activities, the Company recorded approximately $3.2 million of restructuring charges for severance benefits, transition support services and accelerated depreciation.

Non-GAAP income from continuing operations in the fourth quarter of fiscal 2010 was $5.3 million, or $0.12 per share, compared with $4.1 million, or $0.09 per share, in the same period of the prior year. Non-GAAP income from continuing operations for fiscal 2010 was $18.7 million, or $0.42 per share, compared with $18.9 million, or $0.43 per share, for the prior year.

Cash, cash equivalents and short-term investments totaled $75.6 million as of June 27, 2010, a decrease of $57.9 million from the $133.5 million reported as of March 28, 2010. The decrease was driven by the convertible notes repayment of $56.9 million. Net cash provided by operating activities in the fourth quarter was approximately $2.2 million, while property, plant and equipment purchases were $1.4 million, resulting in free cash flow of $0.8 million for the quarter. Free cash flow for fiscal 2010 was $19.6 million.

“In the quarter, we again increased the portion of our Communications Business tied to the development of next generation networks, including our new IEEE1588 packet timing products and our embedded solutions,” said Dave Côté, president and chief executive officer of Symmetricom. “In our Government Business, we bolstered our leadership position in the important GPS space with additional funding on the GPS Block III program and the achievement of a key milestone on GPS Block IIF.

“This was a year of establishing our new strategic direction, building operational excellence and positioning the company to maximize our core leadership and expertise in time,” continued Côté. “We’ve made significant changes organizationally and launched a number of initiatives aimed at driving growth and creating a more efficient business model. Plus, we now have a stronger balance sheet, with no debt and a solid cash flow profile.”

Business Results

Revenue in the Communications Business in the fourth quarter was $33.0 million compared to $36.6 million reported in the same period of last year. The 10% year-over-year decline was driven primarily by reduced sales of cable and sync products, somewhat offset by stronger sales of next generation product including embedded systems for WiMAX base stations and continued growth in PackeTime. For the full year, Communications revenue was $135.8 million, stable versus the prior year.

Revenue in the Government Business in the fourth quarter was $22.7 million compared to $23.7 million reported in the same period of last year. The 4% year-over-year decline in revenues was due primarily to lower sales of atomic clocks and sync products to government agencies. For the full year, revenue increased slightly to $85.5 million.

First Quarter 2011 Guidance

Symmetricom’s guidance for the first quarter of fiscal 2011 is as follows:

• Net revenue is expected to be in the range of $50 million to $55 million
• GAAP earnings (loss) per share is expected to be in the range of $(0.06) to $0.00
• Non-GAAP earnings per share is expected to be in the range of $0.04 to $0.08

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 +1-415-228-5002 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 +1-203-369-1101 and referencing the passcode 5220.

About Symmetricom, Inc.

