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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of October, 2004
EXFO ELECTRO-OPTICAL ENGINEERING INC.
(Translation of registrant's name into English)
400 GODIN AVENUE, VANIER, QUEBEC, CANADA G1M 2K2
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [_]
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [_] No [X]
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-______.
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On October 14, 2004, EXFO Electro-Optical Engineering Inc., a Canadian
corporation, reported its results of operations for the fourth fiscal quarter
and year end for the fiscal year ended August 31, 2004. This report on Form 6-K
sets forth the news release relating to EXFO's announcement and certain
information relating to EXFO's financial condition and results of operations for
the fourth fiscal quarter of the 2004 fiscal year. This press release and
information relating to EXFO's financial condition and results of operations for
the fourth fiscal quarter and year end of the 2004 fiscal year are hereby
incorporated as a document by reference to Form F-3 (Registration Statement
under the Securities Act of 1933) declared effective as of July 30, 2001 and to
Form F-3 (Registration Statement under the Securities Act of 1933) declared
effective as of March 11, 2002 and to amend certain material information as set
forth in these two Form F-3 documents.
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.
EXFO ELECTRO-OPTICAL ENGINEERING INC.
By: /s/ Benoit Ringuette
---------------------------------------
Name: Benoit Ringuette
Title: Legal Counsel and Corporate Secretary
Date: October 15, 2004
[GRAPHIC OMITTED]
[LOGO - EXFO]
Corporate Headquarters 400 Godin Avenue, Vanier (Quebec) G1M 2K2 CANADA
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1 800 683-3936 info@exfo.com o www.exfo.com
Tel: 1 418 683-0211
Fax: 1 418 683-2170
EXFO REPORTS 20.5% YEAR-OVER-YEAR SALES GROWTH FOR FISCAL 2004
o RAISES GROSS MARGIN TO 53.7% IN 2004 FROM 47.4% IN 2003
o GENERATES POSITIVE CASH FLOWS FROM OPERATIONS FOR FISCAL YEAR
o FOCUSES ON GROWTH AREAS LIKE FIBER-TO-THE-PREMISES (FTTP)
DEPLOYMENTS AND IP NETWORKING
QUEBEC CITY, CANADA, October 14, 2004--EXFO Electro-Optical Engineering Inc.
(NASDAQ: EXFO, TSX: EXF.SV) reported today 20.5% year-over-year sales growth for
fiscal 2004.
Sales reached US$74.6 million in the fiscal year ended August 31, 2004, compared
to US$61.9 million in 2003. In the fourth quarter of 2004, sales increased 4.3%
to US$21.3 million from US$20.5 million in the previous quarter and 48.9% from
US$14.3 million in the fourth quarter of 2003.
GAAP net loss in fiscal 2004 totaled US$8.4 million, or US$0.13 per share,
compared to US$55.0 million, or US$0.87 per share, in 2003. In the fourth
quarter of 2004, GAAP net loss amounted to US$2.3 million, or US$0.03 per share,
compared to US$1.2 million, or US$0.02 per share, in the third quarter of 2004
and US$10.1 million, or US$0.16 per share, in the fourth quarter of 2003. GAAP
net loss in the fourth quarter of 2004 includes restructuring and other charges
as well as an impairment of a long-lived asset for a total of US$2.3 million.
Gross margin amounted to 53.7% in fiscal 2004 compared to 47.4% (excluding
inventory write-offs and a non-recurring gain) in 2003. In the fourth quarter of
2004, gross margin increased to 55.1% from 52.9% in the previous quarter and
45.8% (excluding inventory write-offs and a non-recurring gain) in the fourth
quarter of 2003.
