Symmetricom Reports Third Quarter FY2005 Results

Symmetricom Reports Third Quarter FY2005 Results

    Business Editors/High-Tech Editors

    SAN JOSE, Calif.--(BUSINESS WIRE)--April 28, 2005--Symmetricom, Inc. (NASDAQ:SYMM), a leading worldwide supplier of network synchronization and timing solutions, today reported results for its fiscal third quarter ended March 31, 2005.
    Fiscal third quarter revenue was $43.8 million, a decrease of $4.1 million, or 8.7 percent, from prior quarter revenue of $48.0 million, and flat with the same period last year. For the nine months ended March 31, 2005, revenue was $143.7 million, an increase of $20.6 million, or 16.7 percent, over the prior year period.
    Net earnings from continuing operations for the fiscal third quarter were $2.8 million, or $0.06 per share on a fully diluted basis, compared to $4.6 million, or $0.10 per share, in the prior quarter. In the same period of the prior year, the company reported net earnings from continuing operations of $1.8 million, or $0.04 per share. For the nine months ended March 31, 2005, net earnings from continuing operations were $11.9 million, or $0.26 per share on a fully diluted basis, compared to a net loss from continuing operations for the same period in the prior year of $4.4 million, or $(0.10) per share.
    Non-GAAP net earnings for the fiscal third quarter, which excludes certain items related to non-cash compensation, amortization of acquired intangibles, integration and restructuring charges and unusual and non-recurring items, were $4.3 million, or $0.09 per share on a fully diluted basis. This compares to non-GAAP net earnings of $2.6 million, or $0.06 per share, in the third quarter of fiscal year 2004. For the nine months ended March 31, 2005, non-GAAP net earnings were $14.8 million or $0.32 per share on a fully diluted basis, compared to non-GAAP net earnings for the same period of the prior year of $2.9 million, or $0.07 per share.
    "Revenue for the quarter met our expectations, while earnings were higher than expected," said Thomas Steipp, president and CEO of Symmetricom. "We are pleased to report that we have been selected as a provider at three major wireline customers that have completed their RFPs and we are now in the process of completing contracts. Once the contracts are completed, we expect the resumption of more normalized purchase levels and the opportunity to participate in the build-out of next-generation networks by these customers. This represents a critical milestone in our focused sales efforts to take part in the build-out of next-generation networks at some of our largest customers."
    Telecom Solution Division revenue for the quarter was $29.1 million, a decrease of $3.3 million, or 10.3 percent over the prior quarter and a decrease of $2.1 million, or 6.7 percent over the same period last fiscal year. Timing, Test & Measurement Division revenue for the quarter was $14.7 million, a decrease of $0.8 million, or 5.3 percent, over the prior quarter and up $2.1 million, or 17.1 percent, over the same period last fiscal year.

    Outlook for Q4 FY05

    Symmetricom expects fourth quarter FY05 revenue to be between $43 million and $48 million. The company expects earnings to be between $0.04 and $0.08 per share.

    Investor Conference Call

    As previously announced, management will hold a conference call to discuss these results today, April 28 at 1:30 p.m. Pacific Time. Those wishing to join should dial 712-923-4251, passcode "Symmetricom." Please reference the conference leader: Thomas Steipp. A live webcast of the conference call will also be available via the company's website at www.symmetricom.com or www.vcall.com. A replay of the call will be available for one week. To access the replay, please dial 203-369-0286.

    About Symmetricom Inc.