Symmetricom, 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(R) timing. 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, restructuring charges, impairment of goodwill and other intangibles, gains and losses on investments and repayment of convertible notes, non-cash interest expense charges, and other items 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 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 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 fiscal 2011 guidance, 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, reduced rates or changes in government spending patterns, 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 28, 2009 and subsequent Form 10-Q’s and 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 27, March 28, June 28, June 27, June 28, 2010 2010 2009 (1) 2010 2009 (1)   Net revenue $ 55,660 $ 56,526 $ 60,260 $ 221,316 $ 219,746 Cost of sales: Cost of products and services 28,101 28,367 30,918 116,889 111,184 Amortization of purchased technology 268 278 369 1,282 1,474 Restructuring charges   3,384     448     1,591     5,625     3,866   Total cost of sales   31,753     29,093     32,878     123,796     116,524   Gross profit 23,907 27,433 27,382 97,520 103,222 Gross margin 43.0 % 48.5 % 45.4 % 44.1 % 47.0 % Operating expenses: Research and development 6,190 5,684 6,819 23,701 23,421 Selling, general and administrative 14,560 14,385 16,494 56,743 58,119 Amortization of intangible assets 62 62 103 281 411 Restructuring charges 2,657 998 1,368 4,666 5,840 Impairment of goodwill   -     -     -     -     48,144   Total operating expenses   23,469     21,129     24,784     85,391     135,935   Operating income (loss) 438 6,304 2,598 12,129 (32,713 ) Loss on repayment of convertible notes, net (7,026 ) - - (7,026 ) (5,623 ) Loss on short-term investments, net - - - - (1,368 ) Interest income 278 350 226 1,594 1,807 Interest expense   (792 )   (1,318 )   (1,219 )   (4,654 )   (5,321 ) Income (loss) from continuing operations before income taxes (7,102 ) 5,336 1,605 2,043 (43,218 ) Income tax provision (benefit)   (3,521 )   1,648     (404 )   (503 )   588   Income (loss) from continuing operations (3,581 ) 3,688 2,009 2,546 (43,806 ) Income (loss) from discontinued operations, net of tax   (58 )   804     (523 )   (20 )   (1,951 ) Net income (loss) $ (3,639 ) $ 4,492   $ 1,486   $ 2,526   $ (45,757 )   Earnings (loss) per share - basic: Income (loss) from continuing operations $ (0.08 ) $ 0.08 $ 0.05 $ 0.06 $ (1.01 ) Income (loss) from discontinued operations   -     0.02     (0.01 )   -     (0.04 ) Net earnings (loss) $ (0.08 ) $ 0.10   $ 0.04   $ 0.06   $ (1.05 )   Weighted average shares outstanding - basic   43,593     43,438     43,028     43,380     43,500     Earnings (loss) per share - diluted: Income (loss) from continuing operations $ (0.08 ) $ 0.08 $ 0.05 $ 0.06 $ (1.01 ) Income (loss) from discontinued operations   -     0.02     (0.01 )   -     (0.04 ) Net earnings (loss) $ (0.08 ) $ 0.10   $ 0.04   $ 0.06   $ (1.05 )   Weighted average shares outstanding - diluted   43,593     43,934     43,619     43,897     43,500    

(1) Adjusted for the retrospective adoption of recently issued authoritative guidance on accounting for our contingent convertible subordinated notes

    SYMMETRICOM, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (unaudited)   June 27, June 28, 2010 2009 (1)   ASSETS Current assets: Cash and cash equivalents $ 21,794 $ 72,064 Short-term investments 53,825 40,737 Accounts receivable, net 40,075 42,389 Inventories, net 37,229 38,566 Prepaids and other current assets   15,108     16,143   Total current assets 168,031 209,899 Property, plant and equipment, net 23,077 20,749 Intangible assets, net 3,745 5,308 Deferred taxes and other assets   36,534     36,431   Total assets $ 231,387   $ 272,387     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 6,768 $ 8,116 Accrued compensation 18,731 19,093 Accrued warranty 2,900 3,737 Other accrued liabilities   10,506     9,810   Total current liabilities 38,905 40,756 Long-term obligations 8,296 51,769 Deferred income taxes   334     334   Total liabilities 47,535 92,859 Stockholders' equity: Common stock 202,450 200,152 Accumulated other comprehensive income (loss) (356 ) 144 Accumulated deficit   (18,242 )   (20,768 ) Total stockholders' equity   183,852     179,528   Total liabilities and stockholders' equity $ 231,387   $ 272,387    

(1) Adjusted for the retrospective adoption of recently issued authoritative guidance on accounting for our contingent convertible subordinated notes

          SYMMETRICOM, INC. RECONCILIATION OF GAAP TO NON-GAAP RESULTS (In thousands, except per share amounts) (unaudited)   Three months ended Twelve months ended June 27, March 28, June 28, June 27, June 28, 2010 2010 2009 (1) 2010 2009 (1) Reconciliation from GAAP to Non-GAAP GAAP Income (loss) from continuing operations $ (3,581 ) $ 3,688 $ 2,009 $ 2,546 $ (43,806 )   Add Non-GAAP adjustments: Equity-based compensation expense: Cost of products and services 161 176 182 809 630 Research and development 136 228 193 792 627 Selling, general and administrative   803     776     641     2,473     2,035   Total equity-based compensation expense 1,100 1,180 1,016 4,074 3,292   Amortization of intangible assets: Cost of products and services 268 278 369 1,282 1,474 Operating expenses   62     62     103     281     411   Total amortization of intangible assets 330 340 472 1,563 1,885   Restructuring charges 6,041 1,446 2,959 10,291 9,706 Impairment of goodwill - - - - 48,144 Loss on repayment of convertible notes, net 7,026 - - 7,026 5,623 Loss on short-term investments, net - - - - 1,368 Non-cash interest expense on convertible notes 500 812 736 2,844 3,075 CEO post-employment compensation - - - - 1,007 Income tax effect of Non-GAAP adjustments   (6,125 )   (1,035 )   (3,110 )   (9,690 )   (11,380 ) Non-GAAP Income from continuing operations $ 5,291   $ 6,431   $ 4,082   $ 18,654   $ 18,914     Earnings from continuing operations per share-diluted: GAAP income (loss) from continuing operations $ (0.08 ) $ 0.08   $ 0.05   $ 0.06   $ (1.01 )   Non-GAAP income from continuing operations $ 0.12   $ 0.15   $ 0.09   $ 0.42   $ 0.43     Shares used in diluted shares calculation   44,092     43,934     43,619     43,897     44,046    

