Transcript No Slide Title

Convenience Translation
June 18, 2002
Meiningen
ADVA AG Optical Networking
Annual shareholders meeting 2001
Executive report
1
© Copyright ADVA Optical Networking 2002
Brian L. Protiva, CEO
June 18, 2002
Meiningen
Business development
2001 and 2002
2
© Copyright ADVA Optical Networking 2002
Challenges in 2001
 Economic downturn in the USA and Europe
 Reduction of investments for IT and telecommunication
equipment
 Reduction of market growth forecast for optical network
solutions
 Significant decline in valuations
 High operative cost basis with limited liquidity reserves
3
© Copyright ADVA Optical Networking 2002
Action taken in 2001

Assurance of short term economical stability
 Adjustment of business and cost structure
 Optimizing working capital
 Assurance of liquidity

Unchanged strategic focus
 Clear market focus
 Rounding up of product portfolio
 Expansion of sales force, customer, and partner basis
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© Copyright ADVA Optical Networking 2002
Results in 2001
5

Leading global provider of metro area and enterprise optical
networking solutions

Increase of sales by 51% to EUR 90.0 million

Improvement of pro forma operating result

Development of new products: FSP 1000, FSP 2000, FSP Network
Manager, FSP Network Planner

Win of 19 new service provider end customers

Strategic expansion of existing distribution partnerships: Siemens
and INRANGE
© Copyright ADVA Optical Networking 2002
Metro optical network
Metro
Core
(regional)
Metro
Access
(access)
Enterprise/
Customer
Premise
(edge)
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© Copyright ADVA Optical Networking 2002
Market leadership
Global enterprise &
metro access WDM market: 2001
Global metro optical
networking market: 2001
(total market USD 370 million)
(total market USD 550 million*)
ONI
27%
ONI
25%
Others
25%
Nortel
36%
Nortel/IBM
28%
ADVA
20%
Other
14%
Lucent
4%
Ciena
7%
#1 in European metro access/enterprise WDM
#3 in global metro WDM
7
Source: RHK, Dell’Oro, CIR, Infonetics, and own estimates
* Excludes metro core networking over ca. 300 kilometer. WDM = Wavelength Division Multiplexing
© Copyright ADVA Optical Networking 2002
ADVA
14%
ADVA solutions
Intuitive end-to-end
management
Point-and-click
provisioning and endto-end management
Low facility costs
Smallest physical
footprint and lowest
power consumption in
the industry
Low cost of
installation
True plug-and-play
with fully integrated
solutions
Fast deployment
Easy to upgrade with
no customers
downtime for faster
provisioning
Low initial
investment
Modular system
concept at the most
competitive price
8
Low operational
costs Reliable with
99.999% uptime and
remote diagnostics and
service upgrades
© Copyright ADVA Optical Networking 2002
Complete product portfolio
R E G I O N A L / L O N G-H A U L
The ADVA Fiber Service Platform
 FSP 3000, FSP 2000, FSP 1000, FSP 500
 FSP Network Management
 FSP Network Planner
 FSP Rapid Response
Metro core
FSP
management
suite
FSP 3000
All applications
FSP 3000
SONET/SDH, Ethernet, IP, SN, video
FSP 3000
All speeds
1.5M to 10G
FSP 500
FSP 1000
FSP 1000
FSP 1000
All architectures
point-to-point, rings, mesh
FSP 500/2000
FSP 500
9
FSP 500/2000
FSP 500
© Copyright ADVA Optical Networking 2002
A carrier class portfolio
developed from the customer
premise to the core
Service provider end customers
ADVA’s global presence
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© Copyright ADVA Optical Networking 2002

Over 47 service providers

9 of the 15 biggest service
provider have implemented
ADVA‘s solutions

World wide presence on
over 40 countries
Enterprise end customers
ADVA’s globale Präsenz

Over 500 enterprise end
customers
 Fortune 1000 companies,
financial institutions,
insurance companies,
universities, government
agencies, etc.

