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Symmetricom Inc. Reports Operating Results (10-Q)

May 08, 2009 | About:
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Symmetricom Inc. (SYMM) filed Quarterly Report for the period ended 2009-03-29.

Symmetricom Inc. as a worldwide leader in precise time and frequency products and services Symmetricom provides `Perfect Timing` to customers around the world. The company's solutions have helped define the world's time and frequency standards delivering precision reliability and efficiency to wireline and wireless networks instrumentation and testing applications and network time management. The company's synchronization solutions include primary reference sources building integrated timing supplies GPS timing receivers time and frequency distribution systems network time servers and ruggedized oscillators. Symmetricom also incorporates technologies including Universal Timing Interface Network Time Protocol Precision Time Protocol and others supporting the world's migration to Next-Generation-Networks. Symmetricom is based in San Jose Calif. Symmetricom Inc. has a market cap of $204.2 million; its shares were traded at around $4.64 with a P/E ratio of 42.1 and P/S ratio of 1.

Highlight of Business Operations:

Based on the results of our step one test, we determined that the fair values of the Wireline and Timing, Test and Measurement reporting units were less than their respective carrying amounts, and therefore the second step of the goodwill impairment test was performed to measure the amount of impairment loss for the each reporting unit. Due to the extensive work involved in performing the second step of the goodwill impairment analysis, we had not yet completed our analysis at the time our interim report on Form 10-Q for the third quarter of fiscal 2009 was due. Based on this preliminary analysis, we recorded an estimated goodwill impairment charge of approximately $48.1 million in the third quarter of fiscal 2009, consisting of $28.0 million related to the Wireline reporting segment and $20.1 million related to the Timing, Test and Measurement reporting segment.

On January 20, 2009, we announced a restructuring plan to further streamline manufacturing operations and improve operational efficiencies. As part of our ongoing outsourcing and operational efficiency program, we plan to eliminate approximately 100 positions, or about 11% of our total workforce. The reductions began in January 2009 and will be complete by the third quarter of fiscal 2010. We expect to incur restructuring charges of approximately $7.1 million in connection with the plan, including approximately $1.1 million which we expect to record in the fourth quarter of fiscal 2009. Total restructuring charges are expected to include approximately $2.0 million in accelerated depreciation charges and approximately $5.1 million in one-time termination benefits and other restructuring related charges. Total restructuring charges in the third quarter of fiscal 2009 were $3.5 million, including $0.5 million related to accelerated depreciation and $3.0 million in one-time termination benefits and other restructuring related charges. Over the next twelve months, we expect to incur remaining integration and restructuring charges amounting to $3.5 million, including approximately $1.4 million in accelerated depreciation charges and approximately $2.1 million in one-time termination benefits and other restructuring related charges. Upon completion, we expect the restructuring and other actions to reduce our annual manufacturing and operating costs by approximately $7.0 million.

On January 14, 2009, Nortel Networks, one of our customers, filed for bankruptcy protection from its creditors. We reviewed our shipments that related to Nortel as of the end of the second quarter of fiscal 2009. As a result of this review, we determined that $0.5 million in shipments made in the quarter and not yet paid should not be recognized as revenue due to the uncertain nature of the collectability of the related receivables prior to the bankruptcy filing. Additionally, we reviewed accounts receivable balances as of the end of the second quarter of fiscal 2009 related to Nortel and recognized a $0.1 million charge to the allowance for doubtful accounts. Please see Known Trends and Uncertainties Impacting Future Results of Operations: Global Market and Economic Conditions below.

First Nine Months of Fiscal 2009: Net revenue increased by $9.4 million, or 6.2%, in the first nine months of fiscal 2009 as compared to the corresponding nine months in fiscal 2008. Wireline revenue increased $12.5 million, or 20.0%, compared to the same period for the prior year, due to higher sales of cable products and shipments to a new international customer. Wireless/OEM Products revenue decreased by $2.8 million, or 17.2%, compared to the corresponding nine months in fiscal 2008, due primarily to a decline in legacy technology investments by wireless carriers. Global Services revenue decreased by $2.4 million, or 18.7%, compared to the same period for the prior year, primarily due to lower installation revenue from a major customer. Revenue for Quality of Experience Assurance Products decreased $0.6 million, or 37.2%, compared to the same period for the prior year, due primarily to extended trial periods by potential customers. Revenue from the Timing, Test and Measurement Division for the first nine months of fiscal 2009 increased $2.8 million, or 4.8%, compared to the same period for the prior year, primarily due to higher sales to the government communication and electronic system programs.

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