Oclaro Announces Second Quarter Fiscal Year 2013 Financial Results

SAN JOSE, Calif., Jan. 31, 2013 /PRNewswire/ -- Oclaro, Inc. (NASDAQ: OCLR), a provider of optical components, modules and subsystems, today announced the financial results for its second quarter of fiscal year 2013, which ended December 29, 2012.

"Our financial results for the second quarter of fiscal 2013 demonstrate the progress we are making after the merger," said Alain Couder, chairman and CEO. "Our revenues were at the top-end of guidance and we have successfully executed to the planned synergies on schedule. We also took action to strengthen our balance sheet.  Looking ahead, market and economic conditions remain uncertain in a typically softer March quarter. As a result, our efforts will remain focused on reducing operating expenses and improving margin, as well as capitalizing on our new product introductions and strong customer relationships to maximize revenues."

Results for the Second Quarter of Fiscal 2013:

Oclaro closed its merger with Opnext, Inc. on July 23, 2012. The financial results for the second quarter of fiscal 2013 include a full quarter of operating results of Opnext. The financial results for the first quarter of fiscal 2013 include approximately ten weeks of operating results of Opnext since the closing of the merger. Results for the second quarter of fiscal 2012 were pre-merger Oclaro and do not include the operating results of Opnext.

  • Revenues were $159.5 million for the second quarter of fiscal 2013, compared with revenues of $148.8 million in the first quarter of fiscal 2013. Pro forma combined revenues for the first quarter of fiscal 2013, including Opnext for the full quarter, were $160.2 million.
  • GAAP gross margin was 13% for the second quarter of fiscal 2013, compared with a GAAP gross margin of 12% in the first quarter of fiscal 2013.
  • Non-GAAP gross margin was 15% for the second quarter of fiscal 2013, compared with a non-GAAP gross margin of 13% in the first quarter of fiscal 2013.
  • GAAP operating loss was $6.7 million for the second quarter of fiscal 2013, which included a $25.0 million gain on the sale of assets related to our interleaver product line and our thin film filter business. This compares with a GAAP operating loss of $47.4 million in the first quarter of fiscal 2013.
  • Non-GAAP operating loss was $23.1 million for the second quarter of fiscal 2013, compared with a non-GAAP operating loss of $29.4 million in the first quarter of fiscal 2013.
  • GAAP net loss for the second quarter of fiscal 2013 was $12.2 million, and included a $25.0 million gain on the sale of assets related to our interleaver product line and our thin film filter business. This compares with a GAAP net loss of $9.4 million in the first quarter of fiscal 2013, which included a gain on bargain purchase of $39.5 million related to the acquisition of Opnext.
  • Non-GAAP net loss for the second quarter of fiscal 2013 was $25.2 million, and excluded a $25.0 million gain on the sale of assets related to our interleaver product line and our thin film filter business. This compares with a non-GAAP net loss of $31.1 million in the first quarter of fiscal 2013, which excluded a gain on bargain purchase of $39.5 million related to the acquisition of Opnext.
  • Adjusted EBITDA was negative $13.2 million for the second quarter of fiscal 2013, compared with negative $20.6 million in the first quarter of fiscal 2013.
  • Cash, cash equivalents and restricted cash were $96.0 million at December 29, 2012. On January 23, 2013, Silicon Valley Bank (SVB) and Wells Fargo entered into a Joinder Agreement pursuant to the Second Amended and Restated Credit Agreement, dated as of November 2, 2012. Pursuant to the Joinder Agreement, SVB agreed to become an additional Lender under the Credit Agreement, and the Lenders agreed to increase the revolving credit facility under the Credit Agreement from $50 million to $80 million.

Third Quarter Fiscal Year 2013 Outlook

The results of Oclaro for the third quarter of fiscal 2013, which ends March 30, 2013, are expected to be:

  • Revenues in the range of $140 million to $155 million.
  • Non-GAAP gross margin in the range of 10% to 14%.
  • Adjusted EBITDA in the range of negative $25 million to negative $13.5 million.

