Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
JDSU > SEC Filings for JDSU > Form 10-Q on 8-May-2013All Recent SEC Filings

Show all filings for JDS UNIPHASE CORP /CA/ | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for JDS UNIPHASE CORP /CA/


8-May-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Statements contained in this Quarterly Report on Form 10-Q which are not historical facts are forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. A forward-looking statement may contain words such as "anticipates," "believes," "can," "can impact," "could," "continue," "estimates," "expects," "intends," "may," "ongoing," "plans," "potential," "projects," "should," "will," "will continue to be," "would," or the negative thereof or other comparable terminology regarding beliefs, plans, expectations or intentions regarding the future. Forward-looking statements include statements such as:

† our expectations regarding demand for our products, including continued trends in end-user behavior and technological advancements that may drive such demand;

† our belief that the Company is well positioned to benefit from certain industry trends and advancements, and our expectations of the role we will play in those advancements;

† our plans for growth and innovation opportunities;

† our plans to continue to operate as a Company comprised of a portfolio of businesses with a focus on optical and broadband innovation;

† financial projections and expectations, including profitability of certain business units, plans to reduce costs and improve efficiencies, the effects of seasonality on certain business units, continued reliance on key customers for a significant portion of our revenue, future sources of revenue, competition and pricing pressures, the future impact of certain accounting pronouncements and our estimation of the potential impact and materiality of litigation;

† our plans for continued development, use and protection of our intellectual property;

† our strategies for achieving our current business objectives, including related risks and uncertainties;

† our plans or expectations relating to investments, acquisitions, partnerships and other strategic opportunities;

† our strategies for reducing our dependence on sole suppliers or otherwise mitigating the risk of supply chain interruptions;

† our research and development plans; and

† our expectations related to our products, including costs associated with the development of new products, product yields, quality and other issues.

Management cautions that forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from those projected in such forward-looking statements. These forward-looking statements are only predictions and are subject to risks and uncertainties including those set forth in Part II, Item 1A "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q and in other documents we file with the Securities and Exchange Commission. Moreover, neither we assume nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Forward-looking statements are made only as of the date of this Report and subsequent facts or circumstances may contradict, obviate, undermine or otherwise fail to support or substantiate such statements. We are under no duty to update any of the forward-looking statements after the date of this Form 10-Q to conform such statements to actual results or to changes in our expectations.

In addition, Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Annual Report on Form 10-K (except for Items 1, 1A, 6, 7, and 8) for the fiscal year ended June 30, 2012, and our Current Report on Form 8-K dated December 14, 2012.

OUR INDUSTRIES AND QUARTERLY DEVELOPMENTS

JDSU provides communications test and measurement solutions and optical products for telecommunications service providers, cable operators, and network equipment manufacturers. Our diverse technology portfolio also fights counterfeiting and enables commercial lasers for a range of applications.

To serve its markets, JDSU operates the following business segments:

† Communications Test and Measurement ("CommTest")

† Communications and Commercial Optical Products ("CCOP")

† Optical Security and Performance Products ("OSP")


Table of Contents

Communications Test and Measurement

CommTest provides an integrated portfolio of advanced field test and lab instruments, customer experience management ("CEM") tools and service-assurance solutions supported by monitoring software and optimization applications. This portfolio helps network operators and service providers effectively manage the continued growth of network traffic, devices and applications.

As a result of this continued and rapid growth, operators and providers are looking for new ways to drive business agility and generate revenue with innovative services, while continuing to focus on reducing operating costs and improving performance. To this end, CommTest is focused on providing world-class network and service enablement solutions, focusing investments on software and solutions offerings in high-growth markets while leveraging its instruments portfolio. These strategic investments are being placed globally to meet end-customer demand.

CommTest solutions address lab and production environments, field deployment and service assurance for Ethernet and IP services over wireless and fixed communications networks. CommTest also provides protocol test solutions for the development and field deployment of storage and storage-network technologies. CommTest's test instrument portfolio is one of the largest in the industry, with hundreds of thousands of units in active use by major network equipment manufacturers ("NEMs"), operators and services providers worldwide. CommTest is leveraging this installed base and knowledge of network management methods and procedures to develop advanced CEM and service-assurance solutions. Our CEM products let carriers remotely monitor performance and quality of service throughout the entire network. Remote monitoring decreases operating expenses, while early detection increases uptime, preserves revenue, and lets operators better monetize their networks. Service-assurance solutions address the entire scope of network monitoring from xDSL and Ethernet to mobile wireless, providing end-to-end visibility into customers' quality of experience through continuous monitoring and correlation of service and network performance.

