EXFO Reports Strong Financial Results for Third Quarter
- "Posts record sales of US$45.8 million, EPS(*) of $0.11
- Aligns cost structure to current market conditions
- Maintains guidance for fiscal 2001 at lower end of sales range and at
middle of earnings range"
QUEBEC CITY, CANADA, June 27 /CNW/ - EXFO Electro-Optical Engineering
Inc. (NASDAQ: EXFO, TSE: EXF) announced today record sales for the third
quarter ended May 31, 2001.
Sales increased 136% to US$45.8 million in the third quarter of fiscal
2001 from US$19.4 million for the same period in fiscal 2000, and 26% from
US$36.3 million in the second quarter of 2001.
Net earnings(*) increased 115% to US$6.2 million, or $0.11 per share, for
the third quarter from US$2.9 million, or $0.07 per share, for the same period
in fiscal 2000. Compared to the second quarter of fiscal 2001, net earnings(*)
in the third quarter dropped 17% from US$7.5 million, or $0.14 per share.
It should be noted that net earnings per share(*) decreased by $0.01
sequentially if after-tax interest income and foreign exchange losses are
removed. Net earnings(*) in the second quarter included an after-tax foreign
exchange gain of $0.01 per share and after-tax interest income of $0.02 per
share, resulting in earnings of $0.11 per share. In the third quarter, net
earnings(*) included after-tax interest income of $0.01 per share, resulting
in earnings of $0.10 per share.
Including amortization of intangible assets and goodwill, EXFO's net loss
in the third quarter is at US$8.6 million, or $0.15 per share, compared to net
earnings of US$2.7 million, or $0.07 per share, for the same period in fiscal
2000 and net earnings of US$24,000, or $0.00 per share, in the second quarter
of 2001. The non-cash charges related to acquisitions include US$4.2 million
in amortization of intangible assets and US$12.0 million in amortization of
goodwill in the third quarter of 2001.
The financial results of EFOS, a leader in precision light-based
adhesive, spot-curing, are reflected in EXFO's financial statements during
this quarter since the acquisition closed on March 15, 2001.
"Despite the challenging macro-economic environment, we have posted
strong sales growth and healthy profitability," said Germain Lamonde,
Chairman, President and CEO of EXFO. "We have accomplished this feat due to
our successful focus on innovation, our global and diversified customer base,
and the depth and breadth of our product portfolio.
"We have also adopted a series of proactive measures to align our cost
structure to current market conditions in order to mitigate the impact of the
telecom slowdown on our long-term profitability."
EXFO has implemented a structured plan to reduce costs and increase
efficiencies in order to be better prepared when market conditions improve.
The company will reduce non-customer-related expenses; it will postpone plans
to build a new facility in the Quebec Metro High-Tech Park; it will terminate
non-core operations at Nortech Fibronic Inc., a subsidiary that specialized in
manufacturing fiber-optic temperature sensors; and it will reduce its
workforce by 15%, but continue to recruit specific talent for strategic
initiatives.
These measures are expected to trim approximately US$6.0 million in
annual operating expenses and incur one-time charges of about US$2.0 million
that will be accounted for in the fourth quarter.
BUSINESS HIGHLIGHTS
EXFO introduced more than 10 new products at OFC 2001 in March and, more
recently, it launched the FTB-400 Universal Test System (UTS), a next-
generation field-testing platform.
The FTB-400 UTS, which can hold as many as seven test modules, represents
the industry's first modular platform that can perform the essential physical
layer tests for DWDM long-haul, metro and access networks. In addition, it
enhances user productivity by allowing simultaneous acquisitions in the field.
"Market reaction to this second-generation platform has been very
positive," Mr. Lamonde added. "We have already begun shipping units in the
fourth quarter."
BUSINESS OUTLOOK
Mr. Lamonde maintained his outlook for fiscal 2001. Sales are still
expected to fall between US$150 and US$165 million and EPS(*) between $0.40
and $0.50.
"We believe that we will achieve the lower end of the sales range and
middle of the earnings range, provided that economic conditions do not change
materially," Mr. Lamonde said.
BUSINESS EXPENSES
Selling and administrative expenses amounted to US$14.3 million, or 31.3%
of sales, for the third quarter compared to US$6.5 million, or 33.7% of sales,
for the same period in fiscal 2000 and US$10.9 million, or 30.1% of sales, for
the second quarter of fiscal 2001.
Gross research and development expenses were US$5.8 million, or 12.6% of
sales, in the third quarter compared to US$2.2 million, or 11.6% of sales, for
the same period in fiscal 2000 and US$4.5 million, or 12.4% of sales, for the
second quarter of 2001.
CONFERENCE CALL AND WEBCAST
EXFO will host a conference call today at 5 p.m. (Eastern time) to review
its third-quarter results. To listen to the conference call and participate in
the question period via telephone, dial 1 (416) 641-6440 or 1 (888) 209-3765.
Germain Lamonde, Chairman, President and CEO, and Pierre Plamondon, Vice-
President of Finance and Chief Financial Officer, will participate in the
call. A replay of the conference call can be accessed after 7 p.m. (Eastern
time) today until midnight (Eastern time) on July 4, 2001. The replay number
is 1 (416) 626-4100 and the password is 18998674. A Webcast of the conference
call will also be available on EXFO's Web site at www.exfo.com, under the
Investors section.
