NUFO 4/25 (miss ! 2c.. $17 down $12) Outlines Restructuring Plan & to cut 10% of US workforce
SAN JOSE, Calif., April 25 /PRNewswire/ -- New Focus, Inc., (Nasdaq: NUFO - news), a leading supplier of innovative fiber optic products for next-generation optical networks under the Smart Optics for Networks(TM) brand, today announced financial results for its first quarter ended April 1, 2001. The company indicated that first quarter results included net revenue that met the revised guidance issued by the company on March 5, 2001 and a substantial charge for inventory write-downs and related charges that widened the company's operating loss. The company further stated that second quarter results would include a restructuring charge associated with actions related to additional work force reductions and the consolidation of facilities.
First Quarter Review:
Net revenue for the first quarter of 2001 was $40.8 million, up from $33.9 million in the fourth quarter of 2000 and $9.8 million in the first quarter of 2000. During the first quarter of 2001 the company acquired JCA Technology, Inc. and Globe Y. Technology, Inc. Net revenue from these two acquisitions in the first quarter of 2001 totaled $10.9 million.
Net revenue from the company's fiber optic products in the first quarter of 2001 totaled $32.3 million, up 28% from $25.3 million in the fourth quarter of 2000. In the first quarter of 2000 fiber optic products accounted for $4.9 million of the company's net revenue. Net revenue from the company's photonics tool products in the first quarter of 2001 totaled $8.5 million, down slightly from $8.6 million in the fourth quarter of 2000. In the first quarter of 2000 photonics tool products accounted for $4.9 million of the company's net revenue.
The pro forma net loss in the first quarter of 2001, excluding amortization of acquired intangibles, deferred compensation and related income tax effects, was $31.3 million, or $0.44 per share based on 70.5 million basic shares outstanding. This pro forma net loss included a charge of $28.5 million for the write-down of excess inventories and related charges. Excluding this charge, the net loss for the first quarter was $2.8 million, or $0.04 per share based on 70.5 million basic shares outstanding. In the fourth quarter of 2000 the company reported pro forma net income of $2.6 million, or $0.04 per share based on 64.1 million diluted shares outstanding. The pro forma net loss for the first quarter of 2000 was $6.9 million, or $0.14 per share based on 47.8 million basic shares outstanding.
The pro forma calculation for the first quarter of 2001 excluded non-cash charges of $25.3 million for the amortization of deferred stock compensation, $21.4 million for the amortization of goodwill and other intangibles, and $13.4 million for the write-off of acquired in-process R&D. The deferred stock compensation charges in the fourth and first quarters of 2000 were $4.8 million and $5.5 million, respectively. The number of shares used in the calculation of the pro forma net loss per share for the first quarter of 2000 assumed the conversion of the company's convertible preferred stock into common stock. This conversion was completed in conjunction with the company's initial public offering in May 2000.
Without the pro forma adjustments to eliminate the goodwill and other intangibles, in-process R&D, deferred stock compensation charges and related income tax effects, the company recorded a net loss for the first quarter of 2001 of $86.3 million, or $1.22 per share based on 70.5 million basic shares outstanding. The net loss for the fourth quarter of 2000 of $2.3 million, or $0.04 per share based on 60.5 million basic shares outstanding. For the first quarter of 2000 the net loss was $12.5 million, or $2.12 per share based on 5.9 million shares outstanding. Shares outstanding for this period excluded the conversion of preferred stock into common stock.
``Like many other companies in our industry, we have experienced a downturn in our near-term business prospects due to conditions within the telecommunications industry and the U.S. economy. Our industry is currently going through a difficult inventory correction cycle created by the sudden and sharp decline in capital equipment expenditures by telecommunications carriers. As a result of lower customer demand for our products and a current lack of visibility into future order flow, we recorded a $28.5 million charge for the write-down of excess inventories and related charges in the first quarter. Excluding this charge, our gross margin percentage in the first quarter was 34.0%,'' said Ken Westrick, president and chief executive officer of New Focus, Inc.