The foregoing guidance is based on current expectations. These statements are forward looking, and actual results may differ materially. Please see the Safe Harbor Statement in this earnings release for a description of certain important risk factors that could cause actual results to differ, and refer to Oclaro's most recent annual and quarterly reports on file with the Securities and Exchange Commission (SEC) for a more complete description of these risks. Furthermore, our outlook excludes items that may be required by GAAP, including, but not limited to, restructuring and related costs, acquisition or disposal related costs, any additional flood-related expenses, expenses or income from certain legal actions, settlements and related costs outside our normal course of business, impairments of other long-lived assets, depreciation and amortization, extraordinary items, as well as the expensing of stock options and restricted stock grants. We do not intend to update this guidance as a result of developments occurring after the date of this release.

Conference Call

Oclaro will hold a conference call to discuss financial results for the second quarter of fiscal 2013 today at 1:30 p.m. PT/4:30 p.m. ET. To listen to the live conference call, please dial (480) 629-9665. A replay of the conference call will be available through February 7, 2013. To access the replay, dial (858) 384-5517. The passcode for the replay is 4593179. A webcast of this call and a supplemental presentation will be available in the investor section of Oclaro's website at www.oclaro.com.

About Oclaro

Oclaro, Inc. (NASDAQ: OCLR) is one of the largest providers of lasers and optical components, modules and subsystems for the optical communications, industrial and consumer laser markets. The company is a global leader dedicated to photonics innovation, with cutting-edge research and development (R&D) and chip fabrication facilities in the U.S., U.K., Italy, Switzerland, Israel, Korea and Japan. It has in-house and contract manufacturing sites in China, Malaysia and Thailand, with design, sales and service organizations in most of the major regions around the world. For more information, visit http://www.oclaro.com.

Copyright 2013. All rights reserved. Oclaro, the Oclaro logo, and certain other Oclaro trademarks and logos are trademarks and/or registered trademarks of Oclaro, Inc. or its subsidiaries in the U.S. and other countries. Information in this release is subject to change without notice.

Safe Harbor Statement

This press release contains statements about management's future expectations, plans or prospects of Oclaro and its business, and together with the assumptions underlying these statements, constitute forward-looking statements for the purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements concerning (i) financial targets and expectations, and progress toward our target business model, including financial guidance for the fiscal quarter ending March 30, 2013 regarding revenue, non-GAAP gross margin and Adjusted EBITDA, and (ii) expectations related to the integration of Opnext into Oclaro following the closing of the merger on July 23, 2012, and (iii) our market position, economic conditions and future operating prospects. Such statements can be identified by the fact that they do not relate strictly to historical or current facts and may contain words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "will," "should," "outlook," "could," "target," and other words and terms of similar meaning in connection with any discussion of future operations or financial performance. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including (i) the future performance of Oclaro and its ability to effectively integrate the operations of acquired companies following the closing of acquisitions and mergers, including its merger with Opnext, (ii) the potential inability to realize the expected and ongoing benefits and synergies of acquisitions and mergers, (iii) the impact to our operations, revenues and financial condition attributable to the flooding in Thailand, (iv) the impact of continued uncertainty in world financial markets and any resulting reduction in demand for our products, (v) our ability to meet or exceed our gross margin expectations, (vi) the effects of fluctuating product mix on our results, (vii) our ability to timely develop and commercialize new products, (viii) our ability to reduce costs and operating expenses, (ix) our ability to respond to evolving technologies and customer requirements and demands, (x) our dependence on a limited number of customers for a significant percentage of our revenues, (xi) our ability to maintain strong relationships with certain customers, (xii) our ability to effectively compete with companies that have greater name recognition, broader customer relationships and substantially greater financial, technical and marketing resources than we do, (xiii) our ability to effectively and efficiently transition to an outsourced back-end assembly and test model, (xiv) our ability to timely capitalize on any increases in market demand, (xv) increased costs related to downsizing and compliance with regulatory compliance in connection with such downsizing, (xvi) competition and pricing pressure, (xvii) the potential lack of availability of credit or opportunity for equity based financing, (xviii) the risks associated with our international operations, (xix) the outcome of tax audits or similar proceedings, (xx) the outcome of pending litigation against the company, (xxi) our ability to maintain or increase our cash reserves and obtain financing on terms acceptable to us, and (xxii) other factors described in Oclaro's most recent annual report on Form 10-K, quarterly report on Form 10-Q and other documents we periodically file with the SEC. The forward-looking statements included in this announcement represent Oclaro's view as of the date of this announcement. Oclaro anticipates that subsequent events and developments may cause Oclaro's views and expectations to change. Oclaro specifically disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this announcement.

