- Sales reach US$43.6 million despite a challenging economic
environment - Gross margin improves to 62.3%, equaling highest
level since 2001 - Non-cash goodwill impairment charge of US$21.7
million and foreign exchange loss of US$4.7 million contribute to
GAAP net loss of US$23.3 million - Implements cost-reduction plan
providing US$6 million in annualized pre-tax savings QUEBEC CITY,
June 30 /PRNewswire-FirstCall/ -- EXFO Electro-Optical Engineering
Inc. (NASDAQ: EXFO; TSX: EXF) reported today financial results for
the third quarter ended May 31, 2009. Sales decreased 10.2% to
US$43.6 million in the third quarter of fiscal 2009 from US$48.6
million in the third quarter of 2008 and 5.9% from US$46.4 million
in the second quarter of 2009. Net bookings dropped 20.7% to
US$40.2 million for a book-to-bill ratio of 0.92 in the third
quarter of fiscal 2009 from US$50.7 million in the same period last
year and 14.9% from US$47.3 million in the second quarter of 2009.
Gross margin improved to 62.3% of sales in the third quarter of
fiscal 2009 from 60.9% in the third quarter of 2008 and 60.4% in
the second quarter of 2009. GAAP net loss in the third quarter of
fiscal 2009 amounted to US$23.3 million, or US$0.39 per diluted
share, compared to net earnings of US$11.2 million, or US$0.16 per
diluted share, in the same period last year and net earnings of
US$2.7 million, or US$0.04 per diluted share, in the second quarter
of fiscal 2009. It should be noted that EXFO recorded a non-cash
charge of US$21.7 million for impairment of goodwill in the third
quarter of fiscal 2009, following a significant drop in the
company's market capitalization since June 1, 2009. EXFO also
incurred a pre-tax, foreign exchange loss of US$4.7 million in the
third quarter of 2009 mainly due to the impact of a 16.4% increase
in the period-end value of the Canadian/US exchange rate on the
company's balance sheet items. GAAP net loss in the third quarter
of 2009 included US$1.2 million in after-tax amortization of
intangible assets and US$0.4 million in stock-based compensation
costs. "EXFO delivered a solid sales quarter despite an
increasingly challenging economic environment and I remain
confident that we're continuing to gain market share," said Germain
Lamonde, EXFO's Chairman, President and CEO. "The fundamental
trends towards bandwidth growth and IP convergence remain intact
and EXFO is among the best-positioned companies to take advantage
of these key growth drivers, considering our strong product
offering, strengthened by several key new product introductions,
along with targeted sales, channel and marketing initiatives. "In
the meantime, we continue to maintain a strong balance sheet,
generate positive cash flow and have taken actions to protect our
earnings through a cost-reduction plan that will provide
approximately US$6 million in annualized pre-tax savings, while we
carefully balance short-term profitability with mid/long-term
strategy." As part of this plan, EXFO tightened cost controls and
reduced its workforce by approximately 5% (65 employees). The
company has also applied for a Canadian federal program that will
allow certain employees to work four days per week for a maximum of
52 weeks. EXFO will incur severance and other pre-tax related
charges of about US$1.3 million that will be accounted for in the
fourth quarter of fiscal 2009. Unaudited Selected Financial
Information (In thousands of US dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Segmented results: Q3 2009 Q3 2008 Q2 2009
--------------------------------------- Sales: Telecom Division $
39,047 $ 42,843 $ 41,367 Life Sciences and Industrial Division
4,589 5,738 5,005 --------------------------------------- Total $
43,636 $ 48,581 $ 46,372 ---------------------------------------
--------------------------------------- Earnings (loss) from
operations: Telecom Division $ (21,990) $ 3,819 $ 2,117 Life
Sciences and Industrial Division 438 639 482
--------------------------------------- Total $ (21,552) $ 4,458 $
2,599 ---------------------------------------
--------------------------------------- Other selected information:
