UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
August 21, 2008
AVANEX CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
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000-29175
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94-3285348
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(State or other jurisdiction of
incorporation)
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(Commission File Number)
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(IRS Employer
Identification No.)
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40919 Encyclopedia Circle
Fremont, California 94538
(Address of principal executive offices, including
zip code)
(510) 897-4188
(Registrants telephone number, including area code)
(Former name or former address, if changed
since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 2.02.
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Results of Operations and Financial Condition
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On August 21,
2008, Avanex Corporation (the Company) issued a press release reporting its results for the fourth quarter and fiscal year ended June 30, 2008. The press release is furnished herewith as Exhibit 99.1 and is incorporated herein
by reference.
This information shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended
(the Exchange Act), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Non-GAAP Financial Measures
The Companys press release
includes non-GAAP net income (loss) and non-GAAP net income (loss) per share to provide the reader with greater transparency to information used by management in its financial and operational decision-making, to help the reader better understand the
Companys operating results and to provide historical comparability. The Company also believes that when GAAP net income (loss) and GAAP net income (loss) per share are viewed in conjunction with non-GAAP net income (loss) and non-GAAP net
income (loss) per share, readers are provided with a more meaningful understanding of the Companys ongoing operating performance. In addition, management uses these measures for reviewing the Companys financial results. The primary
adjustments from GAAP net income (loss) and GAAP net income (loss) per share that are reflected in the non-GAAP financial measures provided are described in more detail below:
Share-Based Payments.
The Company excludes share-based payments to calculate non-GAAP net income (loss) and non-GAAP net income (loss) per share. Financial Accounting Standards Board Statement No. 123
(revised) (SFAS 123(R)), Share-Based Payment, became effective and was adopted by the Company during the quarter ended September 30, 2005. Under SFAS 123(R), all share-based payments to employees, including grants of
employee stock options, are to be expensed in the financial statements based on their fair value determined by applying a fair value measurement method. The Company believes that excluding share-based payments from GAAP net income (loss) and GAAP
net income (loss) per share provides investors with historical comparability in its financial reporting, as well as comparability with competitors operating results. In addition, the Company believes that excluding share-based payments
provides greater transparency when reviewing the current operating performance of the overall business.
Amortization of Intangibles.
The Company
excludes amortization of intangibles to calculate non-GAAP net income (loss) and non-GAAP net income (loss) per share. The Companys amortization of intangibles primarily relates to its acquisitions of the optical components businesses of
Corning, Alcatel and Vitesse in 2003 and acquisition of certain assets from Essex Corporation in 2007. These adjustments have been excluded because management focuses primarily on the current controllable operating expenses of the business, which
excludes amortization. In addition, the Company believes that excluding amortization provides greater transparency when reviewing the current operating performance of the overall business. The Company believes that it is useful to investors to
provide non-GAAP measures that are indicative of the Companys core operating expenses and performance.
Restructuring.
The Company also
excludes restructuring charges to calculate non-GAAP net income (loss) and non-GAAP net income (loss) per share. Such charges are primarily due to workforce reductions and related costs to enhance the readers overall understanding of the
continuing operations of the Company, its core current financial performance and its prospects for the future. The Company has incurred substantial acquisition-related restructuring charges as well as restructuring charges resulting from material
changes to the Companys cost structure, which makes historical comparisons difficult. The Company believes that excluding restructuring charges from GAAP net income (loss) and GAAP net income (loss) per share provides investors with historical
comparability in its financial reporting as well as comparability with competitors operating results.
Gain (Loss) on Disposal of Property and
Equipment.
The Company also excludes its gain (loss) on the disposal of property and equipment to calculate non-GAAP net income (loss) and non-GAAP net income (loss) per share. From time to time, the Company disposes of property or equipment for
an amount greater than book value. These gains have been excluded from the calculation of non-GAAP net income (loss) and non-GAAP net income (loss) per share because such gains do not relate to the Companys primary business, which is the
design, manufacture
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and marketing of fiber optic-based products. Accordingly, the Company believes that excluding gain on the disposal of property and equipment provides greater
transparency when reviewing the current operating performance of its overall business. The Company believes that it is useful to investors to provide non-GAAP measures that are indicative of the Companys core operating performance. The Company
also believes that excluding these gains from GAAP net income (loss) and GAAP net income (loss) per share provides investors with comparability with competitors operating results.
