<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 10-Q
(MARK ONE)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1999
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 0-07428
ADAPTIVE BROADBAND CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-1668412
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
1143 BORREGAS AVENUE
SUNNYVALE, CALIFORNIA 94089
(Address of principal executive offices)
(Zip Code)
(408) 732-4000
(Registrant's telephone number, including area code)
CALIFORNIA MICROWAVE, INC.
(Former name, if changed since last report)
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Classes Outstanding at April 30, 1999
------- -----------------------------
Common Stock $.10 Par Value 14,792,092
(and related share purchase rights)
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-1-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ADAPTIVE BROADBAND CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 38,553 $ 44,340 $ 116,458 $ 129,553
Costs of revenue 27,442 27,037 77,477 77,845
-------- -------- --------- ---------
Gross margin 11,111 17,303 38,981 51,708
Expenses:
Research and development 6,784 4,459 18,179 13,203
Sales, marketing and administration 10,953 9,055 32,524 29,113
Amortization of intangible assets 540 344 1,408 1,032
Purchased in-process research and development - - 11,775 -
Restructuring and other charges 3,325 - 3,325 -
-------- -------- --------- ---------
Total expenses 21,602 13,858 67,211 43,348
-------- -------- --------- ---------
Operating income (loss) (10,491) 3,445 (28,230) 8,360
Interest expense, net (1,245) (880) (3,224) (2,886)
-------- -------- --------- ---------
Income (loss) from continuing operations
before income taxes (11,736) 2,565 (31,454) 5,474
Provision for (benefit from) income taxes (4,226) 912 (8,494) 1,960
-------- -------- --------- ---------
Income (loss) from continuing operations (7,510) 1,653 (22,960) 3,514
Discontinued operations:
Income (loss) from discontinued operations,
net of income taxes - 1,452 1,963 3,775
Gain (loss) on disposal, net of income taxes - (12,500) - (12,500)
-------- -------- --------- ---------
- (11,048) 1,963 (8,725)
-------- -------- --------- ---------
Net loss $(7,510) $ (9,395) $ (20,997) $ (5,211)
-------- -------- --------- ---------
-------- -------- --------- ---------
Basic earnings (loss) per share:
Income (loss) from continuing operations $ (0.51) $ 0.10 $ (1.54) $ 0.21
Income (loss) from discontinued operations - (0.67) 0.13 (0.53)
-------- -------- --------- ---------
Net loss $ (0.51) $ (0.57) $ (1.40) $ (0.32)
-------- -------- --------- ---------
-------- -------- --------- ---------
Weighted average common shares 14,779 16,505 14,953 16,509
-------- -------- --------- ---------
-------- -------- --------- ---------
Diluted earnings (loss) per share:
Income (loss) from continuing operations $ (0.51) $ 0.10 $ (1.54) $ 0.21
Income (loss) from discontinued operations - (0.66) 0.13 (0.52)
-------- -------- --------- ---------
Net loss $ (0.51) $ (0.56) $ (1.40) $ (0.31)
-------- -------- --------- ---------
-------- -------- --------- ---------
Weighted average common shares and dilutive
common share equivalents 14,779 16,780 14,953 16,753
-------- -------- --------- ---------
-------- -------- --------- ---------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE>
ADAPTIVE BROADBAND CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1999 1998
--------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,638 $ 24,630
Short-term investments 2,149 2,636
Accounts receivable 35,040 35,918
Inventories 24,258 25,710
Deferred income taxes 36,739 15,714
Prepaid expenses 2,602 512
Net current assets of discontinued operations 14,386 11,971
--------- ---------
Total current assets 119,812 117,091
--------- ---------
Property, plant and equipment, net 20,345 19,065
Deferred income taxes 3,005 16,448
Other assets 5,945 3,698
Intangible assets 32,607 27,887
Net long-term assets of discontinued operations 3,014 6,323
--------- ---------
$ 184,728 $ 190,512
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 13,505 $ 13,142
Accrued liabilities 28,513 30,217
Current portion of long-term debt 1,970 352
Note payable 25,250 -
--------- ---------
Total current liabilities 69,238 43,711
--------- ---------
Long-term liabilities:
Long-term debt 1,016 2,748
Convertible subordinated notes 57,500 57,500
Other long-term liabilities 1,790 2,000
--------- ---------
Total long-term liabilities 60,306 62,248
--------- ---------
Shareholders' equity:
Common stock 1,663 1,663
Capital in excess of par value 95,673 95,673
Treasury stock (34,352) (27,831)
Retained earnings (deficit) (7,800) 15,048
--------- ---------
Total shareholders' equity 55,184 84,553
--------- ---------
$ 184,728 $ 190,512
--------- ---------
--------- ---------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE>
ADAPTIVE BROADBAND CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
------------------
1999 1998
---- ----
<S> <C> <C>
Operating activities:
Income (loss) from continuing operations $ (22,960) $ 3,514
Adjustments to reconcile net income to net
Cash provided by (used in) operating activities:
Purchased in-process research and development 11,775 -
Depreciation and amortization 5,264 5,269
Amortization of intangible assets 1,408 1,032
Deferred income taxes (8,494) 4,147
Debt issuance costs 157 238
Other (2,570) (575)
Net effect of changes in:
Accounts receivable 1,212 (15,064)
Refundable income taxes - 10,085
Inventories 1,759 742
Prepaid expenses (2,090) (1,056)
Accounts payable 146 (4,185)
Other assets and accrued liabilities (2,584) 3,668
--------- ---------
Net cash provided by (used in) continuing operations (16,977) 7,815
--------- ---------
Investing activities:
Capital expenditures (5,465) (4,498)
Acquisitions and investments in businesses (18,761) 27,000
Other 487 (2,608)
--------- ---------
Net cash provided by (used in) continuing operations
investing activities (23,739) 19,894
Net cash provided by (used in) discontinued operations
activities 3,960 (11,858)
--------- ---------
Net cash provided by (used in) investing activities (19,779) 8,036
--------- ---------
Financing activities:
Payments on long-term debt (114) (109)
Proceeds from issuance of common stock 2,019 2,600
Proceeds from (payments on) bank credit facilities 25,250 (6,000)
Purchase of treasury stock (10,391) (8,057)
Repayment of convertible subordinated notes - (5,700)
--------- ---------
Net cash provided by (used in) financing activities 16,764 (17,266)
--------- ---------
Net decrease in cash and cash equivalents (19,992) (1,415)
Cash and cash equivalents at beginning of year 24,630 5,705
--------- ---------
Cash and cash equivalents at end of period $ 4,638 $ 4,290
--------- ---------
--------- ---------
Supplemental cash flow information:
Cash paid (received) during the period for:
Interest $ 2,232 $ 2,339
Income taxes 5 (300)
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE>
ADAPTIVE BROADBAND CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements include the
accounts of Adaptive Broadband Corporation (formerly California Microwave,
Inc.) and its subsidiaries (the Company). See Note 13 - Corporate Name
Change. All significant intercompany balances and transactions have been
eliminated. Certain prior year amounts have been reclassified to conform to
the current year presentation. These unaudited condensed consolidated
financial statements include all adjustments (consisting only of normal
recurring adjustments) which, in the opinion of management, are necessary to
fairly state the financial position, results of operation and cash flows for
the periods presented. Interim results are not necessarily indicative of
results for a full year. The condensed consolidated interim financial
statements should be read in conjunction with the audited consolidated
financial statements for the year ended June 30, 1998, included in the
California Microwave, Inc. 1998 Annual Report to Shareholders.
