Andrew Corporation Reports First Quarter Fiscal 2007 Results.WESTCHESTER, Ill. -- Andrew Corporation Andrew Corporation is an American multinational producer of communications devices. Andrew is a global designer, manufacturer, and supplier of communications equipment, services, and systems. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :ANDW): First Quarter Fiscal 2007 Highlights * Total sales increased 1% to $522 million, compared to the prior year first quarter, a record first fiscal quarter for the company * Wireless Infrastructure sales increased 3% to $499 million, total orders increased 2%, and ending backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. is 25% higher compared to the prior year first quarter * Gross margin of 23.3%, compared to 22.7% in the prior year first quarter * Net loss of $0.02 per share, including $0.10 per share of significant expense items * EMS Wireless acquisition for $50 million in cash closed on December 1, 2006 * Repurchased 1 million shares of common stock at an average price of $10.09 per share Andrew Corporation, a global leader in communications systems In telecommunication, a communications system is a collection of individual communications networks, transmission systems, relay stations, tributary stations, and data terminal equipment (DTE) usually capable of interconnection and interoperation to form an integrated whole. and products, today reported total sales of $522 million and a net loss of $2.5 million, or $0.02 per share for the first quarter fiscal 2007. The company recorded a tax rate for the quarter of 121%, which was significantly higher than anticipated. The higher tax rate was due to losses in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and Italy, for which the company recorded no current tax benefit. Net income for the prior year first quarter was $14.8 million, or $0.09 per share. "Andrew achieved improved results in sales and gross margins despite the very challenging spending environment among original equipment manufacturers (OEMs) and North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. operators, driven primarily by consolidation," said Ralph Faison, president and chief executive officer, Andrew Corporation. "Even with our revenue pressured by external factors, we generated a year over year increase in gross margin, and believe this demonstrates that our focus on operational improvement is starting to materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. . Due to losses in the quarter in both the U.S. and Italy for which we could not record a tax benefit, we had an unusually high tax rate. We anticipate that as our U.S. business returns to profitability, we expect to see a much improved tax rate for the overall year. "Andrew remains confident that the long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. demand for our wireless infrastructure products and solutions is robust despite short-term disruptions that are negatively impacting our industry. We anticipate a return to normal spending patterns by our customers as we approach the second half of our fiscal year. With our globally diversified diversified (di·verˑ·s customer base and portfolio of complete radio frequency (RF) products and solutions, we believe Andrew will benefit from growth in the wireless industry." The following table is a summary of significant items impacting the comparability of earnings per share amounts for the fiscal quarters ended December 31, 2006 and December 31, 2005. The per share impact of items for the current quarter is calculated on a pre-tax basis, as no tax benefit was recognized. There were approximately 157 million diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. shares outstanding during the quarter. For the prior year first quarter, an effective tax rate on operations of 30.0% was used and there were approximately 178 million diluted shares outstanding. [TABLE OMITTED] First Quarter Financial Summary Wireless Infrastructure sales increased 3% to $499 million versus the prior year first quarter due to strong demand for antenna and cable products and the implementation of price increases on cable products which were partially offset by weaker sales of active products, primarily to OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and customers. Total orders of $491 million increased 2% from the prior year first quarter due mainly to a 3% increase in Wireless Infrastructure orders. Ending backlog was 25% higher at $289 million compared to the prior year first quarter. Gross margin was 23.3%, compared with 22.6% in the prior quarter and 22.7% in the prior year first quarter. Gross margin increased versus the prior quarter and prior year first quarter due mainly to the solid performance by antenna and cable products and price increases on cable products, which were partially offset by a significant decline in sales of base station components to certain OEMs affected by consolidation. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the quarter was $15.9 million, or 3.1% of sales, compared to $21.3 million, or 4.1% of sales in the prior year first quarter. Excluding significant items, operating income for the quarter was $30.7 million, or 5.9% of sales compared to $27.3 million, or 5.3% of sales in the prior year first quarter. Research and development expenses were $27.3 million, or 5.2% of sales, in the first quarter, down from $28.0 million, or 5.4% of sales, in the prior year first quarter. Sales and administrative expenses increased to $66.0 million, or 12.6% of sales, in the first quarter, compared to $61.7 million, or 12.0% of sales, in the prior year first quarter. Sales and administrative expenses increased in absolute dollars and as a percentage of sales due mainly to costs associated with supporting sales growth in emerging markets, developing direct-to-carrier channels and increased legal expenses for litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. related to intellectual property. Intangible amortization increased to $5.9 million in the first quarter, compared to $5.1 million in the prior year first quarter, primarily due to a $1.2 million charge related to an acquired intangible asset Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. that was impaired during the quarter. Other expenses increased to $3.8 million in the first quarter, compared to $2.7 million in the prior year first quarter, due primarily to foreign exchange losses. The reported tax rate for the first quarter was 121%, due