JDS Uniphase announces fourth-quarter results

July 30, 2001
Sales for the fourth quarter ended June 30, 2001 were 35% below sales of $920 million for the quarter ended March 31, 2001 and 6% lower than pro forma combined sales of $641 million for the quarter ended June 30, 2000.

July 26, 2001 — JDS Uniphase Corp. (San Jose, CA) today reported sales of $3.2 billion for its fiscal year ended June 30, 2001 and sales of $601 million for its fourth quarter. Sales for the fourth quarter ended June 30, 2001 were 35% below sales of $920 million for the quarter ended March 31, 2001 and 6% lower than pro forma combined sales of $641 million for the quarter ended June 30, 2000.

Sales for the fiscal year ended June 30, 2001 of $3.2 billion were 83% above pro forma combined sales of $1.8 billion for the prior fiscal year. Pro forma combined sales for the prior fiscal year periods include the separately reported results of E-TEK Dynamics, Inc., which was acquired on June 30, 2000 in a transaction accounted for as a purchase, but exclude sales of SDL, Inc. which was acquired on February 13, 2001 in a transaction accounted for as a purchase.

“Fiscal year 2001 began as a period of rapid expansion for JDS Uniphase but concluded with a severe industry downturn. Our response to this downturn in the market was immediate and determined. Through our Global Realignment Program, we are taking decisive steps to modify our cost structure and reduce our expenditures to respond to the current industry environment while strengthening our financial position,” says Jozef Straus, Co-Chairman, President and CEO. “We continue to work aggressively to support our customers' current product needs and will continue to dedicate engineering talent and capital to research and development activities for their future product needs. While this downturn is very difficult, we believe that our focus on customer engagement, new products, a lower cost structure and greater financial strength will allow JDS Uniphase to emerge even stronger when industry growth resumes.”

Global Realignment Program

JDS Uniphase has been implementing a Global Realignment Program in response to the severe industry downturn. This program reflects the Company's commitment to remaining the industry leader in optical components and modules for telecommunications during the current business downturn and to position the Company for long term growth.

• The total cost of this program is now estimated to be $900-950 million of which $500 million was incurred through the end of the fourth quarter and the majority of the remaining amounts is expected to be charged in the first quarter of fiscal 2002. The charges recorded in the fourth quarter included $264 million in restructuring charges, $220 million in charges to cost of goods sold, and $16 million in charges to operating expenses. Included in the total costs of the Global Realignment Program are charges for obsolete inventory write-downs and accelerated depreciation, moving and employee costs related to the phasing out of certain facilities and equipment.

• The program is expected to reduce annual expenses by $700 million from the levels experienced at the commencement of the Global Realignment Program through reductions in manufacturing capacity, employment reductions, product rationalization, and decreased discretionary spending. The Company is in the process of vacating approximately two million square feet of space, or about 30% of the Company�s total space before the downturn. The Company expects a global employment reduction of 16,000, of which approximately 9,000 was completed by June 30. Most of the remaining reductions are expected to take place in the first quarter.

In addition to charges associated with the Global Realignment Program, the Company incurred charges of approximately $270 million for the write-down of excess inventory in the fourth quarter related to its lowered sales forecasts. All of the foregoing amounts are greater than estimates previously announced because of further reductions in sales forecasts.

The full impact of the Global Realignment Program will phase into the Company�s income statement over the first three quarters of fiscal 2002. The goal of the program is to create a cost structure that results in breakeven financial performance at $350 million in quarterly sales.

Financial Results

As announced in April, the Company has evaluated the carrying value of certain long-lived assets and acquired equity investments, consisting primarily of goodwill and the Company�s investment in ADVA. Pursuant to Generally Accepted Accounting Principles (GAAP), the majority of the goodwill was recorded based on stock prices at the time merger agreements were executed and announced. The Company�s policy is to assess enterprise level goodwill if the market capitalization of the Company is less than its net assets with goodwill being reduced to the extent net assets are greater than market capitalization.