The Company has adopted Statement of Financial Accounting Standards No.
130 (SFAS 130), "Reporting Comprehensive Income," and for the three and nine
months ended March 31, 1999 and March 31, 1998, the Company's comprehensive
loss was the same as its net loss.
NOTE 2. SEGMENT INFORMATION
During the third quarter of fiscal year 1999, the Company completed the
reorganization of its continuing operations from a holding company operating
in two business segments to an integrated organization operating in one
business segment. The Company is a supplier of terrestrial wireless and
satellite-based systems to support ultra-high speed Internet access,
broadcast digital TV transport and worldwide Internet backbones. The Company
also provides industry-leading solutions for satellite-based data
communications and terrestrial wireless telemetry networks. The Company's
operations are treated as one operating segment as it reports operating
results on an aggregate basis to the chief operating decision maker in the
Company. Prior to the reorganization, the Company reported its continuing
operation through the Satellite Communications Division and the Terrestrial
Wireless Division. See "Results of Operations" in Management's Discussion
and Analysis of Financial Condition and Results of Operations.
NOTE 3. RESTRUCTURING AND OTHER CHARGES
During the third quarter of fiscal year 1999, the Company completed the
reorganization of its continuing operations from a holding company to one
integrated organization and recorded pre-tax charges of $3.3 million. The
charges included $2.5 million for severance and $0.8 million for fixed asset
write-offs. The severance was associated with work force reductions of
approximately 130 employees in manufacturing operations and product
management. The work force reductions and fixed asset write-offs were
primarily driven by the reduction of manufacturing capacity at the Company's
satellite communications operation in Tempe, AZ. The Company utilized $ 0.8
million of the $2.5 million of severance reserve through cash payment for
termination benefits. The Company expects to utilize the remainder of the
severance accrual through additional cash payments for termination benefits
by December 31, 1999.
During the fourth quarter of fiscal year 1998, the Company reviewed and
refocused its operations and business processes in connection with its
strategic and operational initiatives and recorded $4.6 million for
restructuring and other charges, primarily for severance and excess
facilities. The severance charge was $2.9 million associated with workforce
reductions of approximately 160 employees. The workforce reductions were
primarily driven by the elimination of manufacturing capacity in the
Company's Satellite division and factory consolidation in the Company's
Terrestrial division, as well as the elimination of the Company's historical
holding company structure and impacted employees in all functional areas of
the Company. During the first nine months of fiscal year 1999, the Company
terminated approximately all of the 160 employees and utilized $2.2 million
of the $2.9 million reserve recorded at June 30, 1998 through cash payments
for termination benefits. During the first nine months of the fiscal year
1999, there have been no adjustments to the reserve, and the Company expects
to utilize the remainder of the severance accrual through additional cash
payments for termination benefits by June 30, 1999.
NOTE 4. DISCONTINUED OPERATIONS
In October 1998, the Company's Board of Directors adopted a formal plan
to sell its Government Division, which consisted of the Government
Electronics Division (GED), and Airborne Systems Division (ASID).
Historically, the Government Division included the Company's Services
Division (SD), which was sold in the fourth quarter of fiscal year 1998 to
Telscape International, Inc. (Telscape) for $8.2 million in cash with a
pre-tax gain of $6.3 million. These operations contracted principally with
the United States Department of Defense and provided products and services
principally in the areas of communication, reconnaissance, and surveillance
systems. On April 26, 1999, the Company completed the sale of its Government
Division to Northrop Grumman Corporation for $93 million in cash, for an
approximate net gain of $38 million (net of income taxes). The Company used
a portion of the proceeds to pay down the entire outstanding balance of its
credit facility. The Company plans to use the remaining proceeds to pay down
long term debt, resume its share buyback program and continue to invest in
the development and marketing of its new wireless broadband products. The
Government Division sale price will include up to an additional $5 million
contingent upon the future performance of the divested business.
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<PAGE>
The operating results and financial position of the Government Division
have been classified as discontinued operations in the Company's financial
statements for all periods presented. Revenue from the Government Division
discontinued operations was $19.9 million and $22.3 million for the three
months ended March 31, 1999 and 1998, and $59.7 million and $68.1 million for
the nine months ended March 31, 1999 and 1998. Income from discontinued
operations (net of income taxes) for the Government Division was recorded
breakeven and $1.5 million for the three months ended March 31, 1999 and
1998, and $2.0 million and $3.8 million for the nine months ended March 31,
1999 and 1998. The loss from discontinued operations for the Government
Division for the third quarter of fiscal year 1999 has been deferred in
accordance with discontinued operation accounting and will be offset against
the gain from the Government Division sale in the fourth quarter of fiscal
year 1999.