    As a worldwide leader in precise time and frequency products and services, Symmetricom provides "Perfect Timing" to customers around the world, including communications service providers, network equipment manufacturers, U.S. Department of Defense (DOD), aerospace contractors, enterprises, governments and research facilities. Since 1985, the company's timing, frequency and synchronization solutions have helped define the world's standards, delivering precision, reliability and efficiency to wireless and wireline networks, instrumentation and testing applications and network time management. Deployed in more than 90 countries, products include atomic clocks, cesium and rubidium standards, VME, crystal oscillators, PCI cards and Global Positioning System (GPS) solutions for instrumentation applications, as well as network time servers for Network Time Protocol (NTP) synchronization and time synchronization solutions. In 2002, Symmetricom acquired TrueTime and Datum, strengthening its leading position in the world time and frequency markets. Symmetricom is based in San Jose, Calif., with offices worldwide. For more information, visit www.symmetricom.com.

    Non-GAAP Information

    Certain non-GAAP financial information is included in this press release. In the non-GAAP Statements of Operations, Symmetricom excludes certain items related to non-cash compensation, amortization of acquired intangibles, integration and restructuring charges and unusual and non-recurring items. 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 is not determined using GAAP and 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 "Consolidated Statements of Operations (non-GAAP)" schedule provided in the press release.

    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 estimates of future revenue and earnings, pending RFPs, as well as the information regarding the usefulness of the non-GAAP financial information. 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 or test and measurement products, our customers' ability and need to upgrade existing equipment, our ability to negotiate contracts with our customers, our ability to maintain gross margins, timing of orders, cancellation or delay of customer orders, loss of customers, difficulties in manufacturing products to specification or customer volume requirements, challenges in integrating businesses, customer acceptance of new products, 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 report on Form 10-K for the year ended June 30, 2004 and subsequent Form 10-Q and Form 8-K filings.

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

Three months Nine months ended ended March 31, March 31, 2005 2004 2005 2004 -------- -------- --------- ---------

Net revenue $43,815 $43,748 $143,737 $123,179 Cost of products and services 22,085 25,624 73,849 73,031 Amortization of purchased technology 971 978 2,932 2,940 Integration and restructuring charges - - - 5,641 -------- -------- --------- --------- Gross Profit 20,759 17,146 66,956 41,567 Gross Margin 47.4% 39.2% 46.6% 33.7% Operating Expenses: Research and development 4,057 3,798 11,990 12,600 Selling, general and administrative 13,126 10,740 38,864 32,887 Amortization of intangibles 135 218 444 619 Integration and restructuring charges - - - 1,890 -------- -------- --------- --------- Operating income (loss) 3,441 2,390 15,658 (6,429) Interest income 388 95 755 260 Interest expense (127) (143) (392) (448) -------- -------- --------- --------- Earnings (loss) before income taxes 3,702 2,342 16,021 (6,617) Income tax provision (benefit) 883 592 4,134 (2,244) -------- -------- --------- --------- Net earnings (loss) from continuing operations 2,819 1,750 11,887 (4,373) Gain (loss) from discontinued operations, net of tax - (1) 162 (17) -------- -------- --------- --------- Net earnings (loss) $2,819 $1,749 $12,049 $(4,390) ======== ======== ========= =========

Earnings (loss) per share - basic: Earnings (loss) from continuing operations $0.06 $0.04 $0.27 $(0.10) Gain (loss) from discontinued operations - - - - -------- -------- --------- --------- Net earnings (loss) $0.06 $0.04 $0.27 $(0.10) -------- -------- --------- --------- Weighted average shares outstanding - basic 45,868 44,226 45,328 43,386 ======== ======== ========= =========

Earnings (loss) per share - diluted: Earnings (loss) from continuing operations $0.06 $0.04 $0.26 $(0.10) Gain (loss) from discontinued operations - - - - -------- -------- --------- --------- Net earnings (loss) $0.06 $0.04 $0.26 $(0.10) -------- -------- --------- --------- Weighted average shares outstanding - diluted 47,125 46,014 46,709 43,386 ======== ======== ========= =========

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

Three months Nine months ended ended March 31, March 31, 2005 2004 2005 2004 -------- -------- --------- ---------

