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Acterna Corporation Reports Second Quarter Results.

Business/Technology Editors

BURLINGTON, Mass.--(BUSINESS WIRE)--Oct. 30, 2001

Acterna Corporation (Nasdaq: ACTR), the world's largest provider of test and management solutions for optical transport, access and cable networks and the second largest communications test company overall, reported its results for the second quarter of fiscal 2002 ended September 30, 2001. The company also announced that it has signed a definitive agreement to sell ICS Advent and has elected to retain Itronix Corporation. As a result, the company is no longer treating these businesses as discontinued operations and has included them in the company's results for the current quarter and has reclassified them in the previously reported periods.

Net sales for the second quarter of fiscal 2002 were $315 million, down 12 percent from pro forma net sales of $359 million for the same period last year. Excluding the results of the industrial computing subsidiaries, pro forma net sales for the quarter were $267 million down 15 percent from $316 million a year ago. Pro forma sales of communications test products totaled $244 million, which compared to $287 million a year earlier.

Gross margin for the second quarter was 54.7 percent. Excluding Itronix and ICS Advent, it was 59.3 percent, which compared to 62.8 percent a year ago and 61.8 percent in the first quarter on a comparable, pro forma basis.

Acterna's pro forma profit from operations (earnings before interest, taxes, amortization and special charges) was $21 million for the second quarter, before a restructuring charge of $8 million and integration expense of $7 million related to the implementation of an ERP system. Pro forma profit from operations was $47 million on a comparable basis a year ago. Excluding the results of the industrial computing subsidiaries, pro forma profit from operations for the quarter was $22 million versus $49 million on a comparable basis a year ago.

Cash loss per share in the second quarter was $.12, which compared to a cash earnings per share of $.14 in the prior year on a comparable basis.

For the first-half of fiscal 2002, net sales were $671 million, compared to pro forma net sales $702 million for the same period last year. First-half pro forma profit from operations was $62 million, before restructuring and other special charges of $13 million and integration expense of $10 million. Cash loss per share for the first six months of fiscal 2002 were $.04 per share, which compared to cash earnings of $.19 per share in the same period in the prior year.

On an as-reported basis for the second quarter of fiscal 2002, the company reported a net loss of $148 million, or a loss of $.77 per share, which reflected total charges and other special items of $108 million. These charges and special items include a restructuring charge of $8 million related to severance and other costs, $11 million of cumulative losses for Itronix and ICS Advent for the last five quarters, an $18 million loss from the asset write-down principally of ICS Advent, and a $71 million reserve against the company's U.S. deferred tax assets. For the same quarter a year ago, the company reported a net loss of $50 million, or $.27 per share.

The company's results for the current and prior periods referred to above reflect a reclassification to include the results of the company's industrial computing subsidiaries, which were previously treated as discontinued operations. In addition, the company's pro forma results for the prior year referred to above have been restated to reflect all acquisitions and divestitures, including the acquisition of Wavetek Wandel Goltermann, Inc. in the first quarter ended June 30, 2000, and the acquisition of Cheetah Technologies in the second quarter ended September 30, 2000.

Orders of $202 million in the second quarter, which included orders of communications test products of $154 million, were down 49 percent from the prior year. Commenting on the quarter, Ned C. Lautenbach, chairman and chief executive officer, said, "Our order levels were adversely impacted by continued global economic slowdown, capital spending cutbacks in the communications industry, and the impact of the events of September 11. In light of this environment and pressure on our gross margin, our focus is on right-sizing our business through cost reduction, maintaining or gaining market share through new product development, and managing cash flow and liquidity."

The company announced an expanded cost reduction plan, which includes a reduction of 500 positions or 9 percent of its total workforce, excluding ICS Advent. The company will also consolidate some of its development and marketing offices, institute a reduced workweek at selected manufacturing locations and reduce capital expenditures. These measures, which are in addition to the cost reductions announced in August 2000, are expected to yield annualized savings of $115 to $125 million, and to reduce the quarterly operating expense runrate to approximately $130 million as the company exits its fiscal year. This will result in a restructuring charge of $15 to $17 million in the third quarter.