CommTest customers include wireless and fixed services providers, NEMs, government organizations and large corporate customers. These include major telecom, mobility and cable operators such as AT&T, Bell Canada, Bharti Airtel Limited, British Telecom, China Mobile, China Telecom, Chunghwa Telecom, Comcast, CSL, Deutsche Telecom, France Telecom, Telefónica, Telmex, TimeWarner Cable and Verizon. CommTest customers also include many of the NEMs served by our CCOP segment, including Alcatel-Lucent, Ciena, Cisco Systems, Fujitsu and Huawei. JDSU test and measurement customers also include chip and infrastructure vendors, storage-device manufacturers, storage-network and switch vendors, and deployed private enterprise customers. Storage-segment customers include Brocade, Cisco Systems and EMC.

During the third quarter of fiscal 2013, we acquired Arieso, a leading provider of location-aware software solutions that allow mobile network operators improve the subscriber experience. Also, during the third quarter of fiscal 2013, Management approved a strategic plan to exit the low-speed wireline product line, which resulted in a $2.2 million charge for accelerated amortization of related intangibles of which $1.8 million and $0.4 million is included in Amortization of acquired technologies and Amortization of other intangibles in the Consolidated Statement of Operations, respectively. In addition, we incurred $11.3 million of inventory related charges primarily related to the write-off of inventory no longer being sold due to the low-speed wireline product line exit included in Cost of sales in the Consolidated Statement of Operations.

Communications and Commercial Optical Products

CCOP is a leading provider of optical communications and commercial laser products and technologies and commercial laser components.

Serving telecommunications and enterprise data communications markets, CCOP products include components, modules, subsystems, and solutions for access
(local), metro (intracity), long-haul (city-to-city and worldwide), and submarine (undersea) networks, as well as storage access networks ("SANs"), local area networks ("LANs") and Ethernet wide-area networks ("WANs"). These products enable the transmission and transport of video, audio and text data over high-capacity fiber-optic cables. CCOP maintains market-leading positions in the fastest-growing optical communications segments, including ROADMs and tunable XFPs and SFPs. CCOP's growing portfolio of pluggable transceivers supports LAN/SAN needs and the cloud for customers building proprietary data center networks.

OEMs use CCOP lasers-fiber, diode, direct-diode, diode-pumped solid-state ("DPSS"), and gas-that offer low- to high-power output with ultraviolet ("UV"), visible and IR wavelengths. This broad product portfolio addresses the needs of laser clients in applications such as micromachining, materials processing, bio-instrumentation, consumer electronics, graphics, and medical/dental. Core laser technologies include continuous-wave, q-switched and mode-locked lasers addressing application needs from continuous-wave to megahertz repetition rates.


Table of Contents

Gesture-recognition systems use both CCOP laser diodes and optical filters from the Company's OSP business segment. These systems simplify the way people interact with technology by enabling the use of natural body gestures, like the wave of a hand, instead of using a device like a mouse or remote control. Emerging markets for gesture recognition include gaming, home entertainment and personal computing.

CCOP's optical communications products customers include Adva, Alcatel-Lucent, Ciena, Cisco Systems, Ericsson, Fujitsu, Huawei, Infinera, Nokia Siemens Networks, and Tellabs. CCOP's lasers customers include Amada, ASML, Beckman Coulter, Becton Dickinson, Disco, Electro Scientific Industries, and KLA-Tencor.

During the first quarter of fiscal 2013, Management approved a plan to exit the concentrated photovoltaic ("CPV") product line. As a result the Company incurred a $2.6 million charge during the period for accelerated amortization of related intangibles which is included in Amortization of acquired technologies in the Consolidated Statement of Operations.

Optical Security and Performance Products

OSP designs, manufactures, and sells products targeting anti-counterfeiting, consumer electronics, government, healthcare, and other markets.

