STLW Stratos Intl (MM)

/C O R R E C T I O N -- Stratos International, Inc./ In the news release, Stratos International (Nasdaq: STLW) Announces Third Quarter Results, issued yesterday, March 3, by Stratos International, Inc. over PR Newswire, we are advised by the company that the second to last sentence in the "WEBCAST/CONFERENCE CALL" paragraph should read "The replay number is 1-800-642-1687 with a conference ID of 5516589" rather than "... with a pass code of 3403990" as originally issued inadvertently. Complete, corrected release follows: 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 included a 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 share for 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 endedJanuary 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 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 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 conference ID of 5516589. A webcast replay will also be available on the Company's website. ABOUTSTRATOS 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 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 MonthsEnded 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 BPreferred 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 4744,350 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 taxvaluation 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 135 74 Paid incapital 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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