As filed with the Securities and Exchange Commission on October 22, 2003
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F/A
AMENDMENT NO. 2
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
or
ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2002
or
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 0-30684
BOOKHAM TECHNOLOGY PLC
(Exact name of registrant as specified in its charter)
England and Wales (Jurisdiction of incorporation or organization) |
90 Milton Park, Abingdon, Oxfordshire OX14 4RY (Address of principal executive offices) |
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class |
Name of each exchange on which registered |
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None |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Title of each class |
Name of each exchange on which registered |
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American Depositary Shares, evidenced by American Depositary Receipts, each representing one ordinary share, par value 1/3p each |
The Nasdaq National Market | |
Ordinary shares, par value 1/3p each* | The Nasdaq National Market |
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: 204,950,872 ordinary shares
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days: Yes o No o
Indicate by check mark which financial statement item the Registrant has elected to follow:
Item 17 o Item 18 o
We are filing this Amendment with respect to Item 4, Item 6, Item 17 and Item 19. While this Amendment contains certain information related to the first half of 2003, we have not generally updated the Annual Report on Form 20-F in order to preserve the nature and character of the disclosures set forth in the Annual Report as originally filed on March 19, 2003. As a result, with the limited exception noted, this Amendment to the Annual Report on Form 20-F continues to speak as of March 19, 2003.
Item 4: Information on the Company
Our History and Development
Background
We were incorporated on September 22, 1988 as a private limited company under the laws of England and Wales under the name "Coleslaw 145 Limited". We changed our name to "Bookham Technology Limited" on December 14, 1988. On March 16, 2000, we re-registered as a public limited company, or "plc", and have used the name Bookham Technology plc since that time. We are governed by the Companies Act 1985. We have five direct or indirect wholly-owned subsidiaries, one of which is a holding company. Our subsidiaries are located in the United States, Canada, Japan and Switzerland; the holding company is organized under the laws of Canada.
Our principal executive office is located at 90 Milton Park, Abingdon, Oxfordshire OX14 4RY, England and our telephone number is (011) (44) 1235 837 000. The address of our United States office is 10015 Old Columbia Road, Suite B-215, Columbia, Maryland 21046, and our telephone number at that location is (410) 290-6225.
Capital Expenditures
We have, since January 1, 2000, made substantial capital expenditures related to increasing our production capacity, purchasing product development equipment and expanding our production, assembly and testing facilities. We have also in that period acquired and later disposed of an interest in a Canadian company, and completed two other strategic acquisitions. These acquisitions and the disposition are described in detail below under "Principal DevelopmentsStrategic acquisitions and disposition".
In 2000, we invested approximately £28.7 million in increasing our production capacity, including the purchase of 35 acres of land in Swindon, England, which at the time we anticipated would provide the site of additional manufacturing capacity and our future U.K. headquarters. Due to the changed economic environment, and in view of our acquisition of a facility in the United States in 2001, we have decided not to develop this site, and the land is being marketed for sale.
In 2001, we had approximately £41.6 million in capital expenditures, including those related to the expansion of our assembly and test and wafer fabrication facilities in Abingdon, England, and the re-fitting of our assembly and test facility in Swindon, which became operational during the second quarter of 2000. We also acquired a manufacturing facility in Columbia, Maryland, that until recently served as our North American headquarters. In connection with the realignment of our manufacturing facilities in 2002, we closed the Swindon and Maryland facilities. In view of the uncertainty that developed during 2001 in the economy in general and the markets in which we operate in particular, and the deteriorating demand for fibre-optic components, we began to reduce our capital spending significantly in the second half of 2001. In 2001, we impaired the carrying value of our plant and manufacturing and production equipment by £24 million. See "Item 5: Financial and Operating Review and Prospects".
In 2002, capital expenditure was approximately £10.2 million ($16.42 million). In addition, we acquired fixed assets of approximately £42 million ($67.6 million) on the acquisitions from MOC and Nortel Networks. We also implemented an integrated enterprise resource planning, or ERP, and factory management solution based at our Abingdon and Caswell sites, which permits us to interface with the systems we acquired from Nortel Networks. Also during the year, following an assessment of the deterioration in the market for our ASOC products, we impaired the carrying value of all associated plant and equipment by £25.1 million ($40.4 million). See "Item 5: Financial and Operating Review and Prospects". All of our capital expenditures over the past three fiscal years were funded from cash raised in our public offerings in 2000.
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We estimate that we will incur capital expenditures in 2003 of between £12 and £15 million ($19.3 to $24.2 million), a significant amount of which will be associated with the relocation of our manufacturing facility in Ottawa, Canada to our existing facility in Caswell.
Principal Developments
In 2002, we pursued strategic acquisitions, disposed of an earlier-acquired interest, entered into supply agreements and experienced changes in our operations as a result of negative market conditions. A summary of the principal developments in these areas follows.
Strategic acquisitions and disposition
In October 2002, we announced our agreement to acquire the optical amplifier and optical transmitter and receiver businesses of Nortel Networks. The acquisition was completed on November 8, 2002. The aggregate consideration for the acquisition consisted of: (i) 61,000,000 of our ordinary shares; (ii) warrants over 9,000,000 of our ordinary shares; (iii) $30 million secured loan notes; and (iv) $20 million unsecured loan notes. We also paid to Nortel Networks on completion $9.2 million for restructuring expenses incurred by Nortel Networks in connection with the transaction. Nortel Networks beneficially holds 29.9% of our shares as of March 1, 2003.
The acquired Nortel Networks businesses are principally located in Paignton, U.K., Zurich, Switzerland and Ottawa, Canada. A significant portion of the acquired Nortel Networks businesses is located in the United Kingdom, near our head office. We believe that the acquisition will provide synergies and economies of scale which will lead to increased cost efficiencies. In particular, the acquisition permits us to realign our production facilities to centralize certain functions in existing or acquired facilities and close other facilities, thereby reducing the costs of operating overlapping facilities. For example, we have consolidated all of our assembly and test work into the Paignton facility acquired from Nortel Networks and are in the process of re-locating the activities of the former Nortel Networks facility in Ottawa to our plant in Caswell. Anticipated cost savings include those associated with the workforce reductions that will accompany this restructuring of our facilities, a decrease in depreciation charges due to a write down of the assets we purchased from Nortel Networks, and elimination of areas of duplication, including sales and marketing and finance and administration. Between the first and third quarters of fiscal 2002, we reduced our operating losses by approximately £2.5 million ($4.0 million). While we anticipate reducing our cash break-even point between £30 million ($48 million) and £35 million ($56 million) per quarter, there can be no assurance that we will do so.
In addition, as part of an independent entity, we believe that there will be greater opportunity for components manufactured and sold by these businesses to be sold to leading systems manufacturers, other than Nortel Networks, who may not previously have purchased components from Nortel Networks, as Nortel Networks is one of their competitors. The products we acquired include optical amplifiers with vertically integrated pump laser chips, 10 Gb/s transceivers and wide receiver line and transponder modules. The integration of these products with our own active and passive solutions will enable us to provide active and passive optical modules and subsystems to optical network systems manufacturers.
In August 2002, we sold a majority of our interest in Measurement Microsystems A-Z, Inc., a company whose shares we had acquired in January 2001, to a company backed by the former management of Measurement Microsystems for consideration representing less than 1% of our net assets at the time. We retained a 25% interest in the shares of Measurement Microsystems. However, it was agreed that we would not hold any positions on the board of directors of Measurement Microsystems, would not have any involvement in the day-to-day running of Measurement Microsystems, and would not include any of the ongoing operations and cashflows of Measurement
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Microsystems in our consolidated accounts. The terms of the transaction permit us to continue to use Measurement Microsystems' patented optoelectronic technology pursuant to a license agreement.
In December 2001, we announced that we had entered into an agreement to acquire the business and assets of Marconi Optical Components Limited, or MOC, a wholly-owned subsidiary of Marconi plc. We completed the acquisition in February 2002. The consideration for the acquisition was the issuance by us of 12,891,000 ordinary shares to MOC, for a value of approximately £16.4 million. The shares issued represented 9.9% of our outstanding shares prior to the issuance. MOC holds approximately 6.3% of our outstanding shares as of March 1, 2003. This acquisition has made it possible for us to expand our product portfolio into the actives market with a proprietary laser chip design, manufacturing capability and tunable laser and Gallium Arsenide, or GaAs, modulater technologies. The products we acquired included narrow-band and wideband tunable lasers, GaAs modulators and erbium doped fiber amplifiers, or EDFAs, and monolithic microwave integrated circuits, or MMICs.
Supply agreements
In connection with our acquisition from Nortel Networks, we entered into a Supply Agreement with Nortel Networks Limited, a wholly-owned subsidiary of Nortel Networks. Under the agreement, Nortel Networks Limited has agreed to purchase a minimum of $20 million per quarter, or $120 million total, of optical products and related services from us over a period of six quarters from completion of the transaction on November 8, 2002. If purchases in any quarter of the six quarter term are within 15% of $20 million Nortel Networks Limited is permitted to roll over the shortfall to a succeeding quarter. In addition, over the three years following completion, Nortel Networks Limited has agreed to purchase from us agreed percentages on a product-by-product basis of its total component requirements for the optical components products that were being supplied to Nortel Networks by the acquired Nortel Networks businesses (approximately 800 optical component products), subject to our meeting certain customary performance criteria relating to price, quality and delivery, among other things. The individual percentages will vary for each product from year to year and, in the majority of cases, will vary in range from 50% to 100% of Nortel Networks Limited's requirements for these optical component products. For the transmitter and receiver product portfolio the target starts at 80%, reducing to 60% at the end of the three year period; for the amplifier product portfolio the target starts at 65% and reduces over the three year period to 50%. These product portfolio target allocations are non-binding. The agreement can be terminated by either party following a material breach of the agreement by the other party, following a cure period and after a full dispute resolution process has been followed. It can also be terminated upon the bankruptcy or insolvency of either party. The agreement is governed by the laws of the State of New York.
In connection with the MOC acquisition in February 2002, we entered into a non-exclusive supply agreement with Marconi Communications, Inc., a wholly-owned subsidiary of Marconi plc, under which Marconi Communications will, subject to certain performance and capacity terms, purchase a minimum of £30 million ($48.3 million) of components from us over an 18-month period, originally to expire on August 1, 2003, for incorporation into certain Marconi products. In January 2003, we and Marconi Communications amended the Supply Agreement to extend its term to December 31, 2003 and to adjust the timing of the minimum purchase commitments for 2003. There has been no change to the total minimum purchase commitment under the agreement. The agreement can be terminated by either party for material breach of the agreement, following a 30 day cure period. The minimum purchase commitment is preserved where termination follows a material breach by Marconi. The agreement can also be terminated upon the bankruptcy or insolvency of either party. The agreement is governed by the laws of England.
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Operational developments
In February 2003, we announced our decision to significantly downsize the manufacturing and research and development activities associated with our ASOC product line at our Abington facility in order to focus our resources on those product lines that are producing revenue and are expected to produce revenue in the short and medium term. These include the product lines we acquired in connection with the acquisitions from MOC and Nortel Networks. We anticipate that this decision will involve a reduction in our number of employees by approximately 200 people. We will continue to sell and support ASOC-based passive products, including the four channel EVOA, which are qualified, and shipping to customers. We will also retain a dedicated ASOC team to continue development work and maintain our wafer fabrication facility. We continue to believe that there is value and a future revenue opportunity for our ASOC platform. However, current market conditions have required us to focus on revenue-generating activities and it is not clear when we will be able to again focus on the opportunities we believe are presented by our ASOC platform.
In July 2002, we announced the closure of our facilities in Swindon and Maryland, and the consolidation of our ASOC manufacturing to the Abington site. We believe that these closures will reduce costs without an adverse impact on manufacturing capacity or on future sales ramp-up.
Governmental Regulation
Our business involves the use of hazardous materials, and environmental laws and regulations may expose us to liability and increase our costs. We historically have handled small amounts of hazardous materials as part of our manufacturing activities and now handle more and different such hazardous materials as a result of the manufacturing processes related to the acquired Nortel Networks businesses and the product lines we acquired from MOC. Consequently, our operations are subject to environmental laws and regulations governing, among other things, the use and handling of hazardous substances and waste disposal. We may be required to incur environmental costs to comply with current or future environmental laws. As with other companies engaged in manufacturing activities that involve hazardous materials, a risk of environmental liability is inherent in our manufacturing activities, as is the risk that our facilities will be shut down in the event of a release of hazardous waste. The costs associated with environmental compliance or remediation efforts or other environmental liabilities could adversely affect our business.
Our Business
Overview
We principally design, manufacture and market optical components, modules and subsystems for the telecommunications industry. We also manufacture high speed electronics components for the telecommunications, defense and space industries. In 2002, we redefined the company through our acquisitions of the optical components business of MOC and the optical amplifier and optical transmitter and receiver businesses of Nortel Networks, in order to meet customer demand for full-line, independent, solutions-capable partners who can provide a full range of components as well as complete subsystems. These acquisitions enable us to offer a comprehensive product set comprising actives, passives and amplifiers based both on new technologies and products that are established and widely deployed.
Telecommunications Industry Background
The telecommunications and optical components industry suffered a substantial setback in 2001 and 2002. Ryan Hankin Kent, or RHK, a market research and consulting group, estimates that the size of the global optical components market fell from $6.8 billion in 2000 to $2.2 billion in 2002. RHK estimates that the market will further decline to $2.1 billion in 2003 before it begins to recover in 2005.
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This resizing of the market is resulting in industry consolidation, which is expected to continue through 2003.
In anticipation of the projected dramatic growth in bandwidth, telecommunications equipment and components suppliers, including us, made substantial investments in 2000 and 2001 in property, plant, equipment and personnel to meet the projected increase in demand. However, carrier cashflows then ceased to support the substantial investments in technology required to expand their networks, resulting in excess inventory and capacity. In addition, the needs of our customers have changed as they have significantly restructured their operations to focus on other areas, and are now seeking suppliers who can provide "one-stop shopping" solutions, thereby reducing the number of suppliers from whom they purchase product. Consolidation in the market has led to fewer suppliers who can provide these solutions and intense competition among those suppliers.
There have been several consequences of the downturn in the industry on our business. It has required us to consolidate our manufacturing facilities and generally restructure the organization, through cost-cutting measures such as disposing of unused property and reductions in employee headcount. It has also required us to adjust to the new demands of our customers, which we have done through strategic acquisitions from Nortel Networks and MOC, and to change our strategy to focus on revenue producing products rather than next-generation products based on our ASOC platform.
Strategy
Our objective is to be the leading global provider of optical components, modules and subsystems to optical network system manufacturers. We intend to achieve this goal by:
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to take advantage of the market upturn, but in order to do so we must carefully contain costs to preserve research and development, production, sales and marketing capacity during a sustained period of low market activity. To do so, we have in the past year taken steps to rationalize production capacity, adjust headcount and restructure resources. In connection with both the Nortel Networks and MOC acquisitions, we have carefully targeted, and successfully implemented, cost savings programs for each organization, and will continue to do so.
