FiberCore reports Q3

Fiber Optics Weekly Update, Nov 22, 2002

FiberCore Inc., a manufacturer and supplier of optical fiber and preform for the telecommunication and data communications markets, announced results for the third quarter ended September 30, 2002. Sales in the third quarter of 2002 decreased by 31 percent to $6.1 million from $8.8 million in the third quarter of 2001 and decreased by 4 percent from second quarter levels. Sales were negatively impacted by a 66 percent decline in sales to South America, which is primarily a single-mode market, compared to the same quarter in 2001. Overall, single-mode sales were down in all regions except for Asia. Multimode sales, however, increased by approximately 32 percent compared to the same quarter last year. Production at Xtal, which continues to manufacture primarily single-mode fiber, has been reduced in line with demand. The company continues to focus on increasing both its multimode business and exports to markets outside Brazil to try to minimize the large negative effects of the Brazilian market.

Gross profit in the quarter was $671,000, or 11.0 percent of sales, compared to a gross profit of $3.1 million, or 35.0 percent of sales, in the third quarter of 2001. FiberCore's gross margin was severely impacted by continuing price declines in single-mode fiber, lower production levels, and a $333,000 write-down of inventory to reflect the continued deterioration of prices in the third quarter of 2002. The gross margin of 11 percent during the quarter compared favorably to margins of (2.3) percent and 10.3 percent during the first and second quarters of 2002 in light of the continued decline in fiber prices.

SG&A expenses decreased by 9 percent to $2,059,000 from $2,253,000 during the third quarter of 2001. R&D spending decreased by 25 percent to $375,000 in the third quarter of 2002 from $502,000 in the third quarter of 2001. The company is continuing the development of its patented Plasma Outside Vapor Deposition (POVD) process. The company's first manufacturing plant utilizing the POVD technology is expected to come on line in Germany in the fourth quarter of this year. This, as well as other manufacturing initiatives, is expected to reduce future production costs. Overall, the company reduced operating expenses by $321,000, or 11.7 percent, compared to the third quarter of 2001, and by $963,000, or 28 percent, compared to the second quarter of 2002. These reductions are the results of cost reduction initiatives, including a restructuring at our Xtal operation, begun earlier in the year.

The loss from operations in the third quarter of 2002 was reduced to approximately $1.8 million from a loss from operations in the second quarter of 2002 of approximately $2.8 million. In the year ago quarter, the company reported a profit from operations of approximately $334,000.

FiberCore reported a net loss of $5.1 million, or $0.08 per diluted share, in the third quarter of 2002. The net loss includes $209,000 of non-cash interest expense in connection with a deemed beneficial conversion feature, the amortization of deferred financing costs and the fair value of warrants issued to a group of institutional investors related to the issuance of $5.5 million of convertible, subordinated debentures in January and June 2002. In the third quarter of 2001, the net loss was approximately $2.2 million, or $0.04 per diluted share.