New Focus Announces Second Quarter Financial Results
Records Gain on Previously Announced Divestitures and Lowers Breakeven Point with Additional Restructuring Actions
SAN JOSE, Calif.--(BUSINESS WIRE)--July 24, 2002--New Focus, Inc., (Nasdaq:NUFO - News), a leading provider of photonics technology solutions, today announced financial results for its second quarter of fiscal year 2002. Net revenue, net loss and net cash outflow for the second quarter were within the company's pro forma financial guidance provided in April 2002. The company's second quarter results included a gain of $41.5 million from two previously announced divestitures that were completed in May. The company also recorded restructuring and impairment charges that totaled $19.3 million in its second quarter results. These charges reflected the company's decision to discontinue new product development programs for certain telecom-related products and the implementation of a work force reduction at the end of the second quarter. The company also announced a higher cost reduction target for fiscal 2002 that lowered the quarterly net revenue required for profitability to $13 million.
Second Quarter Review:
Net revenue for the second quarter of 2002 was $9.1 million, down from $10.1 million in the first quarter of 2002 and down from $26.6 million in the second quarter of 2001. The company's net revenue guidance for the second quarter of 2002 was $8-11 million.
Net revenue from the company's telecom products in the second quarter of 2002 totaled $4.9 million, unchanged from $4.9 million in the first quarter of 2002 and down from $19.0 million in the second quarter of 2001. Net revenue from the company's photonics tool products in the second quarter of 2002 totaled $4.2 million, down from $5.2 million in the first quarter of 2002 and down from $7.6 million in the second quarter of 2001.
GAAP Results:
Based on results prepared in accordance with generally accepted accounting principles, the company recorded a net profit for the second quarter of 2002 of $2.3 million, or $0.03 per share based on 76.6 million diluted shares outstanding. Diluted shares included 1.0 million option shares based on the treasury stock method. The net loss for the first quarter of 2002 was $46.4 million, or $0.62 per share based on 75.3 million shares outstanding. For the second quarter of 2001 the net loss was $297.7 million, or $4.07 per share based on 73.1 million shares outstanding.
The company's second quarter 2002 results, prepared in accordance with generally accepted accounting principles, included a gain of $41.5 million from sales of the company's network tunable technology to Intel and passive optical component product line to Finisar. Restructuring and impairment charges for the second quarter of 2002 totaled $19.3 million. Approximately $14 million of the total charge was attributable to the company's decision to discontinue development of next-generation data drivers and clock amplifiers for telecom customers. This charge included impairment of tangible and intangible assets but excluded charges for work force reductions related to this decision, which will be recorded in the company's third quarter results. Additionally, the GAAP results for the second quarter included charges of $1.3 million for amortization of acquired intangibles and $4.1 million for deferred stock compensation.
Pro Forma Results:
The pro forma net loss in the second quarter of 2002 was $14.5 million, or $0.19 per share based on 75.6 million shares outstanding. This pro forma net loss included a charge of $0.9 million for the write-down of passive product inventories. Excluding this charge, the net loss for the second quarter was $13.6 million, or $0.18 per share. The company's guidance for its second quarter pro forma net loss, excluding inventory write-downs, order cancellation fees and one-time adjustments, was $13-15 million, or $0.17-0.20 per share.
In the first quarter of 2002 the company reported a pro forma net loss of $15.2 million, or $0.20 per share based on 75.3 million shares outstanding. This pro forma net loss included a charge of $1.3 million for the write-down of passive product inventories. Excluding this charge, the net loss for the first quarter of 2002 was $13.9 million, or $0.19 per share. In the second quarter of 2001 the company recorded a pro forma net loss of $19.1 million, or $0.26 per share based on 73.1 million shares outstanding. This pro forma net loss included a charge of $6.6 million for inventory write-downs, order cancellation fees and other charges. Excluding this charge, the net loss for the second quarter of 2001 was $12.5 million, or $0.17 per share.
"Our pro forma net loss performance, measured without inventory write-downs, improved slightly between first and second quarters even though net revenue dropped sequentially between the quarters. This performance was achieved primarily through a $1.5 million sequential decline in our quarterly expense structure, defined as operating expenses plus manufacturing overhead. Excluding the $45.0 million cash inflow from the Intel transaction, our overall cash balance declined $11.1 million during the second quarter. During the second quarter we incurred an outflow of $2.5 million related to restructuring activities and collected a $2.2 million note receivable from a former officer. Excluding these transactions, our adjusted cash outflow was $10.8 million, which was slightly below our $11-13 million guidance range," said Nic Pignati, president and chief executive officer of New Focus, Inc.