Our Expanded Product Offering
We design, manufacture and market components that generate, detect, route, amplify and control light signals primarily in telecommunications networks. We now have three key technology platforms based on gallium arsenide, indium phosphide and silicon. Gallium arsenide is a compound used to create a variety of semiconductor devices, including devices for a wide range of optical applications, such as modulators and transmitters. Indium phosphide is a compound used in the creation of laser diodes and similar devices to generate light signals at specified wave lengths. Our silicon technology platform uses optical waveguides formed in silicon principally for passive components and larger, integrated semiconductor devices. In addition to these three technology platforms, we also have advanced capabilities in laser diodes used to power laser amplifiers and in the vertically integrated business of optical amplifiers, including intelligent electronics to control optical component systems.
Our acquisitions from Nortel Networks and MOC represent an important step in our business, and enhance our product offering significantly by increasing our capability to deliver "active" optical componentsthose which directly generate or receive light, whereas prior to these acquisitions our product lines were largely focused on "passive" componentsthose that manipulate, guide and route optical signals.
Our broader product portfolio enables us to offer the additional capability of providing subsystems and modules using our component set. These products are developed using gallium arsenide, indium phosphide and silicon technologies. This ability to offer a more comprehensive array of products addresses our customers' goal of reducing the number of suppliers from whom they purchase. In addition, we are now in a position to offer the proven, reliable and widely deployed Nortel Networks products to other leading system manufacturers who may not previously have been willing to purchase components from Nortel Networks, as one of their competitors.
Our current products are primarily configured for use in metropolitan and long-haul networks and include WDM/DWDM applications, where the need for high volume, cost-effective components that feature reduced complexity and greater ease of production is particularly critical. Our products provide functionality for the various elements within the networking system from transmitting to receiving, and include products that amplify, detect, combine and monitor light signals. Our principal product offerings include:
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Customers, Sales and Marketing
We sell our products principally to telecommunications equipment manufacturers internationally. We also generate a small portion of our revenues from product development contracts with our customers. A small number of customers account for a substantial portion of our revenues. For example, in 2002, sales to Marconi Communications and Nortel Networks accounted for 38% and 31%, respectively, of our net revenue. We expect to continue to depend on a small number of customers for our sales and revenues. The loss of any key customer, or reductions in orders from any such customer, would likely have a material adverse effect on our business, financial condition and results of operation. See "Item 3: Key InformationRisk FactorsWe and our customers are dependent upon a limited number of customers".
Our products typically have a long sales cycle. The period of time between our initial contact with a customer to the receipt of an actual purchase order is frequently six months to a year or more. In addition, customers perform, and require us to perform, extensive process and product evaluation and testing of components before entering into purchase arrangements.
Because our targeted market is a small number of very large organizations who rely on our products for critical applications, we believe it is essential to maintain a comprehensive and capable direct sales and marketing organization. Towards that end, we have established a direct sales and marketing force of 64 persons as of December 31, 2002, with salespeople in the United Kingdom, China, France, Italy, Japan and the United States. We intend to continue to invest in staff devoted to sales and marketing functions, in particular in the areas of product management and direct selling, to attract new customers and expand our sales to existing customers. Our direct sales force is supported by an applications engineering group capable of providing technical support for key customers internationally. We have complemented the direct sales force with an international network of representatives and distributors that extends our commercial reach to smaller geographic locations and customers that are not currently covered by our sales offices. In addition, we will from time to time enter into collaborative arrangements for the sale or distribution of our products, where the other party can provide access to special expertise or potential customers.
Intellectual Property
We believe that our proprietary technology provides us with an important competitive advantage and we intend to continue to protect our technology, as appropriate, including design, process and assembly aspects. Our technology extends across active and passive optical semiconductor devices for a wide range of applications in telecommunications networks. We believe that our intellectual property portfolio is a valuable strategic asset that we can use in conjunction with the technologies of the companies with which we collaborate to develop sophisticated solutions and applications for use in the optical network systems market. This portfolio is supplemented by our extensive expertise developed by our personnel, including personnel who joined us from Nortel Networks and Marconi, and significant application and process engineering know-how. We believe that the future success of our business will depend on our ability to translate our intellectual property portfolio and the technological expertise and innovation of our personnel into new and enhanced products, especially involving size and cost reduction.
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We currently hold 170 U.S. granted patents and 242 non-U.S. granted patents, and have approximately 600 patent applications pending in various countries. We maintain an active program of identifying technology appropriate for patent protection. Our practice is to require employees and consultants to execute non-disclosure and proprietary rights agreements upon commencement of employment or consulting arrangements. These agreements acknowledge our exclusive ownership of all intellectual property developed by the individuals during their work for us and require that all proprietary information disclosed will remain confidential. Although such agreements may be binding, we may not be able to enforce them in all jurisdictions. We operate within our business a rewards to inventors scheme.
Although we continue to take these steps to identify and protect our patentable technology, and to obtain and protect proprietary rights to that technology, we cannot be certain the steps we have taken will prevent misappropriation of our technology. We may, as appropriate, take legal action in the future to enforce our patents and trademarks and otherwise to protect our intellectual property rights, including our trade secrets. We do not currently license our technology to third parties in general, but situations may arise in the future where we may decide to grant licenses or enter into cross-licenses.
In our field, as in other technical fields, there is a risk that some technology we develop, or that we use in our products, may overlap with technology deemed proprietary by third parties. In all cases where we become aware of overlaps, we intend to take appropriate steps to avoid infringement of others' intellectual property. A variety of third parties hold or may assert intellectual property rights in markets that we currently or intend to target. To the extent necessary, we will, as appropriate, seek licenses from the third party, take legal action to determine the validity and scope of the third-party rights or to defend against claims of infringement, or develop alternative, non-infringing designs. Such licensing, litigation or redesigning options could result in substantial costs and diversion of resources.
Research and Development
Since our inception in 1988, we have historically devoted a significant amount of our resources to research and development activities. We have spent £17.4 million (2000), £77.6 million (including exceptional items) (2001) and £39.8 million ($64 million) (2002) on research and development, for a total of £134.8 million ($216.9 million) over the last three fiscal years. We invested heavily in research and development in 2001 in connection with increasing our product development efforts in anticipation of an increase in demand. In response to the decline in the market, we decreased these expenses in 2002 as part of our overall cost-cutting efforts. We believe that continued investment in our technology is critical to our future competitive success but we anticipate that research and development expenses in the near term will be lower than in 2002 as a result of ongoing cost restructuring, including the downsizing of our ASOC development efforts. As of December 31, 2002, our research and development organization comprised 374 persons.
Our research and development facilities in Abingdon, Caswell and Paignton, England, and Ottawa, Canada, include computer-aided design stations, modern laboratories and automated test equipment. We intend to devote continued research and development resources to expand our existing product line, enhance our manufacturing processes to reduce production costs, provide increased device performance, and reduce time to market in developing our products. Our research and development organization continues to be a resource available to provide optical and electronic integration expertise to meet customer-specific requirements as they arise in telecommunications and other selected applications. We also sponsor advanced research in a number of universities in the United Kingdom, Europe and North America.
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Manufacturing
We have three manufacturing facilities located in the United Kingdom. Our manufacturing site in Abingdon is a silicon facility located near our corporate headquarters. In connection with the MOC acquisition in February 2002, we acquired a production and research and development facility located in Caswell. In connection with the acquisition from Nortel Networks, we acquired a manufacturing, assembly and test facility in Paignton, a production and research and development facility in Ottawa, Canada, and a manufacturing facility in Zurich, Switzerland. We are presently using the former Nortel Networks facility in Ottawa pursuant to a transitional lease with Nortel Networks. We plan to relocate the manufacturing equipment and activities from the Ottawa plant to our existing Caswell facility by the end of this year. We intend to retain the research and development functions as well as administrative offices in Ottawa in new premises that we have not yet acquired. We previously had facilities in Swindon, England, Columbia, Maryland and Quebec, Canada, all of which are now closed. We lease the Abingdon, Ottawa and Zurich facilities, and we own the Caswell and Paignton plants. Our aggregate potential manufacturing floor space in all of these facilities is approximately 230,000 square feet. As a result of the economic downturn, our manufacturing capability is significantly underutilized.
Our manufacturing capabilities include fabrication processing for indium phosphide, gallium arsenide and silicon. This includes clean room facilities for each of the technology processes along with assembly and test capability and reliability/quality testing. Our manufacturing facilities house sophisticated semi-conductor processing equipment, such as epitaxy reactors, metal deposition systems, photolithography, etching, analytical measurement and control equipment. Our assembly and test facilities include specialized automated assembly equipment, temperature and humidity control and reliability and testing facilities.
Competition
We believe that our principal competitors are the major suppliers of optical components and modules, including both vendors selling to third parties and components companies owned by large telecommunication equipment manufacturers. Specifically, we believe that we compete against two main categories of competitors:
In addition, market leaders in industries such as semiconductor and data communications, who may have significantly more resources than we do, may in the future enter our market with competing products.
Properties
We lease our corporate headquarters and manufacturing facility of approximately 140,000 square feet in aggregate in Abingdon, England, pursuant to four leases, all of which expire in 2007. We own the 183,000 square foot facility in Caswell, England, which includes wafer fabrication, assembly and test, manufacturing support functions and research and development capabilities as well as office space. Our facility in Paignton, England, is approximately 240,000 square feet of manufacturing space incorporating clean room, assembly and test and supporting laboratory, office and storage space. We lease, pursuant to a transitional lease from Nortel Networks, our facility of approximately 75,000 square feet in Ottawa, Canada, which is principally manufacturing space incorporating clean room wafer fabrication and supporting research and development. Our facility in Zurich, Switzerland, is approximately 124,000 square feet comprising office space and manufacturing, including clean room wafer fabrication and production laboratories.
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Revenue Trends
In 2002, following our acquisition of the acquired Nortel Network businesses, we changed the way in which we break out our revenue by geographic market destination. We previously included sales to European Union countries and Canada in the "rest of world" category and considered sales to the United States in a separate category. We now include sales to the United States and Canada in a new "North America" category, and have created a separate category for sales to European Union countries, except the United Kingdom. In addition, our previously reported 2000 and 2001 revenue has been re-allocated among the new categories, as illustrated in the following table:
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Year ended December 31 |
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2002 |
2002 |
2001 |
2000 |
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(in thousands) |
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Revenues: | |||||||||
United Kingdom | $34,250 | £21,273 | £13,306 | £20,474 | |||||
North America | 17,087 | 10,613 | 3,095 | 5,235 | |||||
European Union (except U.K.) | 3,821 | 2,373 | 375 | 415 | |||||
Japan | 95 | 59 | 3,862 | 24 | |||||
Rest of World | 458 | 285 | 1,283 | 153 | |||||
Total Revenues | $55,711 | £34,603 | £21,921 | £26,301 |
Item 6: Directors, Senior Management and Employees
Executive Officers and Directors
The following table sets forth information as of March 1, 2003, with respect to each of our executive officers and directors:
Name |
Age |
Position |
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Andrew G. Rickman(1) | 42 | Chairman | ||
David Simpson(1)(2)(3) | 76 | Vice Chairman of the Board of Directors | ||
Giorgio Anania | 44 | President, Chief Executive Officer and Director | ||
Stephen Abely | 45 | Chief Financial Officer | ||
Stephen Turley | 49 | Chief Commercial Officer | ||
Liam Nagle | 40 | Chief Operating Officer | ||
Michael Scott | 54 | Chief Technology Officer | ||
Lori Holland(1)(2)(3) | 44 | Director | ||
W. Arthur Porter(1)(2)(3) | 61 | Director | ||
Jack St. Clair Kilby | 79 | Director | ||
Robert J. Rickman | 45 | Director | ||
Joseph Cook | 51 | Director |
Andrew G. Rickman founded Bookham Technology in 1988 and served as President and Chief Executive Officer until August 2000 when he ceased to be President and became Chairman of the Board of Directors, continuing as Chief Executive Officer. In February 2001, Dr. Giorgio Anania was appointed Chief Executive Officer and Dr. Rickman became Chairman. Prior to founding Bookham Technology, Dr. Rickman was employed by GenRad from 1984 to 1987 in applications engineering and product management, and was a consultant to GenRad from 1987 to 1988 on signal processing projects.
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Dr. Rickman serves as a director of several privately-held companies and holds advisory positions with a number or organizations. In 2000, HM The Queen awarded Dr. Rickman the OBE for services to the telecommunications industry. Dr. Rickman is a Chartered Engineer and holds an honours degree in Mechanical Engineering from Imperial College, London, an MBA from Cranfield University in England and a PhD in integrated optics from the University of Surrey, England. Dr. Rickman is the brother of Robert J. Rickman.
David Simpson has served as a director of Bookham Technology since March 1995. Professor Simpson became the Vice Chairman of our Board of Directors in August 2000 and, before assuming that position, served as the Chairman of our Board. Prior to joining Bookham Technology, Professor Simpson was employed by the Gould Corporation, a manufacturer of electronic equipment and components, in Chicago, Illinois, from 1976 to 1986, serving as its President from 1980 to 1986, when he retired. Professor Simpson also serves as the Chairman of the Board of Environcom Ltd., a company in the recycling industry and as a director of several privately-held companies, including PFE Ltd., Isocom Components, Ltd., and Photonics Materials Ltd. In 1992, HM The Queen awarded Professor Simpson the CBE for services to the electronics industry. Professor Simpson has received honorary doctorates in science and technology from Heriot Watt, Abertay and Napier Universities, Scotland.
Giorgio Anania has served as President since August 2000. In February 2001, he was also appointed Chief Executive Officer and a Director. From October 1998, when he joined Bookham Technology, until August 2000, Dr. Anania was our Senior Vice President, Sales and Marketing. Prior to joining Bookham Technology, from 1993 to 1998, Dr. Anania was Vice President for Sales, Marketing and Business Development at Flamel Technologies, a French medical equipment company. Prior to that, Dr. Anania was employed as Strategic Marketing Manager, Telecoms, at Raychem Corporation in California, and as a strategy consultant with Booz Allen & Hamilton in New York. Dr. Anania has a BA(Hons) in Physics from Oxford University and an MA and PhD in Plasma Physics from Princeton University.
Stephen Abely has served as Chief Financial Officer since October 2001. From August 2000 until August 2001, Mr. Abely was the Chief Financial Officer of Arescom Technology, a private broadband access equipment provider based in California. Previously, Mr. Abely was an independent consultant from May 1999 to August 2000, during which time he served as interim Chief Financial Officer for two privately-held companies. He was Chief Financial Officer, from January 1992 to April 1999, and also served as President, from June 1998 to April 1999, of StorMedia, a component supplier to the disc drive industry. Mr. Abely holds a BS in Business Administration from Northeastern University in Boston.
