STLW Stratos Intl (MM)

Stratos International Announces Second Quarter Results CHICAGO, Dec. 3 /PRNewswire-FirstCall/ -- Stratos International, Inc., a leading supplier of high data rate optical and electronic subsystems and components, today announced financial results for its second quarter ended October 31, 2003. Sales for the second quarter of fiscal year 2004 were $7.1 million, a sequential increase of 8% from $6.6 million in the first quarter. The Company also recorded license fees and royalty income of $113,000 in the second quarter of fiscal 2004. Sales for the second quarter of fiscal year 2003 were $11.1 million. The net loss for the second quarter of fiscal 2004, based on generally accepted accounting principles (GAAP), was $7.5 million or $1.02 per share, compared with a net loss of $19.5 million or $2.67 per share for the second quarter of fiscal 2003, and a net loss of $7.3 million or $0.99 per share for the first quarter of fiscal 2004. Sales for the six months ended October 31, 2003 were $13.7 million, down 37% from $21.8 million for the same period last year. License fees and royalty income for the first six months were $619,000. The net loss for the first six month ended October 31, 2003, based on generally accepted accounting principles (GAAP), was $14.8 million or $2.00 per share compared to $48.4 million or $6.63 per share for the same period last year. NON-GAAP FINANCIAL RESULTS The Company provides non-GAAP financial measures to complement its consolidated financial statements presented in accordance with GAAP. These non-GAAP financial measures are intended to supplement the user's overall understanding of the Company's financial performance and its prospects for the future. Specifically, the Company believes the non-GAAP results provide useful information to both management and investors by identifying certain expenses, gains and losses that, when excluded from GAAP results, may provide additional understanding of the Company's core operating results or business performance. However, these non-GAAP financial measures are not intended to supersede or replace the Company's GAAP results. A detailed reconciliation of the non-GAAP results to GAAP results is provided in the "NON-GAAP Condensed Consolidated Statements of Operations" schedules below. The non-GAAP net loss for the second quarter of fiscal 2004, which excludes restructuring charges for severance pay and related costs, a reserve for excess and obsolete inventory and reserve for deferred tax assets, was $4.1 million or $0.55 per share, compared with a non-GAAP net loss of $6.4 million or $0.87 per share for the second quarter of fiscal 2003, and compared with a non-GAAP net loss of $4.1 million or $0.55 per share for the first quarter of fiscal 2004. The non-GAAP net loss for the first six months, which excludes restructuring charges for severance pay and related costs, a reserve for excess and obsolete inventory, reserve for deferred tax assets and a gain from the sale of our Bandwidth semiconductor business unit, was $8.2 million or $1.10 per share, compared with a non-GAAP net loss of $12.9 million or $1.77 per share for the same period last year. "As of November 7th, 2003, we completed our acquisition of Sterling Holding Company and changed the Company name to Stratos International, Inc.," Jim McGinley, CEO of Stratos, remarked. "The addition of Sterlings Trompeter and Semflex product lines will now enable Stratos to offer both high-speed transmission coax and optical interconnects and subsystems to our customers throughout the Communications Industry. We are excited about both the product and the customer opportunities that will arise from the new combined company." WEBCAST/CONFERENCE CALL Stratos International will host a live audio webcast and conference call on Wednesday, December 3, 2003 at 5:00 pm EST. Investors and other interested parties may listen to the live webcast by visiting the investor relations section of the Stratos International website at http://www.stratoslightwave.com/ . James W. McGinley and David A. Slack will discuss the Company's earnings and operations. A replay of the conference call will be available for 48 hours beginning at 7:00 pm EST. The replay number is 1-800-642-1687 with a pass code of 3403990. A webcast replay will also be available on the Company's website. About Stratos International Stratos International, Inc., with headquarters in Chicago, develops, manufactures and sells optical subsystems, fiber optic components and electronic interconnect components for high data rate networking, data storage, military, harsh environment, television/broadcast, video and telecommunication markets and applications. This press release contains predictions, estimates and other forward- looking statements regarding anticipated revenue growth, customer orders, manufacturing capacity and financial performance. All forward-looking statements in this press release are based on information available to the company as of the date hereof, and we assume no obligation to update any such forward-looking statements. Forward-looking statements are subject to risks and uncertainties and actual results may differ materially from any future performance suggested. These factors include rapid technological change in the optical communications industry; fluctuations in operating results; the Company's dependence on a few large customers; and competition. Other risk factors that may affect the Company's performance are listed in the Company's annual