Non-GAAP Financial Measures

Oclaro provides certain supplemental non-GAAP financial measures to its investors as a complement to the most comparable GAAP measures. The GAAP measure most directly comparable to non-GAAP gross margin rate is gross margin rate. The GAAP measure most directly comparable to non-GAAP operating income/loss is operating income/loss. The GAAP measure most directly comparable to non-GAAP net income/loss and Adjusted EBITDA is net income/loss. An explanation and reconciliation of each of these non-GAAP financial measures to GAAP information is set forth below.

Oclaro believes that providing these non-GAAP measures to its investors, in addition to corresponding income statement measures, provides investors the benefit of viewing Oclaro's performance using the same financial metrics that the management team uses in making many key decisions and evaluating how Oclaro's "core operating performance" and its results of operations may look in the future. Oclaro defines "core operating performance" as its ongoing performance in the ordinary course of its operations. Items that are non-recurring or do not involve cash expenditures, such as impairment charges, income taxes, restructuring and severance programs, costs relating to specific major projects (such as acquisitions), gain on bargain purchase, non-cash compensation related to stock and options and certain income, purchase accounting adjustments related to the fair market value of acquired inventories, costs to outsource our back-end manufacturing activities, write-offs and expenses related to flooding in Thailand, including advance payments received from insurers, impairment of fixed assets and inventory and related expenses, are not included in Oclaro's view of "core operating performance." Management does not believe these items are reflective of Oclaro's ongoing core operations and accordingly excludes those items from non-GAAP gross margin rate, non-GAAP operating income/loss, non-GAAP net income/loss and Adjusted EBITDA. Additionally, each non-GAAP measure has historically been presented by Oclaro as a complement to its most comparable GAAP measure, and Oclaro believes that the continuation of this practice increases the consistency and comparability of Oclaro's earnings releases.

Non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States of America. Non-GAAP measures should not be considered in isolation from or as a substitute for financial information presented in accordance with generally accepted accounting principles, and may be different from non-GAAP measures used by other companies.

Non-GAAP Gross Margin Rate

Non-GAAP gross margin rate is calculated as gross margin rate as determined in accordance with GAAP (gross profit as a percentage of revenues) excluding non-cash compensation related to stock and options, purchase accounting adjustments related to the fair market value of acquired inventories and costs to outsource our back-end manufacturing activities. Oclaro evaluates its performance using non-GAAP gross margin rate to assess Oclaro's historical and prospective operating financial performance, as well as its operating performance relative to its competitors.

Non-GAAP Operating Income/Loss

Non-GAAP operating income/loss is calculated as operating income/loss as determined in accordance with GAAP excluding the impact of amortization of intangible assets, restructuring, acquisition and related costs, non-cash compensation related to stock and options granted to employees and directors, certain other one-time charges and credits and excluding any flood related advance payments received from insurers, impairment of fixed assets and inventory and related expenses specifically identified in the non-GAAP reconciliation schedules set forth below. Oclaro evaluates its performance using, among other things, non-GAAP operating income/loss in evaluating Oclaro's historical and prospective operating financial performance, as well as its operating performance relative to its competitors.