The company's cash and short-term investments stood at $318.1 million at the end of the second quarter of 2002, up from $284.2 million at the end of first quarter of 2002. The ending cash balance for the second quarter reflected $45.0 million in proceeds from the sale of the company's network tunable technology to Intel. An additional $5.0 million in proceeds associated with this transaction is being held in escrow for eighteen months under the terms of the agreement. The company will recognize a gain and cash receipt upon the release of funds from escrow. Capital expenditures in the second quarter of 2002 were $0.8 million.
"Importantly, during the second quarter we took further actions to sharpen our product focus and to further reduce our expense structure. Based on a weak order outlook, we made the decision to discontinue our high-speed radio frequency, or RF, development programs for next-generation telecom applications. We will reduce the Wisconsin-based engineering staff associated with these programs in the third quarter. Combined with staffing reductions in other corporate support functions instituted at the end of the June quarter, the company's worldwide headcount will be approximately 290 people by the end of the third quarter. This reduced headcount level will allow us to consolidate our California-based operations into our smaller facility in San Jose and downsize our facility in Wisconsin by the early part of the fourth quarter. From this reduced footprint and with a concentrated product focus, we have established the platform for rebuilding New Focus," said Pignati.
Business Outlook:
"Over the past quarter we have seen few signs of improvement in our business. Based on our decisions to exit the passive optical component business and discontinue new product development for certain high-speed RF products, we will experience lower revenue in the third quarter relative to second quarter. We currently expect that net revenue for the third quarter of 2002 will fall within a range of $6-8 million. At these projected revenue levels the pro forma net loss for the third quarter will likely be $9-11 million, or $0.12-0.14 per share. This projected pro forma net loss includes an estimated $2 million, or $0.03 per share, for relocation costs associated with the consolidation of our operations into smaller facilities," said Pignati.
Based on this outlook for net revenue and net loss, the company is targeting a net cash outflow for the third quarter of approximately $8-10 million. Cash outflows associated with restructuring activities and cash proceeds from any sales of Finisar stock held by the company as a result of the sale of its passive optical component product line to Finisar are not included in this estimate. Achievement of this goal remains highly dependent on the realization of planned expense reductions, the minimization of capital expenditures, and the attainment of planned revenue.
The company will record additional restructuring and impairment charges in the third quarter to reflect the decisions to further consolidate its facilities and dispose of excess equipment at these soon-to-be vacated facilities. The third quarter charge will also include a provision for severance pay related to work force reductions not completed in the second quarter. The company currently estimates that these charges will total $18-22 million.
"Based on these additional restructuring actions, the quarterly net revenue required for profitability will drop to approximately $13 million based on a targeted quarterly expense structure of approximately $10 million. Assuming timely completion of the announced restructuring actions, we expect to achieve this expense structure in the fourth quarter of 2002. From a revenue perspective, we are cautiously optimistic that our third quarter revenue will represent a bottom for us and that our fourth quarter revenue will reflect a modest improvement over the third quarter. If our quarterly net revenue were at an $8 million level and our expense structure reached the targeted level, the quarterly net loss in the fourth quarter of 2002 would drop to $3-4 million, yielding a quarterly net cash outflow of less than $2 million in this time period. To augment revenue from our current product lines and to further improve our bottom line performance, we are continuing to pursue our acquisition and partnering strategies. Our commitment to return to profitability remains unchanged," said Pignati.
Composition of Pro Forma Results:
The company's pro forma net losses exclude charges for restructuring activities, the impairment of goodwill and other acquired intangibles, the impairment of tangible assets, the amortization of acquired intangibles and deferred compensation, the write-off of acquired in-process R&D, gains on the sale of product lines and product technologies, and the income tax effects related to these items. Pro forma losses, however, include charges related to inventory write-downs, order cancellation charges, relocation expenses and other charges that may not be repetitive in nature. The company separately identifies the magnitude of such charges. Pro forma net losses include amounts for net interest income and tax provisions.
