x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
New Jersey
(State
or other jurisdiction of incorporation or organization)
|
22-2746503
(I.R.S.
Employer Identification No.)
|
10420
Research Road, SE, Albuquerque, New
Mexico
(Address
of principal executive offices)
|
87123
(Zip
Code)
|
|
Title
of each class:
|
Common Stock, No Par
Value
|
Name
of each exchange on which registered:
|
NASDAQ
|
Securities
registered pursuant to Section 12(g) of the Act:
|
None
|
PAGE
|
|||
Part I
|
|||
Item 1.
|
3
|
||
Item 1A.
|
16
|
||
Item 1B.
|
41
|
||
Item 2.
|
41
|
||
Item 3.
|
42
|
||
Item 4.
|
43
|
||
Part II
|
|||
Item 5.
|
44
|
||
Item 6.
|
47
|
||
Item 7.
|
50
|
||
Item 7A.
|
70
|
||
Item 8.
|
71
|
||
71
|
|||
72
|
|||
73
|
|||
74
|
|||
76
|
|||
106
|
|||
Item 9.
|
107
|
||
Item 9A.
|
107
|
||
Item 9B.
|
110
|
||
Part III
|
|||
Item
10.
|
110
|
||
Item
11.
|
110
|
||
Item
12.
|
110
|
||
Item
13.
|
110
|
||
Item
14.
|
110
|
||
Part IV
|
|||
Item
15.
|
111
|
||
114
|
Business
|
|
·
|
Satellite Solar Power
Generation - We believe we are a leader in providing solar power
generation solutions to the global communications satellite industry and
U.S. government space programs. A satellite’s operational
success and corresponding revenue depend on its available power and its
capacity to transmit data. We provide advanced compound
semiconductor-based solar cells and solar panel products, which are more
resistant to radiation levels in space and generate substantially more
power from sunlight than silicon-based solutions. Space power
systems using our multi-junction solar cells weigh less per unit of power
than traditional silicon-based solar cells. Our products provide our
customers with higher conversion efficiency for reduced solar array size
and launch costs, higher radiation tolerance, and longer lifetime in harsh
space environments.
|
|
·
|
Terrestrial Solar Power
Generation - Solar power generation systems utilize photovoltaic
cells to convert sunlight to electricity and have been used in space
programs and, to a lesser extent, in terrestrial applications for several
decades. The market for terrestrial solar power generation
solutions has grown significantly as solar power generation technologies
improve in efficiency, as global prices for non-renewable energy sources
(i.e., fossil
fuels) continue to rise over the long term, and as concern has increased
regarding the effect of carbon emissions on global warming. Terrestrial
solar power generation has emerged as one of the most rapidly expanding
renewable energy sources due to certain advantages solar power has when
compared to other energy sources, including reduced environmental impact,
elimination of fuel price risk, installation flexibility, scalability,
distributed power generation (i.e., electric power is
generated at the point of use rather than transmitted from a central
station to the user), and reliability. The rapid increase in demand for
solar power has created a growing need for highly efficient, reliable and
cost-effective concentrating solar power
systems.
|
|
·
|
On
February 22, 2008, EMCORE acquired telecom-related assets of Intel
Corporation’s Optical Platform Division (“OPD”) that included inventory,
fixed assets, intellectual property, and technology comprised of tunable
lasers, tunable transponders, 300-pin transponders, and integrated tunable
laser assemblies.
|
|
·
|
On
April 20, 2008, EMCORE acquired the enterprise and storage-related assets
of Intel Corporation’s OPD business, as well as Intel’s Connects Cables
business. The assets acquired include inventory, fixed assets,
intellectual property, and technology relating to optical transceivers for
enterprise and storage customers, as well as optical cable interconnects
for high-performance computing
clusters.
|
|
·
|
In
July 2008, we announced our solar cell technology which provides a
platform for EMCORE’s next generation photovoltaic products for space and
terrestrial solar power applications. Solar cells built using Inverted
Metamorphic (“IMM”) technology recently achieved world record conversion
efficiency of 33% when used in space, and it is anticipated that
efficiency levels in the 42%-45% range will be achieved when adapted for
use under the 500-1500X concentrated illumination, typical in terrestrial
concentrator photovoltaic (CPV) systems. Once commercialized, the CPV
systems that are powered with EMCORE’s IMM-based solar cells will realize
an approximately 10% to 20% reduction in the cost of power generated.