In June 1997, the Company's Board of Directors adopted a formal plan to
sell its Microwave Networks (MN) and Satellite Transmission Systems (STS)
divisions, and provided $8.4 million (net of income taxes) for anticipated
operating losses prior to disposal and for expected losses on their eventual
sale.
In February 1998, STS was sold to L-3 Communications Corporation (L-3)
for $27 million in cash, and in April 1998, MN was sold to Tadiran Ltd.
(Tadiran) for $31.5 million in cash. During the second half of fiscal year
1998, the Company recorded additional provisions of $15.1 million (net of
income taxes) for additional losses on disposal of these divisions, including
$12.5 million (net of income taxes) during the quarter ended March 31, 1998.
These provisions were primarily for adjustments to the combined losses on
sale and for higher than anticipated operating losses prior to disposal of
both divisions. The operating results, loss on disposal, and financial
position of these divisions have been classified as discontinued operations
in the Company's financial statements through the divestiture dates. Revenue
from the MN and STS discontinued operations was $12.9 million and $75.4
million for the three-month and nine-month periods ended March 31, 1998. The
loss from discontinued operations (net of income taxes) for MN and STS for
the three month and nine month periods ended March 31, 1998, was $3.6 million
and $8.3 million, and was accrued as part of the net loss on disposal.
Final accounting for the MN divestiture is subject to completion of the
post-closing procedures provided for in the Tadiran agreement. The Company
believes that the completion of these procedures will not have a material
impact on the Company's financial position, results of operations or cash
flows.
In May 1995, the Company's MN division entered into certain agreements
with Nokia Telecommunications Oy (Nokia) pursuant to which MN was to provide
to Nokia certain microwave radios and related software and services, and was
to carry out certain development programs. In September 1997, Nokia informed
MN of a purported failure of certain of the products sold to Nokia to meet
certain contractual specifications. MN was sold to Tadiran in April 1998 and
under the terms of the sale agreement, Tadiran assumed and indemnified the
Company with respect to the Nokia claims. Tadiran has now taken the position
that the Company is responsible for the Nokia claims, based upon allegations
that the Company failed to provide adequate disclosures and financial
reserves with respect to such claims. Also, in September 1998, the Company
received notices from Nokia that Nokia has decided to terminate the May 1995
agreements and has begun arbitration proceedings to recover damages, which
Nokia provisionally claims are $9.6 million. The Company believes that it
has good defenses and will vigorously defend the Nokia and Tadiran claims.
No accruals have been recorded for expenses that may be incurred to resolve
the dispute, and the Company believes final resolution of this matter will
not have a material impact on the Company's financial position, results of
operations or cash flows.
NOTE 5. INVENTORIES
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) MARCH 31, 1999 JUNE 30, 1998
---------------------- -------------- -------------
<S> <C> <C>
Work-in-process and finished goods $ 12,455 $ 8,766
Raw materials 11,803 16,944
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$ 24,258 $ 25,710
--------- ---------
--------- ---------
</TABLE>
NOTE 6. INTANGIBLE ASSETS OF BUSINESSES ACQUIRED
For acquisitions accounted for under the purchase method, the excess
purchase price over the fair value of net tangible assets acquired is
allocated to intangible assets based on fair value. The carrying value of the
intangible assets are reviewed if the facts and circumstances suggest that
the asset may be impaired. If this review indicates that the intangible
assets are not recoverable, the Company's carrying value is reduced
appropriately. The following table summarizes net intangible assets of
businesses acquired:
<TABLE>
<CAPTION>
AMORTIZATION
(DOLLARS IN THOUSANDS) PERIOD MARCH 31, 1999 JUNE 30, 1998
---------------------- ------------ -------------- -------------
<S> <C> <C> <C>
Goodwill 10-30 years $ 40,222 $37,033
Developed technology 8 years 2,074 -
Assembled workforce 3 - 4 years 865 -
-------- -------
43,161 37,033
Accumulated amortization (10,554) (9,146)
-------- -------
$ 32,607 $27,887
-------- -------
-------- -------
</TABLE>
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<PAGE>
NOTE 7. BORROWING ARRANGEMENTS
In November 1998, the Company terminated its asset-based bank credit
facility due to expire in June 2000 and entered into an unsecured revolving
credit facility with available credit of $30 million that expires in June
1999. The Company increased its revolving credit facility to $36 million in
March 1999. The annual commitment fee on the unused portion of the facility
and the interest rate on the borrowings vary based upon the Company's ratio
of funded debt to earnings before interest, amortization, and taxes, with the
maximum commitment fee set at 0.4% and the maximum borrowing rate set at the
bank's reference rate plus 0.5%. The maximum borrowing rate was 8.0% at
March 31, 1999. The net borrowing capacity under the Company's credit
facility was $9.4 million as of March 31, 1999. In April 1999, the Company
used a portion of the proceeds from the sale of its Government Division to
pay down the entire outstanding balance of the credit facility. See Note 4
- -Discontinued Operations.
At March 31, 1999, the Company was not in compliance with certain
covenants of its bank credit facility and one of its industrial development
bond agreements. The credit facility lender waived such non-compliance at
March 31, 1999, and the credit facility and industrial development bond
balances are classified as current liabilities. The Company plans to use a
portion of the proceeds from the sale of its Government Division to pay down
the balance of the industrial development bond.
NOTE 8. SHAREHOLDERS' EQUITY
On February 5, 1998, the Company announced that its Board of Directors
authorized the repurchase of up to three million shares of its common stock
on the open market. On October 6, 1998, the Company announced that its Board
of Directors had increased the number of shares authorized for repurchase to
six million. During the nine months ended March 31, 1999, the Company
acquired 732,000 shares of common stock for $10.4 million, bringing the total
shares repurchased subsequent to February 5, 1998 to approximately 2.3
million.
The following table summarizes the changes in shareholders' equity for
the nine months ended March 31, 1999.
