AVNXD Avanex (MM)

Avanex Corporation (NASDAQ:AVNXD), a pioneer of intelligent photonic solutions that enable next-generation optical networks, today reported its fiscal 2008 fourth quarter and year-end financial results for the quarter and year ended June 30, 2008. Net revenue in the fourth quarter of fiscal year 2008 was $51.8 million, an increase of 5 percent from $49.6 million in the third quarter of fiscal year 2008, and an increase of 1 percent from $51.1 million in the same period last year. Net revenue in fiscal year 2008 was $208.1 million, a 2 percent decrease from $212.8 million in the prior fiscal year. Gross margin in the fourth quarter of fiscal year 2008 was 32 percent, flat with the third quarter of fiscal year 2008, and an increase of 8 percentage points from 24 percent in the same period last year. Gross margins in fiscal year 2008 were 31 percent, up from 18 percent in fiscal year 2007. In the fourth quarter of fiscal year 2008 and full fiscal year of 2008, gross profit increased by over $3.1 million and $3.7 million, respectively, due to the global distribution agreement, arrangements with customers, and a settlement with our former French subsidiary. We do not expect these benefits to continue in fiscal year 2009. Net income in the fourth quarter of fiscal year 2008 was $1.3 million, or $0.08 per diluted share, compared with net income of $3.3 million, or $0.22 per diluted share in the third quarter of fiscal year 2008. This compares to a net loss of $5.7 million or a net loss of $0.38 per diluted share in the same period last year. Net income in fiscal year 2008 was $4.8 million, or $0.31 per diluted share, compared to a net loss of $30.6 million, or a net loss of $2.16 per diluted share, in the same period last year. All per-share figures in this earnings release take into account the 15-for-1 reverse stock split that the company effected following the close of market on August 12, 2008. Non-GAAP net income in the fourth quarter of fiscal year 2008 was $1.6 million, or $0.11 per diluted share, compared with non-GAAP net income of $2.9 million, or $0.19 per diluted share, in the third quarter of fiscal year 2008. This compares to non-GAAP breakeven in the same period last year. Fiscal year 2008 non-GAAP net income was $9.0 million, or $0.59 per diluted share, compared to a non-GAAP net loss of $13.5 million, or a net loss of $0.95 per diluted share, in fiscal year 2007.1 "We are pleased with our performance during fiscal year 2008," said Giovanni Barbarossa, Interim CEO of Avanex. "The company�s focus is to expand our margins, dramatically improve our execution in new product development and strengthen our relationships with key customers.� Q1 FY 2009 Outlook The company expects revenue to be between $44 million and $48 million and gross margin to be between 20 to 23 percent in the first quarter of fiscal 2009, ending September 30, 2008. Investor Conference Call Avanex will host a conference call to discuss fiscal year 2008 fourth quarter and year-end results at 1:30 p.m. PST today. Investors are invited to listen to a live broadcast of the conference call via webcast, which can be accessed by visiting the Avanex Investor Relations website at http://investor.avanex.com/events.cfm. Investors can also listen to the conference call by dialing 913-312-1268 and entering access ID number 6479892. A replay of the call will be available through an archived webcast at http://investor.avanex.com/events.cfm. An audio replay will be available through 12 AM eastern daylight time on August 28, 2008 and can be accessed by dialing 888-203-1112 and entering access ID number 6479892. About Avanex Avanex Corporation is a leading global provider of Intelligent Photonic Solutions(TM) to meet the needs of fiber optic communications networks for greater capacity, longer distance transmissions, improved connectivity, higher speeds and lower costs. These solutions enable or enhance optical wavelength multiplexing, dispersion compensation, switching and routing, transmission, amplification, and include network-managed subsystems. Avanex Corporation was