EMCORE expects to begin commercializing this technology for both space and
terrestrial applications in 2009. Due to its unique design, the IMM cell
is approximately one fifteenth the thickness of the conventional
multi-junction solar cell and will enable a new class of extremely
lightweight, high-efficiency, and flexible solar arrays for space
applications. Furthermore, this technology can be readily integrated into
EMCORE’s complete line of CPV receiver products and provide increased
energy conversion efficiency in CPV power
systems.
|
|
·
|
In
June 2008, we announced that our optical fiber EMCORE Connects Cables
(ECC) are being used by IBM on the Department of Energy’s supercomputer
nicknamed Roadrunner, the first supercomputer to break the 1,000 trillion
calculations per second mark known as a Petaflop. EMCORE
Connects Cables are high-performance InfiniBand®
interconnects that operate at high-speed 20G data rates with an
extremely low bit error rate of
10-15.
|
Risk
Factors
|
|
•
|
market
acceptance of our products;
|
|
•
|
market
demand for the products and services provided by our
customers;
|
|
•
|
disruptions
or delays in our manufacturing processes or in our supply of raw materials
or product components;
|
|
•
|
changes
in the timing and size of orders by our
customers;
|
|
•
|
cancellations
and postponements of previously placed
orders;
|
|
•
|
reductions
in prices for our products or increases in the costs of our raw materials;
and
|
|
•
|
the
introduction of new products and manufacturing
processes.
|
·
|
The
Company’s historic lack of profitability has caused it to consume cash,
through acquisitions, operations and as a result of the research and
development and capital expenditures necessary to expand the market which
the Company serves (particularly the terrestrial solar market), as
discussed in more detail below. The Company may be unable to
acquire the cash necessary to finance these activities from either the
debt or the equity markets and as a result the Company may be unable to
continue operations.
|
·
|
The
Company’s fiber optics products are sold principally to large publicly
held companies which are also dependent on public debt and equity
markets. Our customers may be unable to obtain the financing
necessary to continue their own
operations.
|
·
|
The
market for the products of the Company’s fiber optics customers, into
which the Company’s fiber optics products are incorporated, is dependent
on capital spending from telecommunications and data communications
companies, which may also be adversely affected by the lack of
financing.
|
·
|
The
market for the Company’s satellite solar cells may also be adversely
affected by the worldwide financial crisis, because the market for
commercial satellites depends on capital spending by telecommunications
companies and the market for military satellites depends on resources
allocated for military intelligence spending, which may be
restricted. The market for the Company’s terrestrial solar
products is dependent on the availability of project financing for
photovoltaic projects, which may no longer be available, and is also
largely dependent on government support of various types, such as
investment tax credits, which may no longer be available as governments
allocate scarce resources to deal with the financial
crisis.
|
·
|
A
reduction in the Company’s sales will adversely affect the Company’s
ability to draw on its existing line of credit with Bank of America
because that line of credit is largely dependent on the level of the
Company’s accounts receivable.
|
|
•
|
Liquidated
damage payments or customer termination rights if the system is not
commissioned within specified
timeframes;
|
|
•
|
System
termination clauses whereby we could be required to buy-back a customer’s
system at fair value on specified future
dates.
|
|
•
|
unexpected
changes in regulatory requirements;
|
|
•
|
legal
uncertainties regarding liability, tariffs and other trade
barriers;
|
|
•
|
inadequate
protection of intellectual property in some
countries;
|
|
•
|
greater
incidence of shipping delays;
|
|
•
|
greater
difficulty in hiring talent needed to oversee manufacturing operations;
and
|
|
•
|
potential
political and economic instability.
|
|
•
|
potential
adverse actions by the incoming Obama Administration pursuant to its
stated intention to reduce the loss of U.S.
jobs
|
|
•
|
changing
product specifications and customer
requirements;
|
|
•
|
unanticipated
engineering complexities;
|
|
•
|
expense
reduction measures we have implemented and others we may
implement;
|
|
•
|
difficulties
in hiring and retaining necessary technical personnel;
and
|
|
•
|
difficulties
in allocating engineering resources and overcoming resource
limitations.
|
|
•
|
our
customers can stop purchasing our products at any time without
penalty;
|
|
•
|
our
customers may purchase products from our competitors;
and
|
|
•
|
political
and economic instability or changes in U.S. Government policy with respect
to these foreign countries may inhibit export of our devices and limit
potential customers’ access to U.S. dollars in a country or region in
which those potential customers are
located;
|
|
•
|
we
may experience difficulties in the timeliness of collection of foreign
accounts receivable and be forced to write off these
receivables;
|
|
•
|
tariffs
and other barriers may make our devices less cost
competitive;
|
|
•
|
the
laws of certain foreign countries may not adequately protect our trade
secrets and intellectual property or may be burdensome to comply
with;
|
|
•
|
potentially
adverse tax consequences to our customers may damage our cost
competitiveness;
|
|
•
|
currency
fluctuations, which may make our products less cost competitive, affecting
overseas demand for our products or otherwise adversely affect our
business; and
|
|
•
|
language
and other cultural barriers may require us to expend additional resources
competing in foreign markets or hinder our ability to effectively
compete.
|
|
In
addition, we may be exposed to additional legal risks under the laws of
both the countries in which we operate and in the United States, including
the Foreign Corrupt Practices Act.
|
|
•
|
infringement
claims (or claims for indemnification resulting from infringement claims)
will not be asserted against us or that such claims will not be
successful;
|
|
•
|
future
assertions will not result in an injunction against the sale of infringing
products, which could significantly impair our business and results of
operations;
|
|
•
|
any
patent owned or licensed by us will not be invalidated, circumvented or
challenged; or
|
|
•
|
we
will not be required to obtain licenses, the expense of which may
adversely affect our results of operations and
profitability.
