New Focus Announces Third Quarter Financial Results
Wednesday October 23, 4:25 pm ET
Company Completes Consolidation of Operations and Facilities
SAN JOSE, Calif.--(BUSINESS WIRE)--Oct. 23, 2002--New Focus, Inc., (Nasdaq:NUFO - News), a leading provider of photonics and microwave solutions, today announced financial results for its third quarter of fiscal year 2002. Net revenue and net cash outflow for the third quarter were within the company's pro forma financial guidance provided in July 2002, but the net loss fell slightly outside of the guidance range. The company's third quarter results included restructuring and impairment charges that totaled approximately $37 million arising primarily from the closure of the company's larger facility in San Jose. The financial results also included approximately $6 million for the partial write-down of an investment and a note receivable from a former officer. The company further announced that all major restructuring actions were implemented by the end of the third quarter as planned. As a result, the company is now firmly positioned to reach profitability at $13 million in quarterly net revenue.
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Third Quarter Review:
Net revenue for the third quarter of 2002 was $6.7 million, down from $9.1 million in the second quarter of 2002 and down from $15.8 million in the third quarter of 2001. The company's net revenue guidance for the third quarter of 2002 was $6-8 million.
Net revenue from the company's telecom products in the third quarter of 2002 totaled $2.4 million, down from $4.9 million in the second quarter of 2002 and down from $9.7 million in the third quarter of 2001. Net revenue from the company's photonics tool products in the third quarter of 2002 totaled $4.3 million, up from $4.2 million in the second quarter of 2002 and down from $6.1 million in the third quarter of 2001.
GAAP Results:
Based on results prepared in accordance with generally accepted accounting principles, the company recorded a net loss for the third quarter of 2002 of $57.5 million, or $0.76 per share based on 76.1 million basic shares outstanding. In the second quarter of 2002 the company recorded a net profit 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 second quarter results 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. For the third quarter of 2001 the net loss was $32.0 million, or $0.43 per share based on 74.2 million shares outstanding.
Restructuring and impairment charges for the third quarter of 2002 totaled $36.6 million. Approximately $14.6 million of the total charge was attributable primarily to the non-cash write-off of leasehold improvements at the company's larger San Jose facility that was vacated in September. The total charge also included approximately $22.0 million in estimated cash expenses for rent expenses, net of projected sublease income, on vacated space and for work force reductions completed in the third quarter. Additionally, the GAAP results for the third quarter included charges of $0.2 million for amortization of acquired intangibles and $3.4 million for deferred stock compensation.
Pro Forma Results:
The pro forma net loss in the third quarter of 2002 was $17.1 million, or $0.22 per share based on 76.1 million shares outstanding. This pro forma net loss included a favorable inventory adjustment of $0.6 million and non-operating charges totaling $6.3 million for the partial write-down of an investment and a note receivable from a former officer. Excluding the net effect of these items, the net loss for the third quarter was $11.4 million, or $0.15 per share. The company's guidance for its third quarter pro forma net loss, excluding inventory write-downs, order cancellation fees and one-time adjustments, was $9-11 million, or $0.12-0.14 per share.
In the second quarter of 2002 the company reported a pro forma net loss of $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 of 2002 was $13.6 million, or $0.18 per share. In the third quarter of 2001 the company recorded a pro forma net loss of $18.0 million, or $0.24 per share based on 74.2 million shares outstanding. This pro forma net loss included a charge of $1.3 million for inventory write-downs and order cancellation fees. Excluding this charge, the net loss for the third quarter of 2001 was $16.7 million, or $0.22 per share.
"Our pro forma net loss performance, measured without inventory and non-operating adjustments, improved between the second and third quarters. Even though net revenue dropped sequentially to $6.7 million from $9.1 million between the quarters, we narrowed our net loss to $11.4 million from $13.6 million. This performance was achieved primarily through a $4.4 million sequential decline in our quarterly expense structure, defined as operating expenses plus manufacturing overhead. Our overall cash and investment balance declined $10.9 million during the third quarter. This decline included a net outflow of $4.2 million related to restructuring activities and the receipt of $2.9 million in the form of a marketable security. Excluding these transactions, our adjusted cash outflow was $9.6 million, which was within our $8-10 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 $307.2 million at the end of the third quarter of 2002, down from $318.1 million at the end of the second quarter of 2002. Capital expenditures in the third quarter of 2002 were $0.4 million.
"During the third quarter we completed the facilities consolidation program by closing our 130,000 square foot facility in San Jose, California and downsizing our 31,000 square foot facility in Madison, Wisconsin. We now occupy approximately 60,000 square feet, or about 10% of the space that we occupied at the beginning of 2001. Our worldwide headcount at the end of the third quarter stood at approximately 275 people, down from a peak of 2,100 people in the first quarter of 2001. The third quarter marks the end of six quarters of restructuring actions and any restructuring and impairment charges recorded in our financial statements beyond the third quarter will be adjustments to prior period estimates and should be minimal in size relative to past charges," said Pignati.