Forward-Looking Statements:
This press release, and in particular the material in the section labeled "Business Outlook," contains predictions, estimates and other forward-looking statements regarding the revenue outlook for the third quarter of 2002, the projected pro forma net loss for the third quarter of 2002, the projected cash outflow for the third quarter of 2002, estimated restructuring and impairment charges to be recorded in the third quarter, planned reductions in the company's expense structure by the end of 2002, the company's projected quarterly revenue level to achieve profitability, quarterly estimates of net loss and net cash outflow at an $8 million revenue level assuming realization of projected expense reductions, the general trend in the company's net revenue, and the company's commitment to its acquisition and partnering strategies. These statements are subject to risks and uncertainties and actual results may differ materially from any future performance suggested. The risks and uncertainties include the difficulty of forecasting anticipated revenues due to weakness and uncertainties related to general economic conditions and overall demand within the company's markets; the high sensitivity of the size of the company's net loss to its level of revenue due to the fixed and/or project oriented nature of its expenses; and the difficulty of achieving anticipated cost reductions due to unforeseen expenses, including costs arising from the consolidation of the company's facilities and the divestiture of certain product lines, that may arise in future quarters. We may experience difficulty in achieving anticipated cost reductions due to an inability to reduce expenses without jeopardizing product development schedules for product areas that will be an ongoing focus of our business. Furthermore, any unforeseen delays in completing the development of the company's new products may limit our ability to generate volume revenues. We also may experience difficulty in gaining customer acceptance of our new products and in generating future revenue from new products commensurate with prior investments in research and development activities. Additionally, if we cannot effectively execute on our acquisition and partnering strategies and our expansion into potential new markets, we will be unable to achieve profitability, measured on a pro forma basis, in a timely manner.
Other risk factors that may affect the company's financial performance are listed in the company's various reports on file with the SEC, including its fiscal year 2001 annual report on Form 10-K and its quarterly report on Form 10-Q for the first quarter of fiscal year 2002. New Focus undertakes no obligation to publicly release any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
About New Focus:
New Focus develops and manufactures innovative photonics solutions for the telecommunications, semiconductor, industrial and biomedical markets. New Focus' product portfolio includes tunable lasers for test and measurement applications, advanced photonics tools and high speed opto-electronic devices. Founded in 1990, the company remains a leader in the creation of advanced optical products for the commercial and research marketplaces. The company is headquartered in San Jose, Calif.
For more information about New Focus visit the company's Internet home page at newfocus.com, call our Investors Relations Department at 408-284-NUFO, or e-mail us at investor@newfocus.com.
NEW FOCUS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per-share data)
(Unaudited)
Three Months Ended Six Months Ended
------------------------------------------------------
Jun 30, Mar 31, Jul 1, Jun 30, Jul 1,
2002 2002 2001 2002 2001
------- -------- --------- -------- ---------
Net revenues $ 9,114 $ 10,096 $ 26,649 $ 19,210 $ 67,411
Cost of net
revenues 12,899 13,921 26,349 26,820 81,791
------- -------- --------- -------- ---------
Gross profit
(loss) (3,785) (3,825) 300 (7,610) (14,380)
(41.5)% (37.9)% 1.1% (39.6)% (21.3)%
Operating expenses:
Research and
development,
net 6,517 7,362 14,377 13,879 27,172
Sales and
marketing 2,312 2,578 2,942 4,890 5,389
General and
administrative 4,289 3,902 6,429 8,191 12,633
Restructuring
charges 11,596 24,022 3,623 35,618 3,623
Amortization
of acquired
intangibles 1,323 1,346 22,462 2,669 57,299
Impairment of
goodwill and
intangibles 7,692 - 241,574 7,692 241,574
Deferred stock
compensation 4,117 5,898 16,057 10,015 41,381
------- -------- --------- -------- ---------
Total
operating
expenses 37,846 45,108 307,464 82,954 389,071
------- -------- --------- -------- ---------
Loss from
operations (41,631) (48,933) (307,164) (90,564) (403,451)
(456.8)% (484.7)% (1,152.6)% (471.4)% (598.5)%
Interest and
other income,
net 43,885 2,497 4,505 46,382 9,499
------- -------- --------- -------- ---------
Income (loss)
before provision
(benefit) for
income taxes 2,254 (46,436) (302,659) (44,182) (393,952)
Provision
(benefit) for
income taxes - - (5,000) - (10,000)
------- -------- --------- -------- ---------
Net income
(loss) $ 2,254 $(46,436) $(297,659) $(44,182) $(383,952)
======= ======== ========= ======== =========
24.7% (459.9)% (1,117.0)% (230.0)% (569.6)%
Basic and
diluted net
income (loss)
per share $ 0.03 $ (0.62) $ (4.07) $ (0.59) $ (5.34)
======= ======== ========= ======== =========
Shares used to
compute basic
net loss
per share 75,608 75,259 73,086 75,463 71,948
======= ======== ========= ======== =========
Shares used to
compute diluted
net income
per share 76,627 N/A N/A N/A N/A
======= ======== ========= ======== =========
NEW FOCUS, INC.
