1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
Commission File Number 0-29811
Date of Report: April 25, 2001
NEW FOCUS, INC.
(Registrant)
Incorporated in the State of Delaware
I.R.S. Employer Identification Number 33-0404910
5215 Hellyer Avenue, San Jose, California 95138
Telephone: (408) 284-4700
2
ITEM 5: OTHER EVENTS
The Company issued the following press release on April 25, 2001:
NEW FOCUS ANNOUNCES FIRST QUARTER FINANCIAL RESULTS AND
OUTLINES RESTRUCTURING PLAN
SAN JOSE, Calif., April 25 /PRNewswire/ -- New Focus, Inc.,
(Nasdaq: NUFO - news), a leading supplier of innovative fiber optic products for
next-generation optical networks under the Smart Optics for Networks(TM) brand,
today announced financial results for its first quarter ended April 1, 2001. The
company indicated that first quarter results included net revenue that met the
revised guidance issued by the company on March 5, 2001 and a substantial charge
for inventory write-downs and related charges that widened the company's
operating loss. The company further stated that second quarter results would
include a restructuring charge associated with actions related to additional
work force reductions and the consolidation of facilities.
First Quarter Review:
Net revenue for the first quarter of 2001 was $40.8 million, up from $33.9
million in the fourth quarter of 2000 and $9.8 million in the first quarter of
2000. During the first quarter of 2001 the company acquired JCA Technology, Inc.
and Globe Y. Technology, Inc. Net revenue from these two acquisitions in the
first quarter of 2001 totaled $10.9 million.
Net revenue from the company's fiber optic products in the first quarter of 2001
totaled $32.3 million, up 28% from $25.3 million in the fourth quarter of 2000.
In the first quarter of 2000 fiber optic products accounted for $4.9 million of
the company's net revenue. Net revenue from the company's photonics tool
products in the first quarter of 2001 totaled $8.5 million, down slightly from
$8.6 million in the fourth quarter of 2000. In the first quarter of 2000
photonics tool products accounted for $4.9 million of the company's net revenue.
The pro forma net loss in the first quarter of 2001, excluding amortization of
acquired intangibles, deferred compensation and related income tax effects, was
$31.3 million, or $0.44 per share based on 70.5 million basic shares
outstanding. This pro forma net loss included a charge of $28.5 million for the
write-down of excess inventories and related charges. Excluding this charge, the
net loss for the first quarter was $2.8 million, or $0.04 per share based on
70.5 million basic shares outstanding. In the fourth quarter of 2000 the company
reported pro forma net income of $2.6 million, or $0.04 per share based on 64.1
million diluted shares outstanding. The pro forma net loss for the first quarter
of 2000 was $6.9 million, or $0.14 per share based on 47.8 million basic shares
outstanding.
The pro forma calculation for the first quarter of 2001 excluded non-cash
charges of $25.3 million for the amortization of deferred stock compensation,
$21.4 million for the amortization of goodwill and other intangibles, and $13.4
million for the write-off of acquired in-process R&D. The deferred stock
compensation charges in the fourth and first quarters of 2000 were $4.8 million
and $5.5 million, respectively. The number of
3
shares used in the calculation of the pro forma net loss per share for the first
quarter of 2000 assumed the conversion of the company's convertible preferred
stock into common stock. This conversion was completed in conjunction with the
company's initial public offering in May 2000.
Without the pro forma adjustments to eliminate the goodwill and other
intangibles, in-process R&D, deferred stock compensation charges and related
income tax effects, the company recorded a net loss for the first quarter of
2001 of $86.3 million, or $1.22 per share based on 70.5 million basic shares
outstanding. The net loss for the fourth quarter of 2000 of $2.3 million, or
$0.04 per share based on 60.5 million basic shares outstanding. For the first
quarter of 2000 the net loss was $12.5 million, or $2.12 per share based on 5.9
million shares outstanding. Shares outstanding for this period excluded the
conversion of preferred stock into common stock.
"Like many other companies in our industry, we have experienced a downturn in
our near-term business prospects due to conditions within the telecommunications
industry and the U.S. economy. Our industry is currently going through a
difficult inventory correction cycle created by the sudden and sharp decline in
capital equipment expenditures by telecommunications carriers. As a result of
lower customer demand for our products and a current lack of visibility into
future order flow, we recorded a $28.5 million charge for the write-down of
excess inventories and related charges in the first quarter. Excluding this
charge, our gross margin percentage in the first quarter was 34.0%," said Ken
Westrick, president and chief executive officer of New Focus, Inc.
The company's cash balance at the end of the first quarter was $370 million,
down $116 million from the end of December. The cash consideration for the JCA
acquisition and expenses associated with both the JCA and Globe Y acquisitions
consumed approximately $82 million during the first quarter. The company also
spent $27 million on capital expenditures primarily for facility construction
projects previously initiated at its larger production facility in Shenzhen,
China and its new facility in San Jose, California. The company plans to
complete these leasehold improvements but will not equip these facilities until
additional capacity is needed.