Downturns in telecommunications equipment and financial markets have created unique circumstances with regard to the assessment of long-lived assets, and the Company sought the counsel of the Staff of the Securities and Exchange Commission on the interpretation of GAAP with regard to this matter. The Company has had communications with the Staff of the SEC, and will amend its Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 to reduce the carrying value of goodwill by $38.7 billion for that quarter. In addition, the Company has recorded a $6.1 billion reduction of goodwill for the quarter ended June 30, 2001 following further declines in its market capitalization.

Finally, approximately $300 million in certain amounts paid to SDL executives in connection with the acquisition which were previously recorded as acquisition costs in the quarter ended March 31, 2001 have been reclassified as a one-time charge for that period and the company also recorded a $715 million charge for that period to write down the value of its equity investment in ADVA. Because of the significant industry downturn the company is in the process of performing a review of its long-lived assets in accordance with GAAP, and this review may result in further charges being recorded for the fourth quarter of fiscal 2001 based on the value of such assets.

The largest portion of the firm's goodwill arose from the merger of JDS FITEL and Uniphase and the subsequent acquisition of SDL, E-TEK, and OCLI. The businesses associated with these business combinations remain significant operations within JDS Uniphase notwithstanding the current business downturn and change in market valuations.

Including reduction of goodwill and purchased intangibles, merger-related charges, realized and unrealized losses on equity investments, gain on the sale of a subsidiary, purchased intangibles amortization, payroll taxes on stock option exercises, stock compensation charges, and activity related to equity method investments, the company reported a loss of $7.9 billion or $5.99 per share for the quarter and $50.6 billion or $46.30 per share for the fiscal year ended June 30, 2001.

On a pro forma basis, excluding reduction of goodwill and purchased intangibles, merger-related charges, realized and unrealized losses on equity investments, gain on the sale of a subsidiary, purchased intangibles amortization, payroll taxes on stock option exercises, stock compensation charges, and activity related to equity method investments, the Company reported a loss of $477 million or $0.36 per share for the fourth quarter and net income of $67 million or $0.06 per share for the year ended June 30, 2001. These results reflect the costs of the Global Realignment Program and charges for the write-down of excess inventory.

The impact of pro forma adjustments listed above are summarized in the firm's pro forma financial tables that follow in this release. The Company�s financial condition remained strong with $1.6 billion in cash, money market and other highly liquid fixed income securities at June 30, 2001. The Company reported $65 million in cash flow from operations for the quarter and $354 million for the fiscal year and increased its cash balances through the sale of equity securities previously held as investments.

Guidance

On June 14, 2001, JDS projected revenue for the first quarter of fiscal 2002 would be $450 million. The company provides guidance based on its sales forecasts. These forecasts have been declining during the severe industry downturn and guidance was revised accordingly. JDS management does not yet see any positive signs of a reversal in the downward trend in the industry and now expects first quarter revenue to be below such earlier guidance and is not currently providing guidance for the first quarter or for future periods.

Pro forma results for the quarter ended June 30, 2001 exclude the $6,087.7 million reduction of goodwill and purchased intangibles, $11.4 million effect on gross profit related to purchase accounting adjustments of the value of inventory; $1,143.3 million of purchased intangibles amortization and in-process R&D (IPR&D) charges; $12.5 million refund of payroll taxes on stock option exercises; $562.0 million of realized and unrealized losses on equity investments; $30.4 million of non-cash stock compensation; and $30.6 million in activity related to investments accounted for under the equity method of accounting. Pro forma results for the quarter ended June 30, 2001 reflect costs of the Global Realignment Program and charges for the write-down of excess inventory. June 30, 2000 pro forma results include the separately reported results of E-TEK Dynamics Inc., which was acquired on June 30, 2000 in a transaction accounted for as a purchase. Pro forma results for the quarter ended June 30, 2000 exclude the $23.9 million effect on gross profit related to purchase accounting adjustments to the value of inventory, $546.2 million of purchased intangibles amortization and IPR&D charges, and $4.6 million of payroll taxes on stock option exercises.

Voice your opinion!

To join the conversation, and become an exclusive member of Laser Focus World, create an account today!