primarily to losses and restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. in the United States and Italy for which the company cannot record current tax benefits. The company currently anticipates the full year tax rate will be in the range of 40% to 42%. The concentration of significant losses and restructuring charges in countries for which the company cannot record current tax benefits in the first quarter resulted in a higher tax rate for the quarter than is anticipated on a full year basis. Due to these losses, the tax rate for the quarter increased versus a reported rate of 19.9% in the prior year first quarter, which included a $1.9 million tax benefit related to repatriation Repatriation The process of converting a foreign currency into the currency of one's own country. Notes: If you are American, converting British Pounds back to U.S. dollars is an example of repatriation. of foreign earnings. Average diluted shares outstanding decreased to approximately 157 million from approximately 178 million in the prior year first quarter primarily due to the accounting treatment for the company's outstanding convertible debt. Additionally, the company repurchased 1.0 million shares of common stock during the quarter at an average price of $10.09, including commissions and fees. The company repurchased 3.4 million shares over the last two quarters and has approximately 6.4 million of additional shares available for repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. under an existing authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: repurchase program. The top 25 customers represented 69% of sales compared to 68% in both the prior quarter and in the prior year first quarter. Major OEMs accounted for 41% of sales compared to 41% in the prior quarter and 38% in the prior year first quarter. Ericsson represented more than 10% of the company's sales for the quarter and Siemens represented more than 5% of the company's sales for the quarter. Results by Major Region and Reporting Segment [TABLE OMITTED] Sales in the Americas decreased 16% versus the prior year first quarter due mainly to a reduction in spending by certain North American operators and OEM customers who were in the process of consolidating during the quarter. The decline in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. was partially offset by increased sales in Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. . EMEA (Europe, Middle East, Africa) Refers to that region of the world. For example, one might see products packaged differently for the UK, EMEA and Asia Pacific markets. increased 13% from the prior year first quarter due mainly to the impact of Precision Antennas, which was acquired in April 2006, and a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impact from foreign exchange rates. Asia Pacific increased 57% versus the prior year first quarter due mainly to robust demand in India, China and Indonesia for Antenna and Cable Products supporting network expansions. "Obviously, this was a difficult quarter in North America with several external factors impacting our performance," said Faison. "However, our geographic diversity is a great advantage and that helped us generate growth in the quarter. We continued to experience strong demand for our products in the emerging markets including Latin America and Asia Pacific, specifically India, where handset The part of the telephone that contains the speaker and the microphone. On a desktop phone, the part you hold in your hand is the handset. On a cellphone, the entire phone is the handset. See multihandset cordless and headset. and subscriber growth is high and wireless networks are being deployed rapidly. With the opening of our new, larger, state-of-the-art facility in Goa, India, we are strategically positioned to better serve customers in this important market." As previously announced, the company has restructured its five product businesses into two operating groups, Wireless Network Solutions and Antenna and Cable Products, in order to reflect the distinct markets these groups serve and to leverage the many opportunities for collaboration and efficiencies in supporting global customers. Since the management reporting and operational structure of the two new groups is still evolving, the company continued to report its results using the five reporting segment structure in place at the end of fiscal 2006. [TABLE OMITTED] Antenna and Cable Products increased 17% versus the prior year first quarter due mainly to the implementation of cable surcharges and price increases, strong demand in Latin America, EMEA and Asia Pacific across most product lines, and the impact from the acquisition of Precision Antennas. Satellite Communications declined 21% due mainly to reduced sales of earth station antennas to consumer satellite service providers and lower direct-to-home satellite products sales. The prior year first quarter included substantial earth station antenna sales to consumer satellite service providers for gateways under a contract that ended in the fiscal 2006 first quarter. Base Station Subsystems The Base Station Subsystem (BSS) is the section of a traditional cellular telephone network which is responsible for handling traffic and signaling between a mobile phone and the Network Switching Subsystem. sales decreased 27% versus the prior year first quarter due primarily to weakness in base station component sales to certain OEM customers. Network Solutions declined 14% versus the prior year first quarter due mainly to a decline in E-911 geolocation equipment sales in North America. In addition, the company experienced continued revenue recognition delays in the first quarter for certain international geolocation sales due to ongoing network acceptance testing (programming) acceptance testing - Formal testing conducted to determine whether a system satisfies its acceptance criteria and thus whether the customer should accept the system. . Wireless Innovations increased 2% due mainly to strong repeater (1) A communications device that amplifies (analog) or regenerates (digital) the data signal in order to extend the transmission distance. Available for both electronic and optical signals, repeaters are used extensively in long distance transmission. sales, which were partially offset by lower systems integration project revenues. [TABLE OMITTED] Antenna and Cable Products operating income increased due mainly to a 17% increase in segment sales, a benefit from implementation