STLW Stratos Intl (MM)

Stratos International Announces Results for Fourth Quarter and Fiscal Year Ended April 30, 2004 Reports Q4 Sales of $19.7 million CHICAGO, June 24 /PRNewswire-FirstCall/ -- Stratos International, Inc. (NASDAQ:STLW), a leading provider of optoelectronic, fiber optic, and radio frequency (RF) and microwave subsystems and components, today announced financial results for its fourth quarter and full fiscal year ended April 30, 2004. Sales for the fourth quarter of fiscal year 2004 were $19.7 million. The Company also recorded license fees and royalty income of $428,000 in the fourth quarter of fiscal year 2004. For comparison, third quarter fiscal 2004 revenue for the 3 months ended January 31, 2004 was $16.0 million. Third quarter fiscal 2004 license fees and royalty income for the 3 months ended January 31, 2004 was $396,000. Jim McGinley, CEO of Stratos, remarked, "We are pleased to report our third consecutive quarter of revenue growth. Our fourth quarter results were driven by strong sequential growth in both the Optoelectronic and RF products. Optoelectronic product sales were up 35% sequentially from the third quarter with strong transceiver sales to the telecom and enterprise markets. The RF Microwave group grew 26% sequentially from the third quarter. Our balance sheet remains healthy with approximately $37 million of cash and short-term investments at quarter end." The net loss attributable to common shareholders for the fourth quarter of fiscal 2004 was $7.0 million, or $0.52 per share. By comparison, the Company reported a net loss attributable to common shareholders of $62.6 million or $8.52 per share for the fourth quarter of fiscal 2003, and a net loss attributable to common shareholders of $5.4 million or $0.40 per share for the third quarter of fiscal 2004. Full Fiscal Year 2004 Results Sales for the full fiscal year 2004 were $49.4 million, compared to $37.2 million for the same period last year. License fees and royalty income for the full fiscal year 2004 was $1.4 million, compared to $14.4 million. The net loss attributable to common shareholders for the full fiscal year 2004 was $27.2 million or $2.61 per share compared to $120.3 million or $16.44 per share for the same period last year. Fourth Quarter 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 fourth quarter of fiscal 2004, 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 other items, was $2.9 million or $0.22 per share, compared with a non-GAAP net income of $1.5 million or $0.21 per share for the fourth quarter of fiscal 2003, and compared with a non-GAAP net loss of $3.2 million or $0.24 per share for the third quarter of fiscal 2004. Full Year Non-GAAP Financial Results The non-GAAP net loss for the full fiscal year 2004, 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 $14.2 million or $1.36 per share, compared with a non-GAAP net loss of $14.9 million or $2.04 per share for the same period last year. The Company completed the acquisition of Sterling Holding Company, a leading designer, manufacturer and marketer of specialty RF and microwave components, on November 6, 2003 as previously announced. Financial results include Sterling's operating results from that date. The merger with Sterling provided Stratos with two leading brands, Trompeter and Semflex, a suite of highly profitable and complementary products, an expanded customer base and strong sales channels to further its penetration into the military and video markets. Company Exploring Strategic Alternatives In May, Stratos International announced its decision to explore various strategic alternatives to maximize shareholder value, including the possible sale of the Company. The Company has retained CIBC World Markets Corp. as its exclusive financial advisor. There is no assurance that a transaction will result involving the Company. In the meantime, the Company expects to continue operations as usual by seeking new business, developing new products and working with customers to maintain a high level of customer service. Webcast/Conference Call Stratos International will host a live audio webcast and conference call on Thursday, June 24, 2004 at 5:00 pm EDT. 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 EDT. The replay number is (706) 645-9291 with a conference ID of 8170644. A webcast replay will also be available on the Company's website. ABOUT STRATOS INTERNATIONAL Stratos International, Inc. is a leading designer, developer and manufacturer of active and passive optical, optoelectronic, RF and Microwave components, subsystems and interconnect products used in telecom, enterprise, military and video markets. Stratos has a rich history of optical and mechanical packaging expertise and has been a pioneer in developing several optical devices using innovative form factors for telecom, datacom and harsh environments application. This expertise, coupled with several strategic acquisitions, has allowed the Company to amass a broad range of products and build a strong IP portfolio of more than 100 patents. The Company is a market leader in several niches including high margin specialty optical products such as RJ and low rider transceivers, Media Interface Adapters, flex circuits, as well as high performance RF and microwave coax and triax interconnect products. The Company currently serves more than 400 active customers in telecom, military and video markets. 