"Through a superior customer value proposition, we delivered our second-best
sales performance in history--ahead of our 2000 sales level--with 21% annual
revenue growth, four consecutive quarters of revenue growth, profitability on a
pro forma basis in the last two quarters, and a significant improvement in gross
margin year-over-year, despite a still difficult market place," said Germain
Lamonde, EXFO's Chairman, President and CEO. "We also displayed our ability to
gain market share--a key metric--in good and bad times. We are among very few
companies that steadily invested in R&D throughout the downturn, maintaining a
long-term course to make EXFO the market leader in key, emerging growth areas
like FTTP and next-generation, IP networking."
EXFO also announced that it achieved three out of four corporate objectives it
had outlined at the beginning of fiscal 2004:
CORPORATE PERFORMANCE OBJECTIVES IN FISCAL 2004
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GOAL METRIC RESULT
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Increase sales through 10% sales growth year-over-year 20.5% sales growth year-over year [check]
market-share gains
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Maximize profitability 50% gross margin 53.7% gross margin [check]
and growth
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Innovate out of the downturn 45% of sales from new products 31.7% of sales from new products [check]
(< two years on the market)
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Maintain a sound financial Positive cash flows from operations Positive cash flows from operations [check]
position in at least one quarter for fiscal year
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EXFO Press Release
October 14, 2004 Page 2
"I am pleased that we adhered to best disclosure practices by formally
communicating our fiscal 2004 corporate performance objectives," Mr. Lamonde
said. "While we successfully reached three out of four of these targets, I
believe our innovation results will improve as traction on our 20 new product
introductions converts to dollars. Turning to fiscal 2005, our relentless
efforts during the last three years should produce significant sales growth, a
return to profitability on a pro forma basis, and continued market-focused
innovation as we create long-term value for our customers, shareholders and
employees."
CORPORATE PERFORMANCE OBJECTIVES IN FISCAL 2005
------------------------------------------------------------------------
GOAL METRIC
------------------------------------------------------------------------
Increase sales through 20% sales growth year-over-year
market-share gains
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Maximize profitability Profitable on a pro forma basis
for the fiscal year*
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Focus on innovation 45% of sales from new products
(< two years on the market)
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*GAAP NET LOSS EXCLUDING STOCK-BASED COMPENSATION COSTS, AMORTIZATION OF
INTANGIBLE ASSETS, RESTRUCTURING CHARGES AND OTHER UNUSUAL ITEMS.
SEGMENTED RESULTS
(IN MILLIONS OF US DOLLARS)
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SALES
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BUSINESS SEGMENT Q4 2004 Q3 2004 Q4 2003 FY 2004 FY 2003
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Telecom Division $16.8 $16.7 $10.8 $58.9 $48.8
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Photonics & Life $4.5 $3.8 $3.5 $15.7 $13.1
Sciences Div.
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EARNINGS (LOSS) FROM OPERATIONS*
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BUSINESS SEGMENT Q4 2004 Q3 2004 FY 2004
---------------------------------------------------------------------------
Telecom Division $0.0 ($0.8) ($5.6)
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Photonics & Life ($2.1) ($1.1) ($5.0)
Sciences Div.
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*Segmented loss from operations is not available for comparative
periods.
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FISCAL 2004 BUSINESS HIGHLIGHTS
o Confirming its market-share gains, EXFO received the 2004 Growth
Strategy Excellence Award from Frost and Sullivan. This leading market
research firm reported that EXFO's overall market share increased from
6.4% in 2001 to 8.4% in 2003--the single largest increase within the
global optical test and measurement industry. EXFO was also deemed
leader in the optical test installation and maintenance space with an
estimated 17% market share worldwide.
o Maximizing efficiency and cost control, EXFO merged its protocol test
operations in Montreal and announced the consolidation of its Photonics
and Life Sciences Division in Toronto. These initiatives will enable
the company to streamline its R&D/manufacturing sites from five to
three. Overall for fiscal 2004, EXFO increased its gross margin to
53.7% from 47.4% (excluding inventory write-offs and a non-recurring
gain) in 2003.