(*)Excluding amortization of intangible assets, goodwill related to
acquisitions and one-time restructuring charges.
ABOUT EXFO
EXFO, which derives its name from expertise in fiber optics, is a leading
designer and manufacturer of fiber-optic test, measurement and automation
solutions for the telecommunications industry. EXFO markets its products to
more than 2000 customers in 70 countries around the world.
EXFO and its subsidiaries develop products mainly for two markets. The
Portable and Monitoring Division provides handheld and modular instruments
primarily to telecommunications carriers. The Industrial and Scientific
Division, Burleigh Instruments and EFOS design an extensive line of high-
performance instruments and automated manufacturing equipment for optical
component and system vendors as well as for research and development labs.
This news release may contain statements that constitute forward-looking
statements within the meaning of the U.S. Private Securities Litigation Reform
Act of 1995. Forward-looking statements are statements other than historical
information or statements of current condition. These statements may appear in
a number of places in this news release and include statements concerning our
intent, belief, or current expectations regarding future events. Forward-
looking statements are not guarantees of future performance and involve risks
and uncertainties, and actual results may differ materially from those in the
forward-looking statements as a result of various factors which are beyond the
control of EXFO, including retention of qualified personnel, revenue
synergies, demand for testing and measurement instruments and precision
positioning instruments. Although we believe that the expectations reflected
in the forward-looking statements are reasonable based on information
currently available to us, we cannot assure you that the expectations will
prove to have been correct. Accordingly, you should not place undue reliance
on these forward-looking statements. In any event, these statements speak only
as of the date of this news release. We undertake no obligation to revise or
update any of them to reflect events or circumstances after the date of this
news release, or to reflect new information or the occurrence of unanticipated
events. Readers are referred to our Annual Report on Form 20-F and our other
filings with the U.S. Securities and Exchange Commission and the Canadian
securities commissions for a discussion of the other factors that may affect
our future performance and other important risk factors concerning us and our
operations.
<<
EXFO ELECTRO-OPTICAL ENGINEERING INC.
Interim Consolidated Balance Sheets
(in thousands of US dollars)
As at As at
August 31, May 31,
2000 2001
---------- ----------
(unaudited)
Assets
Current assets
Cash $ 729 $ 4,355
Short-term investments 162,659 71,267
Accounts receivable
Trade 18,272 29,526
Other 2,790 4,385
Income taxes receivable 284 -
Inventories 18,868 47,499
Prepaid expenses 1,023 1,522
Future income taxes 995 721
---------- ----------
205,620 159,275
Capital assets 8,694 24,319
Intangible assets 68 49,100
Future income taxes 3,089 1,889
Goodwill 2,252 232,637
---------- ----------
$ 219,723 $ 467,220
---------- ----------
---------- ----------
Liabilities
Current liabilities
Bank advances $ 10 $ 4,220
Accounts payable and accrued liabilities 10,353 19,514
Income taxes payable - 2,887
Mandatorily redeemable preferred shares 543 -
Deferred revenue 395 623
Current portion of long-term debt 152 67
---------- ----------
11,453 27,311
Deferred revenue 151 8
Deferred grants 1,109 1,228
Long-term debt 16 739
Future income taxes - 8,416
---------- ----------
12,729 37,702
---------- ----------
Shareholders' Equity
Share capital 198,459 430,179
Contributed surplus - 1,457
Cumulative translation adjustment 1,555 (7,997)
Retained earnings 6,980 5,879
---------- ----------
206,994 429,518
---------- ----------
$ 219,723 $ 467,220
---------- ----------
---------- ----------
EXFO ELECTRO-OPTICAL ENGINEERING INC.
Interim Consolidated Statements of Earnings
(in thousands of US dollars, except share and per share data)
Three Nine Three Nine
months months months months
ended ended ended ended
May 31, May 31, May 31, May 31,
2000 2000 2001 2001
----------- ---------- ---------- ---------
(unaudited)(unaudited)(unaudited)(unaudited)
Sales $ 19,411 $ 48,522 $ 45,781 $110,593
Cost of sales 7,347 16,956 17,418 40,513
-------- -------- -------- ---------
Gross margin 12,064 31,566 28,363 70,080
-------- -------- -------- ---------
Operating expenses
Selling and administrative 6,549 16,487 14,324 34,159
Net research and development 1,265 4,486 4,460 9,747
Amortization of capital assets 391 981 1,033 2,263
Amortization of intangible assets 12 33 4,211 5,873
-------- -------- -------- ---------
Total operating expenses 8,217 21,987 24,028 52,042
-------- -------- -------- ---------
Earnings from operations 3,847 9,579 4,335 18,038
Interest expense (income), net 170 145 (963) (5,371)
Foreign exchange loss (gain) (505) (389) 152 (3,018)
-------- -------- -------- ---------
Earnings before income taxes
and amortization of goodwill 4,182 9,823 5,146 26,427
-------- -------- -------- ---------
Income taxes
Current 1,222 3,085 3,252 10,842
Future 83 107 (1,531) (1,870)
-------- -------- -------- ---------
1,305 3,192 1,721 8,972
-------- -------- -------- ---------
Earnings before amortization
of goodwill 2,877 6,631 3,425 17,455
Amortization of goodwill 129 171 12,055 18,556
-------- -------- -------- ---------
Net earnings (loss) for the
period $ 2,748 $ 6,460 $(8,630) $(1,101)
-------- -------- -------- ---------
--------- -------- -------- --------
Basic and diluted earnings
(loss) per share
Earnings before
amortization of goodwill $ 0.07 $ 0.17 $ 0.06 $ 0.34
Net earnings (loss) $ 0.07 $ 0.17 $ (0.15) $ (0.02)
Basic weighted average number
of shares outstanding (000's) 38,707 38,514 56,383 51,689
Conversion of preferred
shares Series I 45 4 - -
Exercise of stock options
and stock awards - - 477 334
-------- -------- -------- ---------
Diluted weighted average number
of shares outstanding (000's) 38,752 38,518 56,860 52,023
-------- -------- -------- ---------
-------- -------- -------- ---------
EXFO ELECTRO-OPTICAL ENGINEERING INC.
