On the positive side, consolidated revenue for fiscal 2011 increased by 5% from fiscal 2010, to $200.9 million

 

Emcore Corporation has announced its financial results for its fourth quarter and fiscal year ended September 30, 2011.

Consolidated revenue for the fourth quarter ended September 30, 2011 was $52.1 million, which represents a 4% decrease compared to the prior year. Revenue for the Fibre Optics segment was $30.9 million, a 10% decrease compared to the same quarter last year. Revenue for the Photovoltaics segment was $21.2 million, representing an 8% increase compared to the prior year.

Consolidated gross profit was $10.0 million, a 22% decrease compared to the prior year. Consolidated gross margin was 19.2%, which represents a decrease from the 23.6% gross margin reported in the same quarter last year. 

On a segment basis, Fibre Optics gross margin was 18.0%, a decrease from the 20.4% gross margin reported in the prior year. Photovoltaics gross margin was 21.0%, a decrease from the 29.3% gross margin reported in the same quarter, 2010. 

The consolidated operating loss was $14.4 million, which represents a $12.6 million increase in operating loss when compared to the prior year. Emcore says the quarter-over-quarter variance was primarily due to the $8.0 impairment charge recorded on the long-lived assets of its Fibre Optics segment offset slightly by the change in litigation settlements totalling $1.5 million and a decrease in non-cash stock-based compensation expense of $1.1 million.

 

The consolidated net loss was $14.3 million, which represents a $13.4 million increase in net loss when compared to the prior year. The consolidated net loss per share was $0.15, which represents a $0.14 increase in net loss per share when compared to the same quarter last year. During the fourth quarter ended September 30, 2011, the firm recorded $1.0 million of non-operating expense related to its Suncore joint venture.

Annual Financial Results

Consolidated revenue for fiscal 2011 was $200.9 million, which represents a 5% increase compared to the prior year. On a segment basis, revenue for the Fibre Optics segment was $125.6 million, which represents a 3% increase compared to the prior year. Revenue for the Photovoltaics segment was $75.3 million, which represents an 8% increase compared to the same quarter last year.

Consolidated gross profit was $42.8 million, a 16% decrease compared to the prior year. Consolidated gross margin was 21.3%, which represents a decrease from the 26.5% gross margin reported in the prior year. 

On a segment basis, Fibre Optics gross margin was 18.5%, which represents a decrease from the 23.1% gross margin reported in the corresponding quarter last year. Photovoltaics gross margin was 26.0%, a decrease from the 32.3% gross margin reported in the prior year. 

The consolidated operating loss was $32.5 million, which represents an $11.1 million increase in operating loss when compared to the prior year. The year-over-year variance was primarily due to the decrease in gross profit and the $8.0 impairment charge recorded on the long-lived assets of the firm's Fibre Optics segment, offset slightly by lower stock-based compensation expense of $2.4 million and the net gain related to litigation settlements totalling $1.1 million.

The consolidated net loss was $34.2 million, which represents a $10.5 million increase in net loss when compared to the prior year. The consolidated net loss per share was $0.38, which represents a $0.10 increase in net loss per share when compared to the prior year. During fiscal 2011, Emcore recorded $1.8 million of non-operating expense related to its Suncore joint venture.

As of September 30, 2011, cash, cash equivalents, and restricted cash totalled approximately $16.1 million. With respect to measures taken to improve liquidity, in December 2011, Emcore amended the Wells Fargo credit facility, which included adding new classes of assets into the borrowing base calculation and reducing the excess availability covenant requirements. As a result of this amendment, the firm can increase its potential borrowings by up to $14 million. 

 

In addition, the company entered into an equity line of credit arrangement with Commerce Court Small Cap Value Fund, Ltd. in August 2011, pursuant to which, it may sell up to $50 million in shares of its common stock over the 24-month term.   

Business Outlook and Commentary

As disclosed on October 24, 2011, flood waters infiltrated the offices and manufacturing floorspace of Emcore's primary contract manufacturer in Thailand. The areas used to manufacture its fibre optic products and our process and test equipment were submerged in several feet of flood water for more than a month. As a result, the manufacturing infrastructure that supports approximately 50% of Emcore's Fibre Optics segment revenue was damaged. 

This has had a significant impact on operations and the firm's ability to meet customer demand for fibre optics products. Production capabilities for three major product lines were impacted: these include Telecom products, such as tunable lasers and our high-volume tunable XFP line (our low-volume TXFP production line is in the Bay Area and producing products), Cable television (CATV) laser components and transmitters, and other legacy products. 

Over the past two months, Emcore has been developing and implementing alternative manufacturing plans in its facilities in China and the U.S. to meet short-term customer demand. Concurrently, Emcore has been focusing on rebuilding the high-volume production infrastructure for impacted product lines in other locations owned by its primary contract manufacturer in Thailand, as well its China facility. 

The focus during the rebuild is on a quick recovery and strategies to better configure the equipment for efficiency, reduce costs and provide manufacturing diversification in order to turn this crisis into an opportunity.

Purchase orders have been issued to replace the damaged process and test equipment and new equipment is now being received. Between its own facilities and its contract manufacturer, Emcore expects to rebuild its production capacity for its CATV business by the end of March 2012, and rebuild the production capacity of its Telecom production lines before the end of May 2012. The company is working closely with customers on its recovery manufacturing plan to align with their needs.

As for the inventory materials, Emcore were able to move a significant portion of its finished goods inventory to the second story of the facility right before the flood waters reached the manufacturing floor. This has allowed Emcore to serve the near-term demands of some key customers. The major focus is to work with customers to meet their near-term needs and to ascertain that the demand will still be there for Emcore's products when it is back to full capacity. Emcore says many of its key customers for Telecom products have stepped up and committed their demand through non-cancellable purchase orders and pre-payments. As a result, the production capacity for tunable lasers in calendar 2012, when it is fully recovered, is almost fully booked with the existing commitments from customers. 

Emcore has entered into agreements with its key contract manufacturing partner and Wells Fargo Business Credit. These agreements significantly improved the Company's liquidity position while it processes and receives proceeds from insurance claims. The firm believes it has a solid plan in place to rebuild impacted business.

Emcore says its manufacturing infrastructure in the Photovoltaics segment was not impacted by the flooding.

The Company expects the revenues for its first quarter of fiscal year 2012 ending December 2011 to be in a range of $36 to $38 million with the sequential revenue decline primarily attributable to the flood impact to its Fibre Optics business.

Emcore discussed its financial results on 27 December 2011. The call has been archived for one year and can be accessed from the firm's website.

Management will present at the 14th Annual Needham Growth Conference in New York City on January 12th at 10:40 a.m. ET.