GAAP net earnings (loss) $ (23,346) $ 11,179 $ 2,655 Amortization
of intangible assets $ 1,355 $ 1,015 $ 1,246 Tax effect on
amortization of intangible assets $ (203) $ (224) $ (212)
Stock-based compensation costs $ 383 $ 334 $ 325 Recognition of
previously unrecognized future income tax assets $ - $ (5,324) $ -
Extraordinary gain $ - $ (3,036) $ - Impairment of goodwill $
21,713 $ - $ - Tax effect on impairment of goodwill $ (2,070) $ - $
-
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Operating Expenses Selling and administrative expenses amounted to
US$16.7 million, or 38.3% of sales, in the third quarter of fiscal
2009 compared to US$15.7 million, or 32.2% of sales, in the same
period last year and US$15.8 million, or 34.1% of sales, in the
second quarter of 2009. Gross research and development expenses
totaled US$9.3 million, or 21.4% of sales, in the third quarter of
fiscal 2009 compared to US$8.8 million, or 18.2% of sales, in the
third quarter of 2008 and US$8.8 million, or 19.0% of sales, in the
second quarter of 2009. Net R&D expenses totaled US$7.8
million, or 17.8% of sales, in the third quarter of fiscal 2009
compared to US$7.4 million, or 15.2% of sales, in the same period
last year and US$7.3 million, or 15.8% of sales, in the second
quarter of 2009. Third-Quarter Business Highlights Market expansion
- EXFO's sales decreased 10.2% year-over-year to US$43.6 million in
the third quarter of 2009. Telecom Division sales were down 8.9%
year-over-year, while Life Sciences & Industrial Division sales
were more affected by the global recession with a year-over-year
decrease of 20.0%. EXFO's top customer accounted for 10.8% of sales
in the third quarter and its top three customers 22.2%. After nine
months into fiscal 2009, the company's top customer represented
11.6% of sales and its top three customers 18.9%. Profitability -
GAAP net loss amounted to US$23.3 million, or US$0.39 per diluted
share, in the third quarter of 2009 largely due to a non-cash
charge of US$21.7 million for impairment of goodwill and an
unfavorable Canada/US exchange rate. On the other hand, the company
generated US$1.8 million in cash flows from operating activities in
the third quarter of 2009 and US$15.5 million since the beginning
of the fiscal year. Innovation - EXFO launched an unprecedented 11
new products in the third quarter and 23 since the beginning of
fiscal 2009. Key product launches in the third quarter included a
portable test solution for characterizing 100 Gbit/s Ethernet and
40/43 Gbit/s SONET/OTN networks; 1 Gbit/s and 10 Gbit/s test heads
for carrier Ethernet and mobile backhaul testing applications in
Service Assurance; IPv6 testing capabilities across the company's
Transport and DataCom product portfolio; and the next-generation
FTB-500 multi-layer platform for high-end test applications in the
field and central office. Sales from products that have been on the
market two years or less accounted for 40.6% of total sales in the
third quarter of 2009 and 38.3% since the beginning of fiscal 2009.
Business Outlook Given the current challenging economic environment
and typical seasonality of the summer months, EXFO forecasted sales
between US$33 million and US$38 million and GAAP net loss between
US$0.10 and US$0.06 per diluted share for the fourth quarter of
2009. GAAP net loss includes US$0.04 per share in after-tax
amortization of intangible assets, after-tax restructuring expenses
and stock-based compensation costs. This guidance was established
by management based on existing backlog as of the date of this
press release, expected bookings for the remaining of the quarter,
as well as stability in exchange rates compared to the end of the
previous quarter. Conference Call and Webcast EXFO will host a
conference call today at 5 p.m. (Eastern time) to review its
financial results for the third quarter of fiscal 2009. To listen
to the conference call and participate in the question period via
telephone, dial 1-416-620-5690. Germain Lamonde, Chairman,
President and CEO, and Pierre Plamondon, CA, Vice-President of
Finance and Chief Financial Officer, will participate in the call.