"These cost cutting actions, though difficult, are expected to align the size of our business to the current business environment," said John R. Peeler, president. "The goal of the company's actions is to achieve a cost structure in fiscal 2003 that would result in breakeven EBITA performance at approximately $225 to $235 million in quarterly sales."

Peeler added, "However, we intend to implement these cuts in a way that does not compromise our market leading positions around the world. We have successfully launched a new generation of test and management products in our optical transport, access, and cable markets. Our customers continue to rely on our products to optimize their networks, improve service quality and reduce costs."

As of September 30, 2001 the company had total debt of $1.1 billion, cash of $51 million, and approximately $65 million of unused capacity under its credit agreements, of which $40 million is due to expire on December 31, 2001. The company is working with its financing sources to investigate ways for strengthening its financial position and maintaining its liquidity.

"We believe the long-term fundamental drivers of our market remain intact," Lautenbach continued. "Our new product flow, as well as our leading position in the market and long-standing relationships with virtually every service provider worldwide and the leading equipment manufacturers, position us well to benefit as the market recovers. "

In light of limited market and economic visibility, the company has elected not to provide guidance for the third quarter or for fiscal 2002 at this time.

Acterna to Sell ICS Advent; Elects to Retain Itronix

The company also announced today it entered into a definitive agreement to sell ICS Advent, one of two industrial computing businesses previously treated as discontinued operations, for approximately $23 million. The company elected to retain Itronix, its remaining industrial computing business. As a result, the company's financial statements for the current and previous periods include the full results of the industrial computing segment.

Based in Spokane, Washington, Itronix is a leading supplier of rugged wireless computing devices for field service applications. "With its new GoBook rugged notebook PC, Itronix is positioned well, particularly in its international markets," said Lautenbach.

About Acterna Corporation:

Acterna is the world's largest provider of test and management solutions for optical transport, access and cable networks and the second largest communications test company overall. Focused entirely on providing equipment, software, systems and services, Acterna helps customers develop, install, manufacture and maintain their optical transport, access, cable, data/IP, and wireless networks. The company serves customers globally with a presence in more than 80 countries. In addition, the company supplies in-flight passenger information systems and video color correction systems through its AIRSHOW and da Vinci Systems subsidiaries. Through its Itronix subsidiary, the company sells ruggedized computing devices for field service applications. Additional information about the company is available at www.acterna.com.

This press release may contain forward-looking statements 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, which reflect the Company's current judgment on certain issues. Because such statements apply to future events, they are subject to risks and uncertainties that could cause the actual results to differ materially. Important factors that could cause actual results to differ materially are described in the Company's reports on Form 10-K and 10-Q on file with the Securities and Exchange Commission.

Note to Investors and Media

Acterna will be discussing its second quarter results on a conference call today, beginning at 5:00 p.m. (EST). A webcast of the conference call will be available to all interested parties on the Acterna website at www.acterna.com under the "Investor Relations" section.


 Acterna Corporation
 Pro forma Profit from Operations After Integration Expense(a)
 (Unaudited)
 Earnings Before Interest, Taxes and Amortization Excluding
 Special Charges

Dollars in thousands
 Three Months Ended Six Months Ended
 Sept. 30, Sept. 30, Sept. 30, Sept. 30,
 2001 2000 2001 2000

Net sales $314,812 $358,626 $671,412 $701,556
Cost of sales (b) 142,660 146,685 296,564 293,378

Gross margin 172,152 211,941 374,848 408,178

Selling, general & admin.
 expense (b) 105,992 120,047 224,190 234,594
Product development
 expense (b) 41,446 43,230 83,750 87,348
Integration expense (c) 7,417 6,315 9,821 10,171
Other expense 3,447 1,252 5,278 5,008

Pro forma profit from
 operation s $ 13,850 $ 41,097 $ 51,809 $ 71,057


Pro forma profit from
 operations before
 integration expense $ 21,267 $ 47,412 $ 61,630 $ 81,228
Special charges excluded
 from profit from
 operations:
 Amortization of unearned
 compensation $ 5,402 $ 6,296 $ 12,067 $ 8,564
 Recapitalization and other
 costs -- -- -- 9,194
 Purchased incomplete
 technology -- 6,000 -- 56,000
 Amortization of inventory
 step-up -- 26,438 -- 35,188
 WWG Restructuring and other
 charges 485 -- 485 1,603
 Restructuring and other
 special charges (d) 7,897 449 12,612 793
 Impairment of assets held
 for sale 17,918 -- 17,918 --