<TABLE>
<CAPTION>
CAPITAL IN RETAINED TOTAL
SHARES EXCESS OF TREASURY EARNINGS SHAREHOLDERS'
(DOLLARS IN THOUSANDS) ISSUED AMOUNT PAR VALUE STOCK (DEFICIT) EQUITY
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1998 16,629,031 $1,663 $95,673 $(27,831) $ 15,048 $ 84,553
Treasury stock repurchase (10,391) (10,391)
Common stock issued from
treasury shares for stock
option and stock purchase
plans 3,870 (1,851) 2,019
Net loss (20,997) (20,997)
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Balance at March 31, 1999 16,629,031 $1,663 $95,673 $(34,352) $(7,800) $ 55,184
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</TABLE>
NOTE 9. SHAREHOLDER RIGHTS
In October 1989, the Board of Directors of the Company approved a Rights
Agreement which provided for the issuance to holders of common stock rights
to purchase additional common stock and other securities. These Rights
become exercisable in the event, among other things, that a person or group
acquires 20% or more of the Company's common stock as described in the
Agreement. In light of the Company's common stock repurchase program
(discussed in Note 8 above), planned repurchases of common stock by the
Company could cause the ownership of one or more stockholders to cross the
20% threshold, which could inadvertently trigger the exercisability of the
Rights. Accordingly, on November 6, 1998, the Rights Agreement was amended
to provide that the exercisability of the Rights will not be triggered if a
person becomes a beneficial owner of 20% or more of the Company's common
stock as a result of an acquisition of common stock by the Company which, by
reducing the number of shares outstanding, increases the proportionate number
of shares beneficially owned by such stockholder to 20% or more.
Exercisability would still, however, be triggered if such person, following
notice or disclosure of stock repurchases, then becomes the beneficial owner
of an aggregate of 3,000,000 shares of common stock or more. In addition, the
Rights Agreement was also amended to permit the Board of Directors to
authorize, issue or pay, upon exercise of Rights, cash or other property.
The Company also effected certain other changes to the Rights Agreement,
including the change of its Rights Agent to BankBoston, N.A.
NOTE 10. INCOME TAXES
At March 31, 1999, the Company has a cumulative net deferred tax asset
of $39.7 million that will be available to reduce payments on future tax
liabilities. The Company's management believes it is more likely than not
that the deferred tax asset will be realized based on the Company's operating
history in its continuing operations, its projected future results, and the
gain on the sale of its Government Division.
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<PAGE>
NOTE 11. CONTINGENT LIABILITIES
The Company is subject to legal proceedings and claims that arise in the
normal course of its business. The Company believes these proceedings will
not have a material adverse effect on the financial position, results of
operations or cash flows of the Company.
NOTE 12. ACQUISITIONS
On August 20, 1998, the Company acquired Adaptive Broadband Limited
(ABL) a United Kingdom based company developing high-speed wireless Internet
connectivity technology. The acquisition was accounted for under the
purchase method. The initial purchase price was approximately $10.9 million
including cash payments, direct costs, and the assumption of ABL's net
liabilities. The purchase price will include additional future payments of
up to $7 million contingent on ABL's performance exceeding certain targets.
The assets and liabilities assumed by the Company were recorded based on
their fair values at the date of acquisition. The purchase price was
allocated $8.2 million to in-process research and development, $0.4 million
to net tangible assets, $0.4 million to identified intangible assets, and
$1.9 million to goodwill. The amount allocated to in-process research and
development was expensed at the time of acquisition. The Company's
management believes that the allocation of the majority of the initial
purchase price to purchased in-process research and development is
appropriate given the stage of development of ABL's potential products and
the considerable potential for these products to contribute to the future
operations of the Company. The Company's results of operations for the first
nine months of fiscal year 1999 include ABL's results from August 20, 1998.
On November 19, 1998, the Company acquired Crown Satellite (Crown),
which is developing and supplying products and software for the network
delivery of Internet Protocol (IP) data and multimedia services, from Crown
International, Inc. The acquisition was accounted for under the purchase
method. The initial purchase price was approximately $7.7 million including
cash payments, direct costs, and the assumption of Crown's net liabilities.
The purchase price will include additional future payments contingent on
Crown's performance. The assets and liabilities assumed by the Company were
recorded based on their fair values at the date of acquisition. The purchase
price was allocated $3.6 million to in-process research and development, $0.3
million to net tangible assets, $2.5 million to identified intangible assets,
and $1.3 million to goodwill. The amount allocated to in-process research and
development was expensed at the time of acquisition. The Company's
management believes that the purchased in-process research and development is
appropriate given the stage of development of certain of Crown's data
products and the potential for these products to contribute to the future
operations of the Company. The Company's results of operations for the first
nine months of fiscal year 1999 include Crown's results from November 19,
1998.
NOTE 13. CORPORATE NAME CHANGE
Effective April 29, 1999, the Company changed its corporate name from
California Microwave, Inc. to Adaptive Broadband Corporation. During the
past two years, the Company has targeted its market and product focus to
concentrate on wireless broadband solutions. The Company bears little
resemblance to the California supplier of defense electronics and microwave
components that was founded in 1968. The California Microwave name has a
traditionally strong presence in the intelligence community, and the Company
included the name as part of the sale of the Company's Government Division to
Northrop Grumman Corporation. The Company's stock symbol of ADAP was listed
on the Nasdaq national market trading system on April 29, 1999.