Net revenue $43,815 $43,748 $143,737 $123,179 Cost of products and services 22,082 25,618 73,794 73,013 -------- -------- --------- --------- Gross Profit 21,733 18,130 69,943 50,166 Gross Margin 49.6% 41.4% 48.7% 40.7% Operating Expenses: Research and development 4,057 3,798 11,990 12,600 Selling, general and administrative 12,301 10,677 38,191 32,723 Amortization of intangibles 46 91 177 238 -------- -------- --------- --------- Operating income (loss) 5,329 3,564 19,585 4,605 Interest income 388 95 755 260 Interest expense (127) (143) (392) (448) -------- -------- --------- --------- Earnings before income taxes 5,590 3,516 19,948 4,417 Income tax provision 1,334 889 5,147 1,497 -------- -------- --------- --------- Net earnings from continuing operations 4,256 2,627 14,801 2,920 Gain (loss) from discontinued operations, net of tax - - - - -------- -------- --------- --------- Net earnings $4,256 $2,627 $14,801 $2,920 ======== ======== ========= =========

Earnings per share - basic: Earnings from continuing operations $0.09 $0.06 $0.33 $0.07 Gain (loss) from discontinued operations - - - - -------- -------- --------- --------- Net earnings $0.09 $0.06 $0.33 $0.07 -------- -------- --------- --------- Weighted average shares outstanding - basic 45,868 44,226 45,328 43,386 ======== ======== ========= =========

Earnings per share - diluted: Earnings from continuing operations $0.09 $0.06 $0.32 $0.07 Gain (loss) from discontinued operations - - - - -------- -------- --------- --------- Net earnings $0.09 $0.06 $0.32 $0.07 -------- -------- --------- --------- Weighted average shares outstanding - diluted 47,125 46,014 46,709 43,386 ======== ======== ========= =========

    Notes to Consolidated Statements of Operations (000's) Three Months ended March 31
    (a) The above non-GAAP Statements of Operations exclude the effects of the following:

--	For the three months ended March 31, 2005 and March 31, 2004 the amortization of purchased technology related to the acquisitions of Datum, TrueTime, Telmax and the HP Communications Synchronization Business, which amounted to $971 and $978, respectively (from cost of goods);
--	For the three months ended March 31, 2005 and March 31, 2004 the amortization of stock based compensation of $953 and $69, respectively;
--	For the three months ended March 31, 2005 and March 31, 2004 amortization of other intangibles related to the Datum and TrueTime acquisitions of $89 and $127, respectively (from operating expenses);
--	For the three months ended March 31, 2005, a benefit of expense reductions for $125 for recovery of bad debts due to collection of old Datum receivables; and
--	For the three months ended March 31, 2004 the impact of discontinued operations for the Trusted Time Division.

    (b) The above non-GAAP Statements of Operations assume a quarterly effective income tax rate of 23.9% and 25.3% for three months ended March 31, 2005 and 2004 respectively.

    Notes to Consolidated Statements of Operations (000's) Nine Months ended March 31
    (c) The above non-GAAP Statements of Operations exclude the effects of the following:

    -- For the nine months ended March 31, 2005 and March 31,
    2004 the amortization of purchased technology related to
    the acquisitions of Datum, TrueTime, Telmax and the HP
    Communications Synchronization Business, which amounted to
    $2,930 and $2,940, respectively (from cost of goods);

    -- For the nine months ended March 31, 2004, integration and
    restructuring charges related to the Datum, TrueTime, Net
    Monitor and the HP Communications and Synchronization
    Business acquisitions of $7,531, of which $5,641 was
    excluded from cost of goods and $1,890 (from operating
    expenses);

    -- For the nine months ended March 31, 2005 and March 31,
    2004 the amortization of stock based compensation of
    $1,581 and $182, respectively;

    -- For the nine months ended March 31, 2005 and March 31,
    2004 amortization of other intangibles related to the
    Datum and TrueTime acquisitions of $267 and $381,
    respectively (from operating expenses). For the nine
    months ended March 31, 2005, a benefit of expense
    reductions for $485 for recovery of bad debts due to
    collection of old Datum receivables and an expense
    reduction of $368 for an adjustment for a reserve for
    repayment to a bankrupt customer of a collected
    receivable; and.

