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Oclaro Announces Third Quarter Fiscal Year 2014 Financial Results

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SOURCE Oclaro, Inc.

SAN JOSE, Calif., May 6, 2014 /PRNewswire/ -- Oclaro, Inc. (Nasdaq: OCLR), a leading provider and innovator of optical communications solutions, today announced the financial results for its third quarter of fiscal year 2014, which ended March 29, 2014.

Oclaro, Inc. Logo

"While the March quarter results did not meet our expectations, we continued to make good progress on our turnaround plan.  Gross margin was negatively impacted by certain product rationalization and ramp decisions made during the quarter and issues related to management of our contract manufacturers. These actions masked the progress that we made in executing our restructuring plan, in particular our continued reduction of operating and manufacturing overhead costs, which establish the foundation for improved financial performance," said Greg Dougherty, Oclaro CEO. "In addition, we continue to see strong customer interest for our new 100G products and technology.  Overall, our turnaround remains on track."

Results for the Third Quarter of Fiscal 2014

  • Revenues were $95.4 million for the third quarter of fiscal 2014, compared with revenues of $102.9 million in the second quarter of fiscal 2014.
  • GAAP gross margin was 12% for the third quarter of fiscal 2014, compared with a GAAP gross margin of 16% in the second quarter of fiscal 2014.
  • Non-GAAP gross margin was 12% for the third quarter of fiscal 2014, compared with a non-GAAP gross margin of 17% in the second quarter of fiscal 2014.
  • GAAP operating loss was $22.5 million for the third quarter of fiscal 2014. This compares with a GAAP operating loss of $25.3 million for the second quarter of fiscal 2014.
  • Non-GAAP operating loss was $17.5 million for the third quarter of fiscal 2014, compared with a non-GAAP operating loss of $16.8 million in the second quarter of fiscal 2014.
  • GAAP net loss for the third quarter of fiscal 2014 was $22.9 million. This compares with GAAP net income of $31.5 million in the second quarter of fiscal 2014, which included approximately $69.5 million of income related to the discontinued operations.
  • Non-GAAP loss from continuing operations for the third quarter of fiscal 2014 was $17.9 million. This compares with a non-GAAP loss from continuing operations of $27.0 million in the second quarter of fiscal 2014.
  • Adjusted EBITDA was negative $12.3 million for the third quarter of fiscal 2014, compared with negative $10.7 million in the second quarter of fiscal 2014.
  • Cash, cash equivalents, restricted cash, and short-term investments were $122 million at March 29, 2014.

Fourth Quarter Fiscal Year 2014 Outlook

The guidance for the fourth quarter of fiscal 2014, which ends June 28, 2014, is:

  • Revenues in the range of $90 million to $100 million
  • Non-GAAP gross margin in the range of 12% to 16%.
  • Adjusted EBITDA in the range of negative $13 million to negative $9 million.

The foregoing guidance is based on current expectations. These statements are forward looking, and actual results may differ materially. Please see the Safe Harbor Statement in this earnings release for a description of certain important risk factors that could cause actual results to differ, and refer to Oclaro's most recent annual and quarterly reports on file with the Securities and Exchange Commission (SEC) for a more complete description of these risks.

Furthermore, our outlook excludes items that may be required by GAAP, including, but not limited to, restructuring and related costs, acquisition or disposal related costs, expenses or income from certain legal actions, settlements and related costs outside our normal course of business, impairments of other long-lived assets, depreciation and amortization, extraordinary items, as well as the expensing of stock options and restricted stock grants. We do not intend to update this guidance as a result of developments occurring after the date of this release.

Conference Call

Oclaro will hold a conference call to discuss financial results for the third quarter of fiscal year 2014 today at 2:00 p.m. PT/5:00 p.m. ET. To listen to the live conference call, please dial (480) 629-9760. A replay of the conference call will be available through May 20, 2014. To access the replay, dial (858) 384-5517. The passcode for the replay is 4678519. A webcast of this call and a supplemental presentation will be available in the investor section of Oclaro's website at www.oclaro.com.