EXFO Press Release
October 14, 2004 Page 3
o Focusing on market-driven innovation, EXFO launched 20 new products in
fiscal 2004, including several aimed at establishing leadership in the
FTTP test market and others dedicated to life science activities. The
company also strengthened its competitive position in protocol testing
with the introduction of a next-generation Fibre Channel test set for
security-intensive applications and, subsequent to the year-end, it
released a next-generation SONET/SDH analyzer for data-centric IP
networks and a VoIP-ready Gigabit Ethernet test solution.
o Continuing efforts to improve its balance sheet, EXFO closed a
bought-deal financing of US$29.2 million (C$38.4 million) to attain a
total cash position of US$89.1 million at the end of the fiscal year.
The company also generated positive cash flows from operations for the
fiscal year.
OPERATING EXPENSES
Selling and administrative expenses amounted to US$25.9 million, or 34.7% of
sales, in fiscal 2004 compared to US$27.0 million, or 43.6% of sales, in 2003.
In the fourth quarter of 2004, selling and administrative expenses totaled
US$6.3 million, or 29.8% of sales, compared to US$6.9 million, or 33.9% of
sales, in the third quarter of 2004 and 6.0 million, or 42.1% of sales, in the
fourth quarter of 2003.
Gross research and development (R&D) expenses amounted to US$15.7 million, or
21.0% of sales, in fiscal 2004 compared to US$17.1 million, or 27.7% of sales,
in 2003. In the fourth quarter of 2004, gross R&D expenses decreased to US$3.6
million, or 17.0% of sales, from US$4.2 million or, 20.4% of sales, in the
previous quarter and US$3.9 million, or 27.0% of sales, in the fourth quarter of
2003.
BUSINESS OUTLOOK
EXFO forecasted sales between US$20.0 million and US$23.0 million and a GAAP net
loss between US$0.04 and US$0.01 per share for the first quarter of fiscal 2005.
Excluding stock-based compensation costs, amortization of intangible assets,
restructuring charges and other unusual items, the company expects to report pro
forma net loss/earnings between a loss of $0.02 per share and earnings of
US$0.01 per share.
CONFERENCE CALL AND WEBCAST
EXFO will host a conference call today at 5 p.m. (Eastern time) to review its
fourth-quarter and year-end financial results for fiscal 2004. To listen to the
conference call and participate in the question period via telephone, dial
1-416-695-9753. Germain Lamonde, Chairman, President and CEO, and Pierre
Plamondon, CA, Vice-President of Finance and Chief Financial Officer, will
participate in the call. An audio replay of the conference call will be
available between 7 a.m. and 11 p.m. until October 21, 2004. The replay number
is 1-416-695-5275. The audio Webcast of the conference call will also be
available on EXFO's Website at www.exfo.com/investors.
EXFO Press Release
October 14, 2004 Page 4
ABOUT EXFO
EXFO is the recognized test and measurement expert in the global
telecommunications industry through the design and manufacture of advanced and
innovative solutions as well as best-in-class customer support. The Telecom
Division, which represents the company's main business activity, offers fully
integrated and complete test solutions to network service providers, system
vendors and component manufacturers in approximately 70 countries. One of EXFO's
strongest competitive advantages is its PC/Windows-based modular platforms that
host a wide range of tests across optical, physical, data and network layers,
while maximizing technology reuse across several market segments. The Photonics
and Life Sciences Division mainly leverages core telecom technologies to offer
value-added solutions in the life sciences, high-precision manufacturing and
research sectors. For more information about EXFO, visit WWW.EXFO.COM.
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements within the meaning of the
U. S. Private Securities Litigation Reform Act of 1995 and we intend that such
forward-looking statements be subject to the safe harbors created thereby.
