The Global Realignment Program reflects the Company’s commitment to remaining the industry leader in optical components and modules for telecommunications during the current business downturn, and to position the Company for substantial growth over the longer term. This program has the following elements:
Product and Technology Development. The Company is creating global centers for advanced product development. These centers are intended to centralize product development teams with the critical mass necessary to develop future generations of products and fiberoptic technologies. The Company will also benefit from savings resulting from elimination of overlapping development programs, and reallocating such resources to invest in the development of new platforms and capabilities.
Manufacturing. JDS Uniphase will consolidate the manufacturing of several of its products from multiple sites into specific locations around the world. This process involves consolidating product lines, standardizing on global product designs, relocating products to operations designated as global centers of manufacturing excellence, including transferring additional products to China to take greater advantage of its strong optical expertise and favorable cost and tax environment.
Customer Service. The Company is aligning its sales organization to offer customers a single point of contact for all of their product requirements, and creating regional and technical centers to streamline customer interactions with product line managers. It is also building on its successful information technology implementations to consolidate administrative functions to provide improved customer service and realize significant cost savings.
The Global Realignment Program is intended to align the Company’s resources and operations into a global structure that is competitive now and positions the Company to remain competitive in the future. This program includes a number of actions by the Company to reduce costs and expenses and align manufacturing capacity with customer demand. The Company will close several operations, vacate 25 buildings at operations to be closed, as well as at continuing operations, and reduce employment by approximately 5,000 people or 20% of current levels. These actions are being taken in response to current business conditions in a market the Company continues to believe will experience substantial growth over the longer term. The Company believes these changes will position JDS Uniphase well in the current business environment and prepare it for future growth with increasingly competitive new product offerings and long-term cost structure.
We believe we have served our customers well during prior periods of exploding demand. Our industry is in a near-term downturn and we must act decisively and rapidly, said Jozef Straus, Co-Chairman and CEO.
The Global Realignment Program we are announcing today is our response both for now and for the future. While employment reductions of many who have served our customers so well are extremely difficult, we must prepare for the future by creating a product portfolio and cost structure that will permit us to continue to serve the needs of our customers and grow with our markets.
In the fourth quarter of fiscal 2001, the Company will record one time charges for employee severance, consolidation of product lines, closing of some operations, vacating approximately 25 buildings, and inventory write-offs associated with the consolidation of different product designs and manufacturing processes onto single global manufacturing platforms. In addition to these one time charges, the Company will incur costs for accelerated depreciation, moving and employee costs in the first three quarters of fiscal 2002 during the phasing out of certain facilities and equipment. Generally accepted accounting principles require the recording of accelerated depreciation of such assets over the time remaining until phaseout (three to nine months) and the expensing of such moving and employee costs as incurred. It is anticipated that the costs of the Global Realignment Program will be between $375 and $425 million, and the projected effect of the Globa Realignment Program will be to reduce the Company’s annual expense levels by over $250 million.
Sales for the third quarter ended March 31, 2001 were 1% below sales of $925 million for the quarter ended December 30, 2000 and 90% above pro forma combined sales of $485 million for the quarter ended March 31 2000. Sales for the nine months ended March 31, 2001 of $2.6 billion were 133% above pro forma combined sales for the comparable prior year nine-month period. Pro forma combined sales for the prior year periods include the separately reported results of E-TEK Dynamics, Inc., which was acquired on June 30, 2000 in a transaction accounted for as a purchase. Sales for the quarter include SDL, Inc. sales subsequent to the acquisition date of SDL, which was acquired on February 13, 2001 in a transaction accounted for as a purchase, and exclude the sales after that date of the Company’s divested Zurich operations.
Including merger-related charges, reduction in the value of marketable equity securities, gain on the sale of a subsidiary, purchased intangibles amortization, payroll taxes on stock option exercises, stock compensation charges, and activity related to equity investments, the Company reported losses of $1.3 billion or $1.13 per share for the quarter and $3.2 billion or $3.15 per share for the fiscal year to date.
On a pro forma basis, excluding merger-related charges, reduction in the value of marketable equity investments, gain on the sale of a subsidiary, purchased intangibles amortization, payroll taxes on stock option exercises, stock compensation charges, and activity related to equity investments, the Company earned $160 million or $0.14 per share for the quarter as compared to the $208 million or $0.21 per share earned in the quarter ended December 30, 2000. Pro forma net income for the nine months ended March 31, 2001 was $545 million or $0.51 per share, an increase of 112% from the $257 million or $0.28 per share earned in the comparable prior year period.