OSP's security offerings for the currency market include Optically Variable Pigment ("OVP®"), Optically Variable Magnetic Pigment ("OVMP®") and banknote thread substrates. OVP® enables a color-shifting effect used by banknote issuers and security printers worldwide for anti-counterfeiting applications on currency and other high-value documents and products. OVP® protects the currencies of more than 100 countries today. OSP also develops and delivers overt and covert anti-counterfeiting products targeting the pharmaceuticals and consumer-electronics markets.

Leveraging its expertise in spectral management and its unique high-precision coating capabilities, OSP improves the performance of a range of products in the consumer-electronics market. For example, gesture-recognition devices designed for the gaming market use OSP bandpass filters. OSP also manufactures components for phase and polarization control that enhance contrast in home-theater projection systems. OSP also provides glasses and color filter wheels for 3D cinema applications.

OSP value-added solutions meet the stringent requirements of commercial and government customers in aerospace and defense. In the aerospace industry, JDSU precision optical filters are a critical component in satellite and spacecraft power- and temperature-control systems. OSP also supplies anti-reflection coatings, beamsplitters, optical filters, laser optics, solar reflectors, and mirrors for a variety of defense and security applications including guidance systems, high-energy laser systems, battlefield eye protection, infrared night-vision systems, and secure optical communications.

OSP serves customers such as 3M, Barco, Kingston, Lockheed Martin, Northrup Grumman, Pan Pacific, Seiko Epson, and SICPA.

During the second quarter of fiscal 2013, JDSU completed the sale of the Hologram Business, which primarily addressed the transaction card market. JDSU has presented its current and historical Consolidated Statements of Operations and segment financials to reflect the sale of this business. The historical results of this business are reflected as discontinued operations in accordance with the authoritative guidance under US GAAP and are not included in quarterly JDSU results from continuing operations for all periods presented.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

See "Note 2. Recently Issued Accounting Pronouncements" regarding the effect of certain recent accounting pronouncements on our consolidated financial statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

For a description of the critical accounting policies that affect our more significant judgments and estimates used in the preparation of our consolidated financial statements, refer to Item 7 on Management Discussion and Analysis in our Current Report on Form 8-K filed with the SEC on December 14, 2012.


Table of Contents

RESULTS OF OPERATIONS

The results of operations for the current period are not necessarily indicative of results to be expected for future periods. The following table summarizes selected Consolidated Statements of Operations items (in millions, except for percentages):

                          Three Months Ended                                     Nine Months Ended
                       March 30,      March 31,                 Percentage    March 30,     March 31,                 Percentage
                          2013          2012         Change       Change         2013          2012        Change       Change
Segment net
revenue:
CommTest               $    174.2    $     177.8    $   (3.6 )                $    539.1    $    558.6    $  (19.5 )
CCOP                        179.2          173.1         6.1                       559.9         516.6        43.3
OSP                          51.9           52.4        (0.5 )                     156.6         153.2         3.4
Net revenue            $    405.3    $     403.3    $    2.0           0.5 %  $  1,255.6    $  1,228.4    $   27.2           2.2 %

Gross profit           $    155.3    $     167.8    $  (12.5 )        (7.4 )% $    516.9    $    523.9    $   (7.0 )        (1.3 )%
Gross margins                38.3 %         41.6 %                                  41.2 %        42.6 %

Research and
development                  65.8           62.0         3.8           6.1 %       190.9         180.2        10.7           5.9 %
Percentage of net
revenue                      16.2 %         15.4 %                                  15.2 %        14.7 %

Selling, general
and administrative          107.3          104.5         2.8           2.7 %       317.4         320.1        (2.7 )        (0.8 )%
Percentage of net
revenue                      26.5 %         25.9 %                                  25.3 %        26.1 %

Amortization of
acquired
technologies                 17.0           14.1         2.9          20.6 %        48.7          43.8         4.9          11.2 %
Percentage of net
revenue                       4.2 %          3.5 %                                   3.9 %         3.6 %

Amortization of
other intangibles             3.1            5.7        (2.6 )       (45.6 )%        8.8          16.2        (7.4 )       (45.7 )%
Percentage of net
revenue                       0.8 %          1.4 %                                   0.7 %         1.3 %

Restructuring and
related charges               0.4            2.0        (1.6 )       (80.0 )%        6.1           7.5        (1.4 )       (18.7 )%
Percentage of net
revenue                       0.1 %          0.5 %                                   0.5 %         0.6 %

Loss from
discontinued
operations, net of
tax                             -           (1.2 )       1.2        (100.0 )%       (1.0 )        (5.9 )       4.9         (83.1 )%
Percentage of net
revenue                         - %          0.3 %                                   0.1 %         0.5 %

Net Revenue

Net revenue increased by $2.0 million, or 0.5%, during the three months ended March 30, 2013 compared to the same period a year ago. This increase was primarily due to an increase in volume and demand in our CCOP segment in the current period, partially offset by a decline in net revenue in our CommTest and OSP segments, as described below.