|
|
•
|
hire,
train, integrate and manage additional qualified engineers for research
and development activities, sales and marketing personnel, and financial
and information technology
personnel;
|
|
•
|
retain
key management and augment our management team, particularly if we lose
key members;
|
|
•
|
continue
to enhance our customer resource management and manufacturing management
systems;
|
|
•
|
implement
and improve additional and existing administrative, financial and
operations systems, procedures and controls, including the need to update
and integrate our financial internal control
systems;
|
|
•
|
insufficient
experience with technologies and markets in which the acquired business is
involved, which may be necessary to successfully operate and integrate the
business;
|
|
•
|
problems
integrating the acquired operations, personnel, technologies or products
with the existing business and
products;
|
|
•
|
diversion
of management time and attention from the core business to the acquired
business or joint venture;
|
|
•
|
potential
failure to retain key technical, management, sales and other personnel of
the acquired business or joint
venture;
|
|
•
|
difficulties
in retaining relationships with suppliers and customers of the acquired
business, particularly where such customers or suppliers compete with
us;
|
|
•
|
assumption
of liabilities including, but not limited to, lawsuits, tax examinations,
warranty issues, etc.
|
|
•
|
Further
study may reveal issues which make such a split inadvisable or
uneconomical, or future changes in laws, regulations or accounting rules
may create such issues;
|
|
•
|
Key
customers or suppliers may not consent to contract assignments or other
arrangements necessary to implement this
strategy;
|
|
•
|
It
may not be possible to obtain shareholder consent for the implementation
of this strategy;
|
|
•
|
Future
capital market developments may prevent the Company from obtaining
necessary financing for one or both of the resulting corporations;
and
|
|
•
|
It
may not be possible to fully staff the Board of Directors of one or both
resulting corporations.
|
ITEM
1B.
|
Unresolved
Staff Comments
|
Properties
|
Location
|
Function
|
Approximate
Square
Footage
|
Term
(in
calendar year)
|
Active Properties:
|
|||
Albuquerque,
New Mexico
|
Corporate
Headquarters
Manufacturing
facility for photovoltaic products
Manufacturing
facility for digital fiber optic products
R&D
facility
|
165,000
|
Facilities
are owned by the Company; certain land is leased. Land lease
expires in 2050
|
Alhambra,
California
|
Manufacturing
facility for CATV, FTTP and Satcom products
R&D
facility
|
91,000
|
Lease
expires in 2011 (1)
|
Newark,
California
|
R&D
facility
|
55,000
|
Lease
expires in 2013(1)
|
Langfang,
China
|
Manufacturing
facility for fiber optics products
|
44,000
|
Lease
expires in 2012(1)
|
San
Diego, California
|
Manufacturing
facility for video transport products
R&D
facility (April 2007 - Acquisition of Opticomm
Corporation)
|
8,100
|
Lease
expires in April 2009
|
Ivyland,
Pennsylvania
|
Manufacturing
facility for CATV and Satcom products R&D facility
|
9,000
|
Lease
expires in 2011(1)
|
Albuquerque,
New Mexico
|
Storage
warehouse
|
6,000
|
Lease
expires in 2010(1)
|
Taipei
City, Taiwan
|
R&D
facility
|
6,000
|
Lease
expires in 2013
|
Somerset,
New Jersey
|
R&D
facility
|
5,000
|
Lease
to commence in November 2008 and expires in 2010(1)
|
Vacated Properties:
|
|||
Sunnyvale,
California
|
Manufacturing
facility for ECL lasers
R&D
facility
Facility
was vacated in August 2008
|
15,000
|
Lease
terminated.
|
Naperville,
Illinois
|
Manufacturing
facility for LX4 modules
R&D
facility
Facility
was vacated in October 2007
|
11,000
|
Lease
expires in February 2013 and it is in the process of being
subleased.
|
Blacksburg,
Virginia
|
Manufacturing
facility for video transport products
R&D
facility.
Facility
was vacated in June 2007
|
6,000
|
Lease
expired in December 2008.
|
|
(1)
|
This
lease has the option to be renewed by the Company, subject to inflation
adjustments.
|
Legal
Proceedings
|
Submission
of Matters to a Vote of Security
Holders
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
First Quarter
|
Second Quarter
|
Third Quarter
|
Fourth Quarter
|
|||||||||||||
Fiscal
2008 price range per share of common stock
|
$ | 7.22 – $15.90 | $ | 5.62 – $15.70 | $ | 5.80 – $9.30 | $ | 3.90 – $6.65 | ||||||||
Fiscal
2007 price range per share of common stock
|
$ | 4.60 – $ 6.47 | $ | 3.84 – $ 5.89 | $ | 4.32 – $5.78 | $ | 5.45 – $9.91 |
9/03 | 9/04 | 9/05 | 9/06 | 9/07 | 9/08 | |||||||||||||||||||
EMCORE
Corporation
|
100.00 | 67.01 | 208.16 | 201.36 | 326.53 | 168.03 | ||||||||||||||||||
NASDAQ
Composite
|
100.00 | 107.74 | 123.03 | 131.60 | 158.88 | 119.05 | ||||||||||||||||||
NASDAQ
Electronic Components
|
100.00 | 80.82 | 97.22 | 93.26 | 114.21 | 79.72 | ||||||||||||||||||
NASDAQ
Computer
|
100.00 | 99.32 | 113.13 | 119.80 | 144.37 | 109.15 |
Selected
Financial Data
|
|
·
|
In
June and July 2008, the Company sold a total of two million shares of
Series D Preferred Stock of WorldWater and Solar Technologies Corporation
(WWAT), together with 200,000 warrants to a major shareholder of both the
Company and WWAT at a price equal to $6.54 per share. The
Company recognized a total gain of $7.4 million on the sale of this
stock.
