JDSU's Q4 loss narrows

Fiber Optics Weekly Update, August 1, 2003

JDSU reported results for its fourth quarter and fiscal year ended June 30, 2003. Net sales for the fourth quarter were $161 million, compared to net sales of $166 million for the third quarter ended March 31, 2003 and net sales of $222 million for the fourth quarter ended June 30, 2002. Net sales for the fiscal year ended June 30, 2003 were $676 million, compared to net sales of $1.1 billion reported for the fiscal year ended June 30, 2002. The company reported a net loss of $61.6 million, or $0.04 per share, for the quarter ended June 30, 2003, as compared to a net loss of $137 million, or $0.10 per share, for the quarter ended March 31, 2003, and a net loss of $1,043 million, or $0.76 per share, for the quarter ended June 30, 2002.

For the fiscal year ended June 30, 2003, the company reported a net loss of $934 million or $0.66 per share compared to a net loss of $8.7 billion or $6.50 per share for the fiscal year ended June 30, 2002. On a non-GAAP basis, which excludes restructuring and other charges associated with the Global Realignment Program, amortization of purchased intangibles, reductions of long-lived assets, stock-based compensation charges, gains and losses on sale of subsidiaries' assets, and gains and losses on investments, the company reported a net loss of $29 million, or $0.02 per share, for the quarter ended June 30, 2003, as compared to a net loss of $45 million, or $0.03 per share for the quarter ended March 31, 2003, and a net loss of $79 million, or $0.06 per share, for the quarter ended June 30, 2002.

Financial Overview--Fourth Quarter Ended June 30, 2003

--On a geographic basis, sales to North American customers represented 70 percent of total sales. European and Asian customers represented 17 percent and 13 percent of total sales, respectively.

--SICPA, a customer of the company's Thin Film Products Group, represented 11 percent of total sales.

--The Communications Products Group represented $76 million in sales, or 47 percent of total sales. The Thin Film Products Group represented $85 million in sales, or 53 percent of total sales.

--GAAP gross margin was 24 percent of total sales, and non-GAAP gross margin was 25 percent of total sales.

--GAAP operating expenses were $103 million, or 64 percent of total sales. Non-GAAP operating expenses were $75 million, or 47 percent of total sales.

--The company recorded an income tax benefit of $6.0 million. The benefit resulted from a reduction in the valuation allowance for deferred tax assets due to the unrealized gain on our investment in public equity. Fluctuations in the market value of our equity investment may create volatility in our income tax provision / (benefit) in future quarters.

--The company held $1,234 million in cash, cash equivalents and short-term investments at the end of the fourth quarter, of which approximately $1,160 million was cash, money market and other highly liquid fixed income securities. The company used $52.5 million in cash from operations, including $27 million used for the Global Realignment Program. The cash used was net of $4.0 million in net tax refunds received during the fourth quarter.

Business Outlook

The company anticipates net sales for the first quarter of fiscal 2004 will be in the range of $145 to $155 million. The company expects non-GAAP gross margin will be in the range of 19 percent to 21 percent of total net sales, with a non-GAAP net loss of $0.02 to $0.03 per share. The company expects to breakeven on a non-GAAP EBITDA (non-GAAP earnings before interest income and expense, provision for income tax, depreciation and amortization) basis assuming a quarterly revenue level of $200 million by the second quarter of fiscal 2004. In addition, the company expects to breakeven on a non-GAAP EBITDA basis assuming $170 million in quarterly revenue by the fourth quarter of fiscal 2004. Please note that these breakeven levels are indicative of expected improvements to the cost structure and are not intended as projections. The company is expressly not providing revenue guidance beyond the current quarter. Please further note that the outlook excludes items, which depending upon actual results may be required by GAAP, such as restructuring and other charges associated with the Global Realignment Program, amortization of purchased intangibles, reductions of goodwill and other long-lived assets, stock-based compensation expense, and gains and losses on investments, the likelihood and amount of which are uncertain at this time.