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
STATEMENTS MADE BELOW AND IN THE ADAPTIVE BROADBAND CORPORATION, FORMERLY
CALIFORNIA MICROWAVE, INC. (THE COMPANY), 1998 ANNUAL REPORT TO SHAREHOLDERS
THAT ARE NOT HISTORICAL FACTS, INCLUDING ANY STATEMENTS ABOUT EXPECTATIONS
FOR FISCAL YEAR 1999 AND BEYOND, MAY CONTAIN FORWARD-LOOKING STATEMENTS THAT
INVOLVE CERTAIN RISKS AND UNCERTAINTIES. WORDS SUCH AS "BELIEVES,"
"ANTICIPATES," "EXPECTS," "INTENDS," AND SIMILAR EXPRESSIONS ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS, BUT ARE NOT THE EXCLUSIVE MEANS OF
IDENTIFYING SUCH STATEMENTS. READERS ARE CAUTIONED THAT FORWARD-LOOKING
STATEMENTS REFLECT MANAGEMENT'S ANALYSIS ONLY AS THE DATE HEREOF, AND THE
COMPANY ASSUMES NO OBLIGATION TO UPDATE THESE STATEMENTS. ACTUAL EVENTS OR
RESULTS MAY DIFFER MATERIALLY FROM THE EVENTS OR RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE SUCH A DIFFERENCE
INCLUDE, BUT ARE NOT LIMITED TO, DELAYS IN THE RECEIPT OF ORDERS OR IN THE
SHIPMENT OF PRODUCTS, CHANGES IN DEMAND FOR PRODUCTS, PRICE COMPETITION, NEW
PRODUCT INTRODUCTIONS BY COMPETITORS OR THE COMPANY, COST OVERRUNS, FOREIGN
CURRENCY EXCHANGE RATE FLUCTUATIONS, TIMELY AVAILABILITY OF SUPPLY OF
COMPONENTS, DEPENDENCE ON MAJOR ORDERS FROM A SMALL NUMBER OF CUSTOMERS,
LIMITATIONS ON THE COMPANY'S ABILITY TO REDUCE INVENTORY AND EXPENSES IF
FORECASTS AND EXPECTED DEMAND ARE NOT REALIZED, GENERAL ECONOMIC CONDITIONS,
THE IMPACT OF YEAR 2000 AND OTHER FACTORS DISCUSSED ELSEWHERE HEREIN. SEE
ALSO THE RISK FACTORS REFERRED TO UNDER "INFORMATION REGARDING FORWARD
LOOKING STATEMENTS" IN THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND
NOTES TO FINANCIAL STATEMENTS AND IN THE COMPANY'S FORM 10-K ANNUAL REPORT
FOR ITS FISCAL YEAR ENDED JUNE 30, 1998. THE CONSOLIDATED FINANCIAL
STATEMENTS SHOULD BE READ IN CONJUNCTION WITH THIS MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
In October 1998, the Company's board of director's adopted a formal plan
to sell its Government Division. The Government Division was sold on April
26, 1999. During fiscal 1998, the Company sold its Microwave Networks (MN),
Satellite Transmission Systems (STS), and Services (SD) divisions. The
operating results, loss on disposal, and financial position of these
divisions have been classified separately as discontinued operations for all
periods presented in the accompanying Condensed Consolidated Financial
Statements. See Note 4 -- Discontinued Operations, of Notes to Condensed
Consolidated Financial Statements for further discussion of these
transactions.
RESULTS OF OPERATIONS
OVERVIEW
The Company reported a net loss from continuing operations of $7.5
million, or $0.51 per share, for the three months ended March 31, 1999,
compared to net income from continuing operations of $1.7 million, or $0.10
per share for the three months ended March 31, 1998. Operating results from
continuing operations for the third quarter of fiscal year 1999 include
restructuring and other charges of $2.1 million after income taxes. Excluding
the restructuring and other charges, the Company's net loss from continuing
operations for the three months ended March 31, 1999 would have been $5.4
million, or $0.36 net loss per share.
In addition to the restructuring and other charges, the fiscal 1999
third quarter includes excess manufacturing costs of $1.9 million after
income taxes, related to factory floor and inventory reductions, and
manufacturing process changes in the Company's satellite communications
operations.
The Company reported a net loss from continuing operations of $23.0
million, or $1.54 per share, for the first three quarters of fiscal year
1999, compared to net income from continuing operations of $3.5 million, or
$0.21 per share for the same period during fiscal year 1998. Results of
fiscal year 1998 included a litigation settlement charge of $1.2 million
after income taxes. Operating results from continuing operations for the
first three quarters of fiscal year 1999 include one-time charges of $10.4
million after income taxes for purchased in-process research and development
related to the company's acquisitions of Adaptive Broadband Limited (ABL) and
Crown Satellite (Crown) and restructuring and other charges of $2.1 million
after income taxes. Excluding the purchased in-process research and
development charges and restructuring and other charges, net loss from
continuing operations for the nine months ended March 31, 1999 would have
been $10.5 million, or $0.70 net loss per share.
The Company records bookings for new orders received only if the product
will be shipped to the customer within twelve months. New orders booked from
continuing operations were $41.7 million and $43.7 million for the three
months ended March 31, 1999 and 1998, representing a 5% decrease. For the
first nine months of Fiscal 1999, new orders booked from continuing
operations were $117.3 million, compared to $134.1 million for the same
period during fiscal year 1998, representing a 13% decrease. Revenue from
continuing operations was $38.6 million and $44.3 million for the three
months ended March 31, 1999 and 1998, representing a 13% decrease. Revenue
from continuing operations was $116.5 million and $129.6 million for the nine
months ended March 31, 1999 and 1998, representing a 10% decrease. These
decreases were primarily a result of weakness in the Company's international
markets, primarily in Latin America, for both satellite and terrestrial
products, and in satellite product sales to domestic integrators who ship
internationally. The decrease in international revenue was partially offset
by an increase in domestic revenue during the third quarter and the first
nine months of Fiscal 1999.