    -- For the nine months ended March 31, 2005 and March 31,
    2004 the impact of discontinued operations for the Trusted
    Time Division.

    The above non-GAAP Statements of Operations assume a year to date effective income tax rate of 25.8% and 33.9% for the nine months ended March 31, 2005 and 2004, respectively.

SYMMETRICOM, INC. Impact of Non-GAAP Adjustments on Net Income (In thousands, except per share amounts) (unaudited)

Three months ended March 31, 2005

GAAP Adjustments Non-GAAP -------- ----------- --------

Net revenue $43,815 $- $43,815 Cost of products and services 22,085 (3)(a) 22,082 Amortization of purchased technology 971 (971)(b) - -------- ----------- -------- Gross Profit 20,759 974 21,733 Operating Expenses: Research and development 4,057 - 4,057 Selling, general and administrative 13,126 (825)(c) 12,301 Amortization of intangibles 135 (89)(d) 46 -------- ----------- -------- Operating income 3,441 1,888 5,329 Interest income 388 - 388 Interest expense (127) - (127) -------- ----------- -------- Earnings before income taxes 3,702 1,888 5,590 Income tax provision 883 451 (e) 1,334 -------- ----------- -------- Net earnings from continuing operations 2,819 1,437 4,256 Gain from discontinued operations, net of tax - - - -------- ----------- -------- Net earnings $2,819 $1,437 $4,256 ======== =========== ========

Earnings per share - basic: Net earnings $0.06 $0.09 -------- -------- Weighted average shares outstanding - basic 45,868 45,868 ======== ========

Earnings per share - diluted: Net earnings $0.06 $0.09 -------- -------- Weighted average shares outstanding - diluted 47,125 47,125 ======== ========

(a) The adjustment represents the amortization of stock based compensation included in cost of goods.

(b) The adjustment represents the amortization of purchased technology related to acquisitions of Datum, TrueTime, Telmax and the HP Communications and Synchronization Business.

(c) The adjustment is net of an expense of ($950) for stock based compensation, offset by an expense reduction of $125 for bad debts due to the collection of old Datum receivables that were fully reserved.

(d) The adjustment represents the amortization of other intangibles related to acquisition of Datum, TrueTime, Net Monitor and the HP Communications and Synchronization Business.

(e) This adjustment is the tax impact of the above adjustments using the fiscal 2005 quarterly effective tax rate of 23.9%.

SYMMETRICOM, INC. Impact of Non-GAAP Adjustments on Net Income (In thousands, except per share amounts) (unaudited)

Nine months ended March 31, 2005

GAAP Adjustments Non-GAAP --------- ----------- ---------

Net revenue $143,737 $- $143,737 Cost of products and services 73,849 (55)(a) 73,794 Amortization of purchased technology 2,932 (2,932)(b) - --------- ----------------------- Gross Profit 66,956 2,987 69,943 Operating Expenses: Research and development 11,990 - 11,990 Selling, general and administrative 38,864 (673)(c) 38,191 Amortization of intangibles 444 (267)(d) 177 --------- ----------- --------- Operating income 15,658 3,927 19,585 Interest income 755 - 755 Interest expense (392) - (392) --------- ----------- --------- Earnings before income taxes 16,021 3,927 19,948 Income tax provision 4,134 1,013 (e) 5,147 --------- ----------- --------- Net earnings from continuing operations 11,887 2,914 14,801 Gain from discontinued operations, net of tax 162 (162)(f) - --------- ----------- --------- Net earnings $12,049 $2,752 $14,801 ========= =========== =========

Earnings per share - basic: Net earnings $0.27 $0.33 --------- --------- Weighted average shares outstanding - basic 45,328 45,328 ========= =========

Earnings per share - diluted: Net earnings $0.26 $0.32 --------- --------- Weighted average shares outstanding - diluted 46,709 46,709 ========= =========

(a) The adjustment represents the amortization of stock based compensation.