Stephen Turley joined Bookham as Chief Commercial Officer in October 2001. From June 2000 to September 2001, he was Vice President, Strategic Partnerships, with Nortel Networks' High Performance Optical Component Solutions group. Previously, from September 1999 to June 2000, he was the Director, Strategic Business Development, of Nortel Networks. From September 1998 to September 1999, Dr. Turley was the Director, Marketing and Communications, of FCI, a worldwide connector company and, from June 1998 to September 1998, he held the position of Director, Industry Marketing, of Berg Components. From 1990 to 1998, Dr. Turley held various positions at Nortel Networks Optoelectronics, most recently as Director, Strategic and Business Alliances. Dr. Turley has a BA in Physics from Oxford University and a PhD in Semiconductor Laser Physics from Sheffield University.
Liam Nagle joined Bookham as Chief Operating Officer in November 2002. Prior to joining Bookham, Mr. Nagle was employed in various capacities by Nortel Networks Corporation from 1999 to October 2002. He was the Vice President Operations Optical Components of Nortel Networks from October 2000 to October 2002, the Vice President Operations from July 1999 to October 2000 and,
13
from April 1999 to July 1999, was the VP Operations Europe. Prior to Nortel Networks, Mr. Nagle also worked with Bay Networks, Intel and Apple Computer in various senior roles. Mr. Nagle has a CIMA accounting qualification.
Michael Scott joined Bookham as our Chief Technology Officer in December 2002. Dr. Scott was previously employed by Nortel Networks Corporation in various capacities from October 1982 to December 2002, most recently as Vice President Technology and Product Development for the Optical Components business unit, a title he held from May 2000 to November 2002. From April 1998 to May 2000, Dr. Scott was the Vice President of Technology (Microelectronics) and, from April 1996 to March 1998, he served as Assistant Vice President of Hardware Technology. Dr. Scott has a Bachelors degree and a PhD in Material Science from the University of Cambridge.
Lori Holland has served as a director of Bookham Technology since April 1999. Ms. Holland is currently a consultant to various technology startups. Until December 2000, Ms. Holland was the Chief Financial Officer of Zaffire, Inc., a telecommunication company in California. Before that, from 1996 to December 1999, Ms. Holland also served as a consultant to various technology startups. From 1995 to 1996, she was the Vice President and Chief Financial Officer for NeoMagic Corporation. Prior to NeoMagic, Ms. Holland was the Vice President of Finance and Chief Financial Officer for Read-Rite Corporation from 1990 to 1995. Ms. Holland received a BS in Economics from California Polytechnic University.
W. Arthur Porter has served as a director of Bookham Technology since February 1998. Dr. Porter is presently Dean of the College of Engineering and Vice President for Technology Development at the University of Oklahoma. From 1995 to 1998, Dr. Porter was President and Chief Executive Officer of Houston Advanced Research Center. He has a PhD in Interdisciplinary Engineering from Texas A&M University, is a fellow of the Institute of Electrical and Electronics Engineers, and a recipient of its Centennial Medal for extraordinary achievement.
Jack St. Clair Kilby has served as a director of Bookham Technology since January 2000. From 1958 to 1970, Mr. Kilby was employed by Texas Instruments, in Dallas, Texas. Mr. Kilby left Texas Instruments in 1970 to become a freelance inventor and was Professor of Electrical Engineering at Texas A&M University from 1978 to 1985. Mr. Kilby received the Nobel Prize in Physics in 2000. Mr. Kilby has also received numerous awards, notably the U.S. National Medal of Science in 1970 and is an inductee in the U.S. National Inventors Hall of Fame. Mr. Kilby holds a BS degree in Electrical Engineering from the University of Illinois, an MS degree in Electrical Engineering from the University of Wisconsin and holds more than 60 U.S. patents. Mr. Kilby is a member of the National Academy of Engineering and a Fellow of the Institute of Electrical and Electronics Engineers.
Robert J. Rickman has served as a director of Bookham Technology since September 1994. Mr. Rickman also served as a director of Bookham Technology from November 1988 to May 1990. Mr. Rickman is a director of a number of private companies and is also on the board of Highland Timber plc. Mr. Rickman has been the Chairman of the Board of Managers of CSC LLC since February 2003 and, until March 2001, was Managing Director of TFF Limited, a New Zealand registered company. Mr. Rickman received his MA and MSc degrees from Oxford University. Mr. Rickman is the brother of Dr. Andrew G. Rickman.
Joseph Cook became a director of Bookham Technology in February 2002. Mr. Cook is Senior Vice President of Engineering at WorldCom and has served in that position since 1999. From 1979 to 1999, he held various engineering and management positions at WorldCom. Mr. Cook is a member of the advisory boards of the University of Texas at Dallas and Oklahomo State University. Mr. Cook holds a BA and a Masters in Business Administration from Dallas Baptist University in Texas and an Associates degree in engineering from Prince George's Community College in Maryland. Mr. Cook holds a patent for narrowband optical DWDM devices.
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There is no limit on the number of years any of our directors may serve as a director. At every Annual General Meeting, any director who was elected or last re-elected at or before the Annual General Meeting held in the third calendar year before is subject to retirement by rotation. A director retiring by rotation may be re-elected at any general meeting. Our three-year retirement by rotation system for directors is required by our articles of association and may have the effect of deterring or delaying changes in our control or management. However, this effect is mitigated to the extent the Companies Act provides that a director can be removed from office at any time by a majority vote of the shareholders. Our articles of association do not require directors to retire at a specific age.
We have letters of engagement with each of our directors, except Drs. Rickman and Anania (who have employment agreements with us). The letters of engagement may be terminated by either party on not less than six months' notice subject to our right to earlier termination in certain usual circumstances. In addition, we have a director's fee agreement with Ms. Holland, which became effective on August 1, 2002 and replaces the consulting agreement we entered into with Ms. Holland in 1998. The letters of engagement with our directors and Ms. Holland's director's fee agreement do not provide for any benefits upon termination of the individual as a director. Our employment agreements with Drs. Rickman and Anania do not provide for any benefits upon termination of employment.
Employment Agreements
Each of Drs. Rickman, Anania, Turley and Scott and Messrs. Abely and Nagle has an employment agreement with us. These agreements describe the individual's salary, bonus and other benefits including medical and life insurance coverage, car allowance, vacation and sick days, and pension plan participation. The agreements also contain a prohibition on the use or disclosure of our confidential information, such as trade secrets, patents and customer information, for non-business purposes. There is also a non-competition clause in Drs. Rickman's and Anania's agreements prohibiting the individual from dealing with our customers or prospective customers after the individual has stopped working for us.
Our executive officers are elected by our Board of Directors and serve at its discretion, subject generally to a three or six-month notice provision, except for Drs. Rickman and Anania, whose employment agreements provide for a one-year notice period. The agreements provide that the notice period does not apply if the officer is being terminated for cause, which is defined to include gross misconduct, conduct which our Board of Directors determines brings the individuals or us into disrepute, or a serious breach of the employment agreement. Our agreements with Drs. Rickman and Anania automatically terminate when the individual reaches age 65 and the agreements with Drs. Turley and Scott and Messrs. Abely and Nagle automatically terminate when the individual reaches age 60.
Corporate Governance
Our Board of Directors has established an Audit Committee, a Compensation Committee and a Nomination Committee. The Audit Committee is chaired by Lori Holland and its other members are David Simpson and W. Arthur Porter. The Audit Committee, which acts pursuant to a charter, meets not less than four times annually and has responsibility for, among other things, monitoring the planning and reviewing of our annual and quarterly reports and accounts. The committee involves our auditors in that process, focusing particularly on compliance with legal requirements and accounting standards and the requirements of the U.S. Securities and Exchange Commission, the NASDAQ National Market and the United Kingdom Financial Services Authority, and reviews the effectiveness of our systems of internal financial controls. It also advises the Board of Directors on the appointment and remuneration of our auditors for both audit and non-audit services. The ultimate responsibility for reviewing and approving our annual and quarterly reports and accounts remains with our Board of Directors.
15
The Compensation Committee is chaired by W. Arthur Porter and its other members are David Simpson and Lori Holland. This committee determines, pursuant to its charter, our policy on compensation of executive officers and specific remuneration packages for each of the executive directors, including pension benefits.
The Nomination Committee is responsible for nominating candidates to fill Board vacancies and for making recommendations on Board composition and balance. This committee is chaired by Andrew G. Rickman and its other members are Lori Holland, David Simpson and W. Arthur Porter.
Compensation of Executive Officers and Directors
The aggregate cash compensation, including salary, fees, bonuses and cash benefits, paid to our executive officers and directors as a group for the year ended December 31, 2002 was £1,050,598 ($1,691,463). The aggregate amount paid in the year ended December 31, 2002 to provide benefits in kind, including medical insurance, and pension contributions for our executive officers and directors as a group was £104,082 ($167,573). In the year ended December 31, 2002, a total of 2,482,360 options were granted to our executive officers and directors, at exercise prices ranging from £0.78 to £1.22 per share and expiration dates ranging from February 8, 2012 to November 14, 2012. Our executive directors do not receive any additional compensation for their services as members of our Board of Directors but are reimbursed for their reasonable out-of-pocket expenses incurred in attending meetings of our Board of Directors.
The following table sets out the compensation, excluding share options, paid to or accrued on behalf of our directors for the year ended December 31, 2002:
Name |
Salary, Fees, Cash Benefits |
Bonus |
Benefits In Kind |
Pension Contributions |
Total 2002 |
Total 2001 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in thousands) |
|||||||||||||
Andrew G. Rickman | £166.7 | £11.3 | £16.7 | £21.7 | $348.4 | £216.4 | £274 | |||||||
David Simpson | £6.5 | | | | $10.5 | £6.5 | £7 | |||||||
Giorgio Anania | £189.8 | £172.0 | £10.9 | £15.9 | $625.6 | £388.6 | £237 | |||||||
Lori Holland(1) | £39.7 | | | | $63.9 | £39.7 | £65 | |||||||
W. Arthur Porter | £6.5 | | | | $10.5 | £6.5 | £6 | |||||||
Jack St. Clair Kilby | £5.6 | | | | $9.0 | £5.6 | £6 | |||||||
Robert J. Rickman | £6.5 | | | | $10.5 | £6.5 | £6 | |||||||
Joseph Cook | £1.9 | | | | $3.0 | £1.9 | £6 |
Our executive directors and executive officers participate in a bonus scheme. The Compensation Committee agrees the bonus amounts and the performance criteria with each participant at the beginning of each fiscal year. The criteria include achievement of budgeted profits and revenue growth. Dr. Anania's bonus is capped at 100% of his base salary and bonus amounts for other participants in the scheme are capped at a percentage of base salary ranging from 15% to 50%, depending on the position of the participant within our organization.
Share Ownership and Option Information
The following table sets forth the number and percent of our ordinary shares held by each executive officer and director, and the grant date, exercise price, expiration date and number of ordinary shares subject to options held by each such officer and director, as of March 1, 2003. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting or investment power with respect to the securities. Except as indicated
16
by footnote, and subject to applicable community property laws, to our knowledge the individuals named in the table have sole voting and investment power with respect to all ordinary shares shown as beneficially owned by them. The number of shares outstanding includes the ordinary shares underlying options held by such shareholder that are exercisable within 60 days of March 1, 2003. Percentage of beneficial ownership is based on 204,950,872 ordinary shares outstanding at March 1, 2003.
Name |
Number of Shares Held |
Percentage |
Number of Shares Attributable to Exercisable Options |
Shares Underlying Options Granted |
Exercise Price (£)(1) |
Date of Grant |
Expiration Date |
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Andrew G. Rickman(2) | 27,673,809 | 13.50 | 0 | n/a | n/a | n/a | n/a | |||||||
David Simpson | 922,649 | * | 486,088 | 333,600 76,110 64,378 12,000 |
0.847 1.200 3.230 0.790 |
04/15/98 06/18/99 04/30/01 06/12/02 |
04/15/08 06/18/09 04/30/11 06/12/12 |
|||||||
Giorgio Anania | 1,662,804 | * | 1,425,174 | 280,000 180,000 600,000 180,000 1,000,000 224,000 1,207,360 |
(4) (4) |
1.083 1.200 1.200 10.000 1.710 1.220 0.780 |
09/07/98 03/24/99 04/02/99 03/13/00 08/03/01 02/08/02 11/14/02 |
09/07/08 03/24/09 04/02/09 03/13/10 08/03/11 02/08/12 11/14/12 |
||||||
Lori Holland | 408,826 | * | 408,826 | 256,338 76,110 64,378 12,000 |
1.083 1.200 3.230 0.790 |
01/20/99 06/18/99 04/30/01 06/12/02 |
01/20/09 06/18/09 04/30/11 06/12/12 |
|||||||
Stephen Abely | | * | | | | | | |||||||
Stephen Turley | | * | | | | | | |||||||
Liam Nagle | | * | | | | | | |||||||
Michael Scott | | * | | | | | | |||||||
W. Arthur Porter | 319,613 | * | 319,613 | 243,235 64,378 12,000 |
0.847 3.230 0.790 |
04/15/98 04/30/01 06/12/02 |
04/15/08 04/30/11 06/12/12 |
|||||||
Jack St. Clair Kilby | 128,346 | * | 128,346 | 76,110 40,236 12,000 |
4.322 3.230 0.790 |
01/31/00 04/30/01 06/12/02 |
01/31/10 04/30/11 06/12/12 |
|||||||
Robert J. Rickman(3) | 1,301,366 | * | 152,488 | 76,110 64,378 12,000 |
1.200 3.230 0.790 |
06/18/99 04/30/01 06/12/02 |
06/18/09 04/30/11 06/12/12 |
|||||||
Joseph Cook | 0 | | n/a | n/a | n/a | n/a | n/a |
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Employees
As of December 31, 2002, we employed 1,945 persons, including 374 in research and development, 1,383 in manufacturing, 64 in sales and marketing, and 124 in finance and administration. Of those employees, 413 were based in our Abingdon headquarters, 346 were based in Caswell, 791 were based in Paignton, 273 were based in Canada, 104 were based in Switzerland and 18 were based in the United States. We also had, at December 31, 2002, sales representatives in Paris (1), Tokyo (3), China (2), and Italy (1). Our headcount increased significantly during 2002 from 643 at December 31, 2001 to 1,945 at December 31, 2002. This increase, which was partially offset by planned employee reductions, was primarily due to employees who transferred to us in connection with the MOC acquisition and the acquisition from Nortel Networks. None of our employees are subject to collective bargaining agreements. We believe that our relations with our employees are good.
The following tables indicate the average number of our employees during each of the last three fiscal years, broken down geographically and by activity:
|
2002 |
2001 |
2000 |
|||
---|---|---|---|---|---|---|
Geographic Region | ||||||
United Kingdom | 944 | 722 | 605 | |||
USA | 40 | 36 | 6 | |||
Rest of World | 67 | 20 | 4 | |||
Total | 1,051 | 778 | 615 | |||
Activity |
||||||
Research and development | 283 | 266 | 169 | |||
Sales and marketing | 55 | 48 | 33 | |||
Manufacturing | 635 | 387 | 348 | |||
Finance and Administration | 78 | 77 | 65 | |||
Total | 1,051 | 778 | 615 |
Employee Share Schemes
Our Board of Directors and shareholders have approved several share schemes under which eligible employees and directors may obtain share options. The main features of these plans are summarized below.