CommTest net revenue decreased by $3.6 million, or 2.0%, during the three months ended March 30, 2013, compared to the same period a year ago. This decrease was driven by $12.3 million of net revenue decreases primarily from our Broadband and Networking and Media Access and Content product lines. These decreases were primarily due to (i) the wind-down of legacy wireline products, (ii) declines in average selling prices ("ASP") as a result of increased competition within the Media Access Content product line and (iii) procurement delays at a key customer. This was partially offset by $8.7 million of net revenue increases primarily from our Mobility product line driven by new products from the acquisitions of Dyaptive and GenComm.


Table of Contents

CCOP net revenue increased by $6.1 million, or 3.5%, during the three months ended March 30, 2013, compared to the same period a year ago. This increase was driven by $22.2 million of net revenue increases primarily from our Pluggables, Solid State Lasers and Modulators product lines. These increases were primarily due to higher demand in the current period for new products that were released in the prior fiscal year and new customers in the current period. This was partially offset by $16.1 million of net revenue decreases primarily from our Fiber Lasers, Tunables and Amplifiers product lines. These decreases were primarily due to lower demand from key customers for these product lines and the timing of customer transition to newer products within our Fiber Lasers product line.

OSP net revenue decreased by $0.5 million, or 1.0%, during the three months ended March 30, 2013, compared to the same period a year ago. This decrease was driven by $3.3 million of net revenue decreases from our Consumer and Industrial product line primarily due to lower demand for display products, lower cyclical sales in window film products and reductions in 3D products in the current period. This was partially offset by $2.8 million of net revenue increases primarily from our Anti-Counterfeiting product line driven by higher demand for currency products.

Net revenue increased by $27.2 million, or 2.2%, during the nine months ended March 30, 2013 compared to the same period a year ago. This increase was primarily due to (i) an incremental increase in volume and demand in our CCOP segment in the current period, and (ii) the fact that the prior period reflected a reduction in CCOP net revenue of approximately $15 million due to the regional flooding in Thailand which temporarily suspended operations at one of our primary contract manufacturers, Fabrinet. This was partially offset by a decline in CommTest net revenue, as described below.

CommTest net revenue decreased by $19.5 million, or 3.5%, during the nine months ended March 30, 2013, compared to the same period a year ago. This decrease was driven by $44.9 million of net revenue decreases primarily from our Media Access and Content and Services product lines. These decreases were primarily due to the wind-down of legacy wireline products and procurement delays at a key customer. This was partially offset by $25.4 million of net revenue increases primarily from our Mobility product line driven by by new products from the acquisitions of Dyaptive and GenComm.

CCOP net revenue increased $43.3 million, or 8.4%, during the nine months ended March 30, 2013, compared to the same period a year ago. This increase was driven by $68.1 million of net revenue increases primarily from our Pluggables, Modulators, Tunables and Solid State Lasers product lines. These increases were primarily due to (i) higher demand in the current period for new products that were released in the prior fiscal year, (ii) new customers in the current period and (iii) the recovery from the adverse impact of the regional flooding in Thailand in the prior period as described above. This was partially offset by $24.8 million of net revenue decreases primarily from our ROADMs, Gas Lasers and Amplifiers product lines driven by lower demand from key customers.

OSP net revenue increased by $3.4 million, or 2.2%, during the nine months ended March 30, 2013, compared to the same period a year ago. This increase was driven by $11.5 million of net revenue increases primarily from our Anti-Counterfeiting product line driven by higher demand for currency products. This was partially offset by $8.1 million of net revenue decreases from our Consumer and Industrial product line driven by lower demand for commercial infrared products, lower cyclical sales in 3D and window film products and lower demand for gesture products in the current period.