Forward-looking statements are statements other than historical information or
statements of current condition that refer to expectations, projections or other
characterizations of future events and circumstances. They are not guarantees of
future performance and involve risks and uncertainties. Actual results may
differ materially from those in forward-looking statements due to various
factors including global geo-political, economic, competitive and market
uncertainty and our ability to execute successfully in these uncertain
conditions; capital spending levels in the telecommunications sector; market
acceptance of new products and upcoming new products; limited visibility of
customer orders and the timing thereof; the competitive landscape; and
successful integration of our acquired and to-be-acquired companies. Assumptions
relating to the foregoing involve judgments and risks, all of which are
difficult or impossible to predict and many of which are beyond our control.
Other risk factors that may affect our future performance and operations are
detailed in our Annual Report on Form 20-F and our other filings with the U. S.
Securities and Exchange Commission and the Canadian securities commissions. We
believe that the expectations reflected in the forward-looking statements are
reasonable based on information currently available to us, but we cannot assure
you that the expectations will prove to have been correct. Accordingly, you
should not place undue reliance on these forward-looking statements. These
statements speak only as of the date of this document and shall not be revised
or updated to reflect events after the date of this document.
-30-
FOR MORE INFORMATION
Vance Oliver
Manager, Investor Relations
(418) 683-0913, Ext. 3733 VANCE.OLIVER@EXFO.COM
EXFO ELECTRO-OPTICAL ENGINEERING INC.
INTERIM CONSOLIDATED BALANCE SHEET
(in thousands of US dollars)
AS AT AS AT
AUGUST 31, AUGUST 31,
2004 2003
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ASSETS
CURRENT ASSETS
Cash $ 5,159 $ 5,366
Short-term investments 83,969 52,010
Accounts receivable
Trade, less allowance for doubtful accounts
of $510 ($568 as at August 31, 2003) 12,080 9,639
Other 1,532 834
Income taxes and tax credits recoverable 7,836 6,003
Inventories 15,371 15,602
Prepaid expenses 1,513 2,041
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127,460 91,495
INCOME TAXES AND TAX CREDITS RECOVERABLE 449 1,377
PROPERTY, PLANT AND EQUIPMENT 15,442 21,862
LONG-LIVED ASSET HELD FOR SALE 1,600 --
INTANGIBLE ASSETS 9,447 13,847
GOODWILL 18,393 17,673
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$ 172,791 $ 146,254
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LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 11,393 $ 12,026
Income taxes payable -- 1,803
Deferred revenue 805 148
Current portion of long-term debt 121 110
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12,319 14,087
DEFERRED REVENUE 1,123 352
DEFERRED GRANTS 1,690 1,536
LONG-TERM DEBT 332 453
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15,464 16,428
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SHAREHOLDERS' EQUITY
Share capital 521,733 492,452
Contributed surplus 1,986 1,519
Cumulative translation adjustment 13,820 7,643
Deficit (380,212) (371,788)
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157,327 129,826
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$ 172,791 $ 146,254
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EXFO ELECTRO-OPTICAL ENGINEERING INC.