Total special charges: $ 31,702 $ 39,183 $ 43,082 $111,342



a) In May 2000, the company approved a plan to divest the industrial
computing segment, which consisted of ICS Advent and Itronix
Corporation subsidiaries. In October 2001, the company decided to
retain Itronix. As a result, the company's financial information
presented for the current and previous periods include the full
results of the industrial computing segment including losses
previously deferred. On October 17, 2001, the company signed a
definitive agreement to sell ICS. The sale is expected to be completed
on October 31, 2001.

b) Excludes amortization of unearned compensation expense and special
charges.

c) Integration expense in the first six months of fiscal 2002 relates
primarily to the implementation of an Enterprise Resource Planning
system. Integration expense in fiscal 2001 relates primarily to
rebranding, severance and additional consultants hired for the
integration of Wavetek Wandel Goltermann, Inc. (WWG).

d) During the second quarter of fiscal 2002 the Company recorded a
restructuring charge of $8 million related primarily to severance
costs resulting from cost reductions.

Note: The above pro forma financial information has been restated to
include the results of WWG, which was acquired on May 23, 2000;
Cheetah Technologies, which was acquired on August 23, 2000; and
certain other acquisitions as if these acquisitions had occurred at
the beginning of the respective fiscal periods. Similarly, the pro
forma information excludes the results of DataViews Corporation, which
was divested in June 2000, and certain other divestitures.



 Acterna Corporation
 Results of Itronix Corporation
 (Unaudited)
 Earnings Before Interest, Taxes and Amortization Excluding
 Special Charges

Dollars in thousands
 Three Months Ended Six Months Ended
 Sept. 30, Sept. 30, Sept. 30, Sept. 30,
 2001 2000 2001 2000

Net sales $ 33,873 $ 20,919 $ 70,434 $ 46,909
Cost of sales 22,433 13,310 46,194 31,052

Gross margin 11,440 7,609 24,240 15,857
Selling, general & admin
 expense 7,386 7,205 14,253 13,653
Product development expense 2,996 2,459 6,162 6,081
Other expense (income) 75 (129) 601 (129)

EBITA $ 983 $ (1,926) $ 3,224 $ (3,748)




 Acterna Corporation
 Results of ICS Advent
 (Unaudited)
 Earnings Before Interest, Taxes and Amortization Excluding
 Special Charges

Dollars in thousands
 Three Months Ended Six Months Ended
 Sept. 30, Sept. 30, Sept. 30, Sept. 30,
 2001 2000 2001 2000

Net sales $ 13,923 $ 22,157 $ 31,712 $ 42,683
Cost of sales 11,660 15,995 26,284 30,483

Gross margin 2,263 6,162 5,428 12,200

Selling, general & admin
 expense 3,134 4,403 7,534 8,916
Product development expense 1,196 1,433 2,623 3,137
Other expense 82 30 215 16

EBITA $ (2,149) $ 296 $ (4,944) $ 131




 Acterna Corporation
 Pro forma Cash Earnings Table(a)
 (Unaudited)
 Cash Earnings Before Special Charges

Dollars in thousands, except per share amounts

 Three Months Ended Six Months Ended
 Sept. 30, Sept. 30, Sept. 30, Sept. 30,
 2001 2000 2001 2000

Profit from operations (b) $ 13,850 $ 41,097 $ 51,809 $ 71,057
Net interest expense (23,805) (25,978) (49,596) (44,066)

Pretax cash earnings (9,955) 15,119 2,213 26,991
Provision (benefit) for
 taxes (c) 13,264 (13,207) 9,471 (11,782)

Cash earnings (loss) $(23,219) $ 28,326 $ (7,258) $ 38,773

Cash earnings (loss) per
 share $ (.12) $ .14 $ (.04) $ .19

Weighted average diluted
 shares (d) 191,889 207,730 191,538 204,354

(a) In May 2000, the company approved a plan to divest the industrial
computing segment, which consisted of ICS Advent and Itronix
Corporation subsidiaries. In October 2001, the company decided to
retain Itronix. As a result, the company's financial information
presented for the current and previous periods include the full
results of the industrial computing segment. On October 17, 2001, the
company signed a definitive agreement to sell ICS. The sale is
expected to be completed on October 31, 2001.