Going forward, we expect to continue to encounter a number of industry and market risks and uncertainties that may limit our visibility, and consequently, our ability to predict future revenue, profitability and general financial performance, and that could create quarter over quarter variability in our financial measures. For example, continued economic issues in Europe have led to uncertainty of demand in our CommTest and optical communications product portfolios and we cannot predict when or to what extent this uncertainty will be resolved. Our revenues, profitability, and general financial performance may also be affected by: (a) strong pricing pressures, particularly within our optical communications markets, due to, among other things, a highly concentrated customer base, increasing competition, particularly from Asia-based competitors, and a general commoditization trend for certain products; (b) high product mix variability, particularly in our CCOP and CommTest markets, which affects revenue and gross profit; (c) continuing service provider seasonality, which causes demand, revenue and profitability volatility at each level of the communications industry; (d) the current trend of communication industry consolidations, which is expected to continue, that directly affects our CCOP and CommTest customer bases and adds additional risk and uncertainty to our financial and business predictability; and (e) activities related to our program of contract manufacturing transitions in our CommTest segment that present additional supply chain and product delivery disruption risks, yield and quality concerns and risk of increased cost. These risks limit our ability to predict longer-term revenue, profitability and general financial performance.


Table of Contents

We operate primarily in three geographic regions: Americas, EMEA and Asia-Pacific. The following table presents net revenue by geographic regions (in millions):

                           Three Months Ended                     Nine Months Ended
                       March 30,         March 31,          March 30,           March 31,
                         2013              2012               2013                2012
Net revenue:
Americas            $ 194.1    47.9 % $ 187.1    46.4 % $   618.0    49.2 % $   601.1    48.9 %
EMEA                   95.1    23.5     101.1    25.1       294.4    23.5       302.0    24.6
Asia-Pacific          116.1    28.6     115.1    28.5       343.2    27.3       325.3    26.5
Total net revenue   $ 405.3   100.0 % $ 403.3   100.0 % $ 1,255.6   100.0 % $ 1,228.4   100.0 %

Net revenue is assigned to geographic regions based on customer shipment locations. Net revenue from customers in the Americas during the three months ended March 30, 2013 and March 31, 2012 included net revenue from the United States of $144.1 million and $148.9 million, respectively. Net revenue from customers in the Americas during the nine months ended March 30, 2013 and March 31, 2012 included net revenue from the United States of $469.0 million and $477.7 million, respectively.

Net revenue from customers outside the Americas during the three months ended March 30, 2013 and March 31, 2012 represented 52.1% and 53.6% of net revenue, respectively. Net revenue from customers outside the Americas during the nine months ended March 30, 2013 and March 31, 2012, represented 50.8% and 51.1% of net revenue, respectively. We expect revenue from customers outside of North America to continue to be an important part of our overall net revenue and an increasing focus for net revenue growth opportunities.

Gross Margin

Gross margin during the three months ended March 30, 2013, decreased 3.3 percentage points to 38.3% from 41.6% compared to the same period a year ago. The decrease in gross margin was primarily due to inventory charges and accelerated amortization of acquired developed technology related to the strategic exit of the low-speed wireline product line and declines in ASP as a result of increased competition within the Media Access Content product line of CommTest. This was partially offset by an improvement in CCOP gross margin primarily due to higher revenue with a more favorable product mix and an improvement in yield in the current period.

Gross margin during the nine months ended March 30, 2013, decreased 1.4 percentage points to 41.2% from 42.6% compared to the same period a year ago. The decrease in gross margin was primarily due to (i) charges related to the strategic exit from the low-speed wireline product line in the current period as referenced above, (ii) CCOP net revenue, which yields lower gross margin generally than our other two segments, representing a higher percentage of consolidated net revenue in the current period compared to the same period a year ago, and (iii) an increase in amortization expense of acquired developed technology primarily due to recent acquisitions. This was partially offset by improvements in CommTest gross margin in the current period primarily due to
(i) savings obtained through targeted restructuring activities to consolidate and rationalize business functions, (ii) savings associated with the recent outsourcing of our repair operations and ongoing efforts to outsource manufacturing and reduce the number of contract manufacturing partners, and
(iii) a more favorable product mix as net revenue generated from higher margin products, particularly from our Mobility product line, increased compared to the same period a year ago.

. . .

  Add JDSU to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for JDSU - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.