Business Outlook:
The company experienced additional order cancellations and push-outs during the
month of April. As a result of these recent changes, the company believes that
net revenue for the second quarter of 2001 will fall in the range of $28-32
million. The company previously indicated that net revenue would decline
sequentially between the first and second quarters but did not specify a
targeted revenue range for the second quarter.
"In addition to the steps that we took in early March, we are initiating a
series of actions that will resize our operations and result in a restructuring
charge that will be reflected in our second quarter financial results. These
actions will include closure and consolidation of two smaller facilities and
additional work force reductions in our U.S. and China operations. We will also
accelerate our efforts to move more production, in particular subassemblies for
our active products, offshore to Asia. We already produce nearly 100% of our
passive products at our China facilities. In addition to these longer-range
actions,
4
we will cut our capital expenditures and continue to reduce discretionary
spending. We will also significantly reduce the manufacturing build schedule at
our China operations for the next two quarters to properly balance inventories
with near-term demand," said Westrick.
In California the company will close its older Santa Clara facility and transfer
passive product development activities to the company's newer and larger
facility in San Jose. The company anticipates work force reductions at its U.S.
operations of approximately 90 people, mostly manufacturing personnel. In China
the company will idle its smaller production facility and consolidate activities
into its larger factory. Work force reductions at the company's China operations
will total approximately 450 people, mostly direct labor employees. These
actions will result in work force reductions of approximately 10% and 50% at the
company's U.S. and China operations, respectively. After this latest work force
reduction the company's worldwide operations will employ approximately 1,200
people, down from a peak employment level of approximately 2,100 people in early
March.
"Excluding the effect of the anticipated second quarter restructuring charge, we
believe that our second quarter gross margin will fall into a range of 30-33% as
fixed manufacturing costs are spread over lower production volumes. At the
$28-32 million revenue level our pro forma net loss for the second quarter will
likely fall into a range of $8-12 million. Due to the current economic climate
and associated uncertainty within the telecommunications industry, we are
reassessing our prior financial guidance but are currently unable to provide
meaningful forecasts beyond the second quarter. In spite of this lack of
visibility, we remain hopeful that we will see a gradual recovery in our
business starting in the second half of this year supported by an end to the
inventory correction cycle and the introduction of several new products in
upcoming quarters," said Westrick.
The company is currently shipping customer qualification samples of two passive
products, L-band circulators and thin film muxes. Volume revenue from these two
new products is expected to begin early in the third quarter. Development
activities are progressing on two additional passive products that are expected
to ship in the second half of this year, a hybrid micro-optic device for
next-generation optical amplifiers and an interleaver. In the third quarter the
company is planning to commence shipments of a new active product line of 12.5
gigabit per second data drivers that will deliver higher drive voltages at lower
power. Additionally, during the past two months the company has conducted
multiple customer demonstrations of its tunable laser subsystem for network
applications. Customer feedback on these demonstrations has been very positive.
The company is delivering samples to customers this quarter and still expects to
begin initial volume shipments of this new product in the fourth quarter of this
year.
"Consistent with our strategy to expand our product portfolio of both active and
passive products, we will continue to fund key product development programs that
are critical to the long-term success of New Focus. With sizable cash resources,
pending new product introductions and flexible upside manufacturing capacity in
China, we believe that New Focus remains well positioned to exploit the
long-term secular growth potential of the
5
fiber optics industry after the current industry correction cycle runs its
course," said Westrick.
Forward-Looking Statements:
This press release, and in particular the material in the section labeled
"Business Outlook," contains predictions, estimates and other forward-looking
statements regarding the revenue outlook for the second quarter of 2001, the
anticipated gross margin performance for the second quarter of 2001, the
projected pro-forma net loss for the second quarter of 2001, planned
restructuring actions, expected improvements in the company's business during
the second half of 2001, progress on the development of new products and
anticipated shipment dates for products, and the positioning of the company for
future success. These statements are subject to risks and uncertainties and
actual results may differ materially from any future performance suggested. The
risks and uncertainties include the difficulty of forecasting anticipated
revenues due to weakness and uncertainties related to overall demand within the
telecommunications industry, inventory levels within the industry, sudden and
unexpected order reductions and cancellations by customers, lower backlog of
customer orders, and potential pricing pressures that may arise from
supply-demand conditions within the industry; the difficulty of minimizing the
negative effect of lower unit volumes on gross margin performance due to the
level of fixed manufacturing expenses; the challenge of managing inventory
levels during periods of weakening demand; the difficulty of achieving
anticipated cost reductions due to unforeseen expenses the company may incur in
future quarters, an inability to reduce expenses without jeopardizing product
development schedules and an inability to move sufficient volume of production
offshore; any unforeseen delays in completing the development of the company's
new products on a timely basis and achieving sufficient production to generate
volume revenues; the company's ability to gain customer acceptance of its new
products; and the company's ability to generate future revenue from new products
commensurate with prior investments in research and development activities.