-9-
<PAGE>
During the third quarter of fiscal year 1999, the Company completed its
transition from a holding company operating in two business segments to an
integrated organization operating in one business segment. The Company
derives its revenue from two major product groups: Satellite Communications
Products Group (Satellite) and Terrestrial Wireless Products Group
(Terrestrial). The supplemental information for these two product groups are
as follows:
<TABLE>
<CAPTION>
(Dollars in millions) Three months ended March 31, Nine months ended March 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BOOKINGS
Satellite:
Domestic $10.5 50% $11.0 48% $ 26.8 45% $ 30.2 43%
International 10.3 50% 12.0 52% 32.7 55% 40.3 57%
------------- ------------- ------------- --------------
Total 20.8 100% 23.0 100% 59.5 100% 70.5 100%
Terrestrial:
Domestic 16.7 80% 12.3 59% 43.4 75% 39.6 62%
International 4.2 20% 8.4 41% 14.4 25% 24.0 38%
------------- ------------- ------------- --------------
Total 20.9 100% 20.7 100% 57.8 100% 63.6 100%
Total Domestic 27.2 65% 23.3 53% 70.2 60% 69.8 52%
Total International 14.5 35% 20.4 47% 47.1 40% 64.3 48%
------------- ------------- ------------- --------------
Total Bookings $41.7 100% $43.7 100% $117.3 100% $134.1 100%
REVENUE
Satellite:
Domestic $ 9.7 49% $ 9.5 41% $ 26.3 44% $ 27.4 41%
International 10.2 51% 13.5 59% 32.9 56% 40.1 59%
------------- ------------- ------------- --------------
Total 19.9 100% 23.0 100% 59.2 100% 67.5 100%
Terrestrial:
Domestic 13.9 74% 13.2 62% 40.4 71% 37.9 61%
International 4.8 26% 8.1 38% 16.9 29% 24.2 39%
------------- ------------- ------------- --------------
Total 18.7 100% 21.3 100% 57.3 100% 62.1 100%
Total Domestic 23.6 61% 22.7 51% 66.7 57% 65.3 50%
Total International 15.0 39% 21.6 49% 49.8 43% 64.3 50%
------------- ------------- ------------- --------------
Total Revenue $38.6 100% $44.3 100% $116.5 100% $129.6 100%
GROSS MARGIN
Satellite $ 5.1 26% $ 8.3 36% $ 16.9 29% $ 26.4 39%
Terrestrial 6.0 32% 9.0 42% 22.1 39% 25.3 41%
------------- ------------- ------------- -------------
Total $11.1 29% $17.3 39% $ 39.0 33% $ 51.7 40%
GROSS MARGIN-EXCLUDING EXCESS MANUFACTURING COSTS
Satellite $ 7.2 36% $ 8.3 36% $ 19.0 32% $ 26.4 39%
Terrestrial 6.9 37% 9.0 42% 23.0 40% 25.3 41%
------------- ------------- ------------- -------------
Total $14.1 37% $17.3 39% $ 42.0 36% $ 51.7 40%
</TABLE>
SATELLITE COMMUNICATIONS
The Satellite Communications Products Group provides satellite modems
and transceiver products and services primarily to telecommunications
carriers and Internet service providers, it also develops and supplies
products and software for the network delivery of Internet Protocol (IP) data
and multimedia services. These products and services enable customers to
provide voice, video, and data services via satellite.
Satellite revenue was $19.9 million and $23.0 million for the three
months ended March 31, 1999 and 1998, representing a decrease of $3.1 million
or 13%. Satellite revenue was $59.2 million and $67.5 million, for the nine
months ended March 31, 1999 and 1998, representing a decrease of $8.3 million
or 12%. International revenue decreased $3.3 million or 24% for the three
months ended March 31, 1999, and for the nine months ended March 31, 1999,
international revenue decreased $7.2 million or 18%. The international
revenue decrease was due to economic conditions in developing countries, a
delay in the privatization of the public telecommunications company
-10-
<PAGE>
in Brazil, and weakened demand in the satellite European markets. Domestic
revenue increased $0.2 million or 2% for the three months ended March 31,
1999, and decreased $1.1 million or 4% for the nine months ended March 31,
1999. The revenue decrease for the nine months ended March 31, 1999 was due
primarily to lower demand from systems integrators whose ultimate customers
are in the international markets. Satellite book-to-bill ratios were 105%
and 100% for the three months ended March 31, 1999 and 1998, and 101% and
104% for the nine months ended March 31, 1999 and 1998.
Excluding excess manufacturing costs directly related to factory floor
reductions, inventory reductions and manufacturing process changes of $2.1
million, Satellite gross margin would have been $7.2 million and $8.3
million, or as a percentage of revenue 36% and 36% for the three months ended
March 31, 1999 and 1998. Excluding the excess manufacturing costs, Satellite
gross margin would have been $19.0 million and $26.4 million, or as a
percentage of revenue 32% and 39% for the nine months ended March 31, 1999
and 1998.
TERRESTRIAL WIRELESS
The Terrestrial Wireless Products Group provides products and services,
based upon microwave radio technology, primarily to the television broadcast,
oil, gas and utility, and transaction processing industries. It is also
developing high-speed, dynamic bandwidth management and wireless Internet
connectivity technology.
Terrestrial revenue was $18.7 million and $21.3 million for the three
months ended March 31, 1999 and 1998, representing a decrease of $2.6 million
or 12%. Terrestrial revenue was $57.3 million and $62.1 million for nine
months ended March 31 1999 and 1998, representing a decrease of $4.8 million
or 8%. International revenue decreased $3.3 million or 41% for the three
months ended March 31, 1999, partially offset by an increase in domestic
revenue of $0.7 million. For the nine months ended March 31 1999,
international revenue decreased $7.3 million or 30%, partially offset by an
increase in domestic revenue of $2.5 million or 7%. The decrease in
international revenue was due primarily to economic conditions in developing
countries, including declines in oil and gas prices in Latin America.
Terrestrial book-to-bill ratios were 112% and 97% for the three months ended
March 31, 1999 and 1998, and 101% and 102% for the nine months ended March
31, 1999 and 1998, respectively.
Excluding excess manufacturing costs from inventory reductions of $0.9
million, terrestrial gross margin would have been $6.9 million and $9.0
million, or as a percentage of revenue 37% and 42% for the three months ended
March 31, 1999 and 1998, and $23.0 million and $25.3 million, or as a
percentage of revenue 40% and 41% for the nine months ended March 31, 1999
and 1998. The decrease in gross margin was due primarily to lower revenue and
a change in the revenue mix to lower margin products.
RESTRUCTURING AND OTHER CHARGES
During the third quarter of fiscal year 1999, the Company completed its
reorganization of its continuing operations from a holding company to one
integrated organization and recorded pre-tax charges of $3.3 million. The
charges included $2.5 million for severance and $0.8 million for fixed asset
write-offs. The severance was associated with work force reductions of
approximately 130 employees in manufacturing operations and product
management. The work force reductions and fixed asset write-offs were
primarily driven by the reduction of manufacturing capacity at the Company's
satellite communications operation in Tempe, AZ.
The completion of the reorganization included the consolidation of all
company manufacturing operations under new leadership and the installation of
a new management team in its Tempe, AZ, satellite communications operation.