2001 Approved Employee Share Option Scheme
The 2001 Approved Employee Share Option Scheme was adopted in February 2000 and approved by the U.K. Inland Revenue in 2001. Our executive directors and employees, including the employees of our subsidiaries, are eligible to participate in this scheme. We may grant options to those eligible employees selected by the Compensation Committee. Options may be subject to performance criteria. The option price is the market value of the shares on the date of grant. Options are normally exercisable, subject to any performance condition being satisfied, between the third and tenth anniversaries of grant. No option may be exercisable more than ten years after its grant. As of December 31, 2002 there were no options outstanding under this scheme.
2001 Approved Sharesave Scheme
Our Board of Directors and shareholders approved this scheme in 2000 and it was approved by the U.K. Inland Revenue in 2001. All of our employees and full-time directors and those of our subsidiaries with five years service (or such shorter period as the directors may determine) are eligible to participate in this scheme. Our Board of Directors may also offer participation to our other employees and directors at its discretion. All options issued under this plan must be linked to a
18
contractual savings scheme entered into by each participant. Participants may currently save between £10.00 and £250.00 per month and the savings contract requires either 36 or 60 monthly contributions by payroll deduction.
Options will not normally be exercisable for three or five years, and may be exercised only with an amount not exceeding the available proceeds of the savings contract. The exercise price is determined by the Board not later than the date of grant of an option and shall not in any event be less than the higher of the nominal value of a share and 85% of the mid-market price on the day preceding the date on which invitations to apply for options are issued. At December 31, 2002, there were options to purchase 722,785 ordinary shares outstanding under this scheme.
1998 Employee Share Option Scheme
Our 1998 Employee Share Option Scheme was adopted by the Board of Directors and the shareholders in September 1998 and has not been approved by the U.K. Inland Revenue. Unless terminated sooner, the 1998 scheme will terminate in 2008. The rules of the scheme provide for the grant of options and performance related options to our and our subsidiaries' employees, officers, directors or consultants. The Board of Directors may impose conditions or limitations on the exercise of any performance options granted under the 1998 plan, provided that those conditions or limitations relate to the performance of the option holder in connection with his or her employment or our financial condition.
Options granted under the 1998 scheme must generally be exercised within three months after the end of the option holder's status as an employee, officer, director or consultant, provided that the option was exercisable when the option holder ceased to be an employee, officer, director or consultant. If an option holder is terminated for cause, the option holder's options will immediately be cancelled. In the event that an option holder dies or becomes disabled, the option holder's estate or representative, or the option holder in the case of disablement, has one year to exercise any options that were exercisable on the date of death or disability. In any case, no options may be exercised after they have expired. Options granted under the 1998 scheme may not be transferred, assigned, pledged or charged. If an option holder purports to transfer, assign, or charge any options, they are automatically cancelled. As of December 31, 2002, options to purchase 20,460,658 ordinary shares were outstanding under this scheme.
1995 Employee Share Option Scheme
Our 1995 Employee Share Option Scheme was approved by the Board of Directors and the shareholders in July 1995 and has not been approved by the U.K. Inland Revenue. Options were issued under the 1995 scheme until September 29, 1998, when the Board of Directors decided not to issue any further options under this scheme. Options previously granted under the 1995 scheme, however, continue to be valid and governed by the rules. As of December 31, 2002 options to purchase 695,735 ordinary shares were outstanding under this scheme.
Employee Stock Purchase Plan
The Employee Stock Purchase Plan, or ESPP, was adopted in June 2002 and enables our U.S. employees to purchase our ordinary shares in the form of American Depositary Shares, or "ADSs". All of our U.S. employees, and any U.S. employees of any other subsidiary chosen by the board are eligible to participate in the ESPP. Options granted under the plan may be exercised at the expiration of the purchase period relevant to that option. The length of the purchase period is currently 12 months. Unless the participant notifies the Board to the contrary, options will be deemed to be exercised at the expiry of the relevant purchase period. During the purchase period, participants must agree to make regular savings which, following exercise of the option, will be used to meet the purchase price for the
19
ADSs. Participants may save between $15 and the maximum sum necessary to purchase the maximum number of ADSs per pay period. The participant's employer will make appropriate deductions from salary. The option exercise price will be set at 85% of the closing price of our ADSs, which are quoted on the NASDAQ National Market, on the first day of the relevant purchase period. As of December 31, 2002, no ADSs had been purchased, and there were no options outstanding, under this plan.
Limitation on Shares Issued
On June 12, 2002, our shareholders adopted resolutions that have the effect of capping the number of shares which may be issued pursuant to the 2001 Approved Employee Share Option Scheme, the 2001 Approved Sharesave Scheme, the 1998 Employee Share Option Scheme, the Employee Stock Purchase Plan, and any other employee share scheme to be established by us, at an amount equal to 10% of our issued ordinary share capital within any ten year period, not counting for purposes of this limit any shares subject to options or rights granted before April 18, 2000, the date of our initial public offering.
The following financial statements, together with the reports of our independent auditors and independent accountants thereon, are filed as part of this Form 20-F.
Index to consolidated financial statements | F-1 | |
Report of independent auditors | F-2 | |
Report of independent accountants | F-3 | |
Consolidated profit and loss account | F-4 | |
Consolidated statement of total recognised gains and losses | F-5 | |
Consolidated balance sheet | F-6 | |
Consolidated cash flow statement | F-7 | |
Notes to the financial statements | F-8 |
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Exhibit number |
Description of Exhibit |
|
---|---|---|
1.1 | Memorandum of Association of Bookham Technology plc (previously filed as Exhibit 3.1 to Registration Statement on Form F-1, as amended (file no. 333-11698) dated April 11, 2000, and incorporated herein by reference). | |
1.2 |
Articles of Association of Bookham Technology plc, as amended through November 5, 2002 (previously filed as Exhibit 1.2 to Annual Report on Form 20-F for the year ended December 31, 2002, and incorporated herein by reference). |
|
2.1 |
Specimen Ordinary Share Certificate (previously filed as Exhibit 4.1 to Registration Statement on Form F-1, as amended (file no. 333 -11698) dated April 11, 2000, and incorporated herein by reference). |
|
2.2 |
Form of Deposit Agreement (previously filed as Exhibit 4.2 to Registration Statement on Form F-1, as amended (file no. 333 -11698) dated April 11, 2000, and incorporated herein by reference). |
|
2.3 |
Form of ADR Certificate (included in Exhibit 2.2) (previously filed as Exhibit 4.3 to Registration Statement on Form F-1, as amended (file no. 333-11698) dated April 11, 2000, and incorporated herein by reference). |
|
4.1 |
Acquisition Agreement dated as of October 7, 2002 between Nortel Networks Corporation and Bookham Technology plc (previously filed as Exhibit 1 to Schedule 13D filed by Nortel Networks Corporation on October 17, 2002, and incorporated herein by reference). |
|
4.2* |
Letter Agreement dated November 8, 2002 between Nortel Networks Corporation and Bookham Technology plc amending the Acquisition Agreement referred to in Exhibit 4.1. |
|
4.3* |
Optical Components Supply Agreement, dated November 8, 2002, by and between Nortel Networks Limited and Bookham Technology plc (previously filed as Exhibit 4.3 to Amendment No. 1 to Annual Report on Form 20-F for the year ended December 31, 2002, and incorporated herein by reference). |
|
4.4 |
Relationship Deed dated November 8, 2002 between Nortel Networks Corporation and Bookham Technology plc (previously filed as Exhibit 4.4 to Annual Report on Form 20-F for the year ended December 31, 2002, and incorporated herein by reference). |
|
4.5 |
Registration Rights Agreement dated as of November 8, 2002 among Nortel Networks Corporation, the Nortel Subsidiaries listed on the signature pages and Bookham Technology plc (previously filed as Exhibit 4.5 to Annual Report on Form 20-F for the year ended December 31, 2002, and incorporated herein by reference). |
|
4.6 |
Series A Senior Unsecured Note Due 2007, as amended to change the identity of the Lender (previously filed as Exhibit 4.6 to Annual Report on Form 20-F for the year ended December 31, 2002, and incorporated herein by reference). |
|
4.7 |
Series B Senior Secured Note Due 2005, as amended to change the identity of the Lender (previously filed as Exhibit 4.7 to Annual Report on Form 20-F for the year ended December 31, 2002, and incorporated herein by reference). |
|
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4.8 |
Agreement relating to the Sale and Purchase of the Business of Marconi Optical Components Limited, dated December 17, 2001, among Bookham Technology plc, Marconi Optical Components Limited and Marconi Corporation plc (previously filed as Exhibit 4.1 to Annual Report on Form 20-F for the year ended December 31, 2001, and incorporated herein by reference). |
|
4.9 |
Supplemental Agreement to the Agreement relating to the Sale and Purchase of the Business of Marconi Optical Components Limited, dated January 31, 2002, among Bookham Technology plc, Marconi Optical Components Limited and Marconi Corporation plc (previously filed as Exhibit 4.2 to Annual Report on Form 20-F for the year ended December 31, 2001, and incorporated herein by reference). |
|
4.10* |
Global Procurement Agreement dated February 1, 2001 between Marconi Communications, Inc. and Bookham Technology plc (previously filed as Exhibit 4.3 to Annual Report on Form 20-F for the year ended December 31, 2001, and incorporated herein by reference). |
|
4.11* |
Letter Agreement dated January 10, 2003 between Marconi Communications, Inc. and Bookham Technology plc amending the Global Procurement Agreement referred to in Exhibit 4.10 (previously filed as Exhibit 4.11 to Amendment No. 1 to Annual Report on Form 20-F for the year ended December 31, 2002, and incorporated herein by reference). |
|
4.12 |
Service Agreement dated July 23, 2001, between Bookham Technology plc and Andrew G. Rickman (previously filed as Exhibit 4.4 to Annual Report on Form 20-F for the year ended December 31, 2001, and incorporated herein by reference). |
|
4.13 |
Service Agreement dated July 23, 2001 between Bookham Technology plc and Giorgio Anania (previously filed as Exhibit 4.5 to Annual Report on Form 20-F for the year ended December 31, 2001, and incorporated herein by reference). |
|
4.14 |
Lease dated May 21, 1997, between Bookham Technology plc and Landsdown Estates Group Limited, with respect to 90 Milton Park, Abingdon, England (previously filed as Exhibit 10.1 to Registration Statement on Form F-1, as amended (file no. 333-11698) dated April 11, 2000, and incorporated herein by reference). |
|
4.15 |
Bonus Scheme 2002 (previously filed as Exhibit 4.12 to Annual Report on Form 20-F for the year ended December 31, 2001, and incorporated herein by reference). |
|
8.1 |
List of Bookham Technology plc subsidiaries (previously filed as Exhibit 8.1 to Annual Report on Form 20-F for the year ended December 31, 2002, and incorporated herein by reference). |
|
10.1 |
Consent of Ernst & Young LLP. |
|
10.2 |
Consent of PricewaterhouseCoopers. |
|
12.1 |
Rule 13a-14(a)/15(d)-14(a) Certification of Chief Executive Officer. |
|
12.2 |
Rule 13a-14(a)/15(d)-14(a) Certification of Chief Financial Officer. |
|
13.1 |
Section 1350 Certification of Chief Executive Officer. |
|
13.2 |
Section 1350 Certification of Chief Financial Officer. |
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The Registrant hereby certifies that it meets all of the requirements for filing a Form 20-F and has duly caused and authorized the undersigned to sign this Amendment No. 2 to annual report on Form 20-F on its behalf.
BOOKHAM TECHNOLOGY PLC | |||
By: |
/s/ GIORGIO S. ANANIA Giorgio S. Anania President and Chief Executive Officer |
Date: October 22, 2003
23
BOOKHAM TECHNOLOGY PLC INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
Page |
|
---|---|---|
Report of independent auditors | F-2 | |
Report of independent accountants | F-3 | |
Consolidated profit and loss account for the years ended December 31, 2000, 2001 and 2002 | F-4 | |
Consolidated statement of total recognized gains and losses for the years ended December 31, 2000, 2001 and 2002 | F-5 | |
Consolidated balance sheet as at December 31, 2001 and 2002 | F-6 | |
Consolidated cash flow statement for the years ended December 31, 2000, 2001 and 2002 | F-7 | |
Notes to the financial statements | F-8 |
F-1
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of Bookham Technology plc
We have audited the accompanying consolidated balance sheet of Bookham Technology plc at December 31, 2001 and 2002, and the related consolidated profit and loss account and consolidated statements of cash flows, and total recognised gains and losses for each of the two years in the period ended December 31, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with United Kingdom auditing standards and United States generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Bookham Technology plc at December 31, 2001 and 2002, and the consolidated results of its operations and its consolidated cash flows for each of the two years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United Kingdom which differ from those generally accepted in the United States (see Note 30 of Notes to the Financial Statements).
ERNST & YOUNG LLP
Reading, England
March 18, 2003
F-2
REPORT OF INDEPENDENT ACCOUNTANTS
To
the Board of Directors and Shareholders of
Bookham Technology plc
In our opinion, the accompanying consolidated profit and loss account, statement of cash flows, and statement of total recognised gains and losses for the year ended December 31, 2000 present fairly, in all material respects, the results of operations and cash flows of Bookham Technology plc and its subsidiaries for the year then ended, in conformity with accounting principles generally accepted in the United Kingdom. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
Accounting principles generally accepted in the United Kingdom vary in certain important respects from accounting principles generally accepted in the United States of America. The application of the latter would have affected the determination of consolidated net loss for the year ended December 31, 2000 to the extent summarized in Note 30 to the consolidated financial statements.
