OXFORDSHIRE, U.K., Feb. 4, 2003 (PRIMEZONE) -- Bookham Technology plc (LSE:BHM) (Nasdaq:BKHM), a leading provider of optical components, modules and subsystems for fiber optic communication networks, today announced results for the fourth quarter and year ended December 31, 2002.
Highlights for the fourth quarter ended December 31, 2002
-- Revenues in the fourth quarter 2002 were 14.3 million pounds
($23.0 million), up 88% sequentially on the third quarter 2002,
from 7.6 million pounds, and up 580% from the fourth quarter 2001
at 2.1 million pounds. The fourth quarter 2002 figure includes
seven weeks of revenue from the acquired optical components
business from Nortel Networks ("NNOC"). Total revenues for 2002
were 34.6 million pounds ($55.7 million), up 58% from 21.9
million pounds in 2001.
-- Cash burn for the fourth quarter 2002 was 31.6 million pounds
($50.9 million), including 10.6 million pounds in acquisition
costs and 3.2 million pounds used for working capital. This
compares with 11.9 million pounds in the third quarter 2002, and
15.0 million pounds in the fourth quarter 2001. The company's cash
position remains strong, with 105.4 million pounds
($169.7 million) at the end of the quarter.
-- The net loss for the fourth quarter 2002 was 19.9 million pounds
($32.0 million), prior to exceptional charges which were 26.3
million pounds under U.K. GAAP, compared with a loss of 13.5
million pounds in the third quarter 2002 and 14.1 million pounds
in the fourth quarter of 2001. The proforma net loss was 19.7
million pounds ($31.7 million), before one-time charges, which
were 30.9 million pounds under U.S. GAAP.
-- On November 8, the company completed its acquisition of the
optical components businesses of Nortel Networks and results
reflect combined operations since that date. Integration of the
NNOC businesses is ahead of schedule and substantial progress has
been made in restructuring and consolidating development,
manufacturing, sales and administration across all sites.
-- Significant reductions in manufacturing and development activities
in the ASOC product line are announced, further reducing the
company's overhead structure and reducing the level of revenue
required to reach the breakeven point for the company.
Commenting on the results, Giorgio Anania, President and Chief Executive Officer, said: "Following the acquisition of NNOC, we had three critical factors to achieve: rapid integration, reduction in costs and improved revenue. We are extremely pleased with the way the integration has progressed and this is well ahead of schedule. The cost structure is coming down and there is evidence for a further reduction in the level of revenue required to reach breakeven. We are seeing good progress with our customers which we believe will allow us to announce specific design-wins during the course of the year. The most important factor is that the company is working as one team and becoming integrated across sites and functions."
Operating review -- A review of 2002
In 2002, the company redefined itself through two targeted acquisitions, which the company believes positions it to be a leader in the optical components space. The acquisitions of the optical components businesses from Marconi and Nortel Networks have enhanced the company's competitiveness and ability to prosper. Revenue growth has continued quarter-on-quarter throughout 2002 with additional benefits to earnings being achieved through tight financial management.
In February, the acquisition of Marconi's optical components business ("MOC") was completed for an all-share consideration. At the time of completion, the ordinary shares issued represented approximately 9% of the company's issued share capital following the acquisition and were valued at approximately 16.4 million pounds ($23.9 million). The acquisition was an important step for the company, expanding the product portfolio into the actives market with a very strong laser chip design, strong manufacturing capability and leading-edge tunable laser and Gallium Arsenide ("GaAs") modulator technologies. The products included narrow-band and wideband tunable lasers, GaAs modulators and erbium doped fiber amplifiers ("EDFAs").
In November 2002, the company acquired the optical transmitter and receiver and optical amplifier businesses ("NNOC") from Nortel Networks. The consideration for this acquisition was 61 million new ordinary shares (amounting to approximately 29.8% of the issued share capital of the company following the acquisition), together with warrants to purchase 9 million new ordinary shares, loan notes to the value of $50 million (31.6 million pounds) repayable over a total of 5 years and cash of $9.2 million to reimburse Nortel Networks for restructuring expenses.
