OXFORDSHIRE, U.K., Oct. 28, 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 third quarter ended September 28, 2003.
Highlights for the third quarter ended September 28, 2003
-- Revenues in the third quarter were 23.1 million ($37.1 million),
up 10% from the second quarter 2003 of 21.0 million, and up
204% from 7.6 million in the third quarter 2002, in line with
management expectations.
-- Nortel Networks and Marconi Communications remained very strong
customers, representing 57% and 14% of sales respectively, with
Huawei under the 10% level.
-- Gross margin, excluding exceptionals, improved by over 13
percentage points, to near breakeven with a loss of 0.4 million
(or negative 1.5%), down from 3.2 million (or negative 15%) in
the second quarter 2003, in line with management expectations.
Operating expenses, excluding exceptionals, were reduced by 7%
quarter on quarter.
-- Cash burn for the third quarter 2003 was 22.9 million ($36.9
million), in line with management expectations, primarily
reflecting one-off costs associated with the closure of the
Ottawa fab, overhead reductions and restructuring initiatives
announced on July 30, 2003. Management anticipates cash burn
of less than 10 million in the fourth quarter 2003, excluding
acquisition related costs.
-- The net loss for the third quarter 2003, under UK GAAP, was
29.2 million ($47.0 million), including exceptional charges of
14.6 million. This compares with a net loss of 18.1 million
in the second quarter 2003 which included exceptional charges
of 1.8 million. Under US GAAP, the net loss was 28.8 million
($46.3 million), which included restructuring charges of
14.6 million.
-- During the quarter, the company announced a number of strategic
developments including the proposed acquisition of New Focus,
the acquisitions of Ignis Optics Inc and substantially all
of the assets of Cierra Photonics Inc, as well as the
completion of the consolidation of the Ottawa wafer fab,
ahead of schedule.
Commenting on the results, Giorgio Anania, President and Chief Executive Officer, said: "In this quarter, we made substantial progress on many operational fronts. Revenues are up sequentially by 10% and the cost structure has been significantly improved, continuing the trend of the past few quarters. In addition, we achieved a major operational step forward with the completion of the consolidation of the Ottawa fab and the transfer of production to our Caswell facility, which we expect will reduce our cost base going forward. We saw continued progress with key customers and we announced three strategic acquisitions, two of which were completed in the quarter. This progress means we expect this momentum to be reflected in financial results going forward."
Operating review
Products and customers
Nortel Networks and Marconi Communications continued to remain strong customers, and in the third quarter 2003, represented 57% and 14% of sales respectively, the latter growing significantly from the second quarter. The company continued its good relationship with Huawei, who accounted for under 10% of revenues this quarter, and also continued to develop other key customers. Revenues from customers outside of Nortel and Marconi were up 12% quarter on quarter.
Acquisitions
Consolidation in the market is being driven by customers' demands for fewer, larger optical component and subsystem suppliers that can deliver cost competitive pricing through economies of scale. As a result, the company has announced two completed acquisitions and one proposed acquisition during the quarter, all of which the company believes will serve to consolidate the company's position as the number two component supplier to the telecom equipment market worldwide.
On September 22, 2003 the company announced that it had signed an agreement under which it would acquire New Focus Inc. ("New Focus"), for approximately 84 million New Ordinary shares, valued at 117.6 million ($190.5 million) based on the mid market closing share price of Bookham Ordinary Shares on the London Stock Exchange on September 19, 2003.
New Focus is a leading provider of photonics and microwave solutions to non-telecom diversified markets, including the semiconductor, defence research, industrial, biotech/medical and telecom test and measurement industries. Important product solutions include tunable lasers, microwave radio-frequency amplifiers, opto-electronics, photonics subsystems and photonic tools. New Focus's operations are located in San Jose, California, where the company employs approximately 200 people. New Focus also has a manufacturing facility in Shenzhen, China. The proposed acquisition is expected to increase the critical mass of the company's non-telecom business, enabling the company to diversify its customer base and would provide significant additional cash resources. The completion of the proposed New Focus acquisition is subject to a number of conditions, including regulatory and shareholder approval and is expected to complete in late 2003 or early 2004.
In early October 2003, the company acquired Ignis Optics Inc. ("Ignis"), a provider of optical modules for communications networks, based in San Jose, California. Ignis designs and manufactures small form-factor pluggable (SFP and XFP) single-mode optical transceivers for current and next-generation optical datacom and telecom networks. This acquisition allows the company to enter the datacom market, and presents a significant market opportunity for the company's know-how and manufacturing capabilities.