The new team has begun outsourcing the manufacturing of certain new products,
reduced the Tempe factory floor space by 20%, consolidated its manufacturing
operations into one building, and reduced by 32% the manufacturing operations
headcount in Tempe. By transitioning to a build-to-order process, inventory
in Tempe has been reduced by 14%, and through improvements in bill of
materials, inventory in the company's Chelmsford, MA, operation has been
reduced by 17%.
OPERATING EXPENSES
Research and development expenses for continuing operations were $6.8
million and $4.5 million, or as a percentage of revenue 18% and 10% for the
three months ended March 31, 1999 and 1998. For the nine months ended March
31, 1999 and 1998, research and development expenses were $18.2 million and
$13.2 million, or as a percentage of revenue 16% and 10%. The increase was
primarily attributable to the Company's investment in research and
development for AB-Access-TM- and other terrestrial wideband and broadband
products, as well as research and development investment in broadband
satellite products such as the Spectracast-TM- products and the Multimedia
Integrated Digital Access System (MIDAS-TM-). The Company believes that the
continual and rapid introduction of new products and technologies is critical
to the growth within its current and future target markets, thus expects to
continue to commit substantial resources to product development and
engineering in future periods.
Sales, marketing and administrative expenses for continuing operations
were $11.0 million and $9.1 million or as a percentage of revenue 28% and
20%, for the three months ended March 31, 1999 and 1998. For the nine months
ended March 31, 1999 and 1998, sales, marketing and administrative expenses
for continuing operations were $32.5 million and $29.1 million, or as a
percentage of revenue 28% and 22%. Included in sales, marketing and
administrative expenses for the nine months ended March 31, 1998 was a $1.9
million litigation settlement charge. The increase reflects the Company's
investment in new sales and marketing initiatives for its new products.
-11-
<PAGE>
Amortization expense associated with intangible assets for the
continuing operations was $0.5 million and $0.3 million for the three months
ended March 31, 1999 and 1998, and $1.4 million and $1.0 million for the nine
months ended March 31, 1999 and 1998. The increase was due to an increase in
intangible assets from the ABL and Crown acquisitions during the first half
of fiscal year 1999.
During the first half of fiscal year 1999, the Company recorded
purchased in-process research and development charges of $8.2 million
associated with the ABL acquisition and $3.6 million associated with the
Crown acquisition. See Note 12 -- Acquisition, of Notes to Condensed
Consolidated Financial Statements for further discussion of the ABL and
Crown acquisitions.
INTEREST EXPENSE, NET
Net interest expense was $1.2 million and $0.9 million for the three
months ended March 31, 1999 and 1998, and $3.2 million and $2.9 million for
the nine months ended March 31, 1999 and 1998. The increase in net interest
expense during the three and nine months ended March 31, 1999 was due to
higher average borrowings from the utilization of the Company's revolving
credit facility.
PROVISION FOR INCOME TAXES
The Company's income tax benefit from continuing operations was $4.2
million and $8.5 million for the three months and nine months ended March 31,
1999 compared to income taxes expense of $0.9 million and $2.0 million for
the three months and nine months ended March 31, 1998. The effective income
tax rate for the three months ended March 31, 1999 and 1998 was consistent at
36%. Excluding the impact of the partial valuation allowance recorded
against future deductions from the amortization of intangible assets acquired
in the ABL and Crown acquisitions, the effective income tax rate for the nine
months ended March 31, 1999 was consistent with the 36% rate for the same
period in the prior year.
DISCONTINUED OPERATIONS
Discontinued operations includes breakeven results for Government
Division for the three months ended March 31, 1999. For the three months
ended March 31, 1998, discontinued operations includes net income from the
Government Division of $1.5 million. For the nine months ended March 31,
1999 and 1998, discontinued operations includes net income from the
Government Division of $2.0 million and $3.8 million. Also included in
discontinued operations for the three and nine months ended March 31, 1999,
is a $12.5 million provision for losses on the disposal of Microwave Networks
(MN) and Satellite Transmission Systems (STS). The loss from discontinued
operations for the Government Division for the third quarter of fiscal year
1999 has been deferred in accordance with discontinued operation accounting
and will be recognized against the gain from the Government Division sale in
the fourth quarter of fiscal year 1999. See Note 4 - Discontinued operations
of Notes to Condensed Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, the Company had working capital of $50.6 million,
including $4.6 million of cash and cash equivalents, as compared to working
capital of $73.4 million, including cash and cash equivalents of $24.6
million, at June 30, 1998.
Net cash used in continuing operating activities was $17.0 million for
the nine months ended March 31, 1999, primarily due to a loss from operations
before the write-off of purchased in-process research and development, offset
by changes in assets and liabilities. Net cash provided by continuing
operating activities was $7.8 million for the nine months ended March 31,
1998, primarily from operating income of $3.5 million and $10.1 million from
income tax refunds, which was offset by an increase in accounts receivables
of $15.1 million.
Net cash used in investing activities for the nine months ended March
31, 1999 was $19.8 million including the acquisitions of ABL for $10.6
million and Crown for $7.7 million, and capital expenditures of $5.5 million,
offset by $4.0 million cash generated from discontinued operations. Net cash
from investing activities for the nine months ended March 31, 1998, was $8.0
million, primarily from proceeds from the sale of STS for $27 million,
partially offset by $11.9 million of cash used in discontinued operations.
During the first nine months of fiscal year 1999, the Company acquired
732,000 shares of its common stock for $10.4 million, bringing the total
shares repurchased to approximately 2.3 million shares under the Board of
Directors authorized common stock repurchase plan.
In addition to the common stock repurchased, the Company's financing
activities for the nine months ended March 31, 1999 included credit facility
borrowings of $25.3 million and the receipt of $2.0 million from the sale of
the Company's common stock under stock option and stock purchase plans.
In November 1998, the Company terminated its asset-based bank credit
facility due to expire in June 2000 and entered into an unsecured revolving
credit facility with available credit of $30 million that expires in June
1999. The Company increased its revolving credit facility to $36 million in
March 1999. The annual commitment fee on the unused portion of the facility
and the interest rate on the borrowings vary based upon the Company's ratio
of funded debt to earnings before interest, amortization, and taxes, with the
maximum commitment fee set at 0.4% and the maximum borrowing rate set at the
bank's reference rate plus 0.5%. The maximum borrowing rate was 8.0% at
-12-
<PAGE>
March 31, 1999. The net borrowing capacity under the Company's credit
facility was $9.4 million as of March 31, 1999.