Gain (Loss) on Sale of Subsidiary
. The Company excludes its gain (loss) on the sale of its subsidiary in France to calculate non-GAAP net income (loss) and non-GAAP net income (loss) per share. In February
2007, the Company entered into a share purchase agreement with Global Research Company, a société à responsibilité limitée incorporated under the laws of France, and Mr. Didier Sauvage, an individual and
former employee of the Companys, pursuant to which the Company sold ninety percent (90%) of the share capital and voting rights of its wholly owned subsidiary, Avanex France, a société anonyme incorporated under the laws of
France, which owned its semiconductor fabs and associated product lines located in Nozay, France. The sale closed on April 16, 2007. The purchasers changed the name of Avanex France to 3S Photonics following the closing. In July
2007, the Company entered into a settlement agreement with 3S Photonics that finalized the cash payments between the two parties under the share purchase agreement entered into in February 2007. As part of the settlement agreement, the Company
placed in an escrow account the amount of 2 million to provide for payment of certain vendor liabilities claimed by 3S Photonics. In March 2008, the parties finalized the liabilities and the remaining escrow funds of 1,512,506 were
returned to the Company and recognized as a gain on the subsidiary sale. These gains (losses) have been excluded from the calculation of non-GAAP net income (loss) and non-GAAP net income (loss) per share because such gains (losses) do not relate to
the Companys primary business, which is the design, manufacture and marketing of fiber optic-based products. Accordingly, the Company believes that excluding gain (loss) on the sale of its subsidiary provides greater transparency when
reviewing the current operating performance of its overall business. The Company believes that it is useful to investors to provide non-GAAP measures that are indicative of the Companys core operating performance. The Company also believes
that excluding this gain from GAAP net income (loss) and GAAP net income (loss) per share provides investors with comparability with competitors operating results.
Operating Expenses for Subsidiary until the Closing.
The Company also excludes operating expenses incurred at its subsidiary in France until the closing on April 16, 2007 of the transaction described above
with Global Research Company and Mr. Didier Sauvage to calculate non-GAAP net income (loss) and non-GAAP net income (loss) per share. These expenses have been excluded from the calculation of non-GAAP net income (loss) and non-GAAP net income
(loss) per share because management believes the exclusion of such expenses provides investors with historical comparability in its financial reporting as well as with comparability with competitors operating results.
Gain from Legal Settlement.
The Company excludes its gain on the legal settlement with 3S Photonics to calculate non-GAAP net income (loss) and non-GAAP net
income (loss) per share. In June 2008, the Company and 3S Photonics settled their remaining disputes. While neither side admitted liability, the two parties agreed to a settlement that included payables, receivables, and lost profits under the
parties terminated Global Distribution Agreement, and a release by both parties of all claims asserted against each other. With this resolution, there is no further litigation between the Company and 3S Photonics. These gains (losses) have
been excluded from the calculation of non-GAAP net income (loss) and non-GAAP net income (loss) per share because such gains (losses) do not relate to the Companys primary business, which is the design, manufacture and marketing of fiber
optic-based products. Accordingly, the Company believes that excluding gain (loss) on the sale of its subsidiary provides greater transparency when reviewing the current operating performance of its overall business. The Company believes that it is
useful to investors to provide non-GAAP measures that are indicative of the Companys core operating performance. The Company also believes that excluding this gain from GAAP net income (loss) and GAAP net income (loss) per share provides
investors with historical comparability in its financial reporting as well as with comparability with competitors operating results.
Arbitration
Expenses
. The Company excludes operating expenses incurred in connection with its arbitration with 3S Photonics to calculate non-GAAP net income (loss) and non-GAAP net income (loss) per share. These expenses have been excluded from the
calculation of non-GAAP net income (loss) and non-GAAP net income (loss) per share because management believes the exclusion of such expenses provides investors with historical comparability in its financial reporting as well as with
competitors operating results.
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Due Diligence Expenses Related to Abandoned Acquisition Activity
. The Company excludes expenses incurred in
connection with contemplated, but subsequently abandoned acquisition activity to calculate non-GAAP net income (loss) and non-GAAP net income (loss) per share. From time to time, the Company incurs business, legal and financial diligence expenses
with respect to contemplated, but subsequently abandoned merger activity. These expenses have been excluded from the calculation of non-GAAP net income (loss) and non-GAAP net income (loss) per share because management believes the exclusion of such
expenses provides investors with historical comparability in its financial reporting as well as with competitors operating results. The Company also believes that it is useful to investors to provide non-GAAP measures that are indicative of
the Companys core operating performance. Accordingly, the Company believes that excluding expenses related to contemplated, but subsequently abandoned acquisition activity provides greater transparency when reviewing the current operating
performance of its overall business.
There are limitations associated with using non-GAAP financial measures because the non-GAAP financial measures are
not prepared in accordance with generally accepted accounting principles, exclude certain items that may have a material impact upon our reported financial results and may be different from non-GAAP financial measures used by other companies.
Management compensates for these limitations through its review of operating results on a GAAP basis each quarter and by providing GAAP net income (loss) and net income (loss) per share in its earnings release. The presentation of non-GAAP financial
information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with generally accepted accounting principles in the United States. The non-GAAP financial measures are
meant to supplement, and be viewed in conjunction with, GAAP financial measures. Investors should review the information regarding non-GAAP financial measures provided in our press release.
Item 9.01.
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Financial Statements and Exhibits.
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Exhibit No.
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Description
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99.1
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Press Release dated as of August 21, 2008
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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AVANEX CORPORATION
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By:
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/s/ MARK WEINSWIG
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Mark Weinswig
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Vice President, Finance and Treasurer and Interim Chief Financial Officer
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Date: August 21, 2008
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EXHIBIT INDEX
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Exhibit No.
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Description
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99.1
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Press Release dated as of August 21, 2008
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