|
|
·
|
In
February and April 2008, the Company acquired the telecom, datacom, and
optical cable interconnects-related assets of Intel’s Optical Platform
Division for $120 million in cash and the Company’s common
stock.
|
|
·
|
In
February 2008, the Company completed the sale of $100 million of
restricted common stock and warrants to fund the Intel
Acquisitions. Investors purchased 8 million shares of our
common stock, no par value, and warrants to purchase an additional 1.4
million shares of our common stock.
|
|
·
|
In
January and February 2008, the Company redeemed all of its outstanding
5.5% convertible subordinated notes due 2011 pursuant to which the holders
converted their notes into the Company's common stock. The Company
recognized a loss totaling $4.7 million related to the conversion of notes
to equity.
|
|
·
|
Fiscal
2008 operating expenses included $4.8 million related to Intel
Corporation’s transition services agreement charges associated with the
acquisition of certain assets from
Intel.
|
·
|
The
Company recorded approximately $22.0 million of impairment charges on
goodwill related to the fiber optics reporting
segment.
|
·
|
The
Company accounted for the modification of stock options still held to
terminated employees as additional compensation expense of $4.3 million in
accordance with SFAS 123(R) in the first quarter of fiscal
2008.
|
·
|
Other
expenses included a charge of $1.5 million associated with the impairment
of certain
investments.
|
|
·
|
In
November 2006, the Company invested $13.1 million in WWAT in return for
convertible preferred stock and
warrants.
|
|
·
|
In
April 2007, the Company modified its convertible subordinated notes to
resolve an alleged default event. The interest rate was
increased from 5% to 5.5% and the conversion price was decreased from
$8.06 to $7.01. The Company also repurchased $11.4 million of
outstanding notes to reduce interest expense and share
dilution.
|
|
·
|
In
April 2007, the Company acquired privately-held Opticomm Corporation for
$4.1 million in cash.
|
|
·
|
Fiscal
2007 operating expenses included:
|
|
§
|
$10.6
million related to our review of historical stock option granting
practices;
|
|
§
|
$6.1
million related to non-recurring legal expenses;
and,
|
|
§
|
$2.8
million related to severance charges associated with facility closures and
consolidation of operations.
|
|
·
|
In
November 2005, the Company exchanged $14.4 million of convertible
subordinated notes due in May 2007 for $16.6 million of newly issued
convertible senior subordinated notes due May 15, 2011. As a result of
this transaction, the Company recognized approximately $1.1 million in the
first quarter of fiscal 2007 related to the early extinguishment of
debt.
|
|
·
|
The
Company received manufacturing equipment valued at $2.0 million less tax
of $0.1 million as a final earn-out payment from Veeco Instruments, Inc.
(Veeco) in connection with the sale of the TurboDisc
division.
|
|
·
|
In
August 2006, the Company sold its Electronic Materials & Device (EMD) division to
IQE plc (IQE) for $16.0 million. The net gain associated with the sale of
the EMD business totaled approximately $7.6 million, net of tax of $0.5
million. The results of operations of the EMD division have
been reclassified to discontinued operations for all periods
presented.
|
|
·
|
In
August 2006, the Company sold its 49% membership interest in GELcore, LLC
for $100.0 million to General Electric Corporation, which prior to the
transaction owned the remaining 51% membership interest in
GELcore. The Company recorded a net gain of $88.0 million,
before tax, on the sale of GELcore, after netting the Company’s investment
in this joint venture of $10.8 million and transaction expenses of $1.2
million.
|
|
·
|
The
Company recorded approximately $2.2 million of impairment charges on
goodwill and intellectual property associated with the June 2004
acquisition of Corona Optical
Systems.
|
|
·
|
Fiscal
2006 operating expense included $1.3 million related to our review of
historical stock option granting
practices.
|
|
·
|
Other
expense included a charge of $0.5 million associated with the write-down
of the Archcom investment.
|
|
·
|
The
Company recognized a provision for income taxes of $1.9 million from
continuing operations for the year ended September 30,
2006.
|
|
·
|
SG&A
expense included approximately $0.9 million in severance-related charges
and $2.3 million of charges associated with the consolidation of the
Company’s City of Industry, California location to Albuquerque, New
Mexico.
|
|
·
|
The
Company received a $12.5 million net earn-out payment from Veeco in
connection with the 2003 sale of the TurboDisc
division.
|
|
·
|
In
November 2003, the Company sold its TurboDisc division to Veeco. The
results of operations of TurboDisc have been reclassified to discontinued
operations for all periods presented. The net gain associated with the
sale of the TurboDisc business totaled approximately $19.6
million.
|
|
·
|
In
February 2004, the Company exchanged approximately $146.0 million, or
90.2%, of the convertible subordinated notes due in May 2007 for
approximately $80.3 million of new convertible subordinated notes due May
15, 2011 and approximately 7.7 million shares of the Company common stock.