(b) Defined as earnings before interest, taxes, amortization and
special charges. Profit from operations includes acquisition-related
integration expense. Profit from operations for the six months ended
September 30, 2000 is on a pro forma basis.

(c) Excludes a $71 million reserve taken in the second quarter of
fiscal 2002 against the company's net U.S. deferred tax assets.

(d) Weighted average diluted shares including common share equivalents
for the periods ended September 30, 2000.

Note: The above pro forma financial information has been restated to
include the results of WWG, which was acquired on May 23, 2000;
Cheetah Technologies, which was acquired on August 23, 2000; and
certain other acquisitions as if these acquisitions had occurred at
the beginning of the respective fiscal periods. Similarly, the pro
forma information excludes the results of DataViews Corporation, which
was divested in June 2000, and certain other divestitures.


The following consolidated statements of operations and balance sheets
are reported on an historical basis.


 Acterna Corporation
 Consolidated Statements of Operations(a)
 (Unaudited)

Dollars in thousands, except per-share amounts

 Three Months Ended Six Months Ended
 Sept. 30, Sept. 30, Sept. 30, Sept. 30,
 2001 2000 2001 2000

Net sales $ 314,812 $ 348,287 $ 671,412 $ 602,973
Cost of sales 143,013 170,520 298,224 292,358

Gross margin 171,799 177,767 373,188 310,615

Selling, general &
 admin expense 117,816 127,539 247,096 213,098
Product development
 expense 42,574 42,564 86,271 74,101
Impairment of assets
 held for sale 17,918 -- 17,918 --
Recapitalization and
 other related costs -- -- -- 9,194
Restructuring 7,897 -- 7,897 --
Purchased incomplete
 technology -- 6,000 -- 56,000
Amortization of
 intangibles 10,367 33,290 22,151 49,309

 Total operating
 expense 196,572 209,393 381,333 401,702

Operating income
 (loss) (24,773) (31,626) (8,145) (91,087)
Interest expense (24,698) (27,150) (50,976) (45,862)
Interest income 893 1,172 1,380 1,796
Other expense (3,447) (1,267) (5,279) (3,080)

Loss from continuing
 operations before
 income taxes and
 extraordinary item (52,025) (58,871) (63,020) (138,233)
Provision (benefit)
 for income taxes 84,406 (6,623) 80,612 (10,407)

Net loss from
 continuing
 operations before
 extraordinary item (136,431) (52,248) (143,632) (127,826)
Income (loss) from
 discontinued
 operations(b) (11,090) 1,859 (10,039) 5,702

Net income (loss)
 before
 extraordinary item (147,521) (50,389) (153,671) (122,124)
Extraordinary item -- -- -- (10,659)

Net loss $(147,521) $ (50,389) $(153,671) $(132,783)


 Acterna Corporation
 Consolidated Statements of Operations(a)
 (Unaudited)

Dollars in thousands, except per-share amounts

 Three Months Ended Six Months Ended
 Sept. 30, Sept. 30, Sept. 30, Sept. 30,
 2001 2000 2001 2000

Loss per common share
 - basic
 Continuing
 operations $ (0.71) $ (0.28) $ (0.75) (0.72)
 Discontinued
 operations(b) (0.06) 0.01 (0.05) 0.03
 Extraordinary loss -- -- -- (0.06)

Net loss per common
 share - basic and
 diluted $ (0.77) $ (0.27) $ (0.80) $ (0.75)
Weighted average
 number of common
 shares - Basic and
 diluted 191,889 189,003 191,538 177,279

a) In May 2000, the company approved a plan to divest the industrial
computing segment, which consisted of ICS Advent and Itronix
Corporation subsidiaries. In October 2001, the company decided to
retain Itronix. As a result, the company's financial information
presented for the current and previous periods include the full
results of the industrial computing segment. On October 17, 2001, the
company signed a definitive agreement to sell ICS. The sale is
expected to be completed on October 31, 2001.

b) Reflects cumulative effect of the loss from discontinued operations
from the measurement date (May 2000) to the current period.



