Transcript No Slide Title

August 28, 2001
Meiningen
ADVA AG Optical Networking
Annual shareholders meeting 2001
Executive report
1
© Copyright ADVA Optical Networking 2001
Brian L. Protiva, CEO
August 28, 2001
Meiningen
Business development
2000 and 2001
2
© Copyright ADVA Optical Networking 2001
Highlights of 2000
3

Sales growth of 189% to EUR 59.6 million

Total end customers of 28 metro service providers (today 37)
and ca. 500 enterprises

New service provider wins, including Verizon, Swisscom, Torch
Telecom, Hutchinson Global Crossing

OEM partnerships with Cisco and Siemens

Strategic marketing partnerships with Brocade, Compaq, and
EMC

Opening of regional sales subsidiary in Japan and sales office
in Hannover

Launch of FSP 3000 for metro networks
© Copyright ADVA Optical Networking 2001
Highlights of 2000
4

Acquisition of Storage Area Networks, Cellware, First Fibre,
and the Siemens Norway R&D team

Strategic investment in OptXCon

Recruitment of top-quality employees

Appointment of Brian McCann as Chief Sales & Marketing
Officer

Increase in employees worldwide from 132 to 398
© Copyright ADVA Optical Networking 2001
Overview

Leading global provider of metro area and enterprise optical
networking solutions

Leveraging core technology to address exploding market for
metro

Aggressive growth strategy

Clearly differentiated from competitors
 Technological expertise
 Broad product portfolio for enterprise and metro networks
 Blue-chip OEM partners and direct sales force
 State-of-art manufacturing capabilities
 Experienced management team
5
© Copyright ADVA Optical Networking 2001
Metro optical network
Metro
Core
(regional)
Metro
Access
(access)
Enterprise/
Customer
Premise
(edge)
6
© Copyright ADVA Optical Networking 2001
Optical networking market
Market growth per region*
(million USD)
8.9
5.8
4.0
3.0
2001
2002
North America
Europe
2003
Asia
2004
Rest of world
*(including metro core DWDM, metro access DWDM, enterprise DWDM, next-generation
SONET, and metro optical Ethernet technologies)
Source: Pioneer Consulting, Metro Optical Networks study, May 2001
7
© Copyright ADVA Optical Networking 2001
Solutions that make sense
8

Flexible and scalable

Easy installation and set-up

Powerful management and
configuration tools

Flexible service levels

Cost-effective use of
wavelengths

Dynamic provisioning

Protocol and bit-rate
independence
© Copyright ADVA Optical Networking 2001
ADVA solutions
Low facility costs
Smallest physical footprint and
lowest power consumption in the
industry
Low cost of
installation
Point-and-click provisioning and
end-to-end management
Fast deployment
Easy to upgrade with no
customers downtime for faster
provisioning
True plug-and-play with fully
integrated solutions
Low initial
investment
Modular system concept at the
most competitive price
9
Intuitive end-to-end
management
© Copyright ADVA Optical Networking 2001
Low operational
costs Reliable with 99.999%
uptime and remote diagnostics
and service upgrades
ADVA solutions
Metro
core
FSP
management
suite
SONET/SDH
transport
FSP 3000
End-to-end
seamless network
management
FSP 3000
FSP 3000
FSP 3000
FSP 3000
Broadband
access
transport for xDSL
FSP 1000
FSP 3000
Metro
access
ISP/ASP
PoP access
FSP 3000
FSP 3000
Storage network
interconnection
FSP 3000
LAN interconnection
FSP 500
FSP 1000
FSP 2000
FSP 2000
LAN interconnection/
managed network termination
Customer
premise
FSP 500/2000
10
FSP 500
Storage & private
networking
© Copyright ADVA Optical Networking 2001
FSP 500
FSP 500/2000
FSP 1000
End customers

11
37 service provider and ca. 500 enterprise end customers
© Copyright ADVA Optical Networking 2001
Distribution strategy
OEM partners
VARS and
distribution
partners
Direct
 Focused direct
touch model
 Key enterprise
and service
provider
customers
 Business
development team
provides network
consulting and
RFQs/RFPs
12
© Copyright ADVA Optical Networking 2001
Growth strategy

Further expand customer base in the metro market
 FSP 1000, FSP 2000, FSP 3000
13

Execute flawlessly in R&D to drive technology leadership

Facilitate growth through strategic relationships

Expand sales and distribution channels

Leverage expertise in manufacturing of optical networking
systems
© Copyright ADVA Optical Networking 2001
Challenges in 2001
14

