EXFO Electro-Optical Engineering Inc.

EXFO Electro-Optical Engineering Inc.

December 06, 2007 16:25 ET

EXFO Announces Preliminary Results for First Quarter of Fiscal 2008

- GAAP net results lower than expected - US$0.00 per diluted share - Sales to reach high end of guidance range, while book-to-bill ratio at 1.06

QUEBEC CITY, CANADA--(Marketwire - Dec. 6, 2007) - EXFO Electro-Optical Engineering Inc. (TSX:EXF)(NASDAQ:EXFO) pre-announced today financial results for the first quarter ended November 30, 2007. While sales are expected to reach the high end of the previously announced guidance range, GAAP net results have been mainly affected by the increased strength of Canadian dollar versus the US dollar, as well as a lower gross margin and higher operating costs in the first quarter of fiscal 2008.

The impact of the strong Canadian dollar on EXFO's financial results in the first quarter of 2008 is two-fold. The 6.9% increase in the average rate of the Canadian dollar quarter-over-quarter will affect the company's operating results by about US$0.02 per diluted share and the foreign-exchange line item on the income statement will likely amount to a loss of US$0.01 per diluted share. EXFO's gross margin is expected to fall below expectations, while operating expenses will likely increase from the previous quarter due to additional R&D and sales activities. As well, the company will likely incur higher tax expenses than anticipated.

Consequently, EXFO expects to report GAAP net results of US$0.00 per diluted share for the first quarter of fiscal 2008 compared to guidance of US$0.01 to US$0.04 per diluted share.

The company, meanwhile, anticipates that sales will reach about US$41 M, or the high end of its sales outlook between US$38 and US$41 million, while it expects a book-to-bill ratio of 1.06 for the quarter.

"We have been affected not only by the unexpected magnitude but also by the speed of the increase in the Canadian dollar in the first quarter. In the past five fiscal years, we had absorbed a 32% increase of the Canadian dollar, or 6.4% per year on average, but the extraordinary 6.9% surge in the first quarter will likely delay our profit trajectory by a few quarters," explained Germain Lamonde, EXFO's Chairman, President and CEO. "We had already begun transferring some manufacturing to China and R&D to India, strengthening global procurement and designing products at a lower cost to mitigate the impact of the Canadian dollar. In addition, we have started implementing new cost-control measures to ensure that we can absorb a higher currency level."

All financial numbers provided in this press release are preliminary and subject to review. EXFO will announce its complete results for the first quarter of fiscal 2008 after the close of markets on Jan. 8, 2008.

Conference Call/Webcast

EXFO will host a conference call today at 5 p.m. (Eastern time) to review preliminary estimates for the first quarter of 2008. To listen to the conference call and participate in the question period via telephone, dial 1-416-620-2408. Germain Lamonde, Chairman, President and CEO, and Pierre Plamondon, CA, Vice-President of Finance and Chief Financial Officer, will participate in the call. An audio replay will be available one hour after the end of the conference call until 6:45 p.m. on December 13, 2007. The replay number is 1-402-977-9140 and the reservation number is 21360775. The live audio Webcast and replay of the conference call will also be available on EXFO's Website at www.EXFO.com/investors.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, and we intend that such forward-looking statements be subject to the safe harbors created thereby. Forward-looking statements are statements other than historical information or statements of current condition. Words such as may, will, expect, believe, anticipate, intend, could, estimate, continue, or the negative or comparable terminology are intended to identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events and circumstances are considered forward-looking statements. They are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those in forward-looking statements due to various factors including consolidation in the global telecommunications test and measurement industry; capital spending levels in the telecommunications, life sciences and high-precision assembly sectors; concentration of sales; fluctuating exchange rates and our ability to execute in these uncertain conditions; the effects of the additional actions we have taken in response to such economic uncertainty (including our ability to quickly adapt cost structures with anticipated levels of business, ability to manage inventory levels with market demand); market acceptance of our new products and other upcoming products; limited visibility with regards to customer orders and the timing of such orders; our ability to successfully integrate our acquired and to-be-acquired businesses; the retention of key technical and management personnel; and future economic, competitive and market conditions. Assumptions relating to the foregoing involve judgments and risks, all of which are difficult or impossible to predict and many of which are beyond our control. Other risk factors that may affect our future performance and operations are detailed in our Annual Report, on Form 20-F, and our other filings with the U.S. Securities and Exchange Commission and the Canadian securities commissions. We believe that the expectations reflected in the forward-looking statements are reasonable based on information currently available to us, but we cannot assure you that the expectations will prove to have been correct. Accordingly, you should not place undue reliance on these forward-looking statements. These statements speak only as of the date of this document. Unless required by law or applicable regulations, we undertake no obligation to revise or update any of them to reflect events or circumstances that occur after the date of this document.

About EXFO

EXFO is a Tier-1 test and measurement expert in the global telecommunications industry, especially in the portable test market segment. The Telecom Division, which represents about 85% of the company's business, offers a full suite of test solutions and monitoring systems to network service providers, cable TV operators, telecom system vendors and component manufacturers in approximately 70 countries. EXFO is the global market leader for portable optical test solutions with an estimated 25.5% market share and a leading supplier of protocol and access test solutions to enable triple-play deployments and converged IP networking. Its Windows-based modular AXS-200, FTB-200, FTB-400 and IQS-500 test platforms host a wide range of modular test solutions across optical, physical, data and network layers, while maximizing technology reuse across several market segments. The Life Sciences and Industrial Division offers value-added light-based solutions in high-precision medical device and opto-electronics assembly sectors, and advanced fluorescence microscopy and electrophysiology solutions for the life sciences sector. For more information about EXFO's Telecom Division, visit www.EXFO.com, and for its Life Sciences and Industrial Division, visit www.EXFO-lifesciences.com.

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