The total net gain from debt extinguishment was $12.3
million.
|
|
·
|
SG&A
expense included approximately $1.2 million in severance-related
charges.
|
|
·
|
Other
expense included a charge of $0.5 million associated with the write-down
of the Archcom investment.
|
Statements
of Operations Data
For
the fiscal years ended September 30
(in
thousands, except per share data)
|
||||||||||||||||||||
|
2008
|
2007
|
2006 (1)
|
2005 (1)
|
2004 (1)
|
|||||||||||||||
Product
revenue
|
|
$
|
228,977
|
$
|
148,334
|
$
|
132,304
|
$
|
106,656
|
$
|
77,782
|
|||||||||
Services
revenue
|
10,326
|
21,272
|
11,229
|
8,801
|
4,103
|
|||||||||||||||
Total
revenue
|
239,303
|
169,606
|
143,533
|
115,367
|
81,885
|
|||||||||||||||
Gross
profit
|
29,895
|
30,368
|
25,952
|
19,302
|
4,473
|
|||||||||||||||
Operating
loss
|
|
(75,281
|
)
|
(57,456
|
)
|
(34,150
|
)
|
(20,371
|
)
|
(35,604
|
)
|
|||||||||
(Loss)
income from continuing operations
|
|
(80,860
|
)
|
(58,722
|
)
|
45,039
|
(24,685
|
)
|
(28,376
|
)
|
||||||||||
Income
from discontinued operations
|
|
-
|
-
|
9,884
|
11,200
|
14,422
|
||||||||||||||
Net
(loss) income
|
$
|
(80,860
|
)
|
$
|
(58,722
|
)
|
$
|
54,923
|
$
|
(13,485
|
)
|
$
|
(13,954
|
)
|
||||||
|
||||||||||||||||||||
Per
share data:
|
||||||||||||||||||||
(Loss)
income from continuing operations:
|
||||||||||||||||||||
Per
basic share
|
|
$
|
(1.20
|
)
|
$
|
(1.15
|
)
|
$
|
0.91
|
$
|
(0.52
|
)
|
$
|
(0.66
|
)
|
|||||
Per
diluted share
|
$
|
(1.20
|
)
|
$
|
(1.15
|
)
|
$
|
0.87
|
$
|
(0.52
|
)
|
$
|
(0.66
|
)
|
Balance
Sheet Data
As
of September 30
(in
thousands)
|
|
|||||||||||||||||||
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
Cash,
cash equivalents, restricted cash and current
available-for-sale securities
|
$
|
22,760
|
$
|
41,226
|
$
|
123,967
|
$
|
40,175
|
$
|
51,572
|
||||||||||
Working
capital
|
79,234
|
63,204
|
129,683
|
56,996
|
58,486
|
|||||||||||||||
Total
assets
|
329,278
|
234,736
|
287,547
|
206,287
|
213,243
|
|||||||||||||||
Long-term
liabilities
|
-
|
84,981
|
84,516
|
94,701
|
96,051
|
|||||||||||||||
Shareholders’
equity
|
253,722
|
98,157
|
149,399
|
75,563
|
85,809
|
|
(1)
|
In
August 2006, EMCORE sold its Electronic Materials & Device (EMD) division to
IQE plc (IQE). The results of operations of the EMD division have been
reclassified to discontinued operations for fiscal years ended September
30, 2006, 2005 and 2004.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
·
|
Telecom Optical Products –
We are the leading supplier of 10 gigabit per second (Gb/s) fully
C-band and L-band tunable dense wavelength division multiplexed (DWDM) and
coarse wavelength division multiplexed (CWDM) products for the next
generation tele-communications systems. We are one of the few suppliers
who offer vertically-integrated products, including external-cavity laser
modules, integrated tunable laser assemblies (ITLAs) and 300-pin
transponders. The laser module operates at a continuous wave mode, and is
capable for applications of 10, 40, and 100 Gb/s due to the superior
narrow linewidth characteristics. The ITLA and transponder products are
fully Telcordia® qualified and comply with multi-source agreements (MSAs).