incorporated in 1997 and is headquartered in Fremont, Calif. Avanex Corporation also maintains facilities in Horseheads, N.Y.; Melbourne, Fla.; Shanghai, China; Villebon Sur Yvette, France; San Donato, Italy; and Bangkok Thailand. To learn more about Avanex Corporation, visit our web site at: www.avanex.com. Forward-looking Statements This press release contains forward-looking statements including statements regarding expected first quarter of fiscal 2009 outlook and future operating results and our strategies. Actual results could differ materially from those projected in or contemplated by the forward-looking statements. Factors that could cause actual results to differ include general economic conditions, the pace of spending in the telecommunications industry and in particular the optical networks industry, market demand and price of our products, the company�s ability to sufficiently anticipate market needs and develop products and enhancements that achieve market acceptance, unanticipated costs and expenses or the inability to identify expenses which can be eliminated, any slowdown or deferral of orders for products or the application of accounting or tax principles in an unanticipated manner. Finally, please refer to the risk factors contained in the company�s SEC filings including the company�s Annual Report on Form 10-K filed with the SEC on Sept. 7, 2007, Quarterly Report on Form 10-Q filed with the SEC on May�2, 2008 and subsequent filings with the SEC. Avanex assumes no obligation and does not intend to update any forward-looking statements, whether as a result of new information, future events or otherwise. 1 Non-GAAP net income (loss) and non-GAAP net income (loss) per share exclude share-based compensation expenses, gain from legal settlement, amortization of intangibles, restructuring charges (recovery), gain (loss) on disposal of property and equipment, gain (loss) on sale of subsidiary, the operating expenses associated with this subsidiary until the closing, due diligence expenses relating to abandoned acquisition activity, and arbitration expenses. Details on the items excluded from non-GAAP net income (loss) and non-GAAP net income (loss) per share are available in the table entitled, �Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income (Loss),� following the accompanying financial statements. Avanex Corporation CONSOLIDATED BALANCE SHEET In thousands (Unaudited) � � � June 30,2008 � March 31,2008 � June 30,2007 Assets Current assets: Cash and cash equivalents $ 14,839 $ 11,184 $ 14,837 Restricted cash 3,776 3,757 3,620 Short-term investments 40,590 38,758 28,942 Accounts receivable, net 39,032 41,072 33,764 Inventories 16,572 15,624 15,188 Due from related party 85 61 14,381 Other current assets � 6,629 � � � 6,680 � � � 5,716 � Total current assets 121,523 117,136 116,448 Property and equipment, net 7,688 7,736 5,900 Intangibles, net 314 370 559 Goodwill 9,408 9,408 9,408 Other assets � 2,870 � � � 2,758 � � � 2,685 � Total assets $ 141,803 � � $ 137,408 � � $ 135,000 � � Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 33,255 $ 30,662 $ 32,549 Accrued compensation 6,396 5,499 6,091 Accrued warranty 626 700 873 Other accrued expenses and deferred revenue 6,568 7,105 10,940 Current portion of long-term obligations 13 10 9 Current portion of accrued restructuring � 2,940 � � � 2,518 � � � 2,837 � Total current liabilities 49,798 46,494 53,299 � Long-term liabilities: Accrued restructuring 5,043 6,144 8,269 Other long-term obligations � 1,520 � � � 1,762 � � � 1,350 � Total liabilities � 56,361 � � � 54,400 � � � 62,918 � � Stockholders� equity: Common stock 15 15 15 Additional paid-in capital 784,492 783,340 776,112 Accumulated other comprehensive income 1,285 1,295 1,064 Accumulated deficit � (700,350 ) � � (701,642 ) � � (705,109 ) Total stockholders� equity � 85,442 � � � 83,008 � � � 72,082 � Total liabilities and stockholders� equity $ 141,803 � � $ 137,408 � � $ 135,000 � Avanex CorporationCONSOLIDATED STATEMENTS OF OPERATIONS - GAAPIn thousands, except for per share data(Unaudited) � � Three Months Ended Year Ended June 