An audio replay of the conference call will be available one hour
after the event until 7 p.m. on July 7, 2009. The replay number is
1-402-977-9141 and the reservation number is 21424856. The audio
Webcast and replay of the conference call will also be available on
EXFO's Website at http://www.exfo.com/, under the Investors
section. Forward-Looking Statements This press release contains
forward-looking statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995, and we intend that such
forward-looking statements be subject to the safe harbors created
thereby. Forward-looking statements are statements other than
historical information or statements of current condition. Words
such as may, will, expect, believe, anticipate, intend, could,
estimate, continue, or the negative or comparable terminology are
intended to identify forward-looking statements. In addition, any
statements that refer to expectations, projections or other
characterizations of future events and circumstances are considered
forward-looking statements. They are not guarantees of future
performance and involve risks and uncertainties. Actual results may
differ materially from those in forward-looking statements due to
various factors including the effect of the actual worldwide
recession on the telecom market for our customers and suppliers;
fluctuating exchange rates and our ability to execute in these
uncertain conditions; consolidation in the global
telecommunications test, measurement and service assurance
industry; capital spending levels in the telecommunications, life
sciences and high-precision assembly sectors; concentration of
sales; the effects of the additional actions we have taken in
response to such economic uncertainty (including our ability to
quickly adapt cost structures with anticipated levels of business,
ability to manage inventory levels with market demand); market
acceptance of our new products and other upcoming products; limited
visibility with regards to customer orders and the timing of such
orders; our ability to successfully integrate our acquired and
to-be-acquired businesses; our ability to successfully expand
international operations; the retention of key technical and
management personnel; and future economic, competitive, financial
and market condition. Assumptions relating to the foregoing involve
judgments and risks, all of which are difficult or impossible to
predict and many of which are beyond our control. Other risk
factors that may affect our future performance and operations are
detailed in our Annual Report, on Form 20-F, and our other filings
with the U.S. Securities and Exchange Commission and the Canadian
securities commissions. We believe that the expectations reflected
in the forward-looking statements are reasonable based on
information currently available to us, but we cannot assure you
that the expectations will prove to have been correct. Accordingly,
you should not place undue reliance on these forward-looking
statements. These statements speak only as of the date of this
document. Unless required by law or applicable regulations, we
undertake no obligation to revise or update any of them to reflect
events or circumstances that occur after the date of this document.
About EXFO EXFO is a leading provider of test and service assurance
solutions for network service providers and equipment manufacturers
in the global telecommunications industry. The Telecom Division
offers a wide range of innovative solutions extending across the
full technology lifecycle - from design to technology deployment
and onto service assurance - and covering all layers on a network
infrastructure to enable triple-play services and next-generation,
converged IP networking. The Life Sciences and Industrial Division
offers solutions in medical device and opto-electronics assembly,
fluorescence microscopy and other life science sectors. For more
information, visit http://www.exfo.com/. EXFO Electro-Optical
Engineering Inc. Interim Consolidated Balance Sheet (in thousands
of US dollars) As at As at May 31, August 31, 2009 2008 -----------
----------- (unaudited) Assets Current assets Cash $ 11,083 $ 5,914
Short-term investments 53,412 81,626 Accounts receivable Trade
32,295 31,473 Other 2,997 4,753 Income taxes and tax credits
recoverable 4,263 4,836 Inventories 32,999 34,880 Prepaid expenses
2,034 1,774 Future income taxes 9,115 9,140 ----------- -----------
148,198 174,396 Tax credits recoverable 23,817 20,657 Forward
exchange contracts 578 - Property, plant and equipment 19,355
19,875 Intangible assets 17,933 19,945 Goodwill 22,521 42,653
Future income taxes 14,522 15,540 ----------- ----------- $ 246,924
$ 293,066 ----------- ----------- ----------- -----------
Liabilities Current liabilities Accounts payable and accrued
liabilities $ 23,843 $ 24,713 Deferred revenue 7,716 5,079
----------- ----------- 31,559 29,792 Deferred revenue 4,577 3,759
----------- ----------- 36,136 33,551 ----------- -----------
Shareholders' equity Share capital 105,952 142,786 Contributed
surplus 17,035 5,226 Retained earnings 45,090 60,494 Accumulated