We also offer a range of XFP platform OC-192 products for telecom
applications. We supply to almost all major telecom equipment companies
worldwide.
|
·
|
Enterprise Datacom Products –
We provide leading-edge optical components and transceiver modules
for data applications that enable switch-to-switch, router-to-router and
server-to-server backbone connections at aggregate speeds of 10 Gb/s and
above. We offer the broadest range of products with XENPAK form factor
which comply with 10 Gb/s Ethernet (10-GE) IEEE802.3ae standard. Our 10-GE
products include short-reach (SR), long-reach (LR), extended-reach (ER),
coarse WDM LX4 optical transceivers to connect between the photonic
physical layer and the electrical section layer and CX4
transceivers. In addition to the 10-GE products, EMCORE offers
traditional MSA Gigabit Ethernet (GE) 1310-nm small form factor
(SFF) and small form factor pluggable (SFP) optical
transceivers. These transceivers also provide integrated duplex
data links for bi-directional communication over single mode optical fiber
providing high-speed Gigabit Ethernet data links operating at
1.25Gbps.
|
·
|
Cable Television (CATV)
Products - We are a market leader in providing radio frequency (RF)
over fiber products for the CATV industry. Our products are
used in hybrid fiber coaxial (HFC) networks that enable cable service
operators to offer multiple advanced services to meet the expanding demand
for high-speed Internet, on-demand and interactive video and other
advanced services, such as high-definition television (HDTV) and voice
over IP (VoIP). Our CATV products include forward and
return-path analog and digital lasers, photodetectors and subassembly
components, broadcast analog and digital fiber-optic transmitters and
quadrature amplitude modulation (QAM) transmitters and
receivers. Our products provide our customers with increased
capacity to offer more cable services; increased data transmission
distance, speed and bandwidth; lower noise video receive; and lower power
consumption.
|
·
|
Fiber-To-The-Premises (FTTP)
Products - Telecommunications companies are increasingly extending
their optical infrastructure to their customers’ location in order to
deliver higher bandwidth services. We have developed and maintained
customer qualified FTTP components and subsystem products to support plans
by telephone companies to offer voice, video and data services through the
deployment of new fiber optics-based access networks. Our FTTP
products include passive optical network (PON) transceivers, analog fiber
optic transmitters for video overlay and high-power erbium-doped fiber
amplifiers (EDFA), analog and digital lasers, photodetectors and
subassembly components, analog video receivers and multi-dwelling unit
(MDU) video receivers. Our products provide our customers with
higher performance for analog and digital characteristics; integrated
infrastructure to support competitive costs; and additional support for
multiple standards.
|
·
|
Parallel Optical
Transceiver and
Cable
Products – EMCORE is the technology and product leader of the
optical transmitter and receiver products utilizing arrays of optical
emitting or detection devices, e.g., vertical-cavity surface-emitting
lasers (VCSELs) or photodetectors (PDs). These optical transmitter,
receiver, and transceiver products are used for back-plane interconnects,
switching/routing between telecom racks and high-performance computing
clusters. EMCORE’s products include 12-lane SNAP-12 MSA transmitter and
receivers with single, double, and quadruple data rates and 4-lane optical
media converters with single and double data rates. Based on the core
competency of 4-lane parallel optical transceivers, we offer the optical
fiber ribbon cables with embedded parallel-optical transceivers in the
connectors, EMCORE Connects Cables (ECC). These products, with aggregated
bandwidth between 10-40 Gb/s, are ideally suited for high-performance
computing clusters. Our products provide our customers with increased
network capacity; increased data transmission distance and speeds;
increased bandwidth; lower power consumption; improved cable management
over copper interconnects; and lower cost optical interconnections for
massively parallel
multi-processors.
|
·
|
Fibre Channel
Transceiver
Products -
EMCORE offers tri-rate SFF and SFP optical transceivers for storage area
networks. The MSA transceiver module is designed for high-speed Fibre
Channel data links supporting up to 4.25 Gb/s (4X Fibre Channel
rate). The products provide integrated duplex data links for
bi-directional communication over Multimode optical
fiber.
|
·
|
Satellite Communications
(Satcom) Products - We believe we are a leading provider of optical
components and systems for use in equipment that provides high-performance
optical data links for the terrestrial portion of satellite communications
networks. Our products include transmitters, receivers, subsystems and
systems that transport wideband radio frequency and microwave signals
between satellite hub equipment and antenna dishes. Our
products provide our customers with increased bandwidth and lower power
consumption.
|
·
|
Laser/photodetector Component
Products - We believe we are a leading provider of optical
components including lasers, photodetectors and various forms of packaged
subassemblies. Products include chip, TO, and TOSA forms of high-speed
850nm vertical cavity VCSELs, distributed feedback Bragg (DFB) lasers,
positive-intrinsic-negative (pin) and avalanche photodiode (APD)
components for 2G, 8G and 10G Fibre Channel, Ethernet and 10 GE, FTTP, and
Telecom applications. While we provide the component products
to the entire industry, we do enjoy the benefits of vertically-integrated
infrastructure through a low-cost and early availability for new product
introduction.
|
·
|
Video Transport - Our
video transport product line offers solutions for broadcasting,
transportation, IP television (IPTV), mobile video and security &
surveillance applications over private and public networks. EMCORE’s
video, audio, data and RF transmission systems serve both analog and
digital requirements, providing cost-effective, flexible solutions geared
for network reconstruction and
expansion.