At March 31, 1999, the Company was not in compliance with certain
covenants of its bank credit facility and one of its industrial development
bond agreements. The credit facility lender waived such non-compliance at
March 31, 1999, and the credit facility and industrial development bond
balances are classified as current liabilities. In April 1999, the Company
completed the sale of its Government Division to Northrop Grumman for $93
million in cash. The Company used a portion of the sale proceeds to pay down
the entire outstanding balance of the credit facility. The Company plans to
use the remaining proceeds to pay down the balance of the industrial
development bond, resume its share buyback program and continue to invest in
the development and marketing of its new wireless broadband products.
The Company believes that its current cash position, available credit
facilities, and funds generated from operations, will be adequate to meet the
Company's requirements for working capital, capital expenditures and debt
service for the foreseeable future.
YEAR 2000 COMPLIANCE
STATE OF READINESS
As of March 31, 1999, the Company has completed the assessment of the
potential impact of the Year 2000 on its products, information systems,
embedded systems (including computers used in the manufacturing process) and
on the ability of certain third parties to supply critical materials and
services. The Company intends to complete the necessary remediation action
by the end of calendar year 1999.
COSTS ASSOCIATED WITH YEAR 2000
Expenditures to date with respect to Year 2000 have not been material
and have consisted primarily of the limited use of outside consultants and
the time of certain Company personnel. Based on the assessment completed
through March 31, 1999, the Company currently expects the future costs of
making system modifications, primarily consisting of the time of certain
company personnel and the replacement of computer hardware to be
approximately $0.7 million. Based on the assessment completed through March
31, 1999, the Company currently does not expect the future costs of assessing
the Year 2000 readiness of material third party suppliers and major customers
to be material.
RISKS OF YEAR 2000
The Company has completed the assessment of the impact of Year 2000 on
its products. The worst case scenario is unknown and unanticipated Year 2000
failures in the Company's products could have a material adverse impact on
the Company's results of operations, financial position and cash flows.
While the Company does not anticipate a material business interruption to
result from the Year 2000, the Company can give no assurances that its
systems will be Year 2000 ready, and the Company cannot guarantee the Year
2000 readiness of key third party suppliers, service providers and major
customers.
If any of the Company's computer systems, embedded systems, key third
party suppliers, service providers and major customers are not Year 2000
ready, the Company may experience a business interruption which could have a
material adverse impact on the Company's results of operations and financial
condition.
CONTINGENCY PLANS
The Company has developed a comprehensive plan to address situations
that may result from the Year 2000 and is currently making significant
progress in the implementation of this plan.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
The majority of the Company's revenue is denominated in U.S. dollars.
The Company is engaged in minimal foreign currency hedging activity. No
foreign currency exchange contracts were outstanding at March 31, 1999, and
the net currency gains and losses have not been material.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In May 1995, the Company's MN division entered into certain agreements
with Nokia Telecommunications Oy (Nokia) pursuant to which MN was to provide
to Nokia certain microwave radios and related software and services, and was
to carry out certain development programs. In September 1997, Nokia informed
MN of a purported failure of certain of the products sold to Nokia to meet
certain contractual specifications. MN was sold to Tadiran in April 1998 and
under the terms of the sale agreement, Tadiran assumed and indemnified the
Company with respect to the Nokia claims. Tadiran has now taken the position
that the Company is responsible for the Nokia claims, based upon allegations
that the Company failed to provide adequate disclosures and financial
reserves with respect to such claims. Also, the Company, in September 1998,
received notices from Nokia that Nokia has decided to terminate the May 1995
agreements and has begun arbitration proceedings to recover damages, which
Nokia
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<PAGE>
provisionally claims are $9.6 million. The Company believes that it has good
defenses and will vigorously defend the Nokia and Tadiran claims. No
accruals have been recorded for expenses that may be incurred to resolve the
dispute, and, although no assurance can be given the Company believes final
resolution of this matter will not have a material impact on the Company's
financial position, results of operations or cash flow.
ITEM 5. OTHER INFORMATION
In April 1999, the Company completed the sale of its Government Division
to Northrop Grumman Corporation. The Company has filed a Current Report on
Form 8-K on December 11, 1998 to provide supplemental information regarding
the restatement of the operations of the Company's Government Division to
discontinued operations for each of the four quarters and the fiscal year of
1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27.1 Financial Data Schedule
(b) Reports on Form 8-K.
The Company field a Current Report on Form 8-K on March 23, 1999, relating to
its change of the Company's name to Adaptive Broadband Corporation.
The Company also filed a Current Report on Form 8-K on March 17, 1999, for
its announcement of having entered into an agreement for the sale of the
Government Division.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADAPTIVE BROADBAND CORPORATION
(Registrant)
May 14, 1999 BY /s/ Donna S. Birks
- ---------------------------- ------------------------------
Date DONNA S. BIRKS
EXECUTIVE VICE PRESIDENT
CHIEF FINANCIAL OFFICER
-14-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIS
FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 4,638
<SECURITIES> 2,149
<RECEIVABLES> 36,608
<ALLOWANCES> 1,568
<INVENTORY> 24,258
<CURRENT-ASSETS> 119,812
<PP&E> 52,219
<DEPRECIATION> 31,874
<TOTAL-ASSETS> 184,728
<CURRENT-LIABILITIES> 69,238
<BONDS> 58,516
0
0
<COMMON> 1,663
<OTHER-SE> 53,521
<TOTAL-LIABILITY-AND-EQUITY> 184,728
<SALES> 116,458
<TOTAL-REVENUES> 116,458
<CGS> 77,477
<TOTAL-COSTS> 144,688
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 402
<INTEREST-EXPENSE> 3,224
<INCOME-PRETAX> (31,454)
<INCOME-TAX> (8,494)
<INCOME-CONTINUING> (22,960)
<DISCONTINUED> 1,963
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20,997)
<EPS-PRIMARY> (1.40)
<EPS-DILUTED> (1.40)
</TABLE>