Pro Forma Condensed Consolidated Statements of Operations
(In thousands, except per-share data)
(Unaudited)
Three Months Ended Six Months Ended
------------------------------------------------------
Jun 30, Mar 31, Jul 1, Jun 30, Jul 1,
2002 2002 2001 2002 2001
------- -------- --------- -------- ---------
Net revenues $ 9,114 $ 10,096 $ 26,649 $ 19,210 $ 67,411
Cost of net
revenues 12,899 13,921 26,349 26,820 81,791
------- -------- --------- -------- ---------
Gross profit
(loss) (3,785) (3,825) 300 (7,610) (14,380)
(41.5)% (37.9)% 1.1% (39.6)% (21.3)%
Operating expenses:
Research and
development,
net 6,517 7,362 14,377 13,879 27,172
Sales and
marketing 2,312 2,578 2,942 4,890 5,389
General and
administrative 4,289 3,902 6,429 8,191 12,633
------- -------- --------- -------- ---------
Total
operating
expenses 13,118 13,842 23,748 26,960 45,194
------- -------- --------- -------- ---------
Loss from
operations (16,903) (17,667) (23,448) (34,570) (59,574)
(185.5)% (175.0)% (88.0)% (180.0)% (88.4)%
Interest and
other income,
net 2,353 2,497 4,505 4,850 9,499
------- -------- --------- -------- ---------
Loss before
provision
(benefit) for
income taxes (14,550) (15,170) (18,943) (29,720) (50,075)
Provision
(benefit) for
income taxes - - 175 - 350
------- -------- --------- -------- ---------
Net loss $(14,550) $(15,170) $ (19,118) $(29,720) $ (50,425)
======= ======== ========= ======== =========
(159.6)% (150.3)% (71.7)% (154.7)% (74.8)%
Basic and
diluted
net loss per
share $ (0.19) $ (0.20) $ (0.26) $ (0.39) $ (0.70)
======= ======== ========= ======== =========
Shares used to
compute basic
and diluted net
loss per share 75,608 75,259 73,086 75,463 71,948
======= ======== ========= ======== =========
Pro Forma Reconciliation to GAAP:
Pro Forma
loss $(14,550) $(15,170) $ (19,118) $(29,720) $ (50,425)
Impairment,
restructuring
and other
charges (19,288) (24,022) (245,197) (43,310) (245,197)
Amortization
of acquired
intangibles (1,323) (1,346) (22,462) (2,669) (57,299)
Deferred stock
compensation (4,117) (5,898) (16,057) (10,015) (41,381)
Gain from
divestitures 41,532 - - 41,532 -
Benefit for
income taxes - - 5,175 - 10,350
------- -------- --------- -------- ---------
Net income
(loss) $ 2,254 $(46,436) $(297,659) $(44,182) $(383,952)
======= ======== ========= ======== =========
NEW FOCUS, INC.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
Jun 30, 2002 Dec 30, 2001
------------ ------------
ASSETS
Current Assets:
Cash, cash equivalents and
short-term investments $318,099 $294,655
Trade accounts receivable, net 4,163 5,025
Inventories 5,850 9,240
Other current assets 12,199 8,857
-------- --------
Total current assets 340,311 317,777
Property and equipment, net 46,779 88,066
Intangibles, net 1,933 12,294
Other assets 11,421 11,587
-------- --------
Total assets $400,444 $429,724
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 3,055 $ 2,438
Accrued Expenses 19,654 15,777
Deferred research and
development funding 93 1,775
Current portion of long-term debt - 109
-------- --------
Total current liabilities 22,802 20,099
Long-term debt, less current portion - 7
Deferred rent 1,595 1,508
Stockholders' equity 376,047 408,110
-------- --------
Total liabilities and
stockholders' equity $400,444 $429,724
======== ========
--------------------------------------------------------------------------------
Contact:
New Focus
William L. Potts, Jr., 408/284-5184 |
