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Press ReleasesAug 4, 2004 Alvarion Reports Record Results For The Second Quarter Of 2004Revenues Up 9% Sequentially and Net Income Increased 74% from First Quarter Revenues for the second quarter of 2004 rose to a record $48.8 million, an increase of 9% compared to $44.7 million in the first quarter of 2004, and up 57% from $31.0 million in the second quarter of 2003. Gross margin increased for the 11th consecutive quarter, reaching 43.2% compared to 42.6% in the first quarter of 2004 and 40.1% in the second quarter of 2003. According to US GAAP, net income increased to $2.5 million or $0.04 per share on a fully diluted basis for the second quarter of 2004. GAAP net income for the first quarter of 2004 was $1.4 million, or $0.02 per share on a fully diluted basis, and GAAP net loss for the second quarter of 2003 was $(5.9) million, or $(0.11) per share. Results for all periods include expenses attributable to the amortization of intangible assets and amortization of deferred stock compensation, which totaled $680,000 in the first and second quarters of 2004, and $790,000 in the second quarter of 2003. The second quarter of 2003 also included $2.2 million of acquisition-related expenses in connection with the purchase of certain assets and liabilities of InnoWave ECI Wireless Systems Ltd. Excluding all aforementioned amortizations and acquisition related expenses, the Company's non-GAAP net income for the second quarter of 2004 was $3.2 million, or $0.05 per diluted share. For the first quarter of 2004 non-GAAP net income was $2.1 million, or $0.03 per diluted share, and for the second quarter of 2003 non-GAAP net loss was $(2.9) million, or $(0.06) per share. Comments of Management “During the quarter, we made progress in all areas of focus,” continued Mr. Slonimsky. “In addition to benefiting from growth in demand, we continued to expand our customer base and introduce new products. British Telecom completed its trials of wireless broadband access in four cities around the United Kingdom and placed an initial order for commercial deployment. We are proud to be selected by British Telecom, a carrier that recognizes the important contribution that wireless technology can make in addressing the need for broadband services. Their initial order was for our BreezeAccess VL™ solution. Last quarter, we introduced the BreezeAccess VL in 5.4 Ghz band, and, recently we introduced BreezeAccess VL for the 5.2GHz frequency to address the growing demand for broadband we see in Russia as well as in a number of countries in Asia Pacific. The BreezeAccess VL is based on OFDM technology which provides non-line of sight capabilities, a key WiMAX technology. “A major new product milestone in Q2 was the introduction of our BreezeMAX™ platform, a WiMAX-ready platform that enables customers to move forward confidently in anticipation of the availability of WiMAX CPEs. The first product based on our WiMAX platform was the BreezeMAX 3500, for the 3.5GHz frequency band. We announced recently that Siemens, our long-term partner, has selected Alvarion to supply the BreezeMAX 3500 as part of the expansion of our OEM agreement. We are excited and gratified to see increased interest in WiMAX solutions from all types of operators, including Tier 1 carriers all over the world. “Last week we announced the agreement for the acquisition of interWAVE Communications International Ltd., a leading supplier of compact cellular network infrastructure based on GSM and CDMA2000 technology that is particularly well-suited for rural areas in developing regions. We believe that the acquisition will complement our existing wireless solutions with a cost effective fixed and mobile solution to serve the need for voice and data in regions of the world that need telecommunication infrastructure. We also believe that this acquisition will broaden our customer base with additional top-tier operators, and leverage both our strong channel relationships and our global sales and customer support. We intend to apply our experience in integrating acquisitions to quickly realize the benefits of operating synergies. In addition, it is our belief that the interWAVE acquisition provides extremely valuable core mobile technology and expertise in designing and deploying mobile networks, which will help us accelerate our portable and mobile WiMAX offering,” concluded Mr. Slonimsky. Q3 2004 Guidance Alvarion’s management will host a conference call today, August 4, 2004, at 9:00 a.m. Eastern Time to discuss the quarter's results. To participate in the call, please dial one of the following numbers approximately five minutes prior to the scheduled start time: USA: (612) 234-9960; International: +1 612-234-9960. The public is invited to listen to