30,2008 � March 31,2008 � June 30,2007 June 30,2008 � June 30,2007 Net revenue: � � � Third parties $ 51,748 $ 49,523 $ 35,362 $ 189,821 $ 151,380 Related parties � 74 � � � 33 � � � 15,736 � � 18,273 � � � 61,375 � Total net revenue 51,822 49,556 51,098 208,094 212,755 � Cost of revenue: Cost of revenue except for purchases from related parties 34,634 33,241 38,971 142,958 174,059 Purchases from related parties � 449 � � � 220 � � � 28 � � 991 � � � 491 � Total cost of revenue � 35,083 � � � 33,461 � � � 38,999 � � 143,949 � � � 174,550 � Gross profit 16,739 16,095 12,099 64,145 38,205 � Operating expenses: Research and development 6,981 7,012 7,511 28,371 25,231 Sales and marketing 4,230 4,407 3,779 16,754 15,261 General and administrative: Third parties 4,669 4,621 3,469 18,745 22,663 Related parties - - - - 615 Amortization of intangibles 56 55 664 771 2,703 Restructuring 137 32 (17 ) (164 ) 1,511 (Gain) loss on disposal of property and equipment (24 ) 1 (484 ) (23 ) (527 ) (Gain) loss on sale of subsidiary � - � � � (1,996 ) � � 3,216 � � (1,996 ) � � 3,216 � Total operating expenses � 16,049 � � � 14,132 � � � 18,138 � � 62,458 � � � 70,673 � Income (loss) from operations 690 1,963 (6,039 ) 1,687 (32,468 ) Interest and other income 1,049 1,439 (71 ) 4,100 2,292 Interest and other expense � (70 ) � � (68 ) � � 889 � � (152 ) � � 35 � Income (loss) before income taxes 1,669 3,334 (5,221 ) 5,635 (30,141 ) Income tax benefit (provision) � (377 ) � � 2 � � � (464 ) � (876 ) � � (464 ) Net income (loss) $ 1,292 � � $ 3,336 � � $ (5,685 ) $ 4,759 � � $ (30,605 ) � Basic net income (loss) per common share $ 0.08 � � $ 0.22 � � $ (0.38 ) $ 0.31 � � $ (2.16 ) Diluted net income (loss) per common share $ 0.08 � � $ 0.22 � � $ (0.38 ) $ 0.31 � � $ (2.16 ) � Weighted-average number of shares used in computing: Basic net income (loss) per common share � 15,321 � � � 15,294 � � � 15,044 � � 15,242 � � � 14,196 � Diluted net income (loss) per common share � 15,330 � � � 15,301 � � � 15,044 � � 15,370 � � � 14,196 � Avanex CorporationRECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME (LOSS)In thousands, except for per share data(Unaudited) � � Three Months Ended Year Ended June 30,2008 � March 31,2008 � June 30,2007 � June 30,2008 � June 30,2007 � Net income (loss), GAAP $ 1,292 $ 3,336 $ (5,685 ) $ 4,759 $ (30,605 ) � Items reconciling GAAP net income (loss) to non-GAAP net income (loss): Related to cost of revenue: Share-based payments 197 213 257 1,051 1,110 (Gain) from legal settlement � (1,197 ) � � - � � � - � � (1,197 ) � � - � Total related to cost of sales � (1,000 ) � � 213 � � � 257 � � (146 ) � � 1,110 � Related to operating expenses: Research and development - share-based payments 340 334 572 2,097 2,291 Sales and marketing - share-based payments 242 307 210 884 854 General and administrative - share-based payments 340 429 375 2,007 2,840 Amortization of intangibles 56 55 664 771 2,703 Restructuring: Share-based payments - - - - 13 All other 137 32 (17 ) (164 ) 1,498 (Gain) loss on disposal of property and equipment (24 ) 1 (484 ) (23 ) (527 ) (Gain) loss on sale of subsidiary - (1,996 ) 3,216 (1,996 ) 3,216 Operating expenses for subsidiary until closing - - 941 - 941 Due diligence expenses related to abandoned acquisition activity - - - 199 2,146 Arbitration expenses � 251 � � � 171 � � � - � � 606 � � � - � Total related to operating expenses � 1,342 � � � (667 ) � � 5,477 � � 4,381 � � � 15,975 � Total related to net income (loss) � 342 � � � (454 ) � � 5,734 � � 4,235 � � � 17,085 � � Non-GAAP net income (loss) $ 1,634 � � $ 2,882 � � $ 49 � $ 8,994 � � $ (13,520 ) � Basic non-GAAP net income (loss) per common share $ 0.11 � � $ 0.19 � � $ 0.00 � $ 0.59 � � $ (0.95 ) Diluted non-GAAP net income (loss) per common share $ 0.11 � � $ 0.19 � � $ 0.00 � $ 0.59 � � $ (0.95 ) � Weighted-average number of shares used in computing: Basic non-GAAP net income (loss) per common share � 15,321 � � � 15,294 � � � 15,044 � � 15,242 � � � 14,196 � Diluted non-GAAP net income (loss) per common share � 15,330 � � � 15,301 � � � 15,044 � � 15,370 � � � 14,196 