PricewaterhouseCoopers
West London, England
March 14, 2001
F-3
BOOKHAM TECHNOLOGY PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended December 31,
|
Note |
Before Exceptional Items |
Exceptional Items (Note 3) |
2002 |
2001 |
2000 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
||||||||
Turnover(1) | ||||||||||||||
Continuing operations | ||||||||||||||
Ongoing | 6,630 | | 6,630 | 21,921 | 26,301 | |||||||||
Acquisitions: NNOC | 12,779 | | 12,779 | | | |||||||||
15,194 | | 15,194 | | | ||||||||||
Group turnover |
1, 2 |
34,603 |
|
34,603 |
21,921 |
26,301 |
||||||||
Cost of sales | (52,653 | ) | (21,549 | ) | (74,202 | ) | (47,534 | ) | (31,850 | ) | ||||
Gross loss | (18,050 | ) | (21,549 | ) | (39,599 | ) | (25,613 | ) | (5,549 | ) | ||||
Administrative expenses | ||||||||||||||
Research and development | (33,527 | ) | (6,244 | ) | (39,771 | ) | (77,609 | ) | (17,355 | ) | ||||
National insurance on share options | | | | 782 | (1,070 | ) | ||||||||
Selling, general and administration expenses | (17,387 | ) | (3,744 | ) | (21,131 | ) | (21,274 | ) | (13,875 | ) | ||||
Other | (1,249 | ) | (5,126 | ) | (6,375 | ) | (527 | ) | (847 | ) | ||||
(52,163 | ) | (15,114 | ) | (62,277 | ) | (98,628 | ) | (33,147 | ) | |||||
Other operating income | 6 | 175 | | 175 | 76 | 61 | ||||||||
Operating loss | ||||||||||||||
Continuing operations | ||||||||||||||
Ongoing | (66,832 | ) | (36,663 | ) | (103,495 | ) | (99,015 | ) | (38,635 | ) | ||||
Acquisitions (NNOC) | 19 | (3,137 | ) | | (3,137 | ) | | | ||||||
Discontinued operations | 19 | (69 | ) | | (69 | ) | (25,150 | ) | | |||||
Group operating loss | 2 | (70,038 | ) | (36,663 | ) | (106,701 | ) | (124,165 | ) | (38,635 | ) | |||
Interest receivable | 7 | 5,795 | | 5,795 | 11,405 | 10,144 | ||||||||
Interest payable | 8 | (454 | ) | | (454 | ) | (478 | ) | (574 | ) | ||||
Loss on ordinary activities before taxation | 3 | (64,697 | ) | (36,663 | ) | (101,360 | ) | (113,238 | ) | (29,065 | ) | |||
Tax on loss on ordinary activities | 9 | | | | | | ||||||||
Loss on ordinary activities after taxation(1) | (64,697 | ) | (36,663 | ) | (101,360 | ) | (113,238 | ) | (29,065 | ) | ||||
Loss per ordinary share (basic & diluted) (£)(2). |
10 |
(0.43 |
) |
(0.24 |
) |
(0.67 |
) |
(0.88 |
) |
(0.25 |
) |
The accompanying notes form an integral part of these Consolidated Financial Statements.
F-4
BOOKHAM TECHNOLOGY PLC
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
|
Note |
2002 |
2001 |
2000 |
|||||
---|---|---|---|---|---|---|---|---|---|
|
|
£000 |
£000 |
£000 |
|||||
Loss for the financial year | 21 | (101,360 | ) | (113,238 | ) | (29,889 | ) | ||
Exchange difference on translation of subsidiaries | 21 | 44 | 1 | (1 | ) | ||||
Total losses recognised in the year(1) | (101,316 | ) | (113,237 | ) | (29,890 | ) |
The accompanying notes form an integral part of these Consolidated Financial Statements.
F-5
BOOKHAM TECHNOLOGY PLC
CONSOLIDATED BALANCE SHEET
as at December 31,
|
Note |
2002 |
2001 |
||||
---|---|---|---|---|---|---|---|
|
|
£000 |
£000 |
||||
Fixed Assets | |||||||
Intangible assets | 11 | 42,553 | 1,666 | ||||
Tangible assets | 12 | 51,442 | 34,579 | ||||
93,995 | 36,245 | ||||||
Current Assets | |||||||
Stocks | 13 | 23,679 | 2,564 | ||||
Debtors | 14 | 21,405 | 5,001 | ||||
Cash at bank and in hand | 105,418 | 184,814 | |||||
150,502 | 192,379 | ||||||
Creditors: amounts falling due within one year | 15 | (29,302 | ) | (17,675 | ) | ||
Net current assets | 121,200 | 174,704 | |||||
Total assets less current liabilities | 215,195 | 210,949 | |||||
Creditors: amounts falling due after more than one year | 16 | (31,329 | ) | | |||
Provisions for liabilities and charges | 17 | (3,428 | ) | (79 | ) | ||
Net Assets | 180,438 | 210,870 | |||||
Capital and reserves |
|||||||
Called-up share capital | 20, 21 | 683 | 434 | ||||
Share premium account | 21 | 404,187 | 338,576 | ||||
Other reserves | 21 | 10,740 | 5,716 | ||||
Profit and loss account | 21 | (235,172 | ) | (133,856 | ) | ||
Equity shareholders' funds(1) | 21 | 180,438 | 210,870 |
The accompanying notes form an integral part of these Consolidated Financial Statements.
F-6
BOOKHAM TECHNOLOGY PLC
CONSOLIDATED CASH FLOW STATEMENT
for the year ended December 31,
|
Note |
2002 |
2001 |
2000 |
||||||
---|---|---|---|---|---|---|---|---|---|---|
|
|
£000 |
£000 |
£000 |
||||||
Net cash outflow from operating activities | 24 | (61,684 | ) | (44,385 | ) | (38,167 | ) | |||
Return on investments and servicing of finance: | ||||||||||
Interest received | 5,776 | 11,405 | 10,144 | |||||||
Interest paid | (391 | ) | (4 | ) | | |||||
Interest element of finance lease rentals | (43 | ) | (301 | ) | (374 | ) | ||||
5,342 | 11,100 | 9,770 | ||||||||
Capital expenditure and financial investment | ||||||||||
Purchase of intangible fixed assets | (95 | ) | (1,812 | ) | (486 | ) | ||||
Purchase of tangible fixed assets | (10,102 | ) | (39,896 | ) | (28,280 | ) | ||||
Proceeds on disposal of fixed assets | 44 | 96 | 31 | |||||||
(10,153 | ) | (41,612 | ) | (28,735 | ) | |||||
Acquisitions and disposals | ||||||||||
Sale of subsidiary undertaking | | | | |||||||
Net overdrafts disposed of with subsidiary undertaking | (69 | ) | | | ||||||
Purchase of subsidiary undertakings | (12,060 | ) | (6,796 | ) | | |||||
Net cash outflow before management of liquid resources and financing | (78,624 | ) | (81,693 | ) | (57,132 | ) | ||||
Management of liquid resources | ||||||||||
Reduction of short-term investments | 25 | | 1,525 | 5,690 | ||||||
Financing | ||||||||||
Issue of ordinary share capital | 21 | 125 | 1,256 | 338,238 | ||||||
Expenses of share issues | 21 | | | (24,270 | ) | |||||
Capital element of finance lease rental payments | 25 | (897 | ) | (1,357 | ) | (1,377 | ) | |||
(772 | ) | (101 | ) | 312,591 | ||||||
(Decrease)/increase in cash | 25 | (79,396 | ) | (80,269 | ) | 261,149 | ||||
Reconciliation of net cash flow to movement in net funds |
||||||||||
(Decrease)/increase in cash in the year | 25 | (79,396 | ) | (80,269 | ) | 261,149 | ||||
Cash outflow from finance lease repayments | 25 | 897 | 1,357 | 1,377 | ||||||
Cash inflow from decrease in liquid resources | 25 | | (1,525 | ) | (5,690 | ) | ||||
(Decrease)/increase in net funds resulting from cashflows | 25 | (78,499 | ) | (80,437 | ) | 256,836 | ||||
Translation difference | 25 | | | (1 | ) | |||||
Loans arising on acquisition | (31,359 | ) | | | ||||||
(Decrease)/increase in net funds in the year | 25 | (109,858 | ) | (80,437 | ) | 256,835 | ||||
Net funds at beginning of the year | 25 | 183,917 | 264,354 | 7,519 | ||||||
Net funds at end of the year(1) | 25 | 74,059 | 183,917 | 264,354 |
The accompanying notes form an integral part of these Consolidated Financial Statements.
F-7
BOOKHAM TECHNOLOGY PLC
NOTES TO THE FINANCIAL STATEMENTS
1 Accounting policies
The financial statements contained in this Annual Report on Form 20-F have been prepared in accordance with accounting principles generally accepted in the United Kingdom (UK GAAP). UK GAAP differs in certain significant respects from US GAAP (see Note 30).
A summary of the principal accounting policies, which have been applied for all periods covered by this report, is set out below.
(1) Basis of accounting
The financial information in this report has been prepared under the historical cost convention and on a going-concern basis.
In preparing the financial statements for the current year, the Group has adopted FRS 19 "Deferred Tax" and the transitional arrangements of FRS 17 "Retirement Benefits" relating to accounting periods ending on or after 22 June 2002. The adoption of FRS 19 has resulted in a change in accounting policy for deferred tax. Deferred tax is recognised on a full provision basis in accordance with the accounting policy described below. Previously, deferred tax was provided for on a partial provision basis, whereby provision was made on all timing differences to the extent that they were expected to reverse in the future without replacement. Adoption of FRS 19 has not required any revisions to the financial statements in either the current or prior years.
(2) Group consolidation
The Group financial statements consolidate the accounts of Bookham Technology plc and all its subsidiary undertakings drawn up to 31 December each year.
Marconi Optical Components ("MOC") and Nortel Networks Optical Components ("NNOC") have been included in the Group financial statements using the acquisition method of accounting. Accordingly, the Consolidated Profit and Loss Account and Consolidated Statement of Cash Flows include the results and cash flows of MOC for the 11 month period from its acquisition on 1 February 2002, and NNOC for the 7 week period from its acquisition on 8 November 2002.
The Consolidated Profit and Loss Account and Statement of Cash Flows include the results and cash flows of Measurement Microsystems Inc. for the 7 month period until its disposal on 1 August 2002.
Intra-Group sales and profits are eliminated fully on consolidation.
(3) Turnover
Turnover represents the amounts (excluding value-added tax) derived from the provision of goods and services to third-party customers during the period.
Turnover is recognised upon shipment.
The Group uses the percentage-of-completion method, based on costs incurred and milestones accepted by the customer for recognizing revenues on fixed-fee, non-recurring engineering contracts.
F-8
(4) Research and development expenditure
Research and development expenditure is charged to the profit and loss account in the period in which the expenditure is incurred.
(5) Goodwill
Goodwill is calculated as the surplus of cost over fair value attributed to the net assets (excluding goodwill) of subsidiaries. Goodwill is amortized on a straight line basis over its estimated useful life. Goodwill is reviewed in accordance with FRS 10, any impairment loss is included in accumulative amortisation.
(6) Intangible fixed assets and amortisation
Intangible assets acquired separately from a business are capitalized at cost. Intangible assets acquired as part of an acquisition of a business are capitalized separately from goodwill if the fair value can be measured reliably on initial recognition, subject to the constraint that, unless the asset has a readily ascertainable market value, the fair value is limited to an amount that does not create or increase any negative goodwill arising on the acquisition.
Intangible fixed assets are stated at cost less amortisation. Amortisation is provided by the Group to write off the cost of intangible fixed assets on a straight-line basis over their estimated useful economic lives. Intangible fixed assets consist of patent licence fees payable to third parties and patents acquired from third parties.
(7) Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost less depreciation. Depreciation is provided by the Group to write off the cost of tangible fixed assets on a straight-line basis over their estimated useful economic lives as follows:
Buildings | Twenty years | |
Plant and machinery | Three to five years | |
Fixtures, fittings and equipment | Three to five years | |
Computer equipment | Three years |
No depreciation is provided for land or for assets in the course of construction.
Impairment reviews are performed periodically, when deemed appropriate.
(8) Stocks
Stocks are stated at the lower of cost and net realizable value. Cost includes all direct costs of manufacture and a proportion of manufacturing overheads.
(9) Government grants
Government grants received in respect of research and development expenditure are credited to the profit and loss account in the period to which the relevant expenditure relates.
F-9
(10) Leases
Assets held under finance leases are capitalized and depreciated over their estimated useful lives or the term of the lease, whichever is shorter. Future installments under such leases, net of financial charges, are included in creditors. Rentals payable are apportioned between the finance element, which is charged to the profit and loss account, and the capital element, which reduces the outstanding obligations.
Costs in respect of operating leases are charged on a straight-line basis over the lease term.
(11) Foreign currency translation
In individual companies, balances denominated in foreign currencies are translated into reporting currencies at the rates ruling at the year end. Transactions in foreign currencies are translated into reporting currencies using rates of exchange ruling at the date of the transaction. Exchange differences are dealt with in the profit and loss account.
On consolidation, the balance sheets of the Group's overseas subsidiary undertakings are translated into sterling at rates of exchange ruling at the year end. The profit and loss accounts of the Group's overseas subsidiary undertakings are translated into sterling using average rates of exchange. Translation differences are taken to reserves.
(12) Deferred taxation
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more, tax, with the following exceptions:
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
F-10
(13) Pension costs
The Group pays contributions into the Group defined contribution pension scheme for the executive directors and employees. In addition, the company has a defined contribution plan for the benefit of one director. The charge to the profit and loss account reflects those contributions payable in the period. The Group has no other liability in respect of these pension contributions.
(14) Share options issued to employees
The Group recognizes as a charge to the profit and loss account ("stock compensation expense") the amount by which the intrinsic value of any share options issued to employees exceeds their respective exercise prices at the date of grant. The intrinsic value is assessed by reference to the market value of the Company's shares. These costs are recognised over the vesting period. Amounts charged to the profit and loss account are included in other reserves.
(15) Warrants and share options issued to non-employees
Where share options or warrants are granted to non-employees in respect of services rendered, the fair value of the consideration received is recognised as a cost over the period to which the services relate. With the exception of costs related to fundraising, which are included in issue costs and charged to the share premium account, costs are charged to the profit and loss account.
2 Segmental analysis
Turnover represents the amounts derived from the provision of goods and services which fall within the ordinary activities of the Business, stated net of value added tax or similar taxes. The Group has one class of business: the design, development, manufacture and marketing of fibre-optic components. It operates in three geographic markets, the United Kingdom, the European Union (excluding UK) and North America.