report on Form 10-K and other reports filed from time to time with the Securities and Exchange Commission. For additional information contact Stratos International at 7444 W. Wilson Ave., Chicago, IL USA 60706-4549; Tel: 708.867.9600. Fax: 708.867.0996. Website: http://www.stratoslightwave.com/. STRATOS INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (In thousands, except per share amounts and shares outstanding) Three Months Ended Six Months Ended October 31, October 31, 2003 2002 2003 2002 Revenue: Net sales $7,111 $11,051 $13,682 $21,774 License fees and royalties 113 324 619 532 Total 7,224 11,375 14,301 22,306 Costs and expenses: Cost of products sold 8,020 16,445 15,498 27,202 Research and development 1,807 8,886 4,697 15,630 Sales and marketing 1,327 2,074 2,845 4,294 General and administrative 3,775 3,769 6,473 7,207 Total costs and expenses 14,929 31,174 29,513 54,333 Loss from operations (7,705) (19,799) (15,212) (32,027) Investment income 184 264 423 638 Loss before income taxes (7,521) (19,535) (14,789) (31,389) Income taxes - - - - Loss before cumulative effect of a change in accounting principle (7,521) (19,535) (14,789) (31,389) Cumulative effect of a change in accounting principle - - - (16,982) Net loss $(7,521) $(19,535) $(14,789) $(48,371) Net loss per share, basic and diluted : Before cumulative effect of a change in accounting principle $(1.02) $(2.67) $(2.00) $(4.30) Cumulative effect of a change in accounting principle - $- - $(2.33) Net loss $(1.02) $(2.67) $(2.00) $(6.63) Weighted average number of Common Shares outstanding: Basic 7,392,495 7,310,661 7,378,408 7,294,395 Diluted 7,392,495 7,310,661 7,378,408 7,294,395 STRATOS INTERNATIONAL, INC. NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (In thousands, except per share amounts and shares outstanding) Three Months Ended Six Months Ended October 31, October 31, 2003 2002 2003 2002 Revenue: Net sales $7,111 $11,051 $13,682 $21,774 License fees and royalties 113 324 619 532 Total 7,224 11,375 14,301 22,306 Costs and expenses: Cost of products sold 7,273 11,278 13,979 21,649 Research and development 1,807 5,676 4,223 12,351 Sales and marketing 1,327 1,976 2,809 4,140 General and administrative 3,775 3,365 7,284 6,308 Total costs and expenses 14,182 22,295 28,295 44,448 Loss from operations (6,958) (10,920) (13,994) (22,142) Investment income 184 264 423 638 Loss before income taxes (6,774) (10,656) (13,571) (21,504) Provision (credit) for income taxes (2,710) (4,262) (5,428) (8,601) Net loss $(4,064) $(6,394) $(8,143) $(12,903) Net loss per share, basic and diluted $(0.55) $(0.87) $(1.10) $(1.77) Weighted average number of Common Shares outstanding: Basic 7,392,495 7,310,661 7,378,408 7,294,395 Diluted 7,392,495 7,310,661 7,378,408 7,294,395 STRATOS INTERNATIONAL, INC. A reconciliation between net loss on a GAAP basis and non-GAAP net loss is as follows (In thousands) Three Months Ended Six Months Ended October 31, October 31, 2003 2002 2003 2002 GAAP loss before cumulative effect of a change in accounting principle $(7,521) $(19,535) $(14,789) $(48,371) Cost of Goods Sold: Net changes, inventory reserve 682 4,821 1,177 4,863 Restructuring cost - Severance pay and related cost 48 346 287 689 Other restructuring costs 17 - 55 - Total non-GAAP COGS adjustments 747 5,167 1,519 5,552 R&D Expenses: Restructuring cost - Severance pay and related cost - 474 474 543 Write-off of purchased in process R&D - - - 2,070 Impairment of certain fixed assets - - - 666 Other restructuring costs - 2,736 - - Total non-GAAP R&D adjustments - 3,210 474 3,279 Selling Expenses: Restructuring cost - Severance pay and related cost - 98 37 154 Other restructuring costs - - - - Total non-GAAP Selling adjustments - 98 37 154 Administration Expenses: Restructuring cost - Severance pay and related cost - 324 131 819 Gain on sale of business unit - - (1,233) - Impairment of goodwill - - - 16,982 Other restructuring costs - 80 290 81 Total non-GAAP Admin. adjustments - 404 (812) 17,882 Deferred income tax valuation reserve 2,710 4,262 5,428 8,601 Non-GAAP net loss (4,064) (6,394) (8,143) (12,903) STRATOS INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) October 31, April 30, 2003 2003 ASSETS CURRENT ASSETS Cash and cash equivalents $18,627 $43,649 Short term investments 32,703 17,879 Accounts receivable - net 5,874 7,701 Inventories 7,061 7,794 Recoverable income taxes 2,391 2,391 Prepaid expenses 1,061 2,083 TOTAL CURRENT ASSETS 67,717 81,497 PROPERTY, PLANT AND EQUIPMENT 95,111 93,667 Less allowances for depreciation 69,628 67,415 NET PROPERTY, PLANT AND EQUIPMENT 25,483 26,252 OTHER ASSETS 15,270 16,863 TOTAL ASSETS 108,470 124,612 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts and notes payable $5,522 $5,063 Current portion of long-term debt 2,879 6,331 Other current liabilities 5,409 5,006 TOTAL CURRENT LIABILITIES 13,810 16,400 OTHER LIABILITIES Long term debt 1,791 298 Deferred Income Taxes 6,528 6,519 Minority Interest 245 350 SHAREHOLDERS' EQUITY Common Stock 74 74 Paid in capital 284,391 284,254 Retained earnings (deficit) (198,194) (183,406) Other shareholders' equity (175) 123 TOTAL SHAREHOLDERS' EQUITY 86,096 101,045 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $108,470 $124,612 DATASOURCE: Stratos International, Inc. CONTACT: David A. Slack, CFO, or Michael T. Perkins, Manager of Investor Relations, both of Stratos International, +1-708-867-9600 Web site: http://www.stratoslightwave.com/

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