Non-GAAP Net Income/Loss

Non-GAAP net income/loss is calculated as net income/loss excluding the impact of restructuring, acquisition and related costs, gain on bargain purchase, Thailand flood-related income and expenses, non-cash compensation related to stock and options granted to employees and directors, net foreign currency translation gains/losses, the impact of amortization of intangible assets and certain other one-time charges and credits specifically identified in the non-GAAP reconciliation schedules set forth below. Oclaro uses non-GAAP net income/loss in evaluating Oclaro's historical and prospective operating financial performance, as well as its operating performance relative to its competitors.

Adjusted EBITDA

Adjusted EBITDA is calculated as net income/loss excluding the impact of income taxes, net interest income/expense, depreciation and amortization, net foreign currency translation gains/losses, as well as restructuring, acquisition and related costs, non-cash compensation related to stock and options, gain on bargain purchase, purchase accounting adjustments related to the fair market value of acquired inventories and certain other one-time charges and credits, including flood related advance payments received from insurers, impairment of fixed assets and inventory and related expenses, specifically identified in the non-GAAP reconciliation schedules set forth below. Oclaro uses Adjusted EBITDA in evaluating Oclaro's historical and prospective cash usage, as well as its cash usage relative to its competitors. Specifically, management uses this non-GAAP measure to further understand and analyze the cash used in/generated from Oclaro's core operations. Oclaro believes that by excluding these non-cash and non-recurring charges, more accurate expectations of its future cash needs can be assessed in addition to providing a better understanding of the actual cash used in or generated from core operations for the periods presented. Oclaro further believes that providing this information allows Oclaro's investors greater transparency and a better understanding of Oclaro's core cash position.

 

OCLARO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share amounts)






Three Months Ended 



December 29, 2012


September 29, 2012


December 31, 2011







Revenues

$         159,465


$         148,813


$           86,488

Cost of revenues

137,966


130,976


75,613

Gross profit

21,499


17,837


10,875








Operating expenses:







Research and development

25,750


25,765


17,024


Selling, general and administrative

23,092


24,566


14,425


Amortization of intangible assets

2,402


2,026


723


Restructuring, acquisition and related costs

(23,665)


12,636


3,219


Flood-related expense

641


264


9,088


(Gain) loss on sale of property and equipment

6


(18)


37

Total operating expenses

28,226


65,239


44,516








Operating loss

(6,727)


(47,402)


(33,641)

Other income (expense):







Interest income (expense), net

(649)


(478)


(245)


Gain (loss) on foreign currency translation

(3,423)


196


1,298


Other Income

-


-


2,238


Gain on bargain purchase

-


39,460


-

Total other income (expense)

(4,072)


39,178


3,291

Loss before income taxes

(10,799)


(8,224)


(30,350)

Income tax provision

1,424


1,183


478

Net loss

$         (12,223)


$           (9,407)


$         (30,828)








Net loss per share: 







Basic

$             (0.14)


$             (0.12)


$             (0.61)


Diluted

$             (0.14)


$             (0.12)


$             (0.61)

Shares used in computing net loss per share: 







Basic

89,827


80,219


50,492


Diluted

89,827


80,219


50,492








Stock-based compensation included in the following:






   Cost of revenues 

$               524


$               338


$               388

   Research and development 

531


376


374

   Selling, general and administrative 

999


886


913


Total

$            2,054


$            1,600


$            1,675








 

 


 

OCLARO, INC.

RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES

(unaudited, in thousands, except per share amounts)






Three Months Ended 



December 29, 2012


September 29, 2012


December 31, 2011

Reconciliation of GAAP net loss to non-GAAP net loss and adjusted EBITDA:






GAAP net loss

$             (12,223)


$                (9,407)


$             (30,828)


Stock-based compensation included in:







   Cost of revenues 

524


338


388


   Research and development 

531


376


374


   Selling, general and administrative 

999


886


913


Amortization expense

2,402


2,026


723


Restructuring, acquisition and related costs

(23,665)


12,636


3,219


Flood-related expense

641


264


9,088


Opnext FMV inventory adjustment

819


1,462


-


Other (income) expense items, net

-


(39,460)


(2,238)


Outsource transition costs

1,357


-


-


(Gain) loss on foreign currency translation

3,423


(196)


(1,298)

Non-GAAP net loss

(25,192)


(31,075)


(19,659)


Income tax provision 

1,424


1,183


478


Depreciation expense

9,874


8,825


4,624


Interest (income) expense, net

649


478


245

Adjusted EBITDA

$             (13,245)


$             (20,589)


$             (14,312)








Non-GAAP net loss per share: 







Basic

$                  (0.28)


$                  (0.39)


$                  (0.39)


Diluted

$                  (0.28)


$                  (0.39)


$                  (0.39)

Shares used in computing Non-GAAP net loss per share: 







Basic

89,827


80,219


50,492


Diluted

89,827


80,219


50,492








Reconciliation of GAAP gross margin rate to non-GAAP gross margin rate:






GAAP gross profit

$               21,499


$               17,837


$               10,875

Opnext FMV inventory adjustment

819


1,462


-

Outsource transition costs

1,357


-


-

Stock-based compensation in cost of revenues

524


338


388


Non-GAAP gross profit

$               24,199


$               19,637


$               11,263








GAAP gross margin rate

13.5%


12.0%


12.6%

Non-GAAP gross margin rate

15.2%


13.2%


13.0%








Reconciliation of GAAP operating loss to non-GAAP operating loss:






GAAP operating loss

$                (6,727)


$             (47,402)


$             (33,641)

Stock-based compensation included in:







 Cost of revenues 

524


338


388


 Research and development 

531


376


374


 Selling, general and administrative 

999


886


913

Amortization of intangible assets

2,402


2,026


723

Restructuring, acquisition and related costs

(23,665)


12,636


3,219

Flood-related (income) expense, net

641


264


9,088

Opnext FMV inventory adjustment

819


1,462


-

Outsource transition costs

1,357


-


-


Non-GAAP operating loss

$             (23,119)


$             (29,414)


$             (18,936)








 

 

 

OCLARO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands)






ASSETS

December 29, 2012


June 30, 2012

Current assets:





Cash, cash equivalents and
    short-term investments

$                 78,201


$        61,760


Restricted cash

17,773


614


Accounts receivable, net

119,853


74,666


Inventories

151,273


78,444


Prepaid expenses and other current assets

24,979


12,582

Total current assets

392,079


228,066

Property and equipment, net

111,725


59,616

Other intangible assets, net

39,406


16,645

Goodwill

10,904


10,904

Other non-current assets

14,823


13,075


Total assets

$                568,937


$      328,306






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:





Accounts payable

$                122,558


$        60,098


Accrued expenses and other liabilities

59,248


49,944


Capital lease obligations, current

11,650


-


Note payable

17,052


-


Credit line payable

40,756


25,500

Total current liabilities

251,264


135,542

Deferred gain on sale-leaseback

12,049


12,722

Convertible notes payable

23,350


-

Capital lease obligations, non-current

12,997


-

Other long-term liabilities

23,899


12,391

Total liabilities

323,559


160,655

Stockholders' equity:





Common stock 

918


515


Additional paid-in capital 

1,424,116


1,330,172


Accumulated other comprehensive income

34,548


29,538


Accumulated deficit

(1,214,204)


(1,192,574)

Total stockholders' equity

245,378


167,651


Total liabilities and stockholders' equity

$                568,937


$      328,306

 

 

SOURCE Oclaro, Inc.



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