Turnover profit/(loss) before taxation and net assets are analyzed below by geographical area:
Turnover
|
2002 |
2001 |
2000 |
||||
---|---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
||||
Sales to third parties by destination: | |||||||
United Kingdom | 21,273 | 13,306 | 20,474 | ||||
North America | 10,613 | 3,095 | 5,235 | ||||
European Union (excl. UK) | 2,373 | 375 | 415 | ||||
Japan | 59 | 3,862 | 24 | ||||
Rest of the World | 285 | 1,283 | 153 | ||||
34,603 | 21,921 | 26,301 |
F-11
|
2002 |
2001 |
2000 |
||||
---|---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
||||
Sales to third parties by origin: | |||||||
United Kingdom | 34,577 | 21,921 | 26,301 | ||||
European Union (excl. UK) | 24 | | | ||||
North America | 2 | | | ||||
34,603 | 21,921 | 26,301 |
Profit/(loss) before taxation
|
2002 |
2001 |
2000 |
|||||
---|---|---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
|||||
Continuing operations | ||||||||
United Kingdom | (103,764 | ) | (124,170 | ) | (38,635 | ) | ||
North America | (1,832 | ) | | | ||||
European Union (excl. UK) | (1,049 | ) | | | ||||
Rest of the World | 13 | 5 | | |||||
(106,632 | ) | (124,165 | ) | (38,635 | ) | |||
Discontinued operations | ||||||||
North America | (69 | ) | | | ||||
(106,701 | ) | (124,165 | ) | (38,635 | ) | |||
Net interest and income from activities | 5,341 | 10,927 | 9,570 | |||||
Total net assets | (101,360 | ) | (113,238 | ) | (29,065 | ) |
Net assets
|
2002 |
2001 |
||||
---|---|---|---|---|---|---|
|
£000 |
£000 |
||||
Continuing operations | ||||||
United Kingdom | 183,617 | 210,853 | ||||
North America | (2,099 | ) | 421 | |||
European Union (excl. UK) | (1,153 | ) | | |||
Rest of the World | 73 | 66 | ||||
180,438 | 211,340 | |||||
Discontinued operations | ||||||
North America | | (470 | ) | |||
Total net assets | 180,438 | 210,870 |
F-12
3 Loss on ordinary activities before taxation
This is stated after charging/(crediting):
|
2002 |
2001 |
2000 |
||||
---|---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
||||
Auditors' remuneration: | |||||||
Audit | 452 | 139 | 117 | ||||
Other services* | 107 | 91 | 88 | ||||
Amortisation: | |||||||
Goodwill | 442 | 1,679 | | ||||
Patents, licences and other | 894 | 1,147 | 39 | ||||
Depreciation: | |||||||
Owned assets | 8,261 | 7,137 | 3,374 | ||||
Assets held under finance leases | 1,031 | 1,224 | 1,194 | ||||
Loss/(gain) on disposal of fixed assets | (44 | ) | (8 | ) | 20 | ||
Loss/(gain) on foreign exchange | (500 | ) | 194 | 316 | |||
Amounts payable under operating leases: | |||||||
Hire of plant and machinery | 665 | 166 | 143 | ||||
Land and buildings | 2,770 | 1,153 | 594 | ||||
Exceptional items: | |||||||
Impairment of intangible fixed assets | 1,005 | 22,396 | | ||||
Impairment of tangible fixed assets | 27,052 | 32,597 | | ||||
Stock write-downs and order cancellation costs | 980 | 4,653 | | ||||
Voluntary severance costs | 2,499 | 3,190 | | ||||
Restructuring costs | 5,127 | | | ||||
36,663 | 62,836 | | |||||
Analyzed as: | |||||||
Cost of sales | 21,548 | 17,358 | | ||||
Research and development expenses | 6,244 | 39,473 | | ||||
Selling, general and administrative expenses | 3,744 | 6,005 | | ||||
Other operating expenses | 5,127 | | | ||||
Total exceptional items | 36,663 | 62,836 | |
F-13
4 Staff costs
The average number of persons employed by the Group (including executive directors) during the period, analyzed by category, was as follows:
|
2002 |
2001 |
2000 |
|||
---|---|---|---|---|---|---|
Administration | 78 | 78 | 65 | |||
Sales | 55 | 48 | 33 | |||
Research and development | 283 | 266 | 169 | |||
Manufacturing | 635 | 387 | 348 | |||
1,051 | 779 | 615 |
|
2002 |
2001 |
2000 |
||||
---|---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
||||
The aggregate payroll costs of these persons were as follows: | |||||||
Wages and salaries | 23,250 | 26,306 | 13,856 | ||||
Stock compensation expense | 193 | 329 | 531 | ||||
Social security costs | 2,059 | 2,544 | 1,592 | ||||
Other pension costs | 1,437 | 999 | 88 | ||||
26,939 | 30,178 | 16,067 |
Payroll costs exclude the unpaid portion of the provision for National Insurance liabilities on share options referred to in Note 17.
5 Directors' Remuneration
|
2002 |
2001 |
2000 |
|||
---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
|||
Aggregate emoluments | 611 | 514 | 301 | |||
Aggregate gains made on the exercise of share options | | 1,809 | 5,566 | |||
Company contributions to defined contribution pension schemes | 38 | 34 | 35 | |||
649 | 2,357 | 5,902 |
Retirement benefits under defined contribution pension schemes were accruing to two directors at December 31, 2002 and 2001, and to one director at December 31, 2000.
The emoluments of the highest paid director were £387,900 in 2002, £274,000 in 2001 and £234,000 in 2000.
6 Other operating income
|
2002 |
2001 |
2000 |
|||
---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
|||
Grant income | | | 43 | |||
Sale of scrap and other income | 175 | 76 | 18 | |||
175 | 76 | 61 |
F-14
7 Other interest receivable and similar income
|
2002 |
2001 |
2000 |
|||
---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
|||
Bank interest | 5,795 | 11,405 | 10,144 |
8 Interest payable and similar charges
|
2002 |
2001 |
2000 |
|||
---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
|||
Finance charges payable in respect of finance leases | 146 | 478 | 574 | |||
Interest on loans | 308 | | | |||
454 | 478 | 574 |
Finance charges payable includes £83,000 (2001: £173,000) of amortisation in respect of warrants issued to a leasing company in 1999, as described in Note 20.
9 Taxation
|
2002 |
2001 |
2000 |
||||
---|---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
||||
Tax on loss on ordinary activities: | |||||||
Current | | | | ||||
Deferred (Note 17) | | | | ||||
| | |
Factors affecting current tax charge
The tax assessed on the profit on ordinary activities for the year is lower than the standard rate of corporation tax in the UK of 30% (200130%, 200020%). The differences are reconciled below:
|
2002 |
2001 |
2000 |
|||||
---|---|---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
|||||
Loss on ordinary activities before tax | (101,360 | ) | (113,238 | ) | (29,065 | ) | ||
Loss on ordinary activities multiplied by the tax rate above |
(30,408 |
) |
(33,971 |
) |
(5,813 |
) |
||
Effect of: | ||||||||
Disallowed expenses and non-taxable income | 192 | 111 | 103 | |||||
Depreciation in excess of capital allowances | 11,153 | 16,072 | 625 | |||||
Tax losses not recognised | 19,063 | 17,788 | 5,085 | |||||
Current tax charge for the period | | | |
F-15
10 Loss per ordinary share
Loss per ordinary share has been calculated by dividing the loss for the financial year by the weighted average number of ordinary shares in issue during the year, as set out below:
|
2002 |
2001 |
2000 |
||||
---|---|---|---|---|---|---|---|
Loss for the financial year (£000) | (101,360 | ) | (113,238 | ) | (29,065 | ) | |
Weighted average number of shares | 150,996,196 | 128,533,108 | 116,231,841 | ||||
Loss per ordinary share (basic and diluted) (£) | (0.67 | ) | (0.88 | ) | (0.25 | ) |
The Group had share options and warrants which are potential ordinary shares outstanding during the period. Conversion of these potential ordinary shares into ordinary shares would decrease the net loss per ordinary share and would not therefore be dilutive.
11 Intangible fixed assets
|
Goodwill |
Patents & Licences |
Total |
||||
---|---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
||||
Cost | |||||||
At January 1, 2001 | | 486 | 486 | ||||
Additions during the year | | 1,560 | 1,560 | ||||
Acquisition (Note 19) | 18,224 | 6,657 | 24,881 | ||||
At December 31, 2001 | 18,224 | 8,703 | 26,927 | ||||
Additions during the year | | 92 | 92 | ||||
Acquisitions (Note 19) | 35,352 | 7,784 | 43,136 | ||||
Disposals during the year | (18,224 | ) | (6,657 | ) | (24,881 | ) | |
At December 31, 2002 | 35,352 | 9,922 | 45,274 | ||||
Accumulated amortisation |
|||||||
At January 1, 2001 | | 39 | 39 | ||||
Charge during the year | 1,679 | 1,147 | 2,826 | ||||
Impairment during the year | 16,545 | 5,851 | 22,396 | ||||
At December 31, 2001 | 18,224 | 7,037 | 25,261 | ||||
Charge during the year | 442 | 894 | 1,336 | ||||
Impairment during the year | | 1,005 | 1,005 | ||||
Disposals during the year | (18,224 | ) | (6,657 | ) | (24,881 | ) | |
At December 31, 2002 | 442 | 2,279 | 2,721 | ||||
Net book value at December 31, 2002 |
34,910 |
7,643 |
42,553 |
||||
Net book value at December 31, 2001 |
|
1,666 |
1,666 |
ASOC related patents and licences were impaired during the year due to a decline in market growth of the ASOC product line. These assets were being amortized over three and five years.
The goodwill and patents resulting from the 2001 acquisition of Measurement Microsystems A-Z Inc, which were fully written down at the beginning of the year, were disposed of as part of the divestment in the company during the year.
F-16
12 Tangible fixed assets
|
Freehold land |
Buildings |
Plant and machinery |
Fixtures, fittings and equipment |
Computer equipment |
Total |
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|||||||
Cost | |||||||||||||
At January 1, 2001 | 12,324 | | 33,129 | 3,820 | 3,962 | 53,235 | |||||||
Additions during the year | | | 26,443 | 2,155 | 2,762 | 31,360 | |||||||
Disposals | | | (52 | ) | (132 | ) | (62 | ) | (246 | ) | |||
At December 31, 2001 | 12,324 | | 59,520 | 5,843 | 6,662 | 84,349 | |||||||
Additions during the year | | | 8,469 | 108 | 3,072 | 11,649 | |||||||
Acquisitions (Note 19) | 4,113 | 7,645 | 28,471 | 759 | 571 | 41,559 | |||||||
Disposals | | | (10,866 | ) | | (311 | ) | (11,177 | ) | ||||
At December 31, 2002 | 16,437 | 7,645 | 85,594 | 6,710 | 9,994 | 126,380 | |||||||
Accumulated depreciation |
|||||||||||||
At January 1, 2001 | | | 7,550 | 384 | 1,037 | 8,971 | |||||||
Charge for the year | | | 6,790 | 722 | 849 | 8,361 | |||||||
Disposals | | | (48 | ) | (67 | ) | (44 | ) | (159 | ) | |||
Impairment during the year | 3,686 | | 24,340 | 1,725 | 2,846 | 32,597 | |||||||
At December 31, 2001 | 3,686 | | 38,632 | 2,764 | 4,688 | 49,770 | |||||||
Charge for the year | | 1,088 | 6,856 | 795 | 553 | 9,292 | |||||||
Disposals | | | (10,866 | ) | | (311 | ) | (11,177 | ) | ||||
Impairment during the year | | | 23,722 | | 3,331 | 27,053 | |||||||
At December 31, 2002 | 3,686 | 1,088 | 58,344 | 3,559 | 8,261 | 74,938 | |||||||
Net book value at December 31, 2002 |
12,751 |
6,557 |
27,250 |
3,151 |
1,733 |
51,442 |
|||||||
Net book value at December 31, 2001 |
8,638 |
|
20,888 |
3,079 |
1,974 |
34,579 |
ASOC related equipment was impaired during the year due to a decline in market growth of the ASOC product line. These assets were being depreciated in line with the Group policy.
The net book value of assets held under finance leases was £Nil at 31 December 2002 (2001 £1,031,000). Assets held under finance leases are included in plant and machinery above.
Fixed assets include assets in the course of construction amounting to £nil at December 31, 2002 (2001 £7,569,000).
13 Stocks
|
2002 |
2001 |
||
---|---|---|---|---|
|
£000 |
£000 |
||
Raw materials | 5,553 | 1,629 | ||
Work in progress | 7,553 | 15 | ||
Finished goods | 10,573 | 920 | ||
23,679 | 2,564 |
The difference between purchase price or production cost of stocks and their replacement cost is not material.
F-17
14 Debtors
|
2002 |
2001 |
||
---|---|---|---|---|
|
£000 |
£000 |
||
Trade debtors | 17,781 | 822 | ||
Other debtors | 1,864 | 1,791 | ||
Prepayments and accrued income | 1,760 | 2,388 | ||
21,405 | 5,001 |
15 Creditors: amounts falling due within one year
|
2002 |
2001 |
||
---|---|---|---|---|
|
£000 |
£000 |
||
Current installments due on loans (Note 18) | 30 | | ||
Obligations under finance leases (Note 23(3)) | | 897 | ||
Trade creditors | 11,913 | 9,324 | ||
Other creditors | 4,826 | 911 | ||
Taxation and social security | 1,149 | 565 | ||
Accruals and deferred income | 11,384 | 5,978 | ||
29,302 | 17,675 |
16 Creditors: amounts falling due after more than one year
|
2002 |
2001 |
||
---|---|---|---|---|
|
£000 |
£000 |
||
Loans (note 18) | 31,329 | |
17 Provisions for liabilities and charges
|
Provision for warranties |
Environmental provision |
National insurance on share options |
Other liabilities |
Total |
||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
£000 |
£000 |
||||||
At January 1, 2001 | | | 988 | | 988 | ||||||
Payments | | | (127 | ) | | (127 | ) | ||||
Arising during the year | | | (782 | ) | | (782 | ) | ||||
At December 31, 2001 | | | 79 | | 79 | ||||||
Exchange adjustments | | | | 29 | 29 | ||||||
Acquisitions (Note 19) | 1,030 | 1,266 | | 966 | 3,262 | ||||||
Arising during the year | 58 | | | | 58 | ||||||
At December 31, 2002 | 1,088 | 1,266 | 79 | 995 | 3,428 |
Provision for warranties
A provision is recognised for expected warranty claims on products sold over the last year. It is expected that most of these costs will be incurred in the next financial year.
F-18
National Insurance on share options
Provision has been made at December 31, 2002 for UK National Insurance liabilities that are expected to crystallize upon the exercise of certain share options granted under unapproved schemes between April 6, 1999 and November 14, 2000. The provision comprises the difference between the exercise price and the estimated fair market value of the shares at the balance sheet date at the current NIC rate, and apportioned on a straight-line basis over the vesting period of the options. The Group becomes unconditionally liable to pay the National Insurance upon exercise of the options. In accordance with UK legislation introduced in 2001, certain options which had an exercise price in excess of the market price at November 7, 2000 will not give rise to any future liability for NIC. Details of the vesting of share options are given in note 20.
Environmental provision
The Group has provided for potential environmental liabilities at sites where there is a history of soil contamination. The Company is committed to an ongoing programme of monitoring and soil sampling, and has thus made a one-off provision relating to potential costs of future remediation works at the sites.
Other liabilities
Provision has been made for potential historic employee related costs following the acquisitions which are expected to be settled within the year.
Deferred tax
|
Provided |
Unprovided |
|||||||
---|---|---|---|---|---|---|---|---|---|
|
2002 |
2001 |
2002 |
2001 |
|||||
|
£000 |
£000 |
£000 |
£000 |
|||||
Depreciation in excess of capital allowances | | | (23,695 | ) | (12,447 | ) | |||
Trading losses | | | (52,047 | ) | (32,371 | ) | |||
Tax on loss on ordinary activities | | | (75,742 | ) | (44,818 | ) |
The above deferred tax assets have not been recognised, which is in accordance with the requirements of FRS 19.
