Stratos International Announces Third Quarter Results CHICAGO,
March 3 /PRNewswire-FirstCall/ -- Stratos International, Inc., a
leading provider of optoelectronic, fiber optic, and radio
frequency (RF) microwave subsystems and components today announced
financial results for its third quarter ended January 31, 2004. The
Company completed the acquisition of Sterling Holding Company on
November 6, 2003 as previously announced. The financial results for
the third quarter of fiscal 2004 include Sterling's operating
results from that date. Sales for the third quarter of fiscal year
2004 were $16.0 million, which included $8.6 million in sales from
the product lines acquired with Sterling. Sales revenues were at
the high end of the range provided by management on the Company's
second quarter conference call held on December 3, 2003. By
comparison, the Company reported sales of $7.1 million for the
second quarter, and $8.1 million for the third quarter of fiscal
year 2003. The Company also recorded license fees and royalty
income of $396,000 in the third quarter of fiscal year 2004. The
net loss for the third quarter of fiscal 2004, based on generally
accepted accounting principles (GAAP), was $5.4 million, or $0.40
per share, which includeda net operating profit of $533,000 from
the product lines acquired with Sterling. By comparison, the
Company reported a net loss of $9.3 million or $1.27 per share for
the third quarter of fiscal 2003, and a net loss of $7.5 million or
$1.02 per sharefor the second quarter of fiscal 2004. Sales for the
nine months ended January 31, 2004 were $29.7 million, compared to
$29.9 million for the same period last year. License fees and
royalty income for the first nine months was $1.0 million. The net
loss for the first nine months ended January 31, 2004, based on
generally accepted accounting principles (GAAP), was $20.2 million
or $2.14 per share compared to $57.7 million or $7.90 per share for
the same period last year. Jim McGinley, CEO of Stratos, remarked,
"The positive impact of the Sterling acquisition was reflected in
the third quarter's operating results. This combined with the
benefits realized from the consolidation and reorganization of our
optical product groups has positioned the Company with the
operating leverage required to return to profitability. Telecom and
Enterprise markets showed signs of renewed activity this quarter
with an increase in orders from first tier OEMs. Military needs for
information is rising as the transition to digital communications
has created significant opportunities for Stratos' advanced harsh
environment fiber optic end-to-end solutions." 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 orbusiness 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 third quarter of fiscal 2004, which
excludes a reserve for excess and obsolete inventory and a reserve
for deferred tax assets, was $3.2 million or $0.23 per share,
compared with a non-GAAP net loss of $3.5 million or $0.48 per
share for the third quarter of fiscal 2003, and compared with a
non-GAAP net loss of $4.1 million or $0.55 per share for the second
quarter of fiscal 2004. The non-GAAP net loss for the first nine
months, which excludes restructuring charges for severance pay and
related costs, other restructuring costs, a reserve for excess and
obsolete inventory, a reserve for deferred tax assets and a gain
from the sale of our Bandwidth semiconductor business unit, was
$11.3 million or $1.20 per share, compared with a non-GAAP net loss
of $16.4 million or $2.25 per share for the same period last year.
WEBCAST/CONFERENCE CALL Stratos International will host a live
audio webcast and conference call on Wednesday, March 3, 2004 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 onthe 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 timeto 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 Nine Months Ended January 31, January 31, 2004 2003
2004 2003 Revenue: Net sales $16,034 $8,109 $29,716 $29,884 License
fees and royalties 396 3,269 1,016 3,800 Total 16,430 11,378 30,732
33,684 Costs and expenses: Cost of products sold 12,608 11,462
28,105 38,664 Research and development 2,054 5,265 6,754 20,896
Sales and marketing 2,429 1,362 5,274 5,656 General and
administrative 4,883 2,920 11,356 10,126 Total costs and expenses
21,974 21,009 51,489 75,342 Loss from operations (5,544) (9,631)
(20,757) (41,658) Investment income 168 293 592 931 Loss before
income taxes (5,376) (9,338) (20,165) (40,727) Income taxes - - - -
Loss before cumulative effect of a change in accounting principle
(5,376) (9,338) (20,165) (40,727) Cumulative effect of a change in
accounting principle - - - (16,982) Net loss (5,376) (9,338)
(20,165) (57,709) Deduct Series B Preferred Dividend Requirement
(55) - (55) - Net loss available to common shares $(5,431) $(9,338)