of surcharges and price increases on certain cable products and the impact from the acquisition of Precision Antennas, partially offset by higher commodity costs. Satellite Communications operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. increased versus the prior year first quarter due mainly to a 21% decline in sales. Satellite Communications operating performance improved sequentially due to improved gross margins. Base Station Subsystems operating income decreased versus the prior year first quarter due mainly to weakness in base station component sales to certain OEM customers. Fixed costs fixed costs, n.pl the costs that do not change to meet fluctuations in enrollment or in use of services (e.g., salaries, rent, business license fees, and depreciation). on lower volume as well as higher inventory provisions for the filter supply chain transition also contributed to the operating loss. Base Station Subsystems operating loss included a restructuring charge of $5.6 million, primarily attributable to severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when costs associated with the previously announced headcount reduction in Italy for the filter product line. The company also recorded a charge of $1.5 million during the quarter for a product quality matter involving a specific OEM customer. During the first quarter, the company made continued progress towards relocating its high-volume filter product line manufacturing to Elcoteq and expects this transition to be complete by the second half of fiscal 2007. Network Solutions operating income declined versus the prior year first quarter due mainly to a decline in E-911 geolocation equipment sales in North America. Wireless Innovations operating income increased versus the prior year first quarter due mainly to modest sales growth, improved gross margin and better revenue mix. Balance Sheet and Cash Flow Highlights Cash used in operations was $26.5 million in the first quarter, compared to cash used in operations of $1.8 million in the prior year first quarter. Cash used in operations increased compared to the prior year first quarter due to the net loss and increased working capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. . Accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying were $535 million and days' sales outstanding Days' sales outstanding Average collection period. (DSOs) were 89 days at December 31, 2006, compared to $558 million and 80 days at September 30, 2006. The increase in DSOs in the current quarter was primarily attributable to the geographic mix of sales. Inventories were $427 million, including $14 million acquired from EMS, and inventory turns were 3.8x at December 31, 2006, compared to $388 million and 4.8x at September 30, 2006. Inventories increased and inventory turns declined compared to the prior quarter due to lower sales and the anticipated build-up build·up also build-up n. 1. The act or process of amassing or increasing: a military buildup; a buildup of tension during the strike. 2. of inventories in advance of the moves to two new cable manufacturing facilities. Capital expenditures increased to $20.0 million in the first quarter compared to $12.3 million in the prior year quarter primarily due to construction costs for the new cable manufacturing facilities in Goa, India, which opened during the quarter, and in Joliet, Illinois The city of Joliet is located 40 miles southwest of Chicago. It holds the county seat of Will County and is also incorporated in Kendall County. As of the 2000 census, the city had a total population of 106,221. , which is scheduled for completion in the company's fiscal 2007 third quarter. Cash and cash equivalents were $100 million at December 31, 2006, compared to $170 million at September 30, 2006. Cash and cash equivalents decreased from the prior quarter due mainly to the increase in cash used in operations, the EMS Wireless acquisition and the repurchase of 1 million shares of common stock. Total debt outstanding and debt to capital were $386 million and 20.3% at December 31, 2006, compared to $346 million and 18.7% at September 30, 2006. Debt to capital increased primarily due to increased borrowings to finance a portion of the acquisition of EMS Wireless and additional working capital requirements. The balance sheet includes approximately $14 million of net assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. held for sale, primarily related to the recently announced PCT/Andes Industries strategic alliance, which the company expects to close prior to the end of the fiscal second quarter 2007. "Our expanded strategic relationship with PCT (Private Communications Technology) A protocol from Microsoft that provides secure transactions over the Web. See security protocol. International and Andes Industries demonstrates our ongoing commitment of seeking faster avenues to profitable growth," said Faison. "In addition, we continue to evaluate underperforming product lines and ways to enhance our products and solutions. We closed our acquisition of EMS Wireless during the first quarter and are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about the strategic and financial benefits it brings to Andrew." "As the year progresses, we expect cash flow generation to improve, particularly in our seasonally stronger second half of the fiscal year," said Marty Kittrell, executive vice president and chief financial officer. Fiscal 2007 Outlook The company has updated its annual guidance for fiscal year 2007, due to the reduced spending environment caused by OEM and North American operator consolidation and a revised effective tax rate forecast for the year. Sales are anticipated to range from $2.20 billion to $2.325 billion, excluding any further significant rationalization rationalization, in psychology: see defense mechanism. of product lines or significant acquisitions. The company continues to believe that it could experience more variability in sales in the first half of fiscal 2007, due to historical sales seasonality and ongoing consolidation of OEMs and volatility in capital expenditures by key North American operators. The company expects gross margin expansion of at least 100 basis points for the full year. At December 31, 2006, the company had fixed price purchase commitments that covered approximately 12.3 million pounds of copper. The company expects to purchase approximately 39 million additional pounds of copper for the remainder of fiscal 2007. The company