Other risk factors that may affect the company's financial performance are
listed in the company's fiscal year 2000 10-K annual report on file with the
SEC. New Focus undertakes no obligation to publicly release any revisions to
these forward-looking statements, which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
About New Focus:
New Focus designs, manufactures and markets innovative fiber optic products for
next-generation optical networks. The company's Smart Optics for Networks(TM)
products enhance the performance of next-generation optical networks by enabling
higher channel counts, faster data rates, longer reach lengths, new service
capabilities, and lower costs of ownership. Founded in 1990, the company remains
a leader in the creation of advanced optical products for the commercial and
research marketplaces. The company is headquartered in San Jose, California and
has operations in Santa Clara and Camarillo, California, Madison, Wisconsin, and
Shenzhen, People's Republic of China.
6
For more information about New Focus visit the company's Internet home page at
http://www.newfocus.com, call our Investors Relations Department at
408-284-NUFO, or e-mail us at investor@newfocus.com.
NEW FOCUS, INC.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
Apr 1, 2001 Dec 31, 2000
----------- ------------
ASSETS
Current Assets:
Cash, cash equivalents and short-
term investments $369,578 $485,493
Trade accounts receivable, net 14,852 13,835
Inventories 22,222 30,385
Other current assets 11,214 4,805
Total current assets 417,866 534,518
Property and equipment, net 82,995 54,744
Intangibles, net 334,752 577
Other assets 4,225 11,105
Total assets $839,838 $600,944
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 18,887 $ 21,556
Accrued Expenses 18,178 10,355
Deferred research and development
funding 343 343
Current portion of long-term debt 238 281
Total current liabilities 37,646 32,535
Long-term debt, less current portion 92 111
Deferred rent 1,302 1,188
Long-term deferred tax liability 20,886 --
Stockholders' equity 779,912 567,110
Total liabilities and
stockholders' equity $839,838 $600,944
NEW FOCUS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended
------------------------------------
Apr 1, Dec 31, Apr 2,
2001 2000 2000
-------- -------- --------
Net revenues $ 40,762 $ 33,875 $ 9,782
Cost of net revenues 55,442 23,256 10,786
Gross profit (14,680) 10,619 (1,004)
(36.0)% 31.3% (10.3)%
Operating expenses:
Research and development, net 12,795 10,620 3,609
Sales and marketing 2,447 1,789 1,100
General and administrative 6,204 3,483 1,424
7
Three Months Ended
------------------------------------
Apr 1, Dec 31, Apr 2,
2001 2000 2000
-------- -------- --------
Amortization of acquired
intangibles 34,837 -- --
Deferred stock compensation 25,324 4,812 5,548
Total operating expenses 81,607 20,704 11,681
Loss from operations (96,287) (10,085) (12,685)
(236.2)% (29.8)% (129.7)%
Interest and other income
(expense), net 4,994 7,834 224
Loss before provision
(benefit) for income taxes (91,293) (2,251) (12,461)
Provision (benefit) for
income taxes (5,000) 4 --
Net loss $(86,293) $ (2,255) $(12,461)
(211.7)% (6.7)% (127.4)%
Basic and diluted net
loss per share $ (1.22) $ (0.04) $ (2.12)
Shares used to compute basic
and diluted net loss per share 70,460 60,463 5,891
NEW FOCUS, INC.
Pro Forma Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended
------------------------------------
Apr 1, Dec 31, Apr 2,
2001 2000 2000(A)
-------- -------- --------
Net revenues $ 40,762 $ 33,875 $ 9,782
Cost of net revenues 55,442 23,256 10,786
Gross profit (14,680) 10,619 (1,004)
(36.0)% 31.3% (10.3)%
Operating expenses:
Research and development, net 12,795 10,620 3,609
Sales and marketing 2,447 1,789 1,100
General and administrative 6,204 3,483 1,424
Total operating expenses 21,446 15,892 6,133
Loss from operations (36,126) (5,273) (7,137)
(88.6)% (15.6)% (73.0)%
Interest and other income
(expense), net 4,994 7,834 224
Loss before provision (benefit)
for income taxes (31,132) 2,561 (6,913)
Provision (benefit) for
income taxes 175 4 --
Net loss $(31,307) $ 2,557 $ (6,913)
(76.8)% 7.5% (70.7)%
8
Three Months Ended
------------------------------------
Apr 1, Dec 31, Apr 2,
2001 2000 2000(A)
-------- -------- --------
Pro forma basic and diluted
net income (loss) per share
excluding amortization of
deferred stock compensation
and acquired intangibles $ (0.44) $ 0.04 $ (0.14)
Pro forma shares used to
compute pro forma basic and
diluted net income (loss) per
share 70,460 64,124 47,830
(A) Number of shares used for the pro forma net loss per share calculation
assumes the conversion of convertible preferred stock into common stock.
Such conversion was completed in conjunction with the May 2000 initial
public offering.
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Santa Clara, State of
California, on April 26, 2001.
NEW FOCUS, INC.
(Registrant)
DATE: April 26, 2001 BY: /s/ William L. Potts, Jr.
---------------- ----------------------------------
William L. Potts, Jr.
Chief Financial
Officer