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 Year Ended April 30 April 30 2004 2003 2004 2003 Revenue: Net sales $19,664 $7,352 $49,379 $37,236 License fees and royalties 428 10,598 1,444 14,398 Total 20,092 17,950 50,823 51,634 Costs and expenses: Cost of products sold 14,212 24,450 42,317 63,114 Research and development 2,522 19,312 9,274 40,208 Sales and development 2,950 1,407 8,225 7,063 General and administrative 9,311 35,549 20,666 45,675 Total costs and expenses 28,995 80,718 80,482 156,060 Loss from operations (8,903) (62,768) (29,659) (104,426) Investment income 185 186 777 1,117 Loss before income taxes (8,718) (62,582) (28,882) (103,309) Provision (credit) for income taxes (1,797) - (1,797) - Loss before cumulative effect of a change in accounting principle (6,921) (62,582) (27,085) (103,309) Cumulative effect of a change in accounting principle - - - (16,982) Net loss $ (6,921) $(62,582) $(27,085) $(120,291) Preferred Stock Dividends $(88) $- $(143) $- Net loss attributable to Common shareholders $ (7,009) $(62,582) $(27,228) $(120,291) Net loss per share, basic and diluted : Before cumulative effect of a change in accounting principle $(0.51) $(8.52) $ (2.59) $(14.12) Cumulative effect of a change in accounting principle - - - ($2.32) Net loss $(0.51) $(8.52) $ (2.60) $(16.44) Preferred stock dividend requirement ($0.01) - ($0.01) - Net loss per share ($0.52) ($8.52) ($2.61) ($16.44) attributable to common shareholders Weighted average number of Common Shares outstanding: Basic 13,514,085 7,342,081 10,444,480 7,317,624 Diluted 13,514,085 7,342,081 10,444,480 7,317,624 STRATOS INTERNATIONAL INC. NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (In thousands, except per share amounts and shares outstanding) Three Months Ended Year Ended April 30 April 30 2004 2003 2004 2003 Revenue: Net sales $19,664 $7,352 $49,379 $37,236 License fees and royalties 428 10,598 1,444 14,398 20,092 17,950 50,823 51,634 Costs and Expenses: Cost of products sold 13,995 8,544 40,480 39,365 Research and development 2,522 2,362 8,800 18,908 Sales and development 2,950 1,407 8,189 6,883 General and administrative 5,424 3,293 17,592 12,439 24,891 15,606 75,061 77,595 Loss from operations (4,799) 2,344 (24,238) (25,961) Investment income 185 186 777 1,117 Loss before income taxes (4,614) 2,530 (23,461) (24,844) Provision (credit) for income taxes (1,846) 1,012 (9,386) (9,937) Net Loss $(2,768) $1,518 $(14,075) $(14,907) Deduct Series B Preferred Dividend Requirement $(88) $- $(143) $- Net loss attributable to Common shareholders $(2,856) $1,518 $(14,217) $(14,907) Net loss per share available to common shares, basic and diluted ($0.21) $0.21 ($1.35) ($2.04) Preferred stock dividend requirement ($0.01) - ($0.01) - Net loss per share attributable to Common shareholders Basic and diluted ($0.22) $0.21 ($1.36) ($2.04) Weighted average number of Common Shares outstanding: Basic 13,514,085 7,342,081 10,444,480 7,317,624 Diluted 13,514,085 7,342,081 10,444,480 7,317,624 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 Year Ended April 30 April 30 2004 2003 2004 2003 GAAP loss before cumulative effect of a change in accounting principle (6,921) (62,582) (27,085) (120,291) Cost of Goods Sold: Net changes, inventory reserve 163 (525) 1,457 4,798 Restructuring cost -Severance pay and related cost 53 - 363 847 Impairment of certain fixed assets - 16,430 17 18,104 Total non-GAAP COGS adjustments 216 15,905 1,837 23,749 R&D Expenses: Restructuring cost- Severance pay and related cost - 102 474 937 Write-off of purchased in process R&D - - - 2,070 Impairment of intangible assets - 6,500 - 6,500 Impairment of certain fixed assets - 10,348 - 11,793 Total non-GAAP R&D adjustments - 16,950 474 21,300 Selling Expenses: Restructuring cost - Severance pay and related cost - - 37 159 Other restructuring costs - - - 20 Total non-GAAP Selling adjustments - - 37 179 Administration Expenses: Restructuring cost - Severance pay and related cost 21 - 152 830 Other restructuring costs 102 - 392 - Gain on sale of business unit - - (1,233) - Impairment of goodwill - 28,430 - 45,411 Impairment of certain fixed assets 911 3,827 911 3,827 Reserve for bad debts 128 - 128 151 Write-off of investment in MP Optical (114) - (114) - Legal settlements 2,100 - 2,100 - Idle facility leases 738 - 738 - Other 2 - - - Total non-GAAP Admin. adjustments 3,888 32,257 3,074 50,219 Deferred income tax valuation reserve 49 (1,012) 7,588 9,937 Non-GAAP net loss (2,768) 1,518 (14,075) (14,907) STRATOS INTERNATIONAL INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) April 30, April 30, 2004 2003 (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $15,501 $43,649 Short term investments 21,488 17,879 Accounts receivable - net 12,544 7,701 Inventories 15,964 7,794 Recoverable income taxes 4,176 2,391 Prepaid expenses 1,326 2,083 TOTAL CURRENT ASSETS 70,999 81,497 PROPERTY, PLANT AND EQUIPMENT 91,530 93,667 Less allowances for depreciation 64,574 67,415 NET PROPERTY, PLANT AND EQUIPMENT 26,956 26,252 OTHER ASSETS 45,411 16,863 TOTAL ASSETS $143,366 $124,612 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $8,422 $5,063 Current portion of long-term debt 2,230 6,331 Other current liabilities 7,373 5,006 TOTAL CURRENT LIABILITIES 18,025 16,400 OTHER LIABILITIES Long term debt 801 298 Deferred Income Taxes 14,761 6,519 Minority Interest - 350 SHAREHOLDERS' EQUITY Preferred Stock 1 - Common Stock 143 74 Paid in capital 324,211 284,254 Accumulated deficit (210,633) (183,406) Unearned Compensation (3,809) - Treasury Stock (248) (31) Foreign Currency Translation Adjustment 114 154 TOTAL SHAREHOLDERS' EQUITY 109,779 101,045 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $143,366 $124,612 DATASOURCE: Stratos International, Inc. CONTACT: David A. Slack, Chief Financial Officer, and Barry R. Hollingsworth, Investor Relations, both of Stratos International, Inc., +1-708-867-9600 Web site: http://www.stratoslightwave.com/

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