Business Outlook:
"With the successful completion of our restructuring activities, the company's near-term revenues will be based on three product lines -- photonics tools and associated OEM subsystems, tunable lasers, and RF amplifiers. Our strategy is to deliver photonics solutions and microwave products into emerging applications in the semiconductor, test and measurement, defense and industrial markets. We have redirected resources to these product areas and we are beginning to see the benefits from this strategic shift," said Pignati.
"Demand for our photonics tools and RF amplifiers has shown improvement, but the continuing weakness in the telecom test and measurement market has led to a reduction in orders for our OEM and benchtop tunable laser products. In fact, we are anticipating approximately $1 million in revenue from cancellation fees in the fourth quarter due to contract cancellations for OEM tunable products by two customers. Including the revenue from these cancellation fees, we currently expect that net revenue for the fourth quarter of 2002 will fall within a range of $7-9 million. Consistent with previous guidance, we expect to achieve an expense structure, defined as operating expenses plus manufacturing overhead, of approximately $10 million in the fourth quarter. At these projected revenue and expense structure levels, our pro forma net loss in the fourth quarter will likely be $3-5 million, or $0.04-0.07 per share," said Pignati.
Based on this outlook for net revenue and net loss, the company is targeting a net cash outflow for the fourth quarter of approximately $2-4 million. Cash outflows associated with restructuring activities are not included in this estimate. Achievement of this goal remains highly dependent on the realization of planned expense reductions and the attainment of planned revenue.
"With our restructuring efforts behind us, we are now focusing our attention and energy on building our core business. Growing and improving the financial performance of our current product lines is the foundation for our return to profitability and one prong of our strategic plan. The other prongs include a share repurchase program and an active acquisition program. The share repurchase program should increase the trading liquidity of our stock, enhance our cash value per share and improve our earnings per share when we reach profitability. Through acquisitions we intend to strengthen our market position as a provider of photonics and microwave solutions, increase our revenue and improve our bottom line performance. We believe that proper execution of this three-prong strategic plan will lead to improved shareholder value," 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 fourth quarter of 2002, the projected pro forma net loss for the fourth quarter of 2002, the projected cash outflow for the fourth quarter of 2002, the expense structure for the fourth quarter of 2002, the company's projected quarterly revenue level to achieve profitability, the end of the company's restructuring actions and the likely minimization of restructuring and impairment charges in periods beyond the third quarter of 2002, and the improvement in shareholder value through the company's three-pronged strategic plan. 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 and among its current and prospective customers; 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 the introduction of new products may limit our ability to increase 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 second 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 and microwave solutions for the telecommunications, semiconductor, industrial, and defense markets. New Focus' product portfolio includes tunable lasers for test and measurement applications, advanced photonics tools, RF amplifiers and high speed opto-electronic devices. Founded in 1990, the company remains a leader in the development of advanced optical products for the commercial and research marketplaces. The company is headquartered in San Jose, California.
For more information about New Focus visit the company's Internet home page at newfocus.com, call our Investors Relations Department at 408-919-2736, or e-mail us at investor@newfocus.com.
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NEW FOCUS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 29, June 30, Sept. 30, Sept. 29, Sept. 30,
2002 2002 2001 2002 2001
Net revenues $ 6,743 $ 9,114 $ 15,838 $ 25,953 $ 83,249
Cost of net
revenues 9,811 12,899 16,882 36,631 98,673
---------- ---------- ---------- ---------- ----------
Gross profit
(loss) (3,068) (3,785) (1,044) (10,678) (15,424)
(45.5)% (41.5)% (6.6)% (41.1)% (18.5)%
Operating
expenses:
Research and
development,
net 4,249 6,517 13,480 18,128 40,652
Sales and
marketing 1,837 2,312 2,592 6,727 7,981