(b) The adjustment represents the amortization of purchased technology related to acquisitions of Datum, TrueTime, Telmax and the HP Communications and Synchronization Business.

(c) The adjustment is net of an expense of ($1,526) for stock based compensation, an expense reduction of $485 for bad debts due to the collection of old Datum receivables that were fully reserved and an expense reduction of $368 due to an adjustment for a reserve for a repayment to a bankrupt customer of a collected receivable.

(d) The adjustment represents the amortization of other intangibles related to acquisition of Datum, TrueTime, Net Monitor and the HP Communications and Synchronization Business.

(e) This adjustment is the tax impact of the above adjustments using the fiscal 2005 year to date effective tax rate of 25.8%.

(f) Eliminate the impact of discontinued operations

SYMMETRICOM, INC. Impact of Non-GAAP Adjustments on Net Income (In thousands, except per share amounts) (unaudited)

Three months ended March 31, 2004

GAAP Adjustments Non-GAAP -------- ----------- --------

Net revenue $43,748 $- $43,748 Cost of products and services 25,624 (6)(a) 25,618 Amortization of purchased technology 978 (978)(b) - Integration and restructuring charges - - (c) - -------- ----------- -------- Gross Profit 17,146 984 18,130 Operating Expenses: Research and development 3,798 - 3,798 Selling, general and administrative 10,740 (63)(a) 10,677 Amortization of intangibles 218 (127)(d) 91 Integration and restructuring charges - - (c) - -------- ----------- -------- Operating income (loss) 2,390 1,174 3,564 Interest income 95 - 95 Interest expense (143) - (143) -------- ----------- -------- Earnings (loss) before income taxes 2,342 1,174 3,516 Income tax provision (benefit) 592 297 (e) 889 -------- ----------- -------- Net earnings (loss) from continuing operations 1,750 877 2,627 Loss from discontinued operations, net of tax (1) 1 (f) - -------- ----------- -------- Net earnings (loss) $1,749 $878 $2,627 ======== =========== ========

Earnings (loss) per share - basic: Earnings (loss) from continuing operations $0.04 $0.06 Loss from discontinued operations - - -------- -------- Net earnings (loss) $0.04 $0.06 -------- -------- Weighted average shares outstanding - basic 44,226 44,226 ======== ========

Earnings (loss) per share - basic: Earnings (loss) from continuing operations $0.04 $0.06 Loss from discontinued operations - - -------- -------- Net earnings (loss) $0.04 $0.06 -------- -------- Weighted average shares outstanding - diluted 46,014 46,014 ======== ========

(a) The adjustment represents the amortization of stock based compensation.

(b) The adjustment represents the amortization of purchased technology related to acquisitions of Datum, TrueTime, Telmax and the HP Communications and Synchronization Business.

(c) The adjustment represents Integration and restructuring charges related primarily to the Datum and TrueTime acquistions.

(d) The adjustment represents the amortization of other intangibles related to acquisition of Datum, TrueTime, Net Monitor and the HP Communications and Synchronization Business.

(e) This adjustment is the tax impact of the above adjustments using the fiscal 2004 quarterly effective tax rate of 25.3%.

(f) Eliminate the impact of discontinued operations.