This much larger transaction delivered a very significant set of complementary products to add to the growing portfolio along with a comprehensive set of technical skills and management experience. The company believes that the economies of scale generated by the creation of the enlarged group will facilitate increased cost efficiencies. Furthermore the company believes strong revenue enhancement opportunities exist for NNOC components to be sold to other leading system manufacturers who may not previously have been willing to purchase components from Nortel Networks, as one of their competitors. The products acquired include optical amplifiers with vertically integrated pump laser chips, the most widely deployed 10Gb/s transceivers in the world, and wide receiver line and transponder modules.
Key components of both of these transactions were the guaranteed supply agreements that were entered into. Marconi made a minimum commitment to purchase £30 million of products. Nortel Networks agreed to purchase between 50- 80% on a product-by-product basis of its total optical components requirement over the three years following completion, with a guaranteed minimum of $120 million of optical components over a period of six quarters from completion.
The company is pleased with the integration of both MOC and NNOC and in particular with the rapid progress with NNOC. The process is well ahead of schedule, with manufacturing and administrative functions now having been effectively combined.
Products and customers
The company now has a comprehensive product set comprising actives, passives and amplifiers, not just based on new technologies, but on proven, widely deployed established products. The company operates in the metro and long-haul markets in not only 10Gb/s but also in 2.5Gb/s.
Today customers want full-line, independent, solutions-capable partners and therefore fewer suppliers who can provide everything from a full range of components to complete subsystems. The company believes it can offer this solution and is focused on continuing to work with key customers on the development of enhanced products. The company has expanded its customer base through its channels to market with both the MOC and NNOC products, and the customer reaction has been very positive.
Significant sales of optics lasers and modulators into non-telecom accounts was achieved, taking advantage of the same product building blocks used in the company's telecom integrated transmitters. In addition, sales of the company's MMIC (monolithic microwaveable integrated circuit) products to non-telecom accounts increased during the year.
Restructuring
Throughout the year, the company has continued to restructure in order to reduce costs, while improving revenues and investing in new products. The company announced in the second quarter that it would be closing its two facilities in Maryland, U.S. and Swindon, U.K. resulting in significant annual savings.
The continued progress on cost reduction efforts following the integration of MOC and NNOC has contributed to significant reductions in operating expenses of the combined company.
The company has decided to significantly downsize the manufacturing and R&D of its ASOC product line at its Milton facility in order to realign resources more appropriately with current market and revenue opportunities, focus resources on product lines producing revenues in the short and medium term, and reduce the company's overall cash burn. The company anticipates that this action will involve a reduction in headcount of up to approximately 200 people.
The company will continue to sell and support ASOC-based passive products, including the four channel EVOA (electronic variable optical attenuator), which are qualified and shipping to customers. The company will also retain a dedicated ASOC team, as it believes that there is value and a significant revenue opportunity for the ASOC platform, although current market conditions have extended the timescale in which these opportunities could be realized.
Exceptional costs for the year end December 31, 2002
U.K. GAAP U.S. GAAP
m Pounds m Pounds
Impairment ASOC production line 28.1 28.1
Maryland and Swindon site closures 5.1 5.1
IPR&D -- 8.8
Other 3.5 3.5
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Total 36.7 45.5
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Management and personel
The company has continued to strengthen its management and operational team. Through the acquisition of NNOC, Liam Nagle and Mike Scott, formerly of NNOC, joined the officer team and further increased the strength of the management team. At the year end, the company employed a total of 1945 people worldwide.
Financial commentary
All U.S. dollar numbers have been translated at 1 pound = $1.61 for the convenience of the reader.
Fourth quarter ended December, 31 2002
Results include those of the optical components businesses of Nortel Networks ("NNOC") from November 8, 2002.
