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 March 30, 2003 |
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
| SECURITIES AND 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 |
11-2723423 | |
| (State or other jurisdiction of incorporation or organization) |
(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 ¨
Indicate by check mark whether the Registrant is an accelerated filer as defined in Rule 12b-2 of the Securities Exchange Act of 1934. Yes x No ¨
As of May 6, 2003 the number of outstanding shares of Common Stock, par value $0.0001 per share, of the Registrant was 65,968,329.
POWERWAVE TECHNOLOGIES, INC.
2
CAUTIONARY STATEMENT RELATED TO FORWARD LOOKING STATEMENTS
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 transfer of certain manufacturing operations to contract manufacturers, the timing of and demand for 3G products, restructuring charges, and the level of expected capital and research and development expenditures. Such forward-looking statements are based on the beliefs of, estimates made by, and information currently available to Powerwave Technologies Inc.’s (“Powerwave” or the “Company) 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,” “will,” “could,” or “would” 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 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 including those discussed in “Additional Factors That May Affect Our Future Results” under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” at pages 14-39. Because of these and other factors that may effect 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. The Company undertakes no obligation to publicly release the results 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 that Powerwave files from time to time with the Securities and Exchange Commission (“SEC”), including subsequent Current Reports on From 8-K, Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.
HOW TO OBTAIN POWERWAVE SEC FILINGS
All reports filed by Powerwave with the SEC are available free of charge via EDGAR through the SEC website at www.sec.gov. In addition, the public may read and copy materials filed by the Company with the SEC at the SEC’s public reference room located at 450 Fifth St., N.W., Washington, D.C. 20549. Powerwave also provides copies of its Forms 8-K, 10-K, 10-Q, Proxy and Annual Report at no charge to investors upon request and makes electronic copies of its most recently filed reports available through its website at www.powerwave.com/investor.html as soon as reasonably practicable after filing such material with the SEC.
PART I – FINANCIAL INFORMATION
3
POWERWAVE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| March 30, 2003 |
December 29, 2002 |
|||||||
| (Unaudited) |
(See Note) |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
164,165 |
|
$ |
162,529 |
| ||
| Accounts receivable, net of allowance for sales returns and doubtful accounts of $2,190 and $2,505 at March 30, 2003 and December 29, 2002, respectively |
|
42,460 |
|
|
53,264 |
| ||
| Inventories |
|
32,123 |
|
|
29,921 |
| ||
| Prepaid expenses and other current assets |
|
9,340 |
|
|
9,288 |
| ||
| Deferred tax assets |
|
7,124 |
|
|
6,931 |
| ||
| Total current assets |
|
255,212 |
|
|
261,933 |
| ||
| Property, plant and equipment |
|
135,067 |
|
|
135,253 |
| ||
| Less: accumulated depreciation and amortization |
|
(54,344 |
) |
|
(50,431 |
) | ||
| Net property, plant and equipment |
|
80,723 |
|
|
84,822 |
| ||
| Goodwill |
|
— |
|
|
4,852 |
| ||
| Deferred tax assets |
|
20,803 |
|
|
14,922 |
| ||
| Other non-current assets |
|
2,560 |
|
|
2,644 |
| ||
| TOTAL ASSETS |
$ |
359,298 |
|
$ |
369,173 |
| ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ |
28,548 |
|
$ |
26,842 |
| ||
