California Microwave Reports 1995 Operating Results

For Immediate Release - August 16, 1995

CALIFORNIA MICROWAVE REPORTS 1995 OPERATING RESULTS

SUNNYVALE, CALIFORNIA-CALIFORNIA MICROWAVE, INC. (Nasdasq National Market:CMIC) reported today that it had incurred a net loss of $8 million, or ($.51) per share, on a 15% increase in sales to $468 million for its fiscal year ended June 30, 1995, as a result of the restructuring and other charges the company announced on June 29, 1995. Fiscal 1995 fourth quarter results showed a net loss of $25 million, or ($1.60) per share, on sales of $112 million compared to net income of $4 million, or $.28 per share, on sales of $129 million in 1994. Fourth quarter 1995 bookings were $73 million, a decrease of $33 million or 31% from 1994, prompting California Microwave to accelerate integration within its wireless and satellite communications areas. Wireless bookings in the quarter decreased by 16% reflecting weak bookings for Latin America and long-haul radios. Satellite orders decreased by 49% from 1994 due to delays in orders of satellite earth station systems.
Restructuring charges of $21 million were recorded primarily in connection with the integration of operations within California Microwaveís Wireless Products Group, including the write down of $10 million of intangible assets associated with the purchase of TeleCom Transmission Systems (TTS), and the consolidation of Satellite Transmission Systems (STS) facilities. The restructuring charges reflect actions the company is taking to improve profit margins over the long term. Other charges of approximately $16 million reflect contract reserves primarily for STS and the phase-out of short haul radios and associated contracts at TTS. TTS will concentrate on long-haul radios, including radios required for the relocation portion of the Personal Communications Services (PCS) market in the United States. In addition, charges of approximately $4 million of transaction expenses related to the acquisition of Microwave Networks Incorporated (MNI) were recorded.
In May 1995, California Microwave merged with MNI, a wireless communications company, in exchange for 3,475,000 shares of its common stock. The merger was accounted for as a pooling of interest, and all financial information has been restated to include MNI. As a result, California Microwave reported, on a restated basis, net income of $17 million, or $1.04 per share, on sales of $406 million for fiscal 1994.
1995 Wireless, International Orders and Sales Up
New orders booked during fiscal 1995 totaled $463 million, a 5% increase over last yearís $441 million. Orders for wireless products grew 13%, representing 42% of the total. Orders in the satellite communications area grew by 4% and also totaled 42% of new orders booked, and included the companyís largest order in its history, $40 million from AT&T for Saudi Arabia. International orders were up 15%, representing 53% of total orders. At year-end, backlog stood at $232 million, of which 80% is expected to be delivered within 12 months.
Wireless sales and satellite communications sales were 49% and 37% of total sales, respectively, a 29% increase and 2% decrease over 1994. International sales were 48% of 1995ís total, an increase of 19% over 1994. U.S. government sales were 23% of the total compared to 25% in 1994.
Gross Margin Goal Raised to 35%
Gross margins decreased from 27.4% in 1994 to 26.3% in 1995. Excluding the portion of the $16 million charge for contract reserves at STS and TTS, gross margins would have been 29.5% for the year. In 1995, product sales were 70% of total sales. The company believes that its increasing sales of higher-margin products and the integration of operations across the company will help to improve gross margins in the future. Accordingly, the company has increased its long term gross margin goal to 35% from 30% of sales.
Otto: International Opportunities, Daunting Challenges
Commenting on California Microwaveís 1995 fiscal year, Philip F. Otto, the companyís chairman and chief executive officer, said, "We made steady progress in implementing our strategy to become an international telecommunications supplier. Specifically, microwave radio is becoming a bigger part of the international telecommunications market, including personal communications and expansion of telephone systems in developing countries and we are radio experts. California Microwave has doubled its size in three years, and weíre making our strength known so that we will get our share of these growing markets."
"We also expect to achieve significant long-term benefits from the restructuring actions weíre taking, even though these decisions caused our 1995 financial results to fall far short of our targets. In addition to integrating our wireless area, we are developing new products faster; using our size to achieve economies of scale throughout all of our operations; and appointing a seasoned, regional executive to expand our presence in Asia, one of California Microwaveís fastest growing markets. We are addressing enormous market opportunities, but we are also mindful that each opportunity will have to be won in order to qualify for the next."
California Microwave, Inc. is an international leader in satellite and wireless communications. It is the number one U.S. supplier of telecommunications satellite earth stations and microwave radios used in wireless communications. The company operates facilities in eight states and sells into more than 110 countries. Its strategy calls for significant expansion in the wireless area.
For Further Information Contact:

Stephanie M. Day
Vice President
Corporate Communications
(415) 596-6629 Deborah Passik
William Dunk Partners, Inc.
(214) 960-9611