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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 29, 2002
 
OR
 
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                              to                             
 
Commission File Number 000-21507
 
POWERWAVE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
(State or other jurisdiction of
incorporation or organization)
  
11-2723423
(I.R.S. Employer
Identification No.)
 
1801 E. St. Andrew Place
Santa Ana, CA 92705
(Address of principal executive offices, zip code)
 
Registrant’s telephone number, including area code: (714) 466-1000
 
 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES  x  NO  ¨
 
As of October 30, 2002, the number of outstanding shares of Common Stock, par value $.0001 per share, of the Registrant was 65,707,477.
 

 
POWERWAVE TECHNOLOGIES, INC.
 
INDEX
 
        
Page
Part I. Financial Information
     
Item 1.
  
Condensed Financial Statements
     
      
3
      
4
      
5
      
6
      
7-11
Item 2.
     
12-36
Item 3.
     
36-37
Item 4.
     
37
Part II. Other Information
     
Item 6.
     
38
      
39
      
40-41
 
This Quarterly Report on Form 10-Q includes certain forward-looking statements as defined within Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, relating to revenue, revenue composition, demand and pricing trends, future expense levels, trends in average selling prices and gross margins, the timing of and demand for 3G products and the level of expected capital expenditures. Such forward-looking statements are based on the beliefs of, estimates made by, and information currently available to the Company’s management and are subject to certain risks, uncertainties and assumptions. Any statements contained herein (including without limitation statements to the effect that the Company or management “estimates,” “expects,” “anticipates,” “plans,” “believes,” “projects,” “continues,” “may,” or “will,” or statements concerning “potential” or “opportunity” or variations thereof or comparable terminology or the negative thereof) that are not statements of historical fact should be construed as forward-looking statements. The actual results of Powerwave Technologies, Inc. may vary materially from those expected or anticipated in these forward-looking statements. The realization of such forward-looking statements may be impacted by certain important unanticipated factors that may be discussed in “Additional Factors That May Affect Future Results” under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, at pages 12-36. Because of these and other factors that may affect Powerwave’s operating results, past performance should not be considered as an indicator of future performance and investors should not use historical results to anticipate results or trends in future periods. Powerwave undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers should carefully review the risk factors described in this and other documents Powerwave files from time to time with the Securities and Exchange Commission (“SEC”), including subsequent Current Reports on Form 8-K, Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K. All reports filed with the SEC are available free of charge via EDGAR through the SEC website at www.sec.gov. In addition, Powerwave provides copies of its Forms 8-K, 10-K and 10-Q, Proxy and Annual Report at no charge to investors upon request and makes electronic copies of such reports available through its website at www.powerwave.com/investor.html.
 

2

 
POWERWAVE TECHNOLOGIES, INC.
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
 
    
September 29,
2002
     
December 30,
2001
  
    
(Unaudited)
         
ASSETS
                  
Current Assets:
                  
Cash and cash equivalents
   
$
158,063
 
   
$
123,171
 
Accounts receivable, net of allowance for sales returns and doubtful accounts of $3,148 and $3,143 at September 29, 2002 and December 30, 2001, respectively
   
 
62,100
 
   
 
59,732
 
Inventories
   
 
35,845
 
   
 
33,525
 
Prepaid expenses and other current assets
   
 
9,325
 
   
 
5,595
 
Deferred tax assets
   
 
10,707
 
   
 
10,707
 
    
  
Total current assets
   
 
276,040
 
   
 
232,730
 
Property, plant and equipment
   
 
138,863
 
   
 
144,540
 
Less accumulated depreciation and amortization
   
 
(47,909
)
   
 
(42,748
)
    
  
Net property, plant and equipment
   
 
90,954
 
   
 
101,792
 
    
  
Goodwill
   
 
4,852
 
   
 
4,852
 
Deferred tax assets
   
 
10,379
 
   
 
21,194
 
Other non-current assets
   
 
3,348
 
   
 
2,449
 
    
  
TOTAL ASSETS
   
$
385,573
 
   
$
363,017
 
    
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                  
Current Liabilities:
                  
Accounts payable
   
$
39,194
 
   
$
22,692
 
Accrued expenses and other liabilities
   
 
13,428
 
   
 
20,928
 
Short-term notes payable and current portion of long-term debt
   
 
78
 
   
 
659
 
Income taxes payable
   
 
3,164
 
   
 
2,196
 
    
  
Total current liabilities
   
 
55,864
 
   
 
46,475
 
Long-term debt, net of current portion
   
 
—  
 
   
 
239
 
Other non-current liabilities
   
 
80
 
   
 
68
 
    
  
Total liabilities
   
 
55,944
 
   
 