| Accrued expenses and other current liabilities |
|
12,164 |
|
|
14,227 |
| ||
| Short-term notes payable and current portion of long-term debt |
|
78 |
|
|
79 |
| ||
| Income taxes payable |
|
2,322 |
|
|
2,281 |
| ||
| Total current liabilities |
|
43,112 |
|
|
43,429 |
| ||
| Other non-current liabilities |
|
84 |
|
|
83 |
| ||
| Total liabilities |
|
43,196 |
|
|
43,512 |
| ||
| Commitments and contingencies |
|
— |
|
|
— |
| ||
| Shareholders’ Equity: |
||||||||
| Preferred stock, $0.0001 par value, 5,000 shares authorized and no shares issued or outstanding |
|
— |
|
|
— |
| ||
| Common Stock, $0.0001 par value, 135,000 shares authorized, 65,877 shares issued and outstanding at March 30, 2003 and 65,707 shares issued and outstanding at December 29, 2002 |
|
248,425 |
|
|
247,415 |
| ||
| Accumulated other comprehensive loss |
|
(1 |
) |
|
— |
| ||
| Retained earnings |
|
67,678 |
|
|
78,246 |
| ||
| Total shareholders’ equity |
|
316,102 |
|
|
325,661 |
| ||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ |
359,298 |
|
$ |
369,173 |
| ||
Note: December 29, 2002 balances were derived from audited financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
POWERWAVE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
| Three Months Ended | |||||||
| March 30, 2003 |
March 31, 2002 | ||||||
| Net sales |
$ |
52,154 |
|
$ |
104,085 | ||
| Cost of sales |
|
48,369 |
|
|
85,382 | ||
| Gross Profit |
|
3,785 |
|
|
18,703 | ||
| Operating Expenses: |
|||||||
| Sales and marketing |
|
2,901 |
|
|
3,541 | ||
| Research and development |
|
9,950 |
|
|
8,350 | ||
| General and administrative |
|
3,347 |
|
|
3,613 | ||
| Goodwill impairment charge |
|
4,852 |
|
|
— | ||
| Total operating expenses |
|
21,050 |
|
|
15,504 | ||
| Operating income (loss) |
|
(17,265 |
) |
|
3,199 | ||
| Other income, net |
|
752 |
|
|
687 | ||
| Income (loss) before income taxes |
|
(16,513 |
) |
|
3,886 | ||
| Provision for (benefit from) income taxes |
|
(5,945 |
) |
|
1,166 | ||
| Net income (loss) |
$ |
(10,568 |
) |
$ |
2,720 | ||
| Basic earnings (loss) per share |
$ |
(0.16 |
) |
$ |
0.04 | ||
| Diluted earnings (loss) per share |
$ |
(0.16 |
) |
$ |
0.04 | ||
| Basic weighted average common shares |
|
65,877 |
|
|
65,233 | ||
| Diluted weighted average common shares |
|
65,877 |
|
|
66,675 | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
POWERWAVE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands)
| Three Months Ended | |||||||
| March 30, 2003 |
March 31, 2002 | ||||||
| Net income (loss) |
$ |
(10,568 |
) |
$ |
2,720 | ||
| Other comprehensive loss, net of tax: |
|||||||
| Foreign currency translation adjustments |
|
(1 |
) |
|
— | ||
| Comprehensive income (loss) |
$ |
(10,569 |
) |
$ |
2,720 | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
POWERWAVE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| Three Months Ended |
||||||||
| March 30, 2003 |
March 31, 2002 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVTIES: |
||||||||
| Net income (loss) |
$ |
(10,568 |
) |
$ |
2,720 |
| ||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
|
4,948 |
|
|
5,272 |
| ||
| Goodwill impairment charge |
|
4,852 |
|
|
— |
| ||
| Provision for excess and obsolete inventories |
|
1,221 |
|
|
— |
| ||
| Provision for sales returns and doubtful accounts |
|
9 |
|
|
(3 |
) | ||
| Deferred income taxes |
|
(5,997 |
) |
|
1,165 |
| ||
| Compensation costs related to stock options |
|
15 |
|
|
15 |
| ||
| Loss on disposal of property, plant and equipment |
|
12 |
|
|
140 |
| ||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
|
10,795 |
|
|
(7,553 |
) | ||
| Inventories |
|
(4,125 |
) |
|
(3,655 |
) | ||
| Prepaid expenses and other current assets |
|
(52 |
) |
|
1,289 |
| ||
| Accounts payable |
||||||||