Win back investor confidence

Strengthen technology leadership

Continue to strengthen market position in metro segment

Win new customers, particularly service providers

Achieve EBIT profitability

Build up additional infrastructure resources

Secure additional liquidity
© Copyright ADVA Optical Networking 2001
Andreas G. Rutsch, CFO
August 28, 2001
Meiningen
Financial results
15
© Copyright ADVA Optical Networking 2001
Summary 2000 and 1999
(thousand Euro)
2000
Sales
59,615
20.629
189.0%
Pro forma gross profit (% of sales)
31.0%
43,5%
-28.7%
Pro forma operating income/loss (EBIT)*
-10,823
859
-
Pro forma profit/loss before tax (EBT)*
-11,219
1.199
-
-9,091
183
-
-0.29
0.01
-
Total assets
211,483
39,052
441.5%
Total stockholders' equity
177,045
32,197
449.9%
Cash flow from operating activities
-18,458
-7,322
152.1%
Cash flow from investing activities
-6,716
-6,604
1.7%
Cash flow from financing activities
11,135
30,294
-63.2%
Pro forma net profit/loss*
Pro forma earnings/loss
per share (EPS)*
1999
% growth
* 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.
16
© Copyright ADVA Optical Networking 2001
Sales per product
3% Others*
1% OCM
3% CELL-ACE
5% FSP 500
11% FSP-I
1% Others*
49% OCM
13% FSP-I
77% FSP-II
37% FSP-II
1999
2000
*Others includes ABRAXAS, MFOC, FOC, DiskLink
17
© Copyright ADVA Optical Networking 2001
Sales per region
3% Asia-Pacific
8% Asia-Pacific
28% Americas
60% Americas
64% Europe
37% Europe
1999
18
© Copyright ADVA Optical Networking 2001
2000
Consolidated p&l statement
(U.S. GAAP)
2000
1999
(thousand Euro)
(as restated)
Sales
59,615
20,629
Cost of goods sold
43,771
12,365
Gross profit
15,844
8,264
SG&A expenses
33,431
9,231
R&D expenses
17,482
3,810
Amortization of goodwill and intangible assets
59,061
0
Operating loss
-94,130
-4,777
Loss before income taxes
-94,526
-4,437
Net loss
-92,398
-5,453
-2.95
-0.22
Basic net loss per share
19
© Copyright ADVA Optical Networking 2001
Consolidated balance sheet
(U.S. GAAP)
2000
1999
(thousand Euro)
(as restated)
ASSETS
Current assets
38,110
34,596
Noncurrent assets
173,373
4,456
Total assets
211,483
39,052
27,203
6,200
7,235
655
Stockholders' equity
177,045
32,197
Total liabilities and equity
211,483
39,052
LIABILITIES AND EQUITY
Current liabilities
Noncurrent liabilities
20
© Copyright ADVA Optical Networking 2001
Consolidated cash flows
(U.S. GAAP)
2000
1999
(thousand Euro)
(as restated)
Cash flow from operating activities
-18,458
-7,322
Cash flow from investing activities
-6,716
-6,604
Cash flow from financing activities
11,135
30,294
-14,039
16,368
16,433
85
2,356
16,433
Net change in cash
and cash equivalents
Cash and cash equivalents as of Jan. 1
Cash and cash equivalents as of Dec. 31
21
© Copyright ADVA Optical Networking 2001
ADVA employees worldwide
12 Apprentices
50 Administration, finance, IT
71 Sales, marketing, tech support
15 Quality management
99 Procurement, production
4
16
21
6
43
151 Research & development
42
22
1999
2000
Total 132
Total 398
© Copyright ADVA Optical Networking 2001
Summary six months 2001
(thousand Euro)
6M 2001
6M 2000
% growth
Sales
42,656
27,480
55.2%
Pro forma gross profit (% of sales)
36.5%
42.1%
-
Pro forma operating income/loss (EBIT)*
-6,173
787
-
Pro forma profit/loss before tax (EBT)*
-7,498
1,425
-
Pro forma net profit/loss*
-5,947
2,557
-
-0.19
0.08
-
Total assets
204,063
158,925
28.4%
Total stockholders' equity
153,475
139,057
10.4%
Cash flow from operating activities
-7,197
-8,016
-10.2%
Cash flow from investing activities
-2,488
-1,128
120.6%
Cash flow from financing activities
17,068
-461
-
Pro forma earnings/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.
23
© Copyright ADVA Optical Networking 2001
Sales per product
and region
1% Others*
4% CELL-ACE
11% FSP 500
2% Asia-Pacific
22% Americas
11% FSP-I
65% FSP-II
76% Europe
8% FSP 3000
6M 2001
6M 2001
*Others includes ABRAXAS, MFOC, FOC, DiskLink
24
© Copyright ADVA Optical Networking 2001
Consolidated p&l statement
(U.S. GAAP)
6M 2001
(thousand Euro)
Sales
42,656
27,480
Cost of goods sold
23,831
19,003
Gross profit
18,825
8,477
SG&A expenses
-2,623
22,768
R&D expenses
2,586
13,068
30,570
14,653
Operating loss
-11,708
-42,012
Loss before income taxes
-13,033
-41,374
Net loss
-11,482
-40,242
-0.36
-1.32
Amortization of goodwill and intangible assets
Basic net loss per share
25
6M 2000
© Copyright ADVA Optical Networking 2001
Consolidated balance sheet
(U.S. GAAP)
6M 2001
(thousand Euro)
6M 2000
ASSETS
Current assets
51,895
39,940
Noncurrent assets
152,168
118,985
Total assets
204,063
158,925
42,717
17,647
Noncurrent liabilities
7,871
2,221
Stockholders' equity
153,475
139,057
Total liabilities and equity
204,063
158,925
LIABILITIES AND EQUITY
Current liabilities
26
© Copyright ADVA Optical Networking 2001
Consolidated cash flows
(U.S. GAAP)
6M 2001
(thousand Euro)
27
6M 2000
Cash flow from operating activities
-7,197
-8,016
Cash flow from investing activities
-2,488
-1,128
Cash flow from financing activities
17,068
-461
Net change in cash
and cash equivalents
7,383
-9,605
Cash and cash equivalents as of Jan. 1
2,356
16,433
Cash and cash equivalents as of Dec. 31
9,739
6,837
© Copyright ADVA Optical Networking 2001
ADVA employees worldwide
15 Apprentices
53 Administration, finance, IT
12
50
90 Sales, marketing, tech support
71
16 Quality management
15
2000
99
107 Procurement, production
151
158 Research & development
6M 2001
Total 398
28
© Copyright ADVA Optical Networking 2001
Total 439
Organizational structure

