EXFO Electro-Optical Engineering Inc. announced first-quarter results for fiscal 2002. EXFO reported sales of $20.1 million for the quarter ended November 30, 2001 compared to $28.5 million for the same period in fiscal 2001. Pro forma net loss for the first quarter of fiscal 2002 was $1.9 million, or $0.03 per share, compared to pro forma net earnings of $7.6 million, or $0.16 per share, for the first quarter of 2001.
EXFO's net loss for the first quarter of 2002 was $19.1 million, or $0.33 per share, compared to net earnings of $7.5 million, or $0.16 per share, for the same period last year. Gross margin, including an inventory write-off of $3.5 million, amounted to 37.8% of sales for the first quarter of 2002 compared to 63.9% of sales for the same period in 2001. Excluding this non-recurring charge, gross margin would have reached 55.1%, in line with management's expectations based on actual sales for this quarter. Altogether, EXFO incurred restructuring charges of $3.9 million in the first quarter of fiscal 2002.
"There's no question, these are unprecedented times in the telecommunications industry," said Germain Lamonde, Chairman, President and CEO of EXFO. "We've taken appropriate actions to deal with this current situation, while protecting our long-term capabilities and intensifying our focus on gaining market share."
EXFO continued to introduce best-of-class products during the first quarter of fiscal 2002, namely the Packet Blazer Gigabit Ethernet test module and the FPMD-5600 Femtosecond Polarization Mode Dispersion Analyzer. The Company also closed its acquisition of Avantas Networks Corporation (renamed EXFO Protocol Inc.) on November 2, 2001. EXFO Protocol is a supplier of leading-edge fiber-optic testing and optical network performance management that supports a wide range of protocols and data transmission rates.
"We have already begun to leverage this acquisition with the introduction of our Gigabit Ethernet test module for metro and access networks," Mr. Lamonde said. "Based upon our newly acquired protocol-testing expertise, we also plan to deliver a fully integrated solution for physical-, optical- and protocol-layer testing in the near future, and we intend to take advantage of our long-established relationships in the carrier market with this new product."
Selling and administrative expenses amounted to $10.3 million, or 51.3% of sales, for the first quarter of fiscal 2002 compared to $8.9 million, or 31.3% of sales, for the same period in 2001. Gross research and development expenses totalled $4.2 million, or 20.9% of sales, for the first quarter of fiscal 2002 compared to $2.8 million, or 10.0% of sales, for the same period last year. The percentage increases in expenses were mainly due to decreased sales during the first quarter of 2002.
To align costs with current market conditions, EXFO implemented additional cost-cutting measures that will provide approximately $6 million in annualized pre-tax savings. The Company lowered operating expenses, froze employee salaries and reduced its workforce by 10%.
Due to the prolonged downturn in the telecommunications industry, EXFO forecasted sales between $14 million and $18 million and a pro forma net loss between $0.05 and $0.09 for the second quarter of fiscal 2002. "The telecommunications industry continues to be challenging, but I believe that our strong product innovation pipeline and synergies from our strategic acquisitions will return us to growth in the second half of fiscal 2002," Mr. Lamonde said. "We will be launching a number of major leading-edge products in upcoming weeks that will significantly increase our ability to gain market share."