46,782
 
    
  
Commitments and Contingencies
   
 
—  
 
   
 
—  
 
Shareholders’ Equity:
                  
Preferred Stock, $.0001 par value, 5,000 shares authorized and no shares issued and outstanding
   
 
—  
 
   
 
—  
 
Common Stock, $.0001 par value, 135,000 shares authorized, 65,707 shares issued and outstanding at September 29, 2002 and 65,081 shares issued and outstanding at December 30, 2001
   
 
247,394
 
   
 
242,100
 
Retained earnings
   
 
82,235
 
   
 
74,135
 
    
  
Total shareholders’ equity
   
 
329,629
 
   
 
316,235
 
    
  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   
$
385,573
 
   
$
363,017
 
    
  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

3

 
POWERWAVE TECHNOLOGIES, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
 
    
Three Months Ended
     
Nine Months Ended
  
    
September 29,
2002
   
September 30,
2001
     
September 29,
2002
   
September 30,
2001
  
Net sales
   
$
91,300
   
$
64,667
 
   
$
308,753
   
$
215,891
 
Cost of sales
   
 
77,674
   
 
60,147
 
   
 
254,853
   
 
196,440
 
    
  
  
  
Gross profit
   
 
13,626
   
 
4,520
 
   
 
53,900
   
 
19,451
 
Operating expenses:
                                
Sales and marketing
   
 
2,067
   
 
2,565
 
   
 
9,004
   
 
11,143
 
Research and development
   
 
7,567
   
 
7,719
 
   
 
24,854
   
 
26,975
 
General and administrative
   
 
3,349
   
 
2,920
 
   
 
10,679
   
 
12,504
 
    
  
  
  
Total operating expenses
   
 
12,983
   
 
13,204
 
   
 
44,537
   
 
50,622
 
    
  
  
  
Operating income (loss)
   
 
643
   
 
(8,684
)
   
 
9,363
   
 
(31,171
)
Other income, net
   
 
790
   
 
895
 
   
 
2,209
   
 
4,773
 
    
  
  
  
Income (loss) before income taxes
   
 
1,433
   
 
(7,789
)
   
 
11,572
   
 
(26,398
)
Provision (benefit) for income taxes
   
 
430
   
 
(2,804
)
   
 
3,472
   
 
(9,503
)
    
  
  
  
Net income (loss)
   
$
1,003
   
$
(4,985
)
   
$
8,100
   
$
(16,895
)
    
  
  
  
Basic earnings (loss) per share
   
$
.02
   
$
(.08
)
   
$
.12
   
$
(.27
)
    
  
  
  
Diluted earnings (loss) per share
   
$
.02
   
$
(.08
)
   
$
.12
   
$
(.27
)
    
  
  
  
Basic weighted average common shares
   
 
65,584
   
 
64,386
 
   
 
65,411
   
 
64,048
 
    
  
  
  
Diluted weighted average common shares
   
 
66,069
   
 
64,386
 
   
 
66,322
   
 
64,048
 
    
  
  
  
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

4

 
POWERWAVE TECHNOLOGIES, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands)
 
      
Three Months Ended
       
Nine Months Ended
  
      
September 29,
2002
   
September 30,
2001
       
September 29,
2002
   
September 30,
2001
  
Net income (loss)
     
$
1,003
   
$
(4,985
)
     
$
8,100
   
$
(16,895
)
      
  
    
  
Other comprehensive loss, net of tax:
                                    
Reclassification of unrealized gains for amounts included in net income (loss)
     
 
—
   
 
—
 
     
 
—
   
 
(276
)
      
  
    
  
Other comprehensive loss
     
 
—
   
 
—
 
     
 
—
   
 
(276
)
      
  
    
  
Comprehensive income (loss)
     
$
1,003
   
$
(4,985
)
     
$
8,100
   
$
(17,171
)
      
  
    
  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

5

 
POWERWAVE TECHNOLOGIES, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
 
    
Nine Months Ended
  
    
September 29,
2002
     
September 30,
2001
  
CASH FLOWS FROM OPERATING ACTIVITIES:
                  
Net income (loss)
   
$
8,100
 
   
$
(16,895
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
                  
Depreciation and amortization
   
 
15,717
 
   
 
19,988
 
Provision for sales returns and doubtful accounts
   
 
4
 
   
 
236
 
Compensation costs related to stock options
   
 
44
 
   
 
45
 
Loss on disposal of property, plant and equipment
   
 
192
 
   
 
202
 
Gain on sale of available-for-sale securities
   
 
—
 
   
 
(568
)
Changes in operating assets and liabilities:
                  
Accounts receivable