currently anticipates the effective tax rate for the year will be in the range of 40% to 42%, based on the anticipated full year results. The reported tax rate for future quarters may be volatile due to the geographic mix of earnings and losses. The company expects that substantial improvement in the tax rate should occur in the second half of fiscal 2007, based on historical trends and anticipated higher levels of earnings and/or reduced losses in the United States and Italy. Based on the revised revenue guidance and current anticipated tax rate, GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). earnings per share are now anticipated to range from $0.34 to $0.42 for the full year, including estimated intangible amortization expense of approximately $0.10 per share, estimated restructuring charges of approximately $0.08 per share, litigation expenses of approximately $0.01 per share, provision for a quality matter of approximately $0.01 per share, and an anticipated gain of approximately $0.06 per share related to the sale of the second of two parcels of land that comprise the Orland Park, Illinois Orland Park is a village in Cook County, Illinois, United States; it also extends slightly into Will County. The population was 51,077 at the 2000 census, and estimated to be 55,461 as of 2005. manufacturing facility. These items are calculated on a pre-tax basis, as no tax benefit or expense is expected to be recognized for these items for the year. Excluding these items, non-GAAP earnings per share are now anticipated to range from $0.48 to $0.56 for the full year. Attached to this news release is preliminary unaudited financial information for the first quarter fiscal 2007. Conference Call Webcast Andrew Corporation will host a conference call to discuss its first quarter fiscal 2007 financial results on Thursday, February 1, 2007, at 8:00 a.m. CT. Investors can participate via a live webcast over the Internet at www.andrew.com. An audio replay of the conference call will be made available for 60 days following the event. About Andrew Andrew Corporation (NASDAQ:ANDW) designs, manufactures and delivers innovative and essential equipment and solutions for the global communications infrastructure market. The company serves operators and original equipment manufacturers from facilities in 35 countries. Andrew (www.andrew.com), headquartered in Westchester, IL, is an S&P MidCap mid·cap adj. 1. Or or relating to corporations whose retained earnings and outstanding shares of common stock have a value between those of small cap companies and large cap corporations. 2. 400 company founded in 1937. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Statements in this news release that are not historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Forward-looking statements can often be identified by words such as "may," "will," "should," "would", "expect," "project," "anticipate," "intend," "plan," "believe," "estimate," "potential," "outlook" or "continue," the negative of these terms or other similar expressions and include, among others, statements in the introduction and statements under the captions "First Quarter Financial Summary", "Balance Sheet and Cash Flow Highlights" and "Fiscal 2007 Outlook". Forward-looking statements are based on currently available information and involve risks, uncertainties and assumptions, many of which are beyond the company's control, which could cause actual results to differ materially from those expected. Factors that may cause actual results to differ from expected results include fluctuations in commodity costs, the company's ability to integrate acquisitions and to realize the anticipated synergies and cost savings, the effects of competitive products and pricing, economic and political conditions that may impact customers' ability to fund purchases of our products and services, the company's ability to achieve the cost savings anticipated from cost reduction programs, fluctuations in foreign currency exchange rates, the timing of cash payments and receipts, end use demands for wireless communication services, the loss of one or more significant customers and other business factors. Further information on these and other risks and uncertainties is provided under Item 1A "Risk Factors" in the company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and Quarterly Reports on Form 10-Q Form 10-Q See 10-Q. , which is incorporated herein by reference, and elsewhere in reports that the company files or furnishes with the SEC. The company cannot guarantee future results, levels of activity, performance or achievement. Recognize these forward-looking statements for what they are; do not rely on them as facts. This release speaks only as of its date, and the company disclaims any obligation to revise these forward-looking statements or to provide any updates regarding information contained in this release resulting from new information, future events or otherwise. Non-GAAP Financial Measures This news release contains certain non-GAAP financial measures, which are financial measures of Andrew's performance that exclude or include amounts thereby differentiating these measures from the most directly comparable amounts presented in the financial statements that are calculated and presented in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP). Andrew believes that these non-GAAP measures provide useful information to investors because they improve the comparability of the financial results between periods and provide for greater transparency (1) The quality of being able to see through a material. The terms transparency and translucency are often used synonymously; however, transparent would technically mean "seeing through clear glass," while translucent would mean "seeing through frosted glass." See alpha blending. of supplemental information used by management in its financial and operational decision making. Below are reconciliations of the non-GAAP financial measures used in this news release to the most directly comparable GAAP measures. [TABLE OMITTED] The following table shows the Company's reconciliation of GAAP to non-GAAP operating income for the fiscal quarter ended December 31, 2006 and December 31, 2005. [TABLE OMITTED] The following table shows the Company's reconciliation of GAAP to non-GAAP estimated earnings per share for the fiscal year ending September 30, 2007. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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