|
·
|
Defense and Homeland
Security - Leveraging our expertise in RF module design and
high-speed parallel optics, we provide a suite of ruggedized products that
meet the reliability and durability requirements of the U.S. Government
and defense markets. Our specialty defense products include
fiber optic gyro components used in precision guided munitions, ruggedized
parallel optic transmitters and receivers, high-frequency RF fiber optic
link components for towed decoy systems, optical delay lines for radar
systems, EDFAs, terahertz spectroscopy systems and other
products. Our products provide our customers with high
frequency and dynamic range; compact form-factor; and extreme temperature,
shock and vibration tolerance.
|
·
|
Satellite Solar Power
Generation - We are a leader in providing solar power generation
solutions to the global communications satellite industry and U.S.
government space programs. A satellite’s operational success
and corresponding revenue depend on its available power and its capacity
to transmit data. We provide advanced compound semiconductor-based solar
cells and solar panel products, which are more resistant to radiation
levels in space and generate substantially more power from sunlight than
silicon-based solutions. Space power systems using our
multi-junction solar cells weigh less per unit of power than traditional
silicon-based solar cells. Our products provide our customers with higher
conversion efficiency for reduced solar array size and launch costs,
higher radiation tolerance, and longer lifetime in harsh space
environments.
|
·
|
Terrestrial Solar Power
Generation - Solar power generation systems utilize photovoltaic
cells to convert sunlight to electricity and have been used in space
programs and, to a lesser extent, in terrestrial applications for several
decades. The market for terrestrial solar power generation
solutions has grown significantly as solar power generation technologies
improve in efficiency, as global prices for non-renewable energy sources
(i.e., fossil
fuels) continue to rise over the long term, and as concern has increased
regarding the effect of carbon emissions on global warming. Terrestrial
solar power generation has emerged as one of the most rapidly expanding
renewable energy sources due to certain advantages solar power holds over
other energy sources, including reduced environmental impact, elimination
of fuel price risk, installation flexibility, scalability, distributed
power generation (i.e., electric power is
generated at the point of use rather than transmitted from a central
station to the user), and reliability. The rapid increase in demand for
solar power has created a growing need for highly efficient, reliable, and
cost-effective concentrating solar power
systems.
|
|
·
|
On
February 22, 2008, EMCORE acquired telecom-related assets of Intel
Corporation’s Optical Platform Division (“OPD”) that included inventory,
fixed assets, intellectual property, and technology comprised of tunable
lasers, tunable transponders, 300-pin transponders, and integrated tunable
laser assemblies.
|
|
·
|
On
April 20, 2008, EMCORE acquired the enterprise and storage-related assets
of Intel Corporation’s OPD business, as well as Intel’s Connects Cables
business. The assets acquired include inventory, fixed assets,
intellectual property, and technology relating to optical transceivers for
enterprise and storage customers, as well as optical cable interconnects
for high-performance computing
clusters.
|
Segment
Revenue
(in
thousands)
|
2008
|
2007
|
2006
|
|||||||||||||||||||||
Revenue
|
% of Revenue
|
Revenue
|
% of Revenue
|
Revenue
|
% of Revenue
|
|||||||||||||||||||
Fiber
Optics
|
$
|
171,276
|
72
|
%
|
$
|
110,377
|
65
|
%
|
$
|
104,852
|
73
|
%
|
||||||||||||
Photovoltaics
|
68,027
|
28
|
59,229
|
35
|
38,681
|
27
|
||||||||||||||||||
Total
revenue
|
$
|
239,303
|
100
|
%
|
$
|
169,606
|
100
|
%
|
$
|
143,533
|
100
|
%
|
Geographic
Revenue
(in
thousands)
|
2008
|
2007
|
2006
|
|||||||||||||||||||||
Revenue
|
% of Revenue
|
Revenue
|
% of Revenue
|
Revenue
|
% of Revenue
|
|||||||||||||||||||
United
States
|
$
|
134,796
|
56
|
%
|
$
|
124,012
|
73
|
%
|
$
|
109,614
|
76
|
%
|
||||||||||||