The company's cash balance at the end of the first quarter was $370 million, down $116 million from the end of December. The cash consideration for the JCA acquisition and expenses associated with both the JCA and Globe Y acquisitions consumed approximately $82 million during the first quarter. The company also spent $27 million on capital expenditures primarily for facility construction projects previously initiated at its larger production facility in Shenzhen, China and its new facility in San Jose, California. The company plans to complete these leasehold improvements but will not equip these facilities until additional capacity is needed.
Business Outlook:
The company experienced additional order cancellations and push-outs during the month of April. As a result of these recent changes, the company believes that net revenue for the second quarter of 2001 will fall in the range of $28-32 million. The company previously indicated that net revenue would decline sequentially between the first and second quarters but did not specify a targeted revenue range for the second quarter.
``In addition to the steps that we took in early March, we are initiating a series of actions that will resize our operations and result in a restructuring charge that will be reflected in our second quarter financial results. These actions will include closure and consolidation of two smaller facilities and additional work force reductions in our U.S. and China operations. We will also accelerate our efforts to move more production, in particular subassemblies for our active products, offshore to Asia. We already produce nearly 100% of our passive products at our China facilities. In addition to these longer-range actions, we will cut our capital expenditures and continue to reduce discretionary spending. We will also significantly reduce the manufacturing build schedule at our China operations for the next two quarters to properly balance inventories with near-term demand,'' said Westrick.
In California the company will close its older Santa Clara facility and transfer passive product development activities to the company's newer and larger facility in San Jose. The company anticipates work force reductions at its U.S. operations of approximately 90 people, mostly manufacturing personnel. In China the company will idle its smaller production facility and consolidate activities into its larger factory. Work force reductions at the company's China operations will total approximately 450 people, mostly direct labor employees. These actions will result in work force reductions of approximately 10% and 50% at the company's U.S. and China operations, respectively. After this latest work force reduction the company's worldwide operations will employ approximately 1,200 people, down from a peak employment level of approximately 2,100 people in early March.
``Excluding the effect of the anticipated second quarter restructuring charge, we believe that our second quarter gross margin will fall into a range of 30-33% as fixed manufacturing costs are spread over lower production volumes. At the $28-32 million revenue level our pro forma net loss for the second quarter will likely fall into a range of $8-12 million. Due to the current economic climate and associated uncertainty within the telecommunications industry, we are reassessing our prior financial guidance but are currently unable to provide meaningful forecasts beyond the second quarter. In spite of this lack of visibility, we remain hopeful that we will see a gradual recovery in our business starting in the second half of this year supported by an end to the inventory correction cycle and the introduction of several new products in upcoming quarters,'' said Westrick.
The company is currently shipping customer qualification samples of two passive products, L-band circulators and thin film muxes. Volume revenue from these two new products is expected to begin early in the third quarter. Development activities are progressing on two additional passive products that are expected to ship in the second half of this year, a hybrid micro-optic device for next-generation optical amplifiers and an interleaver. In the third quarter the company is planning to commence shipments of a new active product line of 12.5 gigabit per second data drivers that will deliver higher drive voltages at lower power. Additionally, during the past two months the company has conducted multiple customer demonstrations of its tunable laser subsystem for network applications. Customer feedback on these demonstrations has been very positive. The company is delivering samples to customers this quarter and still expects to begin initial volume shipments of this new product in the fourth quarter of this year.
``Consistent with our strategy to expand our product portfolio of both active and passive products, we will continue to fund key product development programs that are critical to the long-term success of New Focus. With sizable cash resources, pending new product introductions and flexible upside manufacturing capacity in China, we believe that New Focus remains well positioned to exploit the long-term secular growth potential of the fiber optics industry after the current industry correction cycle runs its course,'' said Westrick.
RESEARCH ALERT-CSFB cuts New Focus price target
CHICAGO, April 26 (Reuters) - Credit Suisse First Boston analyst James Parmelee said Thursday he cut his 12-month price target on fiber optic supplier New Focus Inc. (NasdaqNM:NUFO - news) to $20 from $38.
The company on Wednesday had reported a first-quarter net loss and said it will take a second-quarter charge for job cuts as part of a restructuring effort.
Shares of New Focus were off 15 percent, or $2.49 at $13.75 on Nasdaq in early morning trade, near their year-low of $9.25. Their year-high was $165.13. |