18 Loans
|
2002 |
2001 |
|||
---|---|---|---|---|---|
|
£000 |
£000 |
|||
Amounts falling due: | |||||
in one year or less or on demand | 30 | | |||
in more than one year but not more than two years | 30 | | |||
in more than two years but not more than five years | 31,148 | | |||
in more than five years | 151 | | |||
31,359 | | ||||
Less: included in creditors: amounts falling due within one year | (30 | ) | | ||
31,329 | |
F-19
Details of loans not wholly repayable within five years are as follows:
|
2002 |
2001 |
||
---|---|---|---|---|
|
£000 |
£000 |
||
5% loan repayable by December 31, 2013* | 151 | |
The long-term loans are secured by fixed charges over various of the Group's properties.
19 Acquisitions and disposals
Marconi Optical Components (MOC)
On February 1, 2002 the Group acquired MOC for a consideration of £15,655,000 satisfied by the issue of 12,891,000 ordinary shares.
Analysis of the acquisition of MOC:
|
Book Value |
Adjustments |
Fair Value |
|||
---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
|||
Net assets at the date of acquisition: | ||||||
Tangible fixed assets | 48,820 | (39,219 | ) | 9,601 | ||
Stock | 7,542 | (182 | ) | 7,360 | ||
56,362 | (39,401 | ) | 16,961 | |||
Analysis of consideration: |
||||||
Costs associated with the acquisition | 1,306 | |||||
Bookham ordinary shares | 15,655 | |||||
16,961 |
The adjustments from the book to fair values were based upon assessments of the resale values in open market conditions in a declining market sector.
MOC earned a loss in the period from 1 April 2001 to 31 January 2002 as shown in the table below:
|
£000 |
||
---|---|---|---|
Turnover | 7,930 | ||
Operating loss |
(35,756 |
) |
|
Loss on fixed asset disposal | (54,201 | ) | |
Other exceptional costs | (3,080 | ) | |
Loss before tax | (93,037 | ) | |
Taxation | | ||
Loss for the 10 months ended January 31, 2002 | (93,037 | ) |
There were no other recognised gains and losses.
F-20
Nortel Networks Optical Components (NNOC)
On November 8, 2002 the Group acquired NNOC for a consideration of £92,092,000 ($153 million) satisfied by the issue of 61,000,000 ordinary shares, 9,000,000 ordinary share warrants, loan notes to the value of £31,642,000 ($50 million) and the payment of a cash consideration of £5,848,000. The 9,000,000 warrants, which expire on November 8, 2012, are immediately exercisable at the option of Nortel Networks with an exercise price of 0 pence each, provided that no exercise is permitted if, as a result of such exercise, Nortel Networks and any person or entity acting in concert with Nortel Networks would own 30% or more of the Company's issued and outstanding shares.
Analysis of the acquisition of NNOC:
|
Book Value |
Adjustments |
Provisional Fair Value |
||||
---|---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
||||
Net assets at the date of acquisition: | |||||||
Intangible fixed assets | | 7,784 | 7,784 | ||||
Tangible fixed assets | 57,768 | (25,810 | ) | 31,958 | |||
Stock | 33,727 | (7,338 | ) | 26,389 | |||
Creditors falling due within one year | | (4,493 | ) | (4,493 | ) | ||
91,495 | (29,857 | ) | 61,638 | ||||
Goodwill arising on acquisition |
35,369 |
||||||
97,007 | |||||||
Analysis of consideration: |
|||||||
Cash | 5,848 | ||||||
Bookham ordinary shares | 47,580 | ||||||
Bookham ordinary share warrants | 7,020 | ||||||
Loan notes | 31,642 | ||||||
Costs associated with the acquisition | 4,917 | ||||||
97,007 |
The adjustments from the book to fair values were based upon assessments of the resale values in open market conditions in a declining market sector.
NNOC contributed £(5.2) million to the Group's net operating cash flows, paid £nil in respect of net returns on investments and servicing of finance, paid £nil in respect of taxation and utilized £(0.5) million for capital expenditure and financial investment.
NNOC made a loss after tax of £220,604,000 in the year ended December 31, 2002 (2001 £385,700,000), of which £216,404,000 arose in the period from January 1, 2001 to November 8, 2002.
F-21
The summarized profit and loss account for the period from January 1, 2002 to the effective date of acquisition is as follows:
|
£000 |
||
---|---|---|---|
Turnover | 64,784 | ||
Operating loss |
(56,804 |
) |
|
Restructuring charges | (159,600 | ) | |
Loss before tax | (216,404 | ) | |
Taxation | 13,923 | ||
Loss for the 101/2 months ended November 8, 2002 | (202,481 | ) |
There were no other recognized gains or losses.
Measurement Microsystems (A-Z) Inc
On February 25, 2001 the Group acquired the entire share capital of Measurement Microsystems A-Z Inc for a consideration of £6,796,000 ($10 million) and 2,108,957 ordinary shares, including 702,986 ordinary shares contingent upon certain performance milestones being achieved. In 2001, the performance milestones for 421,792 of these shares were met and in 2002 it was determined to deem the performance milestones met for a further 85,349 of these shares. The remaining 195,845 such shares will not now be issued.
Net assets at the date of acquisition:
|
Book Value |
Revaluation |
Fair value to Group |
||||
---|---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
||||
Intangible fixed assets | 45 | 6,612 | 6,657 | ||||
Tangible fixed assets | 42 | | 42 | ||||
Debtors | 108 | | 108 | ||||
Stock | 10 | | 10 | ||||
Creditors falling due within one year | (340 | ) | 45 | (295 | ) | ||
Creditors falling due after more than one year | (73 | ) | | (73 | ) | ||
Net assets | (208 | ) | 6,657 | 6,449 | |||
Goodwill arising on acquisition | 18,224 | ||||||
24,673 | |||||||
Analysis of consideration | |||||||
Cash | 6,796 | ||||||
Bookham Ordinary Shares | 17,877 | ||||||
24,673 |
The revaluation of intangible fixed assets represents the fair value of separately identifiable patents valued by a suitably qualified independent valuer.
In the period from February 25, 2001 to December 31, 2001 Measurement Microsystems A-Z Inc. made no sales outside of the Group and all of its costs were reimbursed by Bookham Technology plc. Measurement Microsystems A-Z Inc incurred a loss of £411,000 in the year ended September 30, 2000 and a loss of £194,000 from October 1, 2000 to February 24, 2001.
F-22
During 2001 the goodwill and intangible fixed assets were impaired to £nil and £nil, respectively, due to a decline in market growth and obsolescence of the intellectual property.
On August 1, 2002, the Group disposed of Measurement Microsystems A-Z Inc. to its former management, and retained a 25% interest in the enterprise, without Board representation. The disposal is analyzed as follows:
|
Fair Value |
||
---|---|---|---|
|
£000 |
||
Net Assets | 69 | ||
Loss on disposal | (69 | ) | |
Consideration | |
The loss attributable to members of the parent company includes losses of £69,000 incurred by Measurement Microsystems A-Z Inc. up to its date of disposal on 1 August 2002. In the period to December 2001 a loss of £25,150,000 was incurred, split as follows: charge for impairment of intangible fixed assets of £22,396,000, amortization of intangible assets of £2,485,000 and other research and development expenditure of £269,000.
During the year Measurement Microsystems A-Z Inc. utilized £0.2 million of the Group's net operating cash flows, paid £nil in respect of net returns on investments and servicing of finance, and utilized £nil for capital expenditure and financial investment.
20 Share capital
Called-up share capital
|
2002 |
2001 |
2000 |
|||
---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
|||
Authorised | ||||||
300,000,000 ordinary shares of 1/3p each (2001 200,100,000; 2000 160,500,000) | 1,000 | 667 | 535 | |||
Allotted, issued and fully paid | ||||||
204,950,872 ordinary shares of 1/3p each (2001 130,160,413; 2000 127,317,473) | 683 | 434 | 424 |
2000
On February 23, 2000, the Company's shareholders approved an increase in the authorized share capital of the Company by approving the creation of 200,000 Series A Convertible Preference Shares ("Preference Shares") of US$100 nominal value each. On February 25, 2000, the directors issued 200,000 Preference Shares for consideration of US$20,000,000. In April 2000, all of the issued Preference Shares were automatically converted to 1,263,423 ordinary shares at the conversion rate of US$15.83 per ordinary share. All of the unissued Preference Shares were also cancelled at that time and the authorized share capital was reduced accordingly.
On March 13, 2000, the Company's shareholders approved an increase in the authorized share capital of the company by approving the creation of an additional 6,000,000 ordinary shares of 2p nominal value each. On the same date, the Company's shareholders approved a subdivision of each authorized and issued 2p ordinary share of the Company into six ordinary shares of 1/3p each.
F-23
On April 11, 2000, the Company issued 21,900,000 ordinary shares of 1/3p each for a total cash consideration of £200,060,000 net of issuance costs.
On September 19, 2000, the Company issued 3,064,548 ordinary shares of 1/3p each for a total cash consideration of £97,332,000 net of issuance costs.
During 2000, the Company also issued 2,413,145 ordinary shares of 1/3p each under the 1995 and 1998 Employee Share Option Schemes, including 47,274 shares to consultants upon the exercise of options as described below under "Ordinary share warrants and options issued to non-employees".
During 2000, the Company issued 1,410,972 shares to warrantholders upon the exercise of warrants as described below under "Ordinary shares warrants and options issued to non-employees".
On June 5, 2000, the Company issued 63,171 shares to Goldman Sachs International as payment of $1,000,000 of fees owed by the company in connection with financial advisory services performed by them.
With the exception of shares issued to warrantholders, all shares issued during the period have been issued at fair market price.
2001
On April 26, 2001, the Company's shareholders approved an increase in the authorized share capital of the company by approving the creation of an additional 39,600,000 ordinary shares.
During 2001, the Company also issued 1,558,136 ordinary shares under the 1995 and 1998 Employee Share Option Schemes.
On January 25, 2001, the Company agreed to issue at a future date up to 2,108,957 ordinary shares to the shareholders of Measurement Microsystems A-Z Inc. ("MM") as consideration for the acquisition of the entire share capital of MM. Issue of 702,986 shares was contingent upon the achievement of performance milestones by MM employees. At December 31, 2001, 1,282,304 ordinary shares had been issued under the agreement and 826,653 remained to be issued.
2002
During 2002, the Company issued 320,657 ordinary shares under the 1995 and 1998 Employee Share Option Schemes and 1,559 ordinary shares under the 2001 Approved Share Save Scheme.
During 2002, the Company issued 577,243 ordinary shares to the shareholders of Measurement Microsystems A-Z Inc. Following the determination that 195,845 ordinary shares subject to performance milestones will not be issued, a total of 53,565 shares remain to be issued under the agreement with the MM shareholders dated January 25, 2001.
On February 1, 2002, the Company issued 12,891,000 ordinary shares of 1/3p each, at £1.21 each, to Marconi plc in consideration for the acquisition of the Marconi Optical Component Business.
On November 5, 2002, the Company's shareholders approved an increase in the authorized share capital of the Company by approving the creation of an additional 99,900,000 ordinary shares.
F-24
On November 11, 2002, the Company issued 61,000,000 ordinary shares of 1/3p each, at £0.78 each, to Nortel Networks Corporation in consideration for the acquisition of the Optical Amplifier and Optical Transmitter and Receiver Businesses.
Employee share option schemes
At December 31, 2002, the Group had four employee share option schemes, details of which are set out below.
1995 Scheme
Pursuant to the 1995 Employee Share Option Scheme (the "1995 Scheme"), options to purchase ordinary shares were granted to employees during the period from July 10, 1995 to September 29, 1998. At December 31, 2001 there were no options authorized for future issuance under this scheme and there were 695,735 share options outstanding. The options expire ten years after the date of grant and are exercisable to the extent vested. Vesting generally occurs at the rate of one-third each at 18 months, 30 months and 42 months after the date of grant. All share options were granted for nil consideration. The scheme is unapproved by the UK Inland Revenue.
1998 Scheme
At December 31, 2002 there were 20,460,658 share options outstanding. The options expire ten years after the date of grant and are exercisable to the extent vested. Except as set out below, vesting generally occurs at the rate of one-third each at 18 months, 30 months and 42 months after the date of grant.
Included in the above are a total of 3,754,882 performance options that were outstanding at December 31, 2002 under the 1998 Scheme. Certain of these options vest at the rate of one-quarter every six months based on the achievement of specific targets. Where targets are exceeded by a defined percentage, there is a potential for one-half of the options to vest at the end of each six-month period. Other options will only vest if specific highly defined performance criteria are met.
If these targets are not met, these options will vest in full in four to seven years after the date of grant as specified in the individual option certificates. The total amount of shares subject to options granted does not vary as a result of the potential earlier vesting.
All share options granted under the 1998 Scheme have been granted for nil consideration. The scheme is unapproved by the UK Inland Revenue.
2001 Approved Employee Share Option Scheme
The 2001 Approved Employee Share Option Scheme was approved by shareholders in February 2000. All executive directors and employees are eligible to participate. Options are granted at no cost at the discretion of the board, and vesting may include performance conditions. The option price is the market value of the Group's shares on the date of the grant, and options vest between three and ten years from date of grant. At December 31, 2002, the total options authorized for future issuance under this scheme, when combined with the 1998 Scheme and the 2001 Approved Sharesave Scheme, did not exceed 10% of the issued ordinary share capital of the Company, excluding shares
F-25
subject to rights granted under any of the Company's employee share schemes prior to April 18, 2000. The scheme has been approved by the Inland Revenue.
2001 Approved Sharesave Scheme
The Approved Sharesave Scheme was approved by shareholders in February 2000. All full time directors and all employees with five years service or such shorter period as the board determines and those that the board deems appropriate, are eligible to participate in the scheme. Options to be issued under the scheme are dependent on the savings made by the employee and the option price determined by the board, which shall be not less than 85% of the mid-market price on the date preceding the date which the employees are invited to apply for options. Options will normally be exercisable for three to five years from the commencement of the savings contract established by the employee. At December 31, 2002, the total options authorized for future issuance under this scheme, when combined with the 1998 Scheme and the 2001 Approved Employee Share Option Scheme, did not exceed 10% of the issued ordinary share capital of the Company, excluding shares subject to rights granted under any of the Company's employee share schemes prior to April 18, 2000. There were 722,785 options outstanding under the scheme. The scheme has been approved by the Inland Revenue.
Stock compensation expense
The Group has granted share options to certain employees at exercise prices below the fair market value of the underlying ordinary shares at the date of grant. The differences have been charged to the profit and loss account over the vesting period of the options. The stock compensation expense was £193,000 in the year ended 31 December 2002 (2001 £329,000; 2000 £531,000).
Ordinary share warrants and options issued to non-employees
During 1997 and 1998, the Company issued warrants to purchase 99,466 and 21,000 ordinary shares respectively to non-employees in connection with the issuance of share capital. These warrants were immediately exercisable at prices between £6.50 and £9.20 per share and expired on October 3, 2000. 1,000 warrants were subsequently cancelled. All the remaining warrants were exercised during 2000.