INTERIM CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands of US dollars, except share and per share data)
THREE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDED ENDED THREE MONTHS ENDED ENDED
AUGUST 31, 2004 AUGUST 31, 2004 AUGUST 31, 2003 AUGUST 31, 2003
--------------- --------------- ------------------- ---------------
(unaudited) (unaudited)
SALES $ 21,332 $ 74,630 $ 14,326 $ 61,930
COST OF SALES (1,2) 9,576 34,556 9,767 36,197
-------- -------- -------- --------
GROSS MARGIN 11,756 40,074 4,559 25,733
-------- -------- -------- --------
OPERATING EXPENSES
Selling and administrative (1) 6,347 25,890 6,036 26,991
Net research and development (1) 2,748 12,390 3,198 15,879
Amortization of property, plant and equipment 1,121 4,935 1,274 5,210
Amortization of intangible assets 1,243 5,080 1,278 5,676
Impairment of long-lived assets and goodwill 620 620 -- 7,427
Restructuring and other charges 1,729 1,729 3,786 4,134
-------- -------- -------- --------
TOTAL OPERATING EXPENSES 13,808 50,644 15,572 65,317
-------- -------- -------- --------
LOSS FROM OPERATIONS (2,052) (10,570) (11,013) (39,584)
Interest and other income 370 1,438 316 1,245
Foreign exchange loss (402) (278) (242) (1,552)
-------- -------- -------- --------
LOSS BEFORE INCOME TAXES (2,084) (9,410) (10,939) (39,891)
INCOME TAXES 259 (986) (820) 15,059
-------- -------- -------- --------
NET LOSS FOR THE PERIOD $ (2,343) $ (8,424) $(10,119) $(54,950)
======== ======== ======== ========
BASIC AND DILUTED NET LOSS PER SHARE $ (0.03) $ (0.13) $ (0.16) $ (0.87)
BASIC WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING (000'S) 68,431 66,020 63,030 62,852
DILUTED WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING (000'S) 68,983 66,615 63,555 63,317
(1) STOCK-BASED COMPENSATION COSTS INCLUDED IN:
Cost of sales $ 25 $ 62 $ -- $ --
Selling and administrative 91 265 -- --
Net research and development 44 122 -- --
-------- -------- -------- --------
$ 160 $ 449 $ -- $ --
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(2) Including inventory write-offs of $2,475 and $4,121 for the three months
and the twelve months ended August 31, 2003, respectively.
EXFO ELECTRO-OPTICAL ENGINEERING INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWSYEARS
(in thousands of US dollars)
THREE TWELVE MONTHS THREE TWELVE MONTHS
MONTHS ENDED ENDED MONTHS ENDED ENDED
AUGUST 31, 2004 AUGUST 31, 2004 AUGUST 31, 2003 AUGUST 31, 2003
--------------- --------------- --------------- ---------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (2,343) $ (8,424) $ (10,119) $ (54,950)
Add (deduct) items not affecting cash
Discount on short-term investments (164) 197 (280) (96)
Stock-based compensation costs 160 449 -- --
Inventory and tax credit write-offs -- -- 2,475 6,418
Amortization 2,364 10,015 2,552 10,886
Impairment of long-lived assets and
goodwill 620 620 -- 7,427
Restructuring and other charges 1,261 1,261 512 512
Future income taxes -- -- 146 10,138
Deferred revenue 118 1,404 223 (24)
Deferred grants 369 154 (323) 817
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2,385 5,676 (4,814) (18,872)
Change in non-cash operating items
Accounts receivable (506) (2,677) 1,180 3,957
Income taxes and tax credits (843) (2,464) (2,203) 13,489
Inventories 1,297 1,016 2,403 7,925
Prepaid expenses (193) (449) (434) (569)
Accounts payable and accrued
liabilities (627) (351) 126 (349)
--------- --------- --------- ---------
1,513 751 (3,742) 5,581
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CASH FLOWS FROM INVESTING ACTIVITIES
Additions to short-term investments (146,604) (653,348) (54,212) (401,105)
Proceeds from disposal of short-term
investments 145,983 624,722 57,788 395,699
Additions to property, plant and equipment
and intangible assets (278) (851) (402) (2,652)
Business combination -- (241) -- (1,867)
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(899) (29,718) 3,174 (9,925)
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CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt (29) (109) (25) (133)
Net proceeds of offering -- 29,164 -- --
Share issue expenses 34 (137) -- --
Exercise of stock options 8 254 24 45
Redemption of share capital (2) (5) (9) (16)
Resale of share capital 10 23 30 48
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21 29,190 20 (56)
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EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON
CASH 218 (430) (122) 638
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CHANGE IN CASH 853 (207) (670) (3,762)
CASH - BEGINNING OF PERIOD 4,306 5,366 6,036 9,128
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CASH - END OF PERIOD $ 5,159 $ 5,159 $ 5,366 $ 5,366
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