$(20,220) $(57,709) Net loss per share available to common shares,
basic and diluted : Before cumulative effect of a change in
accounting principle $(0.40) $(1.27) $(2.14) $(5.57) Cumulative
effect of a change in accounting principle $- $- $- $(2.33) Net
loss $(0.40) $(1.27) $(2.14) $(7.90) Preferred stock dividend
requirement $- $- $(0.01) $- Net loss per share available to common
shares $(0.40) $(1.27) $(2.15) $(7.90) Weighted average number of
Common Shares outstanding: Basic 13,507,019 7,339,626 9,421,278
7,309,472 Diluted 13,507,019 7,339,626 9,421,278 7,309,472 STRATOS
INTERNATIONAL, INC. NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (unaudited) (In thousands, except per share amounts and
shares outstanding) Three Months Ended Nine Months Ended January
31, January 31, 2004 2003 2004 2003 Revenue: Net sales $16,034
$8,109 $29,716 $29,884 License fees and royalties 396 3,269 1,016
3,800 Total 16,430 11,378 30,732 33,684 Costs and expenses: Cost of
products sold 12,491 9,172 26,485 30,821 Research and development
2,054 4,195 6,278 16,546 Sales and marketing 2,430 1,336 5,239
5,476 General and administrative 4,882 2,839 12,167 9,147 Total
costs and expenses 21,857 17,542 50,169 61,990 Loss from operations
(5,427) (6,164) (19,436) (28,306) Investment income 168 293 592 931
Loss before income taxes (5,259) (5,871) (18,844) (27,375)
Provision (credit) for income taxes (2,104) (2,348) (7,538)
(10,949) Net loss (3,155) (3,523) (11,307) (16,426) Deduct Series B
Preferred Dividend Requirement (55) - (55) - Net loss available to
common shares $(3,210) $(3,523) $(11,362) $(16,426) Net loss per
share available to common shares, basic and diluted $(0.23) $(0.48)
$(1.20) $(2.25) Preferred stock dividend requirement $(0.01) $-
$(0.01) $- Net loss per share available to common shares $(0.24)
$(0.48) $(1.21) $(2.25) Weighted average number of Common Shares
outstanding: Basic 13,507,019 7,339,626 9,421,278 7,309,472 Diluted
13,507,019 7,339,626 9,421,278 7,309,472 STRATOS INTERNATIONAL,
INC. A reconciliation between net loss on a GAAP basis and non-GAAP
net loss is as follows (unaudited) (In thousands) Three Months
Ended Nine Months Ended January 31, January 31, 2004 2003 2004 2003
GAAP loss before cumulative effect of a change in accounting
principle $(5,376) $(9,338) $(20,165) $(57,709) Cost of Goods Sold:
Net changes, inventory reserve 117 459 1,294 5,322 Restructuring
cost -Severance pay and related cost - 158 271 847 Impairment of
certain fixed assets - 1,673 - 1,673 Other restructuring costs - -
56 - Total non-GAAP COGS adjustments 117 2,290 1,621 7,842 R&D
Expenses: Restructuring cost -Severance pay and related cost - 291
474 835 Write-off of purchased in process R&D - - - -
Impairment of certain fixed assets - 780 - 3,515 Other
restructuring costs - - - - Total non-GAAP R&D adjustments -
1,071 474 4,350 Selling Expenses: Restructuring cost -Severance pay
and related cost - 6 37 159 Other restructuring costs - 20 - 20
Total non-GAAP Selling adjustments - 26 37 179 Administration
Expenses: Restructuring cost -Severance pay and related cost - 11
131 830 Gain on sale of business unit - - (1,233) - Impairment of
goodwill - - - 16,982 Other restructuring costs - 69 290 151 Total
non-GAAP Admin. adjustments - 80 (812) 17,963 Deferred income tax
valuation reserve 2,104 2,348 7,538 10,949 Non-GAAP net loss
(3,155) (3,523) (11,307) (16,426) STRATOS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) January 31,
April 30, 2004 2003 ASSETS CURRENT ASSETS Cash and cash equivalents
$18,101 $43,649 Short term investments 24,388 17,879 Accounts
receivable - net 11,499 7,701 Inventories 15,474 7,794 Recoverable
income taxes 4,974 2,391 Prepaid expenses 1,817 2,083 TOTAL CURRENT
ASSETS 76,253 81,497 PROPERTY, PLANT AND EQUIPMENT 103,395 93,667
Less allowances for depreciation 70,631 67,415 NET PROPERTY, PLANT
AND EQUIPMENT 32,764 26,252 OTHER ASSETS 41,673 16,863 TOTAL ASSETS
150,690 124,612 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT
LIABILITIES: Accounts and notes payable $8,596 $5,063 Current
portion of long-term debt 2,519 6,331 Other current liabilities
6,929 5,006 TOTAL CURRENT LIABILITIES 18,044 16,400 OTHER
LIABILITIES Long term debt 1,313 298 Deferred Income Taxes 14,590
6,519 Minority Interest 204 350 REDEEMABLE PREFERRED STOCK 5,000 -
SHAREHOLDERS' EQUITY Preferred Stock - - Common Stock 13574 Paid in
capital 315,372 284,254 Retained earnings (deficit) (203,628)
(183,406) Other shareholders' equity (340) 123 TOTAL SHAREHOLDERS'
EQUITY 111,539 101,045 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$150,690 $124,612 DATASOURCE: Stratos International, Inc. CONTACT:
David A. Slack, CFO, or Sharon Ah Sam, Assistant to the CFO, both
of Stratos International, Inc., +1-708-867-9600 Web site:
http://www.stratoslightwave.com/
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