Interim Consolidated Statements of Retained Earnings
and Contributed Surplus
(in thousands of US dollars)
Retained earnings
Nine Nine
months months
ended ended
May 31, May 31,
2000 2001
--------- ---------
(unaudited)(unaudited)
Balance - Beginning of period $ 14,592 $ 6,980
Add
Net earnings (loss) for the period 6,460 (1,101)
--------- ---------
Balance - End of period $ 21,052 $ 5,879
--------- ----------
--------- ----------
Contributed surplus
Nine Nine
months months
ended ended
May 31, May 31,
2000 2001
---------- ---------
(unaudited)(unaudited)
Balance - Beginning of period $ - $ -
Add
Premium on resale of share capital - 1,457
---------- ---------
Balance - End of period $ - $ 1,457
---------- ---------
---------- ---------
EXFO ELECTRO-OPTICAL ENGINEERING INC.
Interim Consolidated Statements of Cash Flows
(in thousands of US dollars)
Three Nine Three Nine
months months months months
ended ended ended ended
May 31, May 31, May 31, May 31,
2000 2000 2001 2001
----------- ---------- ---------- ----------
(unaudited)(unaudited)(unaudited)(unaudited)
Cash flows from operating
activities
Net earnings (loss) for the
period $ 2,748 $ 6,460 $(8,630) $(1,101)
Add (deduct) items not
affecting cash
Amortization of discount on
short-term investments - - (251) (251)
Amortization of capital assets 391 981 1,033 2,263
Amortization of intangible
assets 12 33 4,211 5,873
Foreign exchange gains on
disposal of short-term
investments - - (34) (3,222)
Future income taxes 83 107 (1,531) (1,870)
Amortization of goodwill 129 171 12,055 18,556
Change in non-cash operating
working capital items
Accounts receivable (2,811) (7,836) 2,028 (5,269)
Income taxes receivable 522 (16) 806 1,082
Inventories (4,032) (7,275) (7,132) (23,432)
Prepaid expenses (80) (33) 280 (325)
Accounts payable and accrued
liabilities 2,555 4,462 (3,223) 1,148
Income taxes payable - - (1,150) 2,957
Deferred revenue 68 143 (62) 114
Deferred grants 35 290 231 170
----------- ---------- ---------- ----------
(380) (2,513) (1,369) (3,307)
----------- ---------- ---------- ----------
Cash flows from financing
activities
Bank advances 1,996 6,548 1,373 2,177
Repayment of mandatorily
redeemable preferred shares - - - (354)
Repayment of long-term debt (48) (64) (7) (3,311)
Issuance of share capital 356 373 - -
Resale of share capital - - 110 1,490
Redemption of share capital - - (3) (33)
Share issue expenses (811) (811) - (41)
Dividends paid (1) (52) - -
----------- ---------- ---------- ----------
1,492 5,994 1,473 (72)
----------- ---------- ---------- ----------
Cash flows from investing
activities
Additions to short-term
investments - - (251,191) (461,981)
Proceeds from disposal of
short-term investments - 1,400 286,201 550,220
Additions to capital and
intangible assets (1,096) (2,683) (7,469) (13,207)
Business combinations (3) (2,111) (25,150) (67,499)
----------- ---------- ---------- ----------
(1,099) (3,394) 2,391 7,533
----------- ---------- ---------- ----------
Change in cash 13 87 2,495 4,154
Effect of foreign exchange
rate changes on cash (477) (435) (74) (528)
Cash- Beginning of period 539 423 1,934 729
----------- ---------- ---------- ----------
Cash- End of period $ 75 $ 75 $ 4,355 $ 4,355
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
Supplementary information
Interest paid $ 298 $ 342 $ 119 $ 276
Interest received $ - $ - $ 1,435 $ 6,158
Income taxes paid (recovered) $ (221) $ 2,877 $ 3,820 $ 5,930 |