About Oclaro

Oclaro, Inc. (Nasdaq: OCLR), is a leader in optical components, modules and subsystems for the core optical, enterprise and data center markets. Leveraging more than three decades of laser technology innovation, photonics integration, and subsystem design, Oclaro's solutions are at the heart of the fast optical networks and high-speed interconnects driving the next wave of streaming video, cloud computing, voice over IP and other bandwidth-intensive and high-speed applications. For more information, visit http://www.oclaro.com.

Copyright 2014. All rights reserved. Oclaro, the Oclaro logo, and certain other Oclaro trademarks and logos are trademarks and/or registered trademarks of Oclaro, Inc. or its subsidiaries in the U.S. and other countries. Information in this release is subject to change without notice.

Safe Harbor Statement

This press release, in association with Oclaro's third quarter fiscal year 2014 financial results conference call, contains statements about management's future expectations, plans or prospects of Oclaro and its business, and together with the assumptions underlying these statements, constitute forward-looking statements for the purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements concerning (i) financial targets and expectations and progress toward Oclaro's target business model, including financial guidance for the fiscal quarter ending June 28, 2014 regarding revenue, non-GAAP gross margin and Adjusted EBITDA, (ii) the status of Oclaro's restructuring plan and (iii) market interest in Oclaro's 100G products and (iv) Oclaro's future financial performance and operating prospects. Such statements can be identified by the fact that they do not relate strictly to historical or current facts and may contain words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "will," "should," "outlook," "could," "target," "model," and other words and terms of similar meaning in connection with any discussion of future operations or financial performance. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including (i) the effect of receiving a "going concern" statement in our auditors report on our 2013 consolidated financial statements, (ii) the future performance of Oclaro and its ability to effectively restructure its operations and business following the sale of its Zurich and Amplifier businesses in accordance with its business plan, (iii) our dependence on a limited number of customers for a significant percentage of our revenues, (iv) our ability to maintain strong relationships with certain customers, (v) our ability to effectively and efficiently transition to an outsourced back-end assembly and test model, (vi) the potential inability to realize the expected benefits of asset dispositions, (vii) the sale of businesses which may or may not arise in connection with executing our restructuring plans, (viii) the impact of continued uncertainty in world financial markets and any resulting reduction in demand for our products, (ix) our ability to meet or exceed our gross margin expectations, (x) the effects of fluctuating product mix on our results, (xi) our ability to timely develop and commercialize new products, (xii) our ability to reduce costs and operating expenses, (xiii) our ability to respond to evolving technologies and customer requirements and demands, (xiv) our ability to effectively compete with companies that have greater name recognition, broader customer relationships and substantially greater financial, technical and marketing resources than we do, (xv) our ability to timely capitalize on any increase in market demand, (xvi) increased costs related to downsizing and compliance with regulatory and legal requirements in connection with such downsizing, (xvii) competition and pricing pressure, (xviii) the risks associated with our international operations, (xix) the outcome of tax audits or similar proceedings, (xx) the outcome of pending litigation against the company, (xxi) Oclaro's ability to maintain or increase its cash reserves and obtain debt or equity-based financing on terms acceptable to it or at all, and (xxii) other factors described in Oclaro's most recent annual report on Form 10-K, quarterly report on Form 10-Q and other documents it periodically files with the SEC. The forward-looking statements included in this announcement represent Oclaro's view as of the date of this announcement. Oclaro anticipates that subsequent events and developments may cause Oclaro's views and expectations to change. Oclaro specifically disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this press release.

Non-GAAP Financial Measures

Oclaro provides certain supplemental non-GAAP financial measures to its investors as a complement to the most comparable GAAP measures. The GAAP measure most directly comparable to non-GAAP gross margin rate is gross margin rate. The GAAP measure most directly comparable to non-GAAP operating income/loss and Adjusted EBITDA is operating income/loss. The GAAP measure most directly comparable to non-GAAP net income/loss is net income/loss. An explanation and reconciliation of each of these non-GAAP financial measures to GAAP information is set forth below.