In addition, the company completed the acquisition of the business of Cierra Photonics Inc. ("Cierra"), in July 2003. Cierra designs and manufactures thin film filters and other components for the fiber optics telecommunications industry. This acquisition opens up a new, large market area, allowing cost reduction by internal sourcing of some of the company's components used in its amplifiers and also improves the company's competitive position in bidding for and winning optical subsystems business.
In connection with the acquisition of Nortel Networks optical components business, which completed in November 2002 and as required by the accounting standards, the company will be re-evaluating the purchase price allocation preliminarily recorded at year end 2002. As a result of sales of inventory being ahead of initial expectations, the company expects this will result in a reclassification, in the year end 2002 balance sheet, of a portion of the purchase price to inventory from intangibles and property and equipment.
Restructuring
Previously announced cost reduction plans have been substantially completed. On September 11, 2003 the company announced the completion of a major cost reduction initiative: the consolidation of its two main wafer fab facilities, following the acquisition of the Nortel Networks Optical Components businesses ("NNOC"). The consolidation of the Ottawa wafer fab facility into the company's Caswell, UK, facility was a large element of the company's cost reduction plans and the company expects to see the benefits in the fourth quarter 2003, a full quarter ahead of the company's original estimate of the first quarter 2004.
The company also completed the discontinuation of its investment in the ASOC R&D platform and closed the wafer fab facility in Milton, UK.
Other developments
Jack Kilby has informed the company that he will retire from the board on closing of the proposed acquisition of New Focus. Mr Kilby joined the board in January 2000. Nicola Pignati, currently Chairman, President and CEO of New Focus, and Dr Peter Bordui, currently a New Focus board member, are expected to join the board of Bookham on closing of the proposed New Focus acquisition.
Financial commentary All US dollar numbers have been translated at 1 = $1.61 for the convenience of the reader.
Third quarter ended September 28, 2003
Revenues: Revenues in the third quarter of 2003 were 23.1 million ($37.1 million), up 10% on second quarter 2003 revenues of 21.0 million, and up 204% from 7.6 million in the third quarter 2002. Revenues grew at both Nortel and Marconi between the second quarter and the third quarter, with growth at Marconi and other customers accounting for the majority of the increase.
Operating loss (before exceptional items) under UK GAAP: The gross loss (loss at the gross margin level) was 0.4 million ($0.6 million), down from 3.2 million in the second quarter 2003 and down from 3.8 million in the third quarter 2002. The gross margin loss has improved to (1.5%) in the third quarter 2003, from (15%) in the second quarter 2003 and (50%) in the third quarter 2002. This improvement was mainly the result of ongoing restructuring action which continues to reduce the company's fixed manufacturing overheads.
Operating expenses decreased 7% from the second quarter 2003 to the third quarter 2003, driven by reductions in research and development resulting from ceasing of spending on the ASOC product line and other focused reductions in development spending. Within operating expenses, selling, general and administrative expenses remained at the same level as the second quarter 2003, but as a percentage of revenues for the third quarter, fell from 33% to 30% in the same period.
Restructuring charges (exceptionals for UK GAAP and charges for US GAAP): In the third quarter, net exceptional charges were 14.6 million ($23.5 million) under both UK GAAP and US GAAP. These primarily related to one-off severance costs in connection with the completion of the Ottawa wafer fab consolidation and the Milton ASOC closure.
Net loss (including exceptionals for UK GAAP and charges for US GAAP): Net interest for the third quarter was 0.1 million expense compared with 1.9 million (income) in the second quarter 2003. Net interest includes the translation impact on the company's US$ denominated loan notes. In the second quarter, the company recognised a significant translation gain on long-term debt which did not occur in the third quarter, accounting for most of the change between quarters.
The net loss under UK GAAP for the third quarter was 29.2 million ($47.0 million) and the loss per share was 0.14 ($0.23). Under US GAAP, the net loss for the same period was 28.8 million ($46.3 million) and the loss per share was 0.14 ($0.22).
Cash and cash equivalents: Cash and cash equivalents as of September 28, 2003 were 47.9 million ($77.2 million) compared with 70.8 million as at June 29, 2003.
Cash flow: Cash burn for the third quarter 2003 was 22.9 million ($36.9 million) up 36% on the second quarter 2003 (16.9 million), reflecting the one-off costs associated with the overhead reductions and restructuring initiatives announced on July 30, 2003.
Nine months ended September 28, 2003
The results for the first nine months of 2002 were prior to the acquisition of NNOC and it is therefore difficult to draw meaningful comparisons with the first nine months of 2003.
Revenues: Revenues for the nine months ended September 28, 2003 were 65.2 million ($104.9 million), up 221% compared with the same period in 2002.
Nortel Networks and Marconi Communications represented 59% and 14% of sales respectively for the nine months ended September 28, 2003.