Asia
|
73,311
|
31
|
34,574
|
20
|
28,537
|
20
|
||||||||||||||||||
Europe
|
20,420
|
8
|
10,821
|
7
|
4,152
|
3
|
||||||||||||||||||
Other
|
10,776
|
5
|
199
|
-
|
1,230
|
1
|
||||||||||||||||||
Total
revenue
|
$
|
239,303
|
100
|
%
|
$
|
169,606
|
100
|
%
|
$
|
143,533
|
100
|
%
|
Significant
Customers
As
a percentage of total consolidated revenue
|
2008
|
2007
|
2006
|
|||||||||
Fiber
Optics-related customers:
|
||||||||||||
Customer
A
|
14
|
%
|
-
|
-
|
||||||||
Customer
B
|
12
|
%
|
-
|
-
|
||||||||
Customer
C
|
-
|
13
|
%
|
-
|
||||||||
Customer
D
|
-
|
-
|
12
|
%
|
||||||||
Photovoltaics
– related customer:
|
||||||||||||
Customer
E
|
-
|
11
|
%
|
-
|
Statement
of Operations Data
(in
thousands)
|
2008
|
2007
|
2006
|
|||||||||
Operating
loss by segment:
|
||||||||||||
Fiber
Optics
|
$
|
(49,903
|
)
|
$
|
(25,877
|
)
|
$
|
(18,950
|
)
|
|||
Photovoltaics
|
(25,238
|
)
|
(11,202
|
)
|
(8,365
|
)
|
||||||
Corporate
|
(140
|
)
|
(20,377
|
)
|
(6,835
|
)
|
||||||
Operating
loss
|
$
|
(75,281
|
)
|
$
|
(57,456
|
)
|
$
|
(34,150
|
)
|
Segment
Depreciation and Amortization
(in
thousands)
|
2008
|
2007
|
2006
|
|||||||||
Fiber
Optics
|
$
|
9,067
|
$
|
6,991
|
$
|
8,378
|
||||||
Photovoltaics
|
4,472
|
2,860
|
3,470
|
|||||||||
Corporate
|
77
|
271
|
484
|
|||||||||
Total
depreciation and amortization
|
$
|
13,616
|
$
|
10,122
|
$
|
12,332
|
Long-lived
Assets
(in
thousands)
|
2008
|
2007
|
||||||
Fiber
Optics
|
$
|
107,684
|
$
|
56,816
|
||||
Photovoltaics
|
55,232
|
46,706
|
||||||
Corporate
|
622
|
-
|
||||||
Total
long-lived assets
|
$
|
163,538
|
$
|
103,522
|
2008
|
2007
|
2006
|
||||||||||
Product
revenue
|
95.7
|
%
|
87.5
|
%
|
92.2
|
%
|
||||||
Service
revenue
|
4.3
|
12.5
|
7.8
|
|||||||||
Total
revenue
|
100.0
|
100.0
|
100.0
|
|||||||||
Cost
of product revenue
|
87.3
|
73.3
|
75.4
|
|||||||||
Cost
of service revenue
|
0.2
|
8.7
|
6.5
|
|||||||||
Total
cost of revenue
|
87.5
|
82.0
|
81.9
|
|||||||||
Gross
profit
|
12.5
|
18.0
|
18.1
|
|||||||||
Operating
expenses:
|
||||||||||||
Selling,
general and administrative
|
18.2
|
34.1
|
26.6
|
|||||||||
Research
and development
|
16.5
|
17.8
|
13.7
|
|||||||||
Impairment
of goodwill and/or intellectual property
|
9.3
|
-
|
1.6
|
|||||||||
Total
operating expenses
|
44.0
|
51.9
|
41.9
|
|||||||||
Operating
loss
|
(31.5
|
)
|
(33.9
|
)
|
(23.8
|
)
|
||||||
Other
expense (income):
|
||||||||||||
Interest
income
|
(0.4
|
)
|
(2.4
|
)
|
(0.9
|
)
|
||||||
Interest
expense
|
0.7
|
2.9
|
3.7
|
|||||||||
Loss
from conversion of subordinated notes
|
1.9
|
-
|
-
|
|||||||||
Loss
from convertible subordinated notes exchange offer
|
-
|
-
|
0.8
|
|||||||||
Loss
from early redemption of convertible notes
|
-
|
0.3
|
-
|
|||||||||
Stock-based
compensation expense from tolled options
|
1.8
|
-
|
-
|
|||||||||
Gain
from insurance proceeds
|
-
|
(0.2
|
)
|
-
|
||||||||
Gain
from sale of WWAT Investment
|
(3.1
|
)
|
||||||||||
Impairment
of investment
|
0.7
|
-
|
0.3
|
|||||||||
Loss
on disposal of property, plant and equipment
|
0.4
|
0.1
|
0.3
|
|||||||||
Net
gain on sale of GELcore investment
|
-
|
-
|
(61.3
|
)
|
||||||||
Equity
in net loss of GELcore investment
|
-
|
-
|
0.4
|
|||||||||
Equity
in net loss of Velox investment
|
-
|
-
|
0.2
|
|||||||||
Foreign
exchange loss
|
0.3
|
-
|
-
|
|||||||||
Total
other expense (income)
|
2.3
|
0.7
|
(56.5
|
)
|
||||||||
(Loss)
income from continuing operations before income taxes
|
(33.8
|
)
|
(34.6
|
)
|
32.7
|
|||||||
Provision
for income taxes
|
-
|
-
|
1.3
|
|||||||||
(Loss)
income from continuing operations
|
(33.8
|
)
|
(34.6
|
)
|
31.4
|
|||||||
Discontinued
operations:
|
||||||||||||
Income
from discontinued operations, net of tax
|
-
|
-
|
0.3
|
|||||||||
Gain
on disposal of discontinued operations, net of tax
|
-
|
-
|
6.6
|
|||||||||
Income
from discontinued operations
|
-
|
-
|
6.9
|
|||||||||
Net
(loss) income
|
(33.8
|
)%
|
(34.6
|
)%
|
38.3
|
%
|
|
·
|
$10.6
million related to professional fees associated with our review of
historical stock option granting
practices;
|
|
·
|
$6.1
million in non-recurring legal expenses and $2.8 million in restructuring
and severance-related charges associated with facility closures and
consolidation of operations; and
|
|