Aviat Networks, Inc. (AVNW)
F4Q2010 Earnings Call Transcript
August 25, 2010 4:30 pm ET
Cynthia Johnson – Director, Corporate Communications
Chuck Kissner – Chairman and CEO
Tom Cronan – SVP and CFO
Rich Valera – Needham & Company
Matt Thornton – Avian Securities
Colin Denman – D.A. Davidson
Joanna Makris – Mizuho Securities
Nathan Johnson – Pacific Crest Securities
Neal Waggoner – Stephens Inc.
Larry Harris – CL King
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Ladies and gentlemen, thank you for standing by and welcome to the Aviat Networks conference call. At this time, all participants are in a listen-only mode. Later, we will open up the call for your questions. (Operator Instructions) As a reminder, this conference call is being recorded for replay purposes.
I would now like to hand the conference call over to Cynthia Johnson. Cynthia, you may begin.
Thank you, operator. Good afternoon, everybody and welcome to our fourth quarter fiscal 2010 earnings call. This is Cynthia Johnson and I am joined by Chuck Kissner, Chairman and Chief Executive Officer; and Tom Cronan, Senior Vice President and Chief Financial Officer.
During this conference call, we may make forward-looking statements regarding our business, including statements relating to projections of earnings and revenues, business drivers such as the transition to IP infrastructure, the timing and capabilities of new products, network expansion by mobile and private network operators, and variations of economic recovery in different regions.
These and other forward-looking statements involved assumptions, risks and uncertainties that could cause actual results to differ materially from those statements. For more information, please see the press release and the filings made by the company with the SEC. These can be found on the Investor Relations section of our company website, which is www.aviatnetworks.com.
Now I would like to turn the call over to Chuck Kissner, Chairman and Chief Executive Officer of Aviat Networks. Chuck?
Thanks, Cindy, and thank you all for joining us today. During the conference call today, I'm going to will provide a general overview first and then Tom will provide a detailed financial review of our fourth quarter 2010 and some specifics on the restructuring that we recently announced, and then he will provide a discussion on our guidance for Q1, and then I will provide an update on our business status, market conditions, and our short and long-term strategy.
So, first, the overview. Our revenue at $116.3 million came in within the range of the revised guidance of $115 million to $120 million. While there were some issues around parts shortages and the backend loading in shipments, our demand activity was still relatively flat during most of the quarter. While we have seen some uptick in business in the last few weeks, our short-term forward guidance reflects caution about demand in the first quarter.
Non-GAAP profitability for the quarter was primarily affected by the company's legacy OpEx levels. Starting in the current period, we have begun to address our current – our cost structure with the implementation of key actions from our previously announced restructuring plan. Tom is going to discuss the short and long-term impacts of our restructuring plan in more detail during his prepared remarks.
Cash collections were again good for the quarter. So as we enter the most significant phases of our restructuring, and the focus and acceleration of new product development, we are beginning with a strong balance sheet.
Before I turn the call over to Tom, I would like to mention our views on the overall state of our industry. We are pleased actually to say the industry conditions seem to be stabilizing. In addition to that, end user demand for bandwidth continues to increase, even though capital expenditure is a constraint. And finally, we are seeing new vertical market opportunities present themselves. So while our fourth quarter results were disappointing, these reasons give us reason to be cautiously optimistic about fiscal year 2011.
With that, I will turn the call over to Tom. Tom?
Thank you, Chuck. Today, in addition to the detailed financial review, I will discuss the option of new revenue recognition standards, the decision to write off $71.1 million in intangibles, and other intangible long-term assets, and the impact of the financial restructuring on our forward-looking model.
Let me start with a review of the GAAP financial performance for the quarter ended July 2nd, 2010. Fourth quarter revenue was $116.3 million and we reported a net loss of $88.8 million or minus $1.49 per share. GAAP results included $83.5 million of pretax charges, primarily composed of the following; $71.1 million related to intangibles and other asset impairment charges, $3.2 million was for the amortization of purchased intangibles, $4.2 million was for software and other impairment charges, and $5.1 million of stock compensation and restructuring charges.
These charges were offset in part by gains of $2.2 million from the sale of the San Antonio facility and from the final settlement of the Telsima acquisition purchase price. These charges were substantially non-cash charges.
The decision to write off the intangibles and other long-term assets was necessitated by the low market capitalization of the company. The accounting rules require periodic assessment for the goodwill and intangibles. Given the low market capitalization over a sustained period of time and independent assessment of the company's intangibles and other long-term assets did not support the book value and resulted in the decision to make the write-off. On a going-forward basis, the reduction in intangibles and the other long-term assets will result in lowering our depreciation and amortization by $12 million annually.
Now, I would like to present the details of the quarter based on non-GAAP results. We believe the supplemental non-GAAP financial results reflect the basic operating results of the company. We will facilitate comparisons of our results across reporting periods. Please refer to our website for the company GAAP to non-GAAP reconciliation table at www.aviatnetworks.com.