other comprehensive income 42,711 51,009 ----------- -----------
210,788 259,515 ----------- ----------- $ 246,924 $ 293,066
----------- ----------- ----------- ----------- EXFO
Electro-Optical Engineering Inc. Unaudited Interim Consolidated
Statements of Earnings (in thousands of US dollars, except share
and per share data) Three months Nine months Three months Nine
months ended ended ended ended May 31, 2009 May 31, 2009 May 31,
2008 May 31 2008 ------------- ------------- -------------
------------- Sales $ 43,636 $ 136,371 $ 48,581 $ 132,847 Cost of
sales(1),(2) 16,441 52,274 19,004 55,208 -------------
------------- ------------- ------------- Gross margin 27,195
84,097 29,577 77,639 ------------- ------------- -------------
------------- Operating expenses Selling and administrative(1)
16,732 49,623 15,660 44,160 Net research and development(1) 7,781
22,327 7,373 19,570 Amortization of property, plant and equipment
1,166 3,374 1,071 3,045 Amortization of intangible assets 1,355
3,920 1,015 2,469 Impairment of goodwill 21,713 21,713 - -
------------- ------------- ------------- ------------- Total
operating expenses 48,747 100,957 25,119 69,244 -------------
------------- ------------- ------------- Earnings (loss) from
operations (21,552) (16,860) 4,458 8,395 Interest income 42 683 964
4,063 Foreign exchange gain (loss) (4,687) 971 (59) (907)
------------- ------------- ------------- ------------- Earnings
(loss) before income taxes (26,197) (15,206) 5,363 11,551 Income
taxes Current (88) 148 112 (7,080) Future (2,763) 50 2,432 11,881
Recognition of previously unrecognized future income tax assets - -
(5,324) (5,324) ------------- ------------- -------------
------------- (2,851) 198 (2,780) (523) ------------- -------------
------------- ------------- Earnings (loss) before extraordinary
gain (23,346) (15,404) 8,143 12,074 Extraordinary gain - - 3,036
3,036 ------------- ------------- ------------- ------------- Net
earnings (loss) for the period $ (23,346) $ (15,404) $ 11,179 $
15,110 ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- Basic
earnings (loss) before extraordinary gain per share $ (0.39) $
(0.25) $ 0.12 $ 0.18 Diluted earnings (loss) before extraordinary
gain per share $ (0.39) $ (0.25) $ 0.12 $ 0.17 Basic and diluted
net earnings (loss) per share $ (0.39) $ (0.25) $ 0.16 $ 0.22 Basic
weighted average number of shares outstanding (000's) 59,613 62,609
68,907 68,964 Diluted weighted average number of shares outstanding
(000's) 59,613 62,609 69,467 69,543 (1) Stock-based compensation
costs included in: Cost of sales $ 37 $ 97 $ 37 $ 112 Selling and
administrative 238 637 218 598 Net research and development 108 296
79 194 ------------- ------------- ------------- ------------- $
383 $ 1,030 $ 334 $ 904 ------------- ------------- -------------
------------- ------------- ------------- -------------
------------- (2) The cost of sales is exclusive of amortization,
shown separately. EXFO Electro-Optical Engineering Inc. Unaudited
Interim Statements of Comprehensive Income (Loss) and Accumulated
Other Comprehensive Income (in thousands of US dollars)
Comprehensive income (loss) Three months Nine months Three months
Nine months ended ended ended ended May 31, 2009 May 31, 2009 May
31, 2008 May 31 2008 ------------- ------------- -------------
------------- Net earnings (loss) for the period $ (23,346) $
(15,404) $ 11,179 $ 15,110 Foreign currency translation adjustment
31,986 (9,593) (3,511) 16,222 Changes in unrealized losses on
short-term investments - 22 (50) 40 Unrealized gains (losses) on
forward exchange contracts 7,425 (1,238) 295 2,844 Reclassification
of realized gains (losses) on forward exchange contracts in net
earnings 1,849 3,083 (1,218) (3,145) Future income taxes effect of
the above items (2,875) (572) 286 87 ------------- -------------
------------- ------------- Comprehensive income (loss) $ 15,039 $
(23,702) $ 6,981 $ 31,158 ------------- ------------- -------------
------------- ------------- ------------- -------------
------------- Accumulated other comprehensive income Nine months
Nine months ended ended May 31, 2009 May 31, 2008 -------------
------------- Foreign currency translation adjustment Cumulative
effect of prior periods $ 51,129 $ 53,418 Current period (9,593)
16,222 ------------- ------------- 41,536 69,640 -------------
------------- Unrealized gains (losses) on forward exchange
contracts Cumulative effect of prior periods (96) 1,948 Current
period, net of realized gains (losses) and future income taxes
1,273 (214) ------------- ------------- 1,177 1,734 -------------
------------- Unrealized losses on short-term investments
Cumulative effect of prior periods (24) (55) Current period, net of
future income taxes 22 40 ------------- ------------- (2) (15)
------------- ------------- Accumulated other comprehensive income
$ 42,711 $ 71,359 ------------- ------------- -------------
------------- Total retained earnings and accumulated other
comprehensive income amounted to $128,141 and $87,801 as at May 31,
2008, and 2009, respectively. EXFO Electro-Optical Engineering Inc.