Revenues: Revenues in the fourth quarter of 2002 were 14.3 million pounds ($23.0 million), up 88% sequentially from 7.6 million pounds in the third quarter 2002 and up 580% from 2.1 million pounds in the fourth quarter 2001. The increase in the fourth quarter 2002 revenues over the third quarter 2002 and the fourth quarter 2001 is the result of sales to Nortel Networks from the NNOC acquired sites. Nortel Networks and Marconi Communications were over 10% customers and represented 60% and 12% respectively.
Operating loss (before exceptional items) under U.K. GAAP: The gross loss (loss at the gross margin level) was 5.5 million pounds ($8.9 million), up from 3.8 million pounds in the third quarter 2002 and up from 4.0 million pounds in the fourth quarter 2001. This increase is a result of the addition of the higher manufacturing overhead structure of NNOC. Operating expenses increased 37% from the third to fourth quarters as a result of the integration of the NNOC acquisition. Operating expenses increased 26% from the fourth quarter 2001. Selling, general and administrative expenses increased by 96% over this period as a result of the inclusion of the NNOC operations, whilst research and development expenses decreased by 1% as the impact of previous restructuring actions offset the increased expenditure from NNOC.
Restructuring charges (exceptionals for U.K. GAAP and one-time charges for U.S. GAAP): In the fourth quarter, net exceptional charges under U.K. GAAP were 26.3 million pounds ($42.3 million) and 30.9 million pounds ($50 million) under U.S. GAAP. Of the 2002 exceptional and one-time charges, 27.0 million pounds related to the impairment of equipment used in the ASOC product line that is considered to be excess, with 2.8 million pounds relating to the write-back of the third quarter provision for closure of the Maryland and Swindon sites, following successful negotiation and exit from lease arrangements at a considerably reduced cost. In addition, under U.S. GAAP, there was a one-time charge of 4.6 million pounds ($7.4 million) for the write-off of In Process Research and Development ("IPR&D") related to the acquisition of NNOC.
Net loss (including exceptionals for U.K. GAAP and one-time charges for U.S. GAAP): Net interest for the fourth quarter was 0.8 million pounds ($1.3 million), down 45% from 1.4 million pounds in the third quarter 2002 due to lower cash balances. The net loss under U.K. GAAP for the fourth quarter 2002 was 46.2 million pounds ($74.4 million) and the loss per share was 0.26 pounds ($0.41). Under U.S. GAAP the net loss for the same period was 50.6 million pounds ($81.5 million) and the loss per share was 0.28 pounds ($0.45).
Cash and cash equivalents: Cash and cash equivalents as of December 31, 2002 were 105.4 million pounds ($169.7 million) compared with 137.1 million pounds as at September 29, 2002.
Year ended December, 31 2002
Results include those of the optical components businesses of Nortel Networks ("NNOC") from November 8, 2002, as well as Marconi's optical components business ("MOC") from February, 1 2002.
Revenues: Revenues for 2002 were 34.6 million pounds ($55.7 million), up 58% from 21.9 million pounds in 2001. The increase in the 2002 revenues over 2001 is primarily the result of sales to Nortel Networks from the NNOC acquired sites. Marconi Communications and Nortel Networks were over 10% customers, representing 38% and 31% of revenue for the year respectively.
Operating loss (before exceptional items): The gross loss (loss at the gross margin level) under U.K. GAAP was 18.1 million pounds ($29.1 million), up from 8.3 million pounds in 2001.
Operating expenses excluding National Insurance provision on stock options declined 3% compared with 2001, mainly as a result of the increased costs arising from the NNOC and MOC acquisitions being offset by the continuing process of cost reduction efforts.
Restructuring charges (exceptionals for U.K. GAAP and one-time charges for US GAAP): Net exceptional charges under U.K. GAAP were 36.7 pounds million ($59.1 million). Of this, 5.1 million pounds related to the closures of the Maryland and Swindon locations. For the year, the company also wrote down 28.1 million poundsof equipment considered excess and took provisions for excess inventory of 1.2 million pounds. Under U.S. GAAP the net one-time charges were 45.5 million pounds ($73.3 million), including IPR&D write downs of 8.8 million pounds.