Oclaro believes that providing these non-GAAP measures to its investors, in addition to corresponding income statement measures, provides investors the benefit of viewing Oclaro's performance using the same financial metrics that the management team uses in making many key decisions and evaluating how Oclaro's "core operating performance" and its results of operations may look in the future. Oclaro defines "core operating performance" as its ongoing performance in the ordinary course of its operations. Items that are non-recurring or do not involve cash expenditures, such as impairment charges, income taxes, restructuring and severance programs, costs relating to specific major projects (such as acquisitions), gain on bargain purchase, non-cash compensation related to stock and options and certain income, purchase accounting adjustments related to the fair market value of acquired inventories, costs to outsource our back-end manufacturing activities, write-offs and expenses related to flooding in Thailand, including advance payments received from insurers, impairment of fixed assets and inventory and related expenses, are not included in Oclaro's view of "core operating performance." Management does not believe these items are reflective of Oclaro's ongoing core operations and accordingly excludes those items from non-GAAP gross margin rate, non-GAAP operating income/loss, non-GAAP net income/loss and Adjusted EBITDA. Additionally, each non-GAAP measure has historically been presented by Oclaro as a complement to its most comparable GAAP measure, and Oclaro believes that the continuation of this practice increases the consistency and comparability of Oclaro's earnings releases.

Non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States of America. Non-GAAP measures should not be considered in isolation from or as a substitute for financial information presented in accordance with generally accepted accounting principles, and may be different from non-GAAP measures used by other companies.

Adjusted EBITDA

Adjusted EBITDA is calculated as operating income/loss excluding the impact of depreciation and amortization, restructuring, acquisition and related costs, non-cash compensation related to stock and options, gain on bargain purchase, purchase accounting adjustments related to the fair market value of acquired inventories, impairment of intangible assets and goodwill and certain other one-time charges and credits, including flood related advance payments received from insurers, impairment of fixed assets and inventory and related expenses, specifically identified in the non-GAAP reconciliation schedules set forth below. Oclaro uses Adjusted EBITDA in evaluating Oclaro's historical and prospective cash usage, as well as its cash usage relative to its competitors. Specifically, management uses this non-GAAP measure to further understand and analyze the cash used in/generated from Oclaro's core operations. Oclaro believes that by excluding these non-cash and non-recurring charges, more accurate expectations of its future cash needs can be assessed in addition to providing a better understanding of the actual cash used in or generated from core operations for the periods presented. Oclaro further believes that providing this information allows Oclaro's investors greater transparency and a better understanding of Oclaro's core cash position.

     

OCLARO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)















Three Months Ended


March 29, 2014


December 28, 2013


March 30, 2013


(Thousands, except per share amounts)

Revenues

$

95,398



$

102,914



$

101,539


Cost of revenues

84,298



86,001



95,939


Gross profit

11,100



16,913



5,600


Operating expenses:






Research and development

14,624



16,424



19,231


Selling, general and administrative

17,437



18,557



19,078


Amortization of other intangible assets

418



417



1,219


Restructuring, acquisition and related expense, net

3,068



6,721



2,782


Flood-related (income) expense, net

(1,657)



(140)



(11,548)


Loss on sale of property and equipment

(326)



205



74


Total operating expenses

33,564



42,184



30,836


Operating loss

(22,464)



(25,271)



(25,236)


Other income (expense):






Interest income (expense), net

(29)



(8,532)



(1,103)


Gain (loss) on foreign currency transactions, net

625



(2,848)



(6,788)


Other income (expense), net

(56)



28



(3,760)


Total other income (expense)

540



(11,352)



(11,651)


Loss from continuing operations before income taxes

(21,924)



(36,623)



(36,887)


Income tax provision

745



1,424



148


Loss from continuing operations

(22,669)



(38,047)



(37,035)


Income (loss) from discontinued operations, net of tax

(252)



69,538



(2,971)


Net income (loss)

$

(22,921)



$

31,491



$

(40,006)


Basic and diluted net income (loss) per share:






Loss per share from continuing operations

$

(0.22)



$

(0.41)



$

(0.41)


Income per share from discontinued operations

-



0.75



(0.03)


Basic and diluted net income (loss) per share

$

(0.22)



$

0.34



$

(0.44)


Shares used in computing net income (loss) per share:






Basic

105,487



93,204



90,263


Diluted

105,487



93,204



90,263


 

 

OCLARO, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

CONTINUING OPERATIONS

(Unaudited)