Unaudited Interim Consolidated Statements of Retained Earnings and
Contributed Surplus (in thousands of US dollars) Retained earnings
Nine months Nine months ended ended May 31, 2009 May 31, 2008
------------- ------------- Balance - Beginning of the period $
60,494 $ 42,330 Add (deduct) Net earnings (loss)for the period
(15,404) 15,110 Premium on redemption of share capital - (658)
------------- ------------- Balance - End of the period $ 45,090 $
56,782 ------------- ------------- ------------- -------------
Contributed surplus Nine months Nine months ended ended May 31,
2009 May 31, 2008 ------------- ------------- Balance - Beginning
of the period $ 5,226 $ 4,453 Add (deduct) Stock-based compensation
costs 1,012 919 Reclassification of stock-based compensation costs
to share capital upon exercise of stock awards (460) (387) Discount
on redemption of share capital 11,257 - ------------- -------------
Balance - End of the period $ 17,035 $ 4,985 -------------
------------- ------------- ------------- EXFO Electro-Optical
Engineering Inc. Unaudited Interim Consolidated Statements of Cash
Flows (in thousands of US dollars) Three months Nine months Three
months Nine months ended ended ended ended May 31, 2009 May 31,
2009 May 31, 2008 May 31, 2008 ------------- -------------
------------- ------------- Cash flows from operating activities
Net earnings (loss) for the period $ (23,346) $ (15,404) $ 11,179 $
15,110 Add (deduct) items not affecting cash Change in discount on
short-term investments (18) 573 533 1,521 Stock-based compensation
costs 383 1,030 334 904 Amortization 2,521 7,294 2,086 5,514
Deferred revenue (178) 3,245 (937) (435) Write-down of capital
assets 237 237 - - Impairment of goodwill 21,713 21,713 - - Future
income taxes (2,763) 50 (2,892) 6,557 Extraordinary gain - -
(3,036) (3,036) Change in unrealized foreign exchange (gain) loss
2,516 (1,541) 86 526 ------------- ------------- -------------
------------- 1,065 17,197 7,353 26,661 Change in non-cash
operating items Accounts receivable 3,456 639 (326) (145) Income
taxes and tax credits (1,845) (2,189) (1,789) (11,437) Inventories
568 689 (3,585) (2,878) Prepaid expenses (104) (338) (110) (506)
Accounts payable and accrued liabilities (1,301) (539) (116)
(3,075) ------------- ------------- ------------- -------------
1,839 15,459 1,427 8,620 ------------- ------------- -------------
------------- Cash flows from investing activities Additions to
short-term investments (94,435) (349,899) (235,160) (644,220)
Proceeds from disposal and maturity of short-term investments
97,936 374,042 277,791 686,371 Additions to capital assets(1)
(1,507) (5,967) (1,370) (5,056) Business combinations, net of cash
acquired (2,414) (2,414) (40,938) (40,938) -------------
------------- ------------- ------------- (420) 15,762 323 (3,843)
------------- ------------- ------------- ------------- Cash flows
from financing activities Change in bank loan - - 786 1,485
Exercise of stock options 10 41 51 61 Redemption of share capital -
(26,078) (3,219) (3,393) ------------- ------------- -------------
------------- 10 (26,037) (2,382) (1,847) -------------
------------- ------------- ------------- Effect of foreign
exchange rate changes on cash 424 (15) 3 111 -------------
------------- ------------- ------------- Change in cash 1,853
5,169 (629) 3,041 Cash - Beginning of period 9,230 5,914 9,211
5,541 ------------- ------------- ------------- ------------- Cash
- End of period $ 11,083 $ 11,083 $ 8,582 $ 8,582 -------------
------------- ------------- ------------- -------------
------------- ------------- ------------- (1) As at May 31, 2008
and 2009, unpaid purchases of capital assets amounted to $35,000
and $324,000, respectively. DATASOURCE: EXFO ELECTRO-OPTICAL
ENGINEERING INC. CONTACT: Vance Oliver, Manager, Investor
Relations, (418) 683-0913, Ext. 3733,
Copyright