Net loss (including exceptionals for U.K. GAAP and one-time charges for U.S. GAAP): Net interest for the year decreased from 10.9 million pounds in 2001 to 5.3 million pounds ($8.5 million) in 2002 as a result of increasing expenditures from the expanded business. Further, interest rates were lower in 2002 than in 2001. The net loss under U.K. GAAP for 2002 was 101.4 million pounds ($163.3 million) and loss per share was 0.67 pounds ($1.08). The net loss under U.S. GAAP was 110.0 million pounds ($177.1 million) and loss per share was 0.73 pounds ($1.17).
Cash and cash equivalents: Cash and cash equivalents as of December 31, 2002 were 105.4 million pounds ($169.7 million) compared with 184.8 million pounds at December 31, 2001.
Outlook
The company anticipates revenues for the first quarter 2003 to be in the range of 20 million pounds to 23 million pounds and cash burn of 18 million pounds to 21 million pounds. The company has seen firm order flow, to date, in the first quarter 2003. Although our outlook for revenues remains limited beyond the first quarter 2003, there is potential for increased demand in the second half of the year. Taking into account the improved cost reduction plans and achieving revenue growth targets, the company is targeting to breakeven by the fourth quarter 2003.
The company will be hosting a conference call to discuss this set of results on Tuesday, February 4, 2003 at 13:00 (BST), 08:00 (EST). Dial in numbers are as follows:
U.K./European participants +44 (0) 20 7162 0125 U.S. participants +1 800 513 7968 A taped recording will be available approximately 1 hour after the call ends for 5 days. Dial in numbers are as follows: U.K./European participants +44 (0) 20 8288 4459 (access code: 144062) U.S. participants +1 334 323 6222 (access code: 144062)
A taped recording will also be available on the company's Website, www.bookham.com
Bookham Technology (LSE:BHM) (Nasdaq:BKHM) designs, manufactures and markets optical components and subsystems using high volume production methods. With three cost disruptive technologies: Gallium Arsenide (GaAs) for modulation; Indium Phosphide (InP) for tunability and the silicon-based ASOC integration platform, the company delivers end-to-end solutions to communication network system providers, that offer higher performance, lower cost and provide greater subsystems capability to meet their customers' needs. The company's components and subsystems are used in access, metropolitan and long-haul networks. In November 2002, Bookham acquired the optical components businesses from Nortel Networks. This followed the acquisition of Marconi's optical components business in February 2002. The company, whose securities are traded on Nasdaq and the London Stock Exchange, is headquartered in the U.K., with manufacturing facilities in the U.K., Canada, and Switzerland with offices in U.S., France, Italy and Japan, and employs approximately 2000 people worldwide.More information on Bookham Technology is available at www.bookham.com
Bookham and ASOC are registered trademarks of Bookham Technology plc
Statements made in this press release that are not historical facts include forward-looking statements that involve risks and uncertainties. Important factors that could cause actual results to differ from those indicated by such forward-looking statements include, among others, recovery of industry demand, the need to manage manufacturing capacity, production equipment and personnel to anticipated levels of demand for products, possible disruption in commercial activities caused by terrorist activities or armed conflicts, the related impact on margins, acceptance of our ASOC product line, reductions in demand for optical components, expansion of our business operations, quarterly variations in results, manufacturing capacity yields and inventory, intellectual property issues and other uncertainties that are discussed in the "Risk Factors" sections of our Annual Report on Form 20-F for the year ended December 31 2001, filed with the Securities and Exchange Commission on May 21, 2002 and our listing particulars dated October 7, 2002 on file with Companies House in England and Wales and the United Kingdom Listing Authority. Forward-looking statements represent our estimates as of today, and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements in the future, we disclaim any obligation to do so.
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