the live webcast of the conference call. For details please visit Alvarion's website at www.alvarion.com. An archive of the on-line broadcast will be available on the website. A replay of the call will be available from 4 p.m. Eastern Time on August 4, 2004 through 11:59 p.m. Eastern Time on August 11, 2004. To access the replay, please call USA: (320) 365-3844, International: +1-320-365-3844. To access the replay, users will need to enter the following code: 737948. About Alvarion With more than 2 million units deployed in 130 countries, Alvarion is the worldwide leader in wireless broadband providing systems to carriers, ISPs and private network operators. Leading the WiMAX revolution, Alvarion has the most extensive deployments and proven product portfolio in the industry covering the full range of frequency bands. Alvarion’s products enable the delivery of business and residential broadband access, corporate VPNs, toll quality telephony, mobile base station feeding, Hotspot coverage extension, community interconnection, and public safety communications. Alvarion works with several top OEM providers and over 200 local partners to support its diverse global customer base in solving their last-mile challenges. As a wireless broadband pioneer, Alvarion has been driving and delivering innovations for over 10 years from core technology developments to creating and promoting industry standards. Leveraging its key roles in the IEEE and HiperMAN standards committees and experience deploying OFDM-based systems, the company's prominent work in the WiMAX ForumTM is focused on increasing widespread adoption of standards-based products in the wireless broadband market. This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on the current expectations or beliefs of Alvarion’s management and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward -looking statements. The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: inability to further identify, develop and achieve success for new products, services and technologies; increased competition and its effect on pricing, spending, third-party relationships and revenues; as well as the in ability to establish and maintain relationships with commerce, advertising, marketing, and technology providers and other risks detailed from time to time in filings with the Securities and Exchange Commission. In addition, our limited history in completing acquisitions may adversely impact our ability to successfully integrate the business of Alvarion and interWAVE; we may face liabilities and expenses in excess of those currently anticipated with respect to the acquisition of interWAVE; we may be unable to retain key personnel of interWAVE, if interWAVE does not receive required shareholder approvals or either company fails to satisfy other conditions to closing, the transaction will not be consummated. Factors affecting interWAVE’s business generally include those set forth in interWAVE’s filings with the SEC, including its Annual Report on Form 10-K for its most recent fiscal year and its most recent Quarterly Report on Form 10-Q and its Current Reports on Form 8-K. Certain information set forth in this press release pertaining to third parties has not been independently verified by Alvarion and is based solely on publicly available information or on information provided to Alvarion by such third parties for inclusion in this press release. The web sites appearing in this press release are not and will not be included or incorporated by reference in any filing made by Alvarion with the Securities and Exchange Commission, which this press release will be a part of. You may request Alvarion's future press releases or a complete Investor Kit by contacting Carmen Deville, Investor Relations: carmen.deville@alvarion.com or +1 760-517-3188.
CONDENSED CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands December June 30, 31, 2004 2003 -------- -------- ASSETS Cash, cash equivalents, short-term and long-term investments $167,609 $153,616 Trade receivables 19,709 21,199 Other accounts receivable 8,475 4,499 Inventories 35,626 36,981 Severance pay fund 6,172 5,493 Long-term receivables 732 834 PROPERTY AND EQUIPMENT, NET 11,425 11,939 GOODWILL AND OTHER INTANGIBLE ASSETS 49,058 50,396 -------- -------- TOTAL ASSETS $298,806 $284,957 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Trade payables $ 16,100 $ 23,780 Other accounts payable and accrued expenses 39,436 27,959 -------- -------- Total current liabilities 55,536 51,739 LONG TERM LIABILITIES 3,470 5,248 ACCRUED SEVERANCE PAY 8,567 7,768 -------- -------- TOTAL LIABILITIES 67,573 64,755 SHAREHOLDERS' EQUITY 231,233 220,202 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $298,806 $284,957 ======== ======== ALVARION LTD. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS U.S. dollars in thousands (except per share data) Six Six Three Three Three Months Months Months Months Months Ended Ended Ended Ended Ended June June June June March 30, 30, 30, 30, 31, ------- -------- ------- ------- ------- 2004 2003 2004 2003 2004 ------- -------- ------- ------- ------- Sales $93,451 $ 53,421 $48,772 $31,008 $44,679 Cost of sales 53,364 32,166 27,710 18,583 25,654 ------- -------- ------- ------- ------- Gross profit 40,087 21,255 21,062 12,425 19,025 ------- -------- ------- ------- ------- Operating expenses: Research and development, net 13,474 11,284 6,860 6,195 6,614 Selling and marketing 18,493 15,308 9,506 8,623 8,987 General and administrative 4,607 2,854 2,367 1,499 2,240 Amortization of intangibles 1,338 1,250 669 650 669 Amortization of deferred stock compensation 22 280 11 140 11 Acquisition related expenses - 2,201 - 2,201 - ------- -------- ------- ------- ------- Total Operating expenses 37,934 33,177 19,413 19,308 18,521 ------- -------- ------- ------- ------- Operating income (loss) 2,153 (11,922) 1,649 (6,883) 504 Financial income, net 1,782 2,092 850 1,021 932 ------- -------- ------- ------- ------- Net Income (loss) $ 3,935 $ (9,830)$ 2,499 $(5,862)$ 1,436 ------- -------- ------- ------- ------- Basic earnings (loss) per share $ 0.07 $ (0.19)$ 0.04 $ (0.11)$ 0.03 ======= ======== ======= ======= ======= Weighted average number of shares used in computing basic earnings (loss) per share 55,839 51,508 56,488 51,487 55,190 ======= ======== ======= ======= ======= Diluted earnings (loss) per share $ 0.06 $ (0.19)$ 0.04 $ (0.11)$ 0.02 ======= ======== ======= ======= ======= Weighted average number of shares used in computing diluted earnings (loss) per share 63,617 51,508 63,651 51,487 62,804 ======= ======== ======= ======= ======= ALVARION LTD. DISCLOSURE OF NON-US GAAP NET INCOME (LOSS) U.S. dollars in thousands (except per share data) Six Six Three Three Three Months Months Months Months Months Ended Ended Ended Ended Ended June June June June March 30, 30, 30, 30, 31, ------- ------- ------- ------- ------- 2004 2003 2004 2003 2004 ------- ------- ------- ------- ------- Net Income (loss) according to US GAAP $ 3,935 $(9,830)$ 2,499 $(5,862)$ 1,436 Amortization of intangibles 1,338 1,250 669 650 669 Amortization of deferred stock compensation 22 280 11 140 11 Acquisition related expenses - 2,201 - 2,201 - ------- ------- ------- ------- ------- Net Income (loss), excluding amortization of intangibles and deferred stock compensation and acquisition related expenses $ 5,295 $(6,099)$ 3,179 $(2,871)$ 2,116 ======= ======= ======= ======= ======= Basic net earnings (loss) per share, excluding amortization of intangibles and deferred stock compensation and acquisition related expenses $ 0.09 $ (0.12)$ 0.06 $ (0.06)$ 0.04 ======= ======= ======= ======= ======= Weighted average number of shares used in computing basic net earnings (loss) per share 55,839 51,508 56,488 51,487 55,190 ======= ======= ======= ======= ======= Diluted net earnings (loss) per share, excluding amortization of intangibles and deferred stock compensation and acquisition related expenses $ 0.08 $ (0.12)$ 0.05 $ (0.06)$ 0.03 ======= ======= ======= ======= ======= Weighted average number of shares used in computing diluted net earnings (loss) per share 63,617 51,508 63,651 51,487 62,804 ======= ======= ======= ======= ======= ALVARION LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands Three Months Ended June 30,2004 ----------- Cash flows from operating activities: Net Income $ 2,499 Adjustments to reconcile net income to net cash used by operating activities: Depreciation 992 Amortization of deferred stock compensation 11 Unrealized gain from hedging activities 105 Amortization of intangibles 669 Decrease in trade receivables 3,276 Increase in other accounts receivable and prepaid expenses (3,034) Decrease in inventories 2,858 Decrease in trade payables (8,566) Decrease in Long term receivables 141 Increase in other accounts payables and accrued expenses 6,859 Accrued severance pay, net 88 ----------- Net cash provided by operating activities 5,898 Cash flows from investing activities: Purchase of fixed assets (705) ----------- Net cash used in investing activities (705) Cash flows from financing activities: Proceeds from issuance of shares, net of expenses 1,501 ----------- Net cash provided by financing activities 1,501 ----------- Increase in cash, cash equivalents, short-term and long-term investments 6,694 Cash, cash equivalents, short-term and long-term investments at the beginning of the period 160,915 ----------- Cash, cash equivalents, short-term and long-term investments at the end of the period $ 167,609 ===========
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