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Emcore Quarterly Incomes Bounce Back

Although operations related to the impact from the floods in Thailand are fully restored, yearly revenues have decreased by over 18 percent
Emcore Corporation, a provider of compound semiconductor-based components, subsystems, and systems for the fibre optics and solar power markets, has announced its financial results for its fourth quarter and fiscal year ended September 30th, 2012.

Quarterly financial results

Consolidated revenue for the fourth quarter ended September 30th, 2012 was $47.5 million, which represents an 8.9% decrease compared to the prior year. On a segment basis, revenue for the Fibre Optics segment was $30.1 million, a 2.7% decrease compared to the prior year. Revenue for the Photovoltaics segment was $17.4 million, representing a 17.9% decrease compared to the prior year.



Consolidated gross profit was $4.6 million, which represents a 54.2% decrease compared to the prior year. Consolidated gross margin was 9.7%, a decrease from the 19.2% gross margin reported in the previous year. On a segment basis, Fibre Optics gross margin was 2.4%, which is a reduction from the 18.0% gross margin reported in the prior year.

Photovoltaics gross margin was 22.2%, an increase from the 21.0% gross margin reported in the the same quarter last year.

The consolidated operating loss was $6.3 million, which represents an $8.1 million improvement in operating loss when compared to the prior year. The quarter-over-quarter variance was primarily due to the $4.0 million of insurance recoveries relating to the Thailand flood partially offset by higher severance-related costs from corporate restructuring.

The consolidated net loss was $6.6 million, representing a $7.7 million improvement in net loss when compared to the same quarter last year. The consolidated net loss per share was $0.27 compared to $0.61 in the prior year and $0.38 in the immediate preceding quarter.

Annual Financial Results

Consolidated revenue for fiscal 2012 was $163.8 million, which represents an 18.5% decrease compared to the prior year. On a segment basis, revenue for the Fibre Optics segment was $96.2 million, a 23.5% decrease compared to the prior year primarily due to the Thailand flood in October 2011. Revenue for the Photovoltaics segment was $67.6 million, a 10.2% decrease compared to the prior year primarily due to lower sales to an international customer.



Consolidated gross profit was $17.8 million, which represents a 58.3% decrease compared to the prior year. Consolidated gross margin was 10.9%, a decrease from the 21.3% gross margin reported in the prior year. On a segment basis, Fibre Optics gross margin was 4.5%, representing a decrease from the 18.5% gross margin reported in the FY 2011. Photovoltaics gross margin was 20.0%, a reduction from the 26.0% gross margin reported in the prior year.

During fiscal 2012, lower fibre optics revenues due to the impact from the Thailand flood resulted in higher manufacturing overhead as a percentage of revenue. Manufacturing of certain fibre optics components was moved to company-owned facilities in the U.S., which involved higher labour and other related costs. Instead of completely rebuilding all flood-damaged manufacturing lines, management decided to realign the company's fibre optics product portfolio and focus on business areas with strong technology differentiation and growth opportunities.

During the year ended September 30th, 2012, management identified $1.6 million of inventory on order related to manufacturing product lines that were destroyed by the Thailand flood and will not be replaced. This expense was recorded within cost of revenues on the firm's statement of operations and comprehensive loss. Photovoltaics gross margins declined when compared to prior periods primarily due to lower revenues with unfavourable product mix changes, as well as lower manufacturing yields on new products.

The consolidated operating loss was $35.6 million, which represents a $3.1 million increase in operating loss when compared to the prior year.

The consolidated net loss was $39.2 million, representing a $5.0 million increase in net loss when compared to the prior year. The consolidated net loss per share was $1.66, a $0.12 increase in net loss per share when compared to FY 2011.

As of September 30th, 2012, order backlog for the Photovoltaics segment totalled $43.3 million, which represents a 6.3% decrease from $46.2 million reported as of June 30, 2012. The order backlog as of September 30th, 2012 and June 30, 2012 included $1.9 million and $5.1 million, respectively, of terrestrial solar cell orders from the Suncore joint venture.

Order backlog is defined as purchase orders or supply agreements accepted by Emcore with expected product delivery and/or services to be performed within the next twelve months. Product sales from the Fibre Optics segment are made pursuant to purchase orders, often with short lead times, and revenue from this segment is still limited by the rebuilding of Emcore's production capacity.

Business Outlook

On a consolidated basis, Emcore expects revenue for the first quarter ended December 31st, 2012 to be in the range of $49 to $51 million, which includes revenue from the Suncore joint venture that was previously deferred.



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