Three Months Ended


March 29, 2014


December 28, 2013


March 30, 2013


(Thousands, except per share amounts)

Reconciliation of GAAP gross margin rate to non-GAAP gross margin rate:






GAAP gross profit

$

11,100



$

16,913



$

5,600


Outsource transition costs

353



419



871


Stock-based compensation in cost of revenues

244



250



488


Non-GAAP gross profit

$

11,697



$

17,582



$

6,959


GAAP gross margin rate

11.6

%


16.4

%


5.5

%

Non-GAAP gross margin rate

12.3

%


17.1

%


6.9

%

Reconciliation of GAAP operating loss to non-GAAP operating loss and adjusted EBITDA:






GAAP operating loss

$

(22,464)



$

(25,271)



$

(25,236)


Stock-based compensation

2,985



846



1,583


Amortization of intangible assets

418



417



1,219


Restructuring, acquisition and related costs

3,068



6,721



2,782


Flood-related (income) expense, net

(1,657)



(140)



(11,548)


Outsource transition costs

509



419



871


Loss on sales of property and equipment

(326)



205



74


Non-GAAP operating loss

$

(17,467)



$

(16,803)



$

(30,255)


Depreciation expense

5,142



6,089



6,525


Adjusted EBITDA

$

(12,325)



$

(10,714)



$

(23,730)


Reconciliation of GAAP loss from continuing operations to non-GAAP loss from continuing operations:






GAAP loss from continuing operations

$

(22,669)



$

(38,047)



$

(37,035)


Stock-based compensation

2,985



846



1,583


Amortization of intangible assets

418



417



1,219


Restructuring, acquisition and related costs

3,068



6,721



2,782


Flood-related (income) expense, net

(1,657)



(140)



(11,548)


Other (income) expense items, net

56



(28)



3,760


Outsource transition costs

509



419



871


(Gain) loss on foreign currency translation

(625)



2,848



6,788


Non-GAAP loss from continuing operations

$

(17,915)



$

(26,964)



$

(31,580)


Non-GAAP loss per share-continuing operations:






Basic

$

(0.17)



$

(0.29)



$

(0.35)


Diluted

$

(0.17)



$

(0.29)



$

(0.35)


Shares used in computing Non-GAAP loss per share-continuing operations:






Basic

105,487



93,204



90,263


Diluted

105,487



93,204



90,263


 

 















Three Months Ended


March 29, 2014


December 28, 2013


March 30, 2013


(Thousands, except per share amounts)

Stock-based compensation for the above included the following:






Cost of revenues

$

244



$

250



$

488


Research and development

249



206



380


Selling, general and administrative

2,492



390



715


Total

$

2,985



$

846



$

1,583








 

 

OCLARO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)











March 29, 2014


June 29, 2013


(Thousands, except par value)

ASSETS




Current assets:




Cash and cash equivalents

$

117,441



$

84,635


Restricted cash

4,678



2,719


Short-term investments

160



200


Accounts receivable

75,505



100,774


Inventories

81,661



86,029


Prepaid expenses and other current assets

58,869



33,498


Assets of discontinued operations held for sale

-



55,333


Total current assets

338,314



363,188


Property and equipment, net

53,311



72,028


Other intangible assets, net

8,886



10,233


Other non-current assets

3,222



4,445


Total assets

$

403,733



$

449,894


LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

89,203



$

94,157


Accrued expenses and other liabilities

47,240



52,010


Capital lease obligations, current

5,649



8,281


Term loan payable

-



24,647


Credit line payable

-



39,964


Liabilities of discontinued operations held for sale

-



17,470


Total current liabilities

142,092



236,529


Deferred gain on sale-leasebacks

10,699



10,477


Convertible notes payable

-



22,990


Capital lease obligations, non-current

5,295



9,914


Other non-current liabilities

15,806



15,852


Total liabilities

173,892



295,762


Stockholders' equity:




Preferred stock




Common stock

1,068



928


Additional paid-in capital

1,457,131



1,429,155


Accumulated other comprehensive income

45,113



39,368


Accumulated deficit

(1,273,471)



(1,315,319)


Total stockholders' equity

229,841



154,132


Total liabilities and stockholders' equity

$

403,733



$

449,894


 

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