During 1999, the Company issued a warrant to purchase 137,988 ordinary shares to a leasing company. The warrant was immediately exercisable at £7.20 per share and expires on April 11, 2004. During 2001, no warrants were exercised and warrants in respect of 131,262 shares were exercisable as of December 31, 2002.
During 1999, the Group granted share options to three consultants to purchase 57,600 ordinary shares under the 1998 Scheme. These options vested upon the completion of specified performance requirements, all of which were met in the year ended 31 December 2000. Options over 48,000 shares are exercisable at £6.50 per share and options over 9,600 shares are exercisable at £7.20 per share. During 2001 no options were exercised. During 2002 the Group granted share options to one consultant to purchase 400,000 ordinary shares under the 1998 Scheme. 25,000 of these shares vested immediately and the remaining 375,000 vest upon completion of specified performance criteria. During 2002, no options were exercised. The remaining options expire ten years from the date of grant.
F-26
The profit and loss account includes a charge of £83,000 (2001 £173,000) in respect of warrants and options granted to non-employees.
During the 2002, the Company issued a warrant to purchase 9,000,000 ordinary shares to Nortel Networks Inc as part of the purchase price for the acquisition of NNOC, which is exercisable at the option of Nortel Networks. The warrant was immediately exercisable and expires on November 8, 2012.
No shares have been authorized for future issuance of warrants. The number of shares reported in this note does not reflect the six-for-one share split approved on March 13, 2000.
A summary of the share option movements is given below:
|
Range of exercise prices |
Options outstanding |
Weighted average exercise price |
|||
---|---|---|---|---|---|---|
|
|
|
£ |
|||
Outstanding as at January 1, 2000 | £0.003-£3.10 | 11,180,394 | 1.03 | |||
Granted | £4.322-£36.05 | 3,354,210 | 12.56 | |||
Exercised | £0.003-£1.36 | (2,413,145 | ) | 0.68 | ||
Cancelled | £0.75-£36.05 | (93,074 | ) | 3.17 | ||
Outstanding as at December 31, 2000 | £0.003-£36.50 | 12,028,385 | 4.28 | |||
Granted | £1.12-£7.03 | 6,559,192 | 2.09 | |||
Exercised | £0.003-£1.083 | (1,556,338 | ) | 0.35 | ||
Cancelled | £1.20-£36.50 | (2,960,913 | ) | 7.51 | ||
Outstanding as at December 31, 2001 | £1.083-£36.50 | 14,070,326 | 3.31 | |||
Granted | £0.70-£1.22 | 10,715,413 | 0.86 | |||
Exercised | £0.186-£1.083 | (322,216 | ) | 0.39 | ||
Cancelled | £0.70-£36.05 | (2,584,345 | ) | 3.59 | ||
Outstanding as at December 31, 2002 | £0.70-£36.05 | 21,879,178 | 1.86 |
F-27
21 Reconciliation of movements in shareholders' funds
|
Share capital |
Share premium account |
Other reserve |
Profit and loss account |
Total shareholders' funds |
||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
£000 |
£000 |
||||||
At January 1, 2000 | 324 | 7,420 | 695 | 8,487 | 16,926 | ||||||
Loss for the year | | | | (29,065 | ) | (29,065 | ) | ||||
Shares issued | 100 | 338,238 | | | 338,338 | ||||||
Share issue costs | | (24,270 | ) | | | (24,270 | ) | ||||
Translation adjustment | | | | (1 | ) | (1 | ) | ||||
Stock compensation expense | | | 531 | | 531 | ||||||
Warrant/non-employee option expense | | | 1,603 | | 1,603 | ||||||
At December 31, 2000 | 424 | 321,388 | 2,829 | (20,579 | ) | 304,062 | |||||
Loss for the year | | | | (113,238 | ) | (113,238 | ) | ||||
Shares issued/to be issued | 10 | 16,764 | 2,385 | | 19,159 | ||||||
Refund of share issue costs | | 424 | | | 424 | ||||||
Translation adjustment | | | | (39 | ) | (39 | ) | ||||
Stock compensation expense | | | 329 | | 329 | ||||||
Warrant/non-employee option expense | | | 173 | | 173 | ||||||
At December 31, 2001 | 434 | 338,576 | 5,716 | (133,856 | ) | 210,870 | |||||
Loss for the year | | | | (101,360 | ) | (101,360 | ) | ||||
Arising on share issues | 249 | 63,291 | | | 63,540 | ||||||
Warrants issued relating to acquisition | | | 7,020 | | 7,020 | ||||||
Shares issued in respect of conversion of warrants | | 2,272 | (2,272 | ) | | | |||||
Refund of share issue costs | | 48 | | | 48 | ||||||
Translation adjustment | | | | 44 | 44 | ||||||
Stock compensation expense | | | 193 | | 193 | ||||||
Warrant/non employee option expense | | | 83 | | 83 | ||||||
At December 31, 2002 | 683 | 404,187 | 10,740 | (235,172 | ) | 180,438 |
Other reserves comprise of shares issued to warrant holders and non-employees in consideration for services performed (£2,232,000), shares reserved for issue in connection with the acquisition of NNOC (£7,018,000), shares issued to employees at values below the fair market value at date of issue (£1,377,000), and shares reserved for issue in connection with the acquisition of Measurement Microsystems A-Z Inc.(£113,000).
22 Pensions
The Group pays contributions into the Group's defined contribution pension scheme for directors and employees.
The Group also has a defined contribution plan for the benefit of one director.
The Group's contributions to the plans are charged to the profit and loss account in the year to which they relate. The Group does not accept any responsibility for the benefit gained from these schemes. Accordingly, the Group has no other liability in respect of these pension arrangements. There were no amounts outstanding in respect of payments due to pension plans at December 31, 2002 (2001 £nil).
F-28
23 Commitments
(1) Capital commitments
Amounts contracted for but not provided in the financial statements amount to £nil for the Group at December 31, 2002 (2001: £2,795,000).
(2) Operating leases
Annual commitments under non-cancellable operating leases are as follows:
|
2002 |
2001 |
|||
---|---|---|---|---|---|
|
£000 |
£000 |
|||
Land and buildings | |||||
Operating leases which expire: | |||||
Within one year | 651 | 679 | |||
In the second to fifth years inclusive | 1,419 | 49 | |||
After the fifth year | 110 | 1,803 | |||
2,180 | 2,531 | ||||
Other |
|||||
Operating leases which expire: | |||||
Within one year | 238 | 13 | |||
In the second to fifth years inclusive | 127 | 112 | |||
365 | 125 |
(3) Finance lease commitments
Commitments for future minimum payments under finance leases are as follows:
|
2002 |
2001 |
||
---|---|---|---|---|
|
£000 |
£000 |
||
Within one year | | 897 |
24 Reconciliation of operating loss to net cash flow from operating activities
|
2002 |
2001 |
2000 |
||||
---|---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
||||
Operating loss | (106,701 | ) | (124,165 | ) | (38,635 | ) | |
Loss on disposal of subsidiary undertaking | 69 | | | ||||
Depreciation, amortisation and impairment charge | 38,678 | 66,180 | 4,607 | ||||
Stock compensation expense | 193 | 329 | 531 | ||||
Warrant/non-employee option expense | 137 | | 1,403 | ||||
(Profit)/loss on sale of fixed assets | (44 | ) | (8 | ) | 20 | ||
Decrease/(increase) in stocks | 12,635 | 4,397 | (6,204 | ) | |||
Decrease/(increase) in debtors | (17,833 | ) | 8,238 | (10,511 | ) | ||
Increase in creditors | 11,078 | 1,553 | 9,723 | ||||
Increase/(decrease) in provisions for liabilities and charges | 104 | (909 | ) | 899 | |||
Net cash outflow from operating activities | (61,684 | ) | (44,385 | ) | (38,167 | ) |
F-29
25 Analysis of net funds
|
Cash at bank and in hand |
Restricted cash |
Short investments |
Finance leases |
Loans |
Total |
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|||||||
At January 1, 2000 | 1,685 | 2,250 | 7,215 | (3,631 | ) | | 7,519 | ||||||
Cash flow | 262,949 | (1,800 | ) | (5,690 | ) | 1,377 | | 256,836 | |||||
Translation difference | (1 | ) | | | | | (1 | ) | |||||
At December 31, 2000 | 264,633 | 450 | 1,525 | (2,254 | ) | | 264,354 | ||||||
Cash flow | (79,819 | ) | (450 | ) | (1,525 | ) | 1,357 | | (80,437 | ) | |||
At December 31, 2001 | 184,814 | | | (897 | ) | | 183,917 | ||||||
Cash flow | (79,396 | ) | | | 897 | | (78,499 | ) | |||||
Loans arising on acquisitions | | | | | (31,359 | ) | (31,359 | ) | |||||
At December 31, 2002 | 105,418 | | | | (31,359 | ) | 74,059 |
26 Financial instruments
The Group's financial instruments comprise finance leases, cash and liquid resources, loans and various items, such as debtors and creditors, that arise directly from its operations. It is, and has been throughout the period under review, the Group's policy that no trading in financial instruments shall be undertaken. The main risks arising from the Group's financial instruments are interest rate risk and foreign currency risk. The Group's current policy is not to enter into forward currency contracts or hedges, and to centrally manage and invest surplus cash in a variety of money management securities.
Interest rate risk
The Group finances its operations through a mixture of shareholders' funds, loan notes, finance leases and working capital. Throughout the period, the Group's only exposure to interest rate fluctuations was on its cash deposits.
The Group monitors its interest rate risk on cash balances primarily through cash flow forecasting. Cash which is surplus to immediate requirements is invested in short-term deposits with banks with maturity dates of up to three months and invested in overnight money market accounts.
Foreign currency risk
As the Group has grown and become increasingly multinational in scope, it has become more subject to fluctuations based upon changes in the exchange rates between the currencies in which it collects revenue and pays expenses. In the future it is expected that a substantial portion of the revenues will be denominated in U.S. dollars, while the majority of expenses will continue to be denominated in pounds sterling. In addition, the loan notes issued in connection with the acquisition from Nortel Networks are denominated in U.S. dollars. The Group therefore anticipates engaging in currency hedging transactions in an effort to cover any exposure to such fluctuations, and may be required to convert currencies to meet its obligations.
F-30
Short-term debtors and creditors
Short-term debtors and creditors have been excluded from all the following disclosures, other than currency risk disclosures.
Interest rate risk profile of financial assets and liabilities
Financial assets
The currency profiles of the Group's financial assets were:
|
2002 |
2001 |
|||
---|---|---|---|---|---|
|
£000 |
£000 |
|||
Floating rate financial assets: | |||||
Sterling | 102,879 | 180,465 | |||
Canadian dollars | 1,464 | 51 | |||
US dollars | 802 | 3,471 | |||
Swiss francs | 247 | | |||
Euro | 22 | 824 | |||
Japanese yen | 4 | 3 | |||
105,418 | 184,814 |
Interest earned on floating rate financial assets varies according to changes in bank deposit account interest rates.
Financial liabilities
The currency profile of the Group's financial liabilities at 31 December is as follows:
|
2002 |
2001 |
|||
---|---|---|---|---|---|
|
£000 |
£000 |
|||
Fixed rate financial liabilities: | |||||
US dollars | 31,058 | | |||
Swiss francs | 301 | | |||
31,359 | |
|
Fixed Rate financial liabilities |
|||
---|---|---|---|---|
Currency |
Weighted average Interest rate |
Weighted average period for which rate is fixed |
||
|
% |
years |
||
US dollars | 5.6 | 3.8 | ||
Swiss francs | 5.0 | 10 |
Currency exposure of net monetary assets/liabilities
The below shows the Group's currency exposures; in other words, those transactional (or non-structural) exposures that give rise to the net currency gains and losses recognised in the profit and
F-31
loss account. Such exposures comprise the monetary assets and monetary liabilities of the Group that are not denominated in the operating (or "functional') currency of the operating unit involved.
Functional currency of Group operations
|
Net foreign currency monetary assets/(liabilities) |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
Sterling |
US Dollar |
Euro |
Other |
Total |
||||||
|
£000 |
£000 |
£000 |
£000 |
£000 |
||||||
2002 | |||||||||||
Sterling | | (20,812 | ) | (439 | ) | (318 | ) | (21,569 | ) | ||
Canadian dollars | | (108 | ) | | | (108 | ) | ||||
Swiss francs | (23 | ) | (24 | ) | (12 | ) | | (59 | ) | ||
Total | (23 | ) | (20,944 | ) | (451 | ) | (318 | ) | (21,736 | ) | |
2001 |
|||||||||||
Sterling | | 3,461 | 654 | (61 | ) | 4,054 |
Maturity of financial liabilities
|
2002 |
2001 |
||
---|---|---|---|---|
|
£000 |
£000 |
||
In one year or less or on demand | 30 | | ||
In more than one year but not more than two | 30 | | ||
In more than two years but not more than five | 31,148 | | ||
In more than five years | 151 | | ||
31,359 | |
Fair value
In the opinion of the directors, there was no difference between the fair value of the Group's financial instruments and their carrying value. Fair values are assessed by reference to market values and discounted cash flows.
Borrowing facilities
At December 31, 2002 the Group had no undrawn lines of credit or other borrowing facilities in place.
27 Related party transactions
During 1998, the Group entered into a contract with Lori Holland for the provision of consultancy services. Lori Holland became a director in 1999. In respect of her consultancy services, Lori Holland received £23,000 (2001 £59,000).
During 2002, £nil (2001 £nil) was charged to the profit and loss account on revaluation of the options received in respect of consultancy services which vested in 2000. Lori Holland exercised none
F-32
of these options during 2002. All options had vested and 42,723 options were outstanding at December 31, 2002.
During the year the Group entered into transactions, in the ordinary course of business, with other related parties. Transactions entered into, and trading balances outstanding at December 31, are as follows:
|
Sales to related party |
Purchases from related party |
Amounts owed from related party |
Amounts owed to related party |
||||||
---|---|---|---|---|---|---|---|---|---|---|
|
£000 |
£000 |
£000 |
£000 |
||||||
Related party | ||||||||||
Marconi Communications | ||||||||||
2002 | 13,179 | 1,346 | 6,919 | | ||||||
2001 | 3,205 | 4 | | | ||||||
Nortel Networks | ||||||||||
2002 | 10,845 | 526 | 8,425 | (524 | ) | |||||
2001 | 8,989 | 1,606 | 433 | (121 | ) | |||||
Marconi Communications has a 6.3% interest in the Company | ||||||||||
Nortel Networks has a 29.9% interest in the Company |
28 Subsequent events
Subsequent to year-end the Company announced significant reductions in manufacturing and development activities in the ASOC product line, further reducing the Company's overhead structure and reducing the level of revenue required to reach the breakeven point for the Company.
An impairment of £27 million and £1.2 million relating