Acterna Corporation Corrects and Replaces Previous Earnings Announcement, BW2592, MA-ACTERNA

Business Wire, Oct 30, 2001

Business Editors

The following news release replaces and corrects the previous Acterna Corporation news release, which ran earlier Tuesday on Business Wire, BW2592, (MA-ACTERNA).

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

Acterna Corporation Reports Second Quarter Results

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 $.11 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 $.13 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.