11
© Copyright ADVA Optical Networking 2002
Globale presence in more
than 40 countries
Leveraged market access
A three-pronged strategy
OEM, VAR, and
distribution partners
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Dedicated direct
sales force
© Copyright ADVA Optical Networking 2002
Strategic marketing
partners
Organizational structure
Brian L. Protiva
Chief Executive Officer
Jürgen Hansjosten
Chief Sales Officer
13
Brian P. McCann
Chief Marketing &
Strategy
Dr. Stephan
Offermanns
Chief Operations Officer
© Copyright ADVA Optical Networking 2002
Andreas G. Rutsch
Chief Financial Officer
Growth strategy 2002
 Market leadership
 Carrier Class
 Best in class logistics
 EBIT profitable
 Develop people
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© Copyright ADVA Optical Networking 2002
First results in 2002

Solid financial performance in difficult market conditions
 Q1 2002 revenues increased 19% to EUR 21.6 million
 Pro forma break-even reached: pro forma operating income totalled
EUR 0.1 million in Q1 2002

Expansion of global reach through new partnerships
 Strategic OEM partnership formed with Fujitsu Network
Communications for USA
 Strategic OEM partnership formed with Hitachi Ltd. for Japan
 VAR partnership formed with Fujitsu Ltd. for Japan
 Optical networking solutions support agreement with IBM Global
Services for USA

Continuously gaining customer traction
 10 carrier customers won with Siemens since August 2001
 Brasil Telecom deploys FSP 2000 in storage network in Brazil
 Hitachi installed FSP 2000 with one main customers in Japan
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© Copyright ADVA Optical Networking 2002
Andreas G. Rutsch, CFO
June 18, 2002
Meiningen
Financial results
16
© Copyright ADVA Optical Networking 2002
Challenges in 2001

Adjustment of business and cost structure





Improvement of working capital




Extraordinary and cash neutral write-offs relating to our acquisitions of
Cellware and First Fibre
Assurance of liquidity

17
Reduction of inventory by 37%
Decrease of delivery times and purchasing costs
Reduction of delinquent outstanding customer debits
Adjustment of goodwill and intangible assets


Closing of Cambridge, UK
Reduction of world wide personnel by 13%
Lowering of general and administrative expenses
Decrease of break even point
Capital increase of EUR 7.0 million in June
© Copyright ADVA Optical Networking 2002
Overview 2001
(thousand Euro)
2001
2000 difference
Revenues
90,017
59,539
30,478
Pro forma gross profit (% of sales)
37.6%
31.2%
-
Pro forma operating loss (EBIT)
-5,634
-8,728
3,094
Pro forma loss before income tax (EBT)
-7,557
-9,119
1,562
Pro forma net loss from continuing operations
-4,103
-6,991
2,888
-0.13
-0.22
-
Total assets
90,933
211,483
-120,550
Total stockholders' equity
47,469
177,045
-129,576
Cash flow from operating activities
-4,853
-16,357
11,504
Cash flow from investing activities
-4,612
-6,039
1,427
Cash flow from financing activities
16,876
11,135
5,741
Pro forma loss per share (EPS)
Pro forma financial numbers are calculated prior to accounting for purchased in-process R&D, amortization of goodwill and
purchased intangible assets, and non-cash charges related to the stock option programs. Additionally pro forma financial numbers
are calculated prior to losses of discontinued operations.
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© Copyright ADVA Optical Networking 2002
Revenue per product 2001
1%
8%
11%
3%
3%
12%
3%
4%
5%
11%
11%
FSP 1000
FSP 2000
FSP 3000
CELL-ACE
Others*
77%
51%
FSP 500
FSP-I
FSP-II
2000
2001
* Including Software, Services, CityLAN, CampusLight, OCM.
19
© Copyright ADVA Optical Networking 2002
Revenue per region 2001
2000
20
3%
3%
37%
69%
60%
28%
2001
© Copyright ADVA Optical Networking 2002
Asia-Pacific
Europe, Middle
East and Africa
America
Consolidated p&l statement
2001 (U.S. GAAP)
2001
(thousand Euro)
Revenues
90,017
59,539
30,478
52,874
43,542
9,332
37,143
15,997
21,146
9,445
13,297
-3,852
General and administrative expenses
384
18,576
-18,192
Research and development expenses
7,386
15,238
-7,852
Amortization and impairment of goodwill
35,035
10,543
24,492
Amortization and impairment of intangible
assets
21,492
21,910
-418
-36,599
-63,567
26,968
-35,068
-61,829
26,761
-116,354
-92,398
-23,956
-3.57
-2.95
-0.62
Cost of revenues
Gross profit
Selling and marketing expenses
Operating loss
Net loss from continuing operations
Net loss
Net loss per share (basic)
21
2000 difference
© Copyright ADVA Optical Networking 2002
Consolidated balance sheet 2001
(U.S. GAAP)
2001
2000
difference
Current assets
42,408
38,110
4,298
Non-current assets
48,525
173,373
-124,848
90,933
211,483
-120,550
36,530
27,203
9,327
6,934
7,235
-301
47,469
177,045
-129,576
90,933
211,483
-120,550
(thousand Euro)
ASSETS
Total assets
LIABILITIES AND EQUITY
Current liabilities
Non-current liabilities
Stockholders' equity
Total liabilities and equity
22
© Copyright ADVA Optical Networking 2002
Consolidated cash flows 2001
(U.S. GAAP)
2001
2000
difference
Cash flow from operating activities
-4,853
-16,357
11,504
Cash flow from investing activities
-4,612
-6,039
1,427
Cash flow from financing activities
16,876
11,135
5,741
Cash paid in discontinued component
-2,309
-2,778
469
Net change in cash
and cash equivalents
5,061
-14,077
19,138
Cash and cash equivalents as of Jan. 1
2,356
16,433
-14,077
Cash and cash equivalents as of Dec. 31
7,417
2,356
5,061
(thousand Euro)
23
© Copyright ADVA Optical Networking 2002
Overview 1st quarter 2002
(U.S. GAAP)
Q1 2002 Q1 2001 difference
(thousand Euro)
24
Revenues
21,564
18,037
3,527
Pro forma gross profit (% of sales)
40.9%
34.5%
-
Pro forma operating loss (EBIT)
131
-3,576
3,707
Pro forma loss before income tax (EBT)
-42
-3,880
3,838
Pro forma net loss from continuing operations
-145
-2,707
2,562
Pro forma earnings per share (EPS)
0.00
0.08
-
Total assets
91,807
90,933*
874
Total stockholders' equity
45,988
47,469*
-1,471
Cash flow from operating activities
4,729
-5,821
10,550
Cash flow from investing activities
-489
-1,375
886
Cash flow from financing activities
-399
6,355
-6,754
Pro forma financial numbers are calculated prior to accounting for purchased in-process R&D, amortization of goodwill and purchased
intangible assets, and non-cash charges related to the stock option programs. Additionally pro forma financial numbers are calculated
prior to losses of discontinued operations.
* Results according to December 31st, 2001.
© Copyright ADVA Optical Networking 2002
Consolidated p&l statement
Q1 2002 (U.S. GAAP)
Q1 2002
(thousand Euro)
Revenues
21,564
18,037
3,527
12,743
8,725
4,018
Gross profit
8,821
9,312
-491
Selling and marketing expenses
2,903
-3,948
6,851
General and administrative expenses
2,645
-4,860
7,505
Research and development expenses
3,006
-2,734
5,740
0
4,624
-4,624
1,427
2,422
-995
-1,160
13,808
-14,968
-1,436
14,677
-16,113
-1,450
5,887
-7,337
-0.04
0.18
-0.22
Cost of revenues
Amortization of goodwill
Amortization of intangible assets
Operating income/loss
Net income/loss from continuing operations
Net income/loss
Net income/loss per share (basic)
25
Q1 2001 difference
© Copyright ADVA Optical Networking 2002
Consolidated balance sheet
Q1 2002 (U.S. GAAP)
Mar. 31,
2002
Dec. 31,
2001
difference
Current assets
45,086
42,408
2,678
Noncurrent assets
46,721
48,525
-1,804
91,807
90,933
874
39,225
36,530
2,695
6,594
6,934
-340
45,988
47,469
-1,481
91,807
90,933
874
(thousand Euro)
ASSETS
Total assets
LIABILITIES AND EQUITY
Current liabilities
Noncurrent liabilities
Stockholders' equity
Total liabilities and equity
26
© Copyright ADVA Optical Networking 2002
Consolidated cash flows Q1 2002
(U.S. GAAP)
Q1 2002 Q1 2001 difference
(thousand Euro)
Cash flow from operating activities
4,729
-5,821
10,550
Cash flow from investing activities
-489
-1,375
886
Cash flow from financing activities
-399
6,355
-6,754
Net change in cash
and cash equivalents
3,777
-1,272
5,049
Cash and cash equivalents as of Jan. 1
7,417
2,356
5,061
11,194
1,084
10,110
Cash and cash equivalents as of Dec. 31
27
© Copyright ADVA Optical Networking 2002
ADVA employees worldwide
12
50
12
56
15
55
71
85
15
19
99
95
Apprentices
18
Administration, finance, IT
103
97
Sales, marketing, tech support
Quality management
Procurement, production
151
28
125
128
Dec. 31, 2000
Dec. 31, 2001
May 1, 2002
Total 398
Total 396
Total 412
© Copyright ADVA Optical Networking 2002
Research & development
Investor relations
Stockholder information
29
Security code number
Symbol
510 300
ADV
Exchange
Neuer Markt,
Frankfurt Stock
Exchange
Numbers of shares outstanding
33,136,768
Offering price
(March 29, 1999)
EUR 5.33
Share price
(December 31, 2001)
EUR 4.74
Share price
(May 31, 2002)
EUR 2.74
Performance since IPO
-53.66%
Market capitalization
(December 31, 2001)
EUR 157.1 million
Market capitalization
(May 31, 2002)
EUR 90.8 million
© Copyright ADVA Optical Networking 2002
Stockholder structure
(May 1, 2002 – total 33.136.768 shares)
JDS Uniphase
27.8%
Free float
43.2%
EGORA-Group
29.0%
Outlook 2002

Market potential
 Stable demand for enterprise products
 Low metro infrastructure investments

Revenue expectations
 Q2 2002: EUR 20 – 25 million

Cost expectations
 Break even at a quarterly revenue of EUR 23 – 24 million
 Strict cost control
 Selective investments

Liquidity expectations
 Liquidity and credit lines are sufficient means to continue
operations
30
© Copyright ADVA Optical Networking 2002
Andreas G. Rutsch, CFO
June 18, 2002
Meiningen
Explanation of agenda items
31
© Copyright ADVA Optical Networking 2002
Agenda items
ITEM 1 Submission of the approved annual financial statements,
the group financial statements, as well as the
management report of both the AG and the group for the
2001 financial year, along with the report of the
Supervisory Board
ITEM 2 Approval of the activities of the Management Board
during the 2001 financial year
ITEM 3 Approval of the activities of the Supervisory Board during
the 2001 financial year
ITEM 4 Election of new members to the Supervisory Board
ITEM 5 Reduction of the conditional capital according to § 4 para.
5 (f) of the Articles of Association
32
© Copyright ADVA Optical Networking 2002
Agenda items
ITEM 6 Reduction of the conditional capital according to § 4 para.
5 (d) of the Articles of Association
ITEM 7 Resolution to issue convertible bonds to the new
members of the Supervisory Board ("2002 Supervisory
Board Convertible Bond"), to create conditional capital
and to amend the Articles of Association
ITEM 8 Appointment of the auditor for the financial year 2002
ITEM 9 Resolution concerning the creation of additional
authorized capital with a possible exclusion of
subscription rights and amendment of the Articles of
Association
33
© Copyright ADVA Optical Networking 2002
Agenda items
ITEM 10Resolution concerning the amendment of the resolution
concerning the issuance of stock options to the
Management Board and employees (Stock Option
Program 1999) and the partial cancellation of the
creation of conditional capital, as well as a corresponding
amendment to the Articles of Association
ITEM 11Resolution concerning the amendment of the resolution
concerning the issuance of stock options to the
management and employees of ADVA Ltd., Cambridge,
UK, and ADVA Optical Networking Ltd., York, UK (Stock
Options Program UK), the partial cancellation of the
creation of conditional capital and a corresponding
amendment to the Articles of Association
ITEM 12Resolution concerning an extension of the authorization
to issue stock options (Stock Options Program 2001), the
creation of additional conditional capital and an
amendment to the Articles of Association
34
© Copyright ADVA Optical Networking 2002
Agenda items
ITEM 13Resolution concerning the amendment of the resolution
concerning the issuance of an option bond (Option Bond
Employees 2001), the cancellation and creation of
conditional capital and corresponding amendments to the
Articles of Association
ITEM 14Resolution regarding the issuance of convertible bonds to
members of the Technical Advisory Board (2002
Technical Advisory Board Convertible Bond), the creation
of conditional capital and an amendment to the Articles
of Association
35
© Copyright ADVA Optical Networking 2002
Thank You
36
© Copyright ADVA Optical Networking 2002
© Copyright ADVA Optical Networking 2002