General and
admini-
strative 3,688 4,289 5,010 11,879 17,643
Restructuring
charges 36,597 11,596 2,162 72,215 5,785
Amortization
of acquired
intangibles 183 1,323 5,255 2,852 49,154
In-process
research and
development -- -- -- -- 13,400
Impairment of
goodwill and
intangibles -- 7,692 -- 7,692 241,574
Deferred
stock
compensation 3,377 4,117 11,766 13,392 53,147
---------- ---------- ---------- ---------- ----------
Total
operating
expenses 49,931 37,846 40,265 132,885 429,336
---------- ---------- ---------- ---------- ----------
Loss from
operations (52,999) (41,631) (41,309) (143,563) (444,760)
(786.0)% (456.8)% (260.8)% (553.2)% (534.3)%
Interest and
other income
(expense), net (4,501) 43,885 4,341 41,881 13,840
---------- ---------- ---------- ---------- ----------
Income (loss)
before
provision
(benefit) for
income taxes (57,500) 2,254 (36,968) (101,682) (430,920)
Provision
(benefit) for
income taxes -- -- (5,000) -- (15,000)
---------- ---------- ---------- ---------- ----------
Net income
(loss) $ (57,500) $ 2,254 $ (31,968) $(101,682) $(415,920)
========== ========== ========== ========== ==========
(852.7)% 24.7% (201.8)% (391.8)% (499.6)%
Basic and
diluted net
income (loss)
per share $ (0.76) $ 0.03 $ (0.43) $ (1.34) $ (5.69)
========== ========== ========== ========== ==========
Shares used to
compute basic
net loss per
share 76,112 75,608 74,212 75,766 73,130
========== ========== ========== ========== ==========
Shares used to
compute
diluted net
income per
share N/A 76,627 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 Nine Months Ended
Sept. 29, June 30, Sept. 30, Sept. 29, Sept. 30,
2002 2002 2001 2002 2001
Net revenues $ 6,743 $ 9,114 $ 15,838 $ 25,953 $ 83,249
Cost of net
revenues 9,811 12,899 16,882 36,631 98,673
---------- ---------- ---------- ---------- ----------
Gross profit
(loss) (3,068) (3,785) (1,044) (10,678) (15,424)
(45.5)% (41.5)% (6.6)% (41.1)% (18.5)%
Operating
expenses:
Research and
development,
net 4,249 6,517 13,480 18,128 40,652
Sales and
marketing 1,837 2,312 2,592 6,727 7,981
General and
admini-
strative 3,688 4,289 5,010 11,879 17,643
---------- ---------- ---------- ---------- ----------
Total
operating
expenses 9,774 13,118 21,082 36,734 66,276
---------- ---------- ---------- ---------- ----------
Loss from
operations (12,842) (16,903) (22,126) (47,412) (81,700)
(190.4)% (185.5)% (139.7)% (182.7)% (98.1)%
Interest and
other income
(expense), net (4,232) 2,353 4,341 618 13,840
---------- ---------- ---------- ---------- ----------
Loss before
provision
(benefit) for
income taxes (17,074) (14,550) (17,785) (46,794) (67,860)
Provision
(benefit) for
income taxes -- -- 175 -- 525
---------- ---------- ---------- ---------- ----------
Net loss $ (17,074) $ (14,550) $ (17,960) $ (46,794) $ (68,385)
========== ========== ========== ========== ==========
(253.2)% (159.6)% (113.4)% (180.3)% (82.1)%
Basic and
diluted net
loss per
share $ (0.22) $ (0.19) $ (0.24) $ (0.62) $ (0.94)
========== ========== ========== ========== ==========
Shares used to
compute basic
and diluted
net loss per
share 76,112 75,608 74,212 75,766 73,130
========== ========== ========== ========== ==========
Pro Forma
Reconciliation
to GAAP:
Pro Forma loss $ (17,074) $ (14,550) $ (17,960) $ (46,794) $ (68,385)
Impairment,
restructuring
and other
charges (36,597) (19,288) (2,162) (79,907) (247,359)
Amortization
of acquired
intangibles (183) (1,323) (5,255) (2,852) (49,154)
In-process
research and
development -- -- -- -- (13,400)
Deferred stock
compensation (3,377) (4,117) (11,766) (13,392) (53,147)
Gain/(loss)
from
divestitures (269) 41,532 -- 41,263 --
Benefit for
income taxes -- -- 5,175 -- 15,525
---------- ---------- ---------- ---------- ----------
Net income
(loss) $ (57,500) $ 2,254 $ (31,968) $(101,682) $(415,920)
========== ========== ========== ========== ==========
NEW FOCUS, INC.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
Sept. 29, 2002 Dec. 30, 2001
ASSETS
Current Assets:
Cash, cash equivalents and
short-term investments $ 307,238 $ 294,655
Trade accounts receivable, net 3,316 5,025
Inventories 4,363 9,240
Other current assets 3,477 8,857
---------- ----------
Total current assets 318,394 317,777
Property and equipment, net 27,011 88,066
Intangibles, net 1,556 12,294
Other assets 5,327 11,587
---------- ----------
Total assets $ 352,288 $ 429,724
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,683 $ 2,438
Accrued expenses 6,542 10,821
Restructuring liabilities 24,449 4,956
Deferred research and
development funding -- 1,775
Current portion of long-term debt -- 109
---------- ----------
Total current liabilities 32,674 20,099
Long-term debt, less current portion -- 7
Deferred rent 460 1,508
Stockholders' equity 319,154 408,110
---------- ----------
Total liabilities and
stockholders' equity $ 352,288 $ 429,724
========== ========== |