SYMMETRICOM, INC. Impact of Non-GAAP Adjustments on Net Income (In thousands, except per share amounts) (unaudited)

Nine months ended March 31, 2004

GAAP Adjustments Non-GAAP --------- ----------- ---------

Net revenue $123,179 $- $123,179 Cost of products and services 73,031 (18)(a) 73,013 Amortization of purchased technology 2,940 (2,940)(b) - Integration and restructuring charges 5,641 (5,641)(c) - --------- ----------- --------- Gross Profit 41,567 8,599 50,166 Operating Expenses: Research and development 12,600 - 12,600 Selling, general and administrative 32,887 (164)(a) 32,723 Amortization of intangibles 619 (381)(d) 238 Integration and restructuring charges 1,890 (1,890)(c) - --------- ----------- --------- Operating income (loss) (6,429) 11,034 4,605 Interest income 260 - 260 Interest expense (448) - (448) --------- ----------- --------- Earnings (loss) before income taxes (6,617) 11,034 4,417 Income tax benefit (2,244) 3,741 (e) 1,497 --------- ----------- --------- Net earnings (loss) from continuing operations (4,373) 7,293 2,920 Loss from discontinued operations, net of tax (17) 17 (f) - --------- ----------- --------- Net earnings (loss) $(4,390) $7,310 $2,920 ========= =========== =========

Earnings (loss) per share - basic: Earnings (loss) from continuing operations $(0.10) $0.07 Loss from discontinued operations - - --------- --------- Net earnings (loss) $(0.10) $0.07 --------- --------- Weighted average shares outstanding - basic 43,386 43,386 ========= =========

Earnings (loss) per share - diluted: Earnings (loss) from continuing operations $(0.10) $0.07 Loss from discontinued operations - - --------- --------- Net earnings (loss) $(0.10) $0.07 --------- --------- Weighted average shares outstanding - diluted 43,386 43,386 ========= =========

(a) The adjustment represents the amortization of stock based compensation.

(b) The adjustment represents the amortization of purchased technology related to acquisitions of Datum, TrueTime, Telmax and the HP Communications and Synchronization Business.

(c) The adjustment represents integration and restructuring charges related primarily to the Datum and TrueTime acquistions.

(d) The adjustment represents the amortization of other intangibles related to acquisition of Datum, TrueTime, Net Monitor and the HP Communications and Synchronization Business.

(e) This adjustment is the tax impact of the above adjustments using the fiscal 2004 year to date effective tax rate of 33.9%.

(f) Eliminate the impact of discontinued operations

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

March 31, June 30, 2005 2004 --------- ---------

ASSETS Current assets: Cash and cash equivalents $48,289 $34,213 Short-term investments 25,595 13,398 Accounts receivable, net 28,725 28,941 Inventories, net 25,163 27,877 Prepaids and other current assets 9,384 9,720 --------- --------- Total current assets 137,156 114,149 Property, plant and equipment, net 23,589 27,936 Goodwill, net 49,248 49,248 Other intangible assets, net 11,349 14,665 Deferred taxes and other assets 42,427 41,092 Note receivable from employee 500 500 --------- --------- Total assets $264,269 $247,590 ========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $10,120 $15,372 Accrued compensation 8,930 9,661 Accrued warranty 3,415 3,194 Other accrued liabilities 13,224 12,506 Current maturities of long-term obligations 1,087 1,128 --------- --------- Total current liabilities 36,776 41,861 Long-term obligations 7,630 8,827 Deferred income taxes 902 418 --------- --------- Total liabilities 45,308 51,106 --------- --------- Stockholders' equity: Common stock 183,269 174,293 Stockholder note receivable - (555) Accumulated other comprehensive loss 177 (1) Deferred stock-based compensation (401) (1,120) Retained earnings 35,916 23,867 --------- --------- Total stockholders' equity 218,961 196,484 --------- --------- Total liabilities and stockholders' equity $264,269 $247,590 ========= =========

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CONTACT: Symmetricom Inc. Bill Slater, 408-428-7801 bslater@symmetricom.com or Stapleton Communications Inc. Ellen Brook, 650-470-0200 ellen@stapleton.com

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: HARDWARE SOFTWARE TELECOMMUNICATIONS NETWORKING EARNINGS CONFERENCE CALLS SOURCE: Symmetricom Inc.

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