 Acterna Corporation
 Balance Sheets(a)
 Unaudited


Dollars in thousands


 September 30, March 31,
 2001 2001

ASSETS
 Cash and cash equivalents $ 51,448 $ 63,054
 Accounts receivable, net 190,064 233,371
 Inventories, net 164,389 157,481
 Deferred income taxes 38,198 37,961
 Other current assets 38,383 39,610
 Net assets held for sale 19,052 37,908

 Total current assets 501,534 569,385

 Property, plant and equipment, net 128,310 124,566
 Goodwill, net 435,853 435,478
 Other intangible assets, net 172,901 195,093
 Other assets 49,345 58,457

 Total assets $1,287,943 $ 1,382,979


LIABILITIES & SHAREHOLDERS' DEFICIT
 Notes payable $2,520 $ 10,919
 Current portion of long-term debt 25,175 22,248
 Accounts payable 93,437 112,155
 Other current liabilities 204,409 201,498

 Total current liabilities 325,541 346,820

 Long-term debt 1,071,339 1,056,383
 Deferred income taxes 52,630 2,915
 Deferred compensation 61,648 57,838
 Total shareholders' deficit (223,215) (80,977)

 Total liabilities and
 shareholders' deficit $1,287,943 $ 1,382,979



a) In May 2000, the company approved a plan to divest the industrial
computing segment, which consisted of ICS Advent and Itronix
Corporation subsidiaries. On October 17, 2001, the company signed a
definitive agreement to sell ICS Advent. The sale is expected to be
completed on October 31, 2001. In October 2001, the company decided to
retain Itronix. As a result, the company's financial information
presented for the current and previous periods reflect the assets and
liabilities of ICS Advent as held for sale.



 Acterna Corporation
 Pro Forma Sales for Continuing Operations by Product Area
 (Unaudited)

Dollars in thousands

 Three Months Ended Six Months Ended
 Sept. 30, Sept. 30, %Chg Sept. 30, Sept. 30, %Chg
 2001 2000 2001 2000

Optical
 Transport $126,231 $ 98,636 28% $257,785 $186,044 39%
Cable Networks 19,785 45,159 -56% 44,708 84,884 -47%
Access Network 26,818 46,426 -42% 68,908 94,965 -27%
Data/IP,
 Wireless and
 Other 71,041 96,906 -27% 149,057 191,401 -22%

Communications
 Test
Total
 Communications
 Test $243,875 $287,127 -15% $520,458 $557,294 -7%

Other Acterna
 Corp 23,141 28,423 -19% 48,808 54,670 -11%
Industrial
 computing:
 Itronix 33,873 20,919 62% 70,434 46,909 50%
 ICS Advent 13,923 22,157 -37% 31,712 42,683 -26%

Total $314,812 $358,626 -12% $671,412 $701,556 -4%



 Acterna Corporation
 Second Quarter Actual Results Compared to Company Guidance

 ($ in Millions)


Revenue Prior Guidance Actual Result

Test Communications, Airshow, $280 - $300 $267
DaVinci

Itronix, ICS (was reported as $48
 discontinued operations)


Total N/A $315




Pro Forma Profit from
 Operations Prior Guidance Actual Result
 (Excluding restructuring
 and before integration
 expense)

Communications Test, Airshow, $35 - $43 $22
DaVinci

Itronix, ICS (was reported as ($1)
 discontinued operations)


Total N/A $21



Cash Earnings (Loss)
 Per Share Prior Guidance Actual Result

Communications Test, Airshow, $.05 - $.08 $(.12)(a)
DaVinci

(a)Impact of Itronix and ICS Advent less than $(.01) per share
COPYRIGHT 2001 Business Wire
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