(1) Adjusted for the retrospective adoption of recently issued authoritative guidance on accounting for our contingent convertible subordinated notes

            SYMMETRICOM, INC. RECONCILIATION OF GAAP TO NON-GAAP RESULTS (In thousands, except per share amounts) (unaudited)     Three months ended Twelve months ended June 27, March 28, June 28, June 27, June 28, 2010 2010 2009 (1) 2010 2009 (1)   GAAP Revenue $ 55,660 $ 56,526 $ 60,260 $ 221,316 $ 219,746   Reconciliation from GAAP to Non-GAAP Gross Margin: GAAP Gross profit (A) $ 23,907 $ 27,433 $ 27,382 $ 97,520 $ 103,222 GAAP Gross margin 43.0 % 48.5 % 45.4 % 44.1 % 47.0 %   Add Non-GAAP adjustments: Equity-based compensation expense 161 176 182 809 630 Amortization of intangible assets 268 278 369 1,282 1,474 Restructuring charges   3,384     448     1,591     5,625     3,866     Non-GAAP Gross profit (B) $ 27,720   $ 28,335   $ 29,524   $ 105,236   $ 109,192   Non-GAAP Gross margin 49.8 % 50.1 % 49.0 % 47.6 % 49.7 %   Reconciliation from GAAP to Non-GAAP Operating Expense: GAAP Operating expenses (C) $ 23,469 $ 21,129 $ 24,784 $ 85,391 $ 135,935 Operating expense % to revenue 42.2 % 37.4 % 41.1 % 38.6 % 61.9 %   Add Non-GAAP adjustments: Equity-based compensation expense 939 1,004 834 3,265 2,662 Amortization of intangible assets 62 62 103 281 411 Restructuring charges 2,657 998 1,368 4,666 5,840 Impairment of goodwill - - - - 48,144 CEO post-employment compensation   -     -     -     -     1,007     Non-GAAP operating expenses (D) $ 19,811   $ 19,065   $ 22,479   $ 77,179   $ 77,871   Non-GAAP operating expenses % to revenue 35.6 % 33.7 % 37.3 % 34.9 % 35.4 %   Reconciliation from GAAP to Non-GAAP Operating Income (loss): GAAP Operating income (loss) (A) - (C) $ 438   $ 6,304   $ 2,598   $ 12,129   $ (32,713 ) Operating income (loss) % to revenue 0.8 % 11.2 % 4.3 % 5.5 % -14.9 %   Non-GAAP Operating income (loss) (B) - (D) $ 7,909   $ 9,270   $ 7,045   $ 28,057   $ 31,321   Operating income (loss) % to revenue 14.2 % 16.4 % 11.7 % 12.7 % 14.3 %  

(1) Adjusted for the retrospective adoption of recently issued authoritative guidance on accounting for our contingent convertible subordinated notes

  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 26, 2010 Income (Loss) Per Share from Revenue Continuing Operations From To From To   GAAP Guidance $ 50,000 $ 55,000 $ (0.06 ) $ 0.00   Estimated Non-GAAP Adjustments Equity-based compensation expense 0.02 0.01 Amortization of intangible assets 0.01 0.01 Integration and restructuring charges 0.13 0.10 Income tax effect of non-GAAP adjustments         (0.06 )     (0.04 ) Total Non-GAAP Adjustments - - 0.10 0.08             Non-GAAP Guidance $ 50,000   $ 55,000 $ 0.04     $ 0.08