Operating loss (before exceptional items) under UK GAAP: The gross loss (loss at the gross margin level) was 8.6 million ($13.8 million) for the nine months, down 31% from the same period in 2002. The gross margin loss has improved to (13%) in the nine months from (62%) in the first nine months 2002 primarily as a result of the company's ongoing cost reduction efforts.
Operating expenses increased 27% compared with the first nine months of 2002 due to the inclusion of the acquired NNOC operations. As a percentage of revenues, however, operating expenses declined to 72% over the first nine months of 2003, compared with 182% for the same period in 2002. Within operating expenses, selling, general and administrative expenses increased by 92% from the first nine months of 2002, reflecting the impact of the increased size of the company and the integration of acquisitions made in 2002 and 2003. Research and development expenses decreased by 5%, as a result of reductions in ASOC related research and development, partially offset by the research and development spending related to the NNOC operations acquired in November 2002.
Restructuring charges (exceptionals for UK GAAP and charges for US GAAP): For the nine months ended September 28, 2003, net exceptional charges were 19.3 million ($31.1 million) under both UK GAAP and US GAAP. These primarily related to overhead reductions, incurred in the third quarter 2003, including plant closures in Ottawa and Milton and other manufacturing consolidations and workforce reductions.
Net loss (including exceptionals for UK GAAP and charges for US GAAP): Net interest for the nine months ended September 28, 2003 was 2.2 million ($3.6 million), down 51% from 4.5 million in the first nine months 2002 due to significantly lower cash balances offset by favourable exchange movements in the US$ denominated loan notes.
The net loss under UK GAAP for the nine months was 72.3 million ($116.4 million) and the loss per share was 0.35 ($0.57). Under US GAAP, the net loss for the same period was 71.0 million ($114.3 million) and the loss per share was 0.34 ($0.56).
Cash and cash equivalents: Cash and cash equivalents as of September 28, 2003 were 47.9 million ($77.2 million) compared with 105.4 million as at December 31, 2002.
Cash flow: Cash burn for the nine months ended September 28, 2003 was 57.5 million ($92.6 million), up 20% on the same period in 2002. While the company's operating performance improved, restructuring costs in the period had a significant effect.
Outlook
The company anticipates revenues for the fourth quarter 2003 will increase between 3% to 10%, from the third quarter 2003, and be in the range of 24 million to 26 million.
The company estimates that gross margin will improve by between 5 and 10 percentage points in the fourth quarter 2003.
With the completion of the transfer of the Ottawa fab to Caswell and the other actions taken in the last few quarters, the company anticipates cash burn, including restructuring costs but excluding the transaction costs associated with the proposed acquisition of New Focus, to be less than 10 million in the fourth quarter.
The company will be hosting a conference call to discuss this set of results on Tuesday October 28, 2003 at 15:00 (GMT), 10:00 (EST). Dial in numbers are as follows:
UK/European participants +44 (0) 20 7162 0194 US participants +1 888 222 0364
A taped recording will be available approximately 1 hour after the call ends for 30 days. Dial in numbers are as follows:
UK/European participants +44 (0) 20 8288 4459 (access code: 407842)
US participants +1 334 323 6222 (access code: 407842)
The call can also be accessed on the company's web site, www.bookham.com
Bookham Technology (LSE:BHM) (Nasdaq:BKHM) is a global leader in the design, manufacture and marketing of optical and RF components, modules and subsystems. Bookham's disruptive technologies and broad product range allow it to deliver an extensive range of cost effective optical functionality and solutions to customers, which offer higher performance, lower cost and provide greater subsystems capability to meet their customers' needs. The company's optical and RF components, modules and subsystems are used in various applications and industries, including telecommunications, aerospace, industrial and military. In 2002, Bookham acquired the optical components businesses from Nortel Networks and Marconi. In July 2003, the company acquired the business of Cierra Photonics Inc. and in October 2003, the company acquired Ignis Optics, Inc. The company, whose securities are traded on NASDAQ and the London Stock Exchange, is headquartered in the UK, with manufacturing facilities in the UK, Canada, and Switzerland; offices in the UK, US, France, Italy, and China; and employs approximately 1700 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, the ability to consummate the proposed transaction with New Focus, possible disruption in commercial activities caused by terrorist activities or armed conflicts, the related impact on margins, reductions in demand for optical components, expansion of our business operations, quarterly variations in results, currency exchange rate fluctuations, 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, 2002, as amended. 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.
To view the full press release with financial tables, visit the following link:
http://www.huginonline.com/plsql/try/pressreleases.queryview?P_IDENTIFIER=922272&p_la=5