Newly-defined executive structure
Brian L. Protiva
Chief Executive Officer
Brian P. McCann
Stephan Offermanns
Andreas G. Rutsch
Chief Sales & Marketing Officer
Chief Operating Officer
Chief Financial Officer
29
© Copyright ADVA Optical Networking 2001
Investor relations
Stockholder information
30
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
(August 20, 2001)
EUR 3.68
Share price
(December 31, 2000)
EUR 64.90
Performance since IPO
-31.0%
Market capitalization
(August 20, 2001)
EUR 121.9 million
Market capitalization
(December 31, 2000)
EUR 2.08 billion
© Copyright ADVA Optical Networking 2001
Stockholder structure
(August 20, 2001 – total 33.136.768 shares)
JDS Uniphase
28%
Egora Group
35%
Free float
37%
Outlook
31

Continued focus on tightening cost structure

Continued optimization of balance sheet and capital structure

Qualitative growth and profitability

Win back investor confidence
© Copyright ADVA Optical Networking 2001
Andreas G. Rutsch, CFO
August 28, 2001
Meiningen
Explanation of agenda items
32
© Copyright ADVA Optical Networking 2001
Agenda items
TOP 1: Submission of the approved adjusted annual financial
statements, the group financial statements, as well as
the management report of both the AG and the group for
the 1999 financial year, along with the report of the
Supervisory Board
TOP 2: 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
2000 financial year, along with the report of the
Supervisory Board
TOP 3: Approval of the activities of the Management Board
during the 2000 financial year
33
© Copyright ADVA Optical Networking 2001
Agenda items
TOP 4: Approval of the activities of the Supervisory Board during
the 2000 financial year
TOP 5: Election of new members to the Supervisory Board
TOP 6: Resolution regarding the amendment of the resolution
concerning the issuance of convertible bonds to
members of the Supervisory Board (2001 Supervisory
Board Convertible Bond) and the partial cancellation of
the creation of conditional capital, as well as a
corresponding amendment to the Articles of Association
34
© Copyright ADVA Optical Networking 2001
Agenda items
TOP 7: Resolution to issue convertible bonds to the new
members of the Supervisory Board ("2001 Supervisory
Board Convertible Bond - II"), to create conditional
capital and to amend the Articles of Association
TOP 8: Resolution concerning the remuneration of the
Supervisory Board
TOP 9: Appointment of the auditor for financial year 2001
TOP 10:Resolution concerning the creation of additional
authorized capital with a possible exclusion of
subscription rights and amendment of the Articles of
Association
35
© Copyright ADVA Optical Networking 2001
Agenda items
TOP 11:Resolution regarding the clarification of the 1999 Stock
Option Program
TOP 12:Resolution regarding the clarification of the 2000 Stock
Option Program
TOP 13:Resolution regarding the amendment of the authorization
to issue stock options (UK Stock Option Program), as
well as the amendment of the resolution concerning the
creation of conditional capital and amendment of the
Articles of Association
TOP 14:Resolution regarding the amendment of the authorization
to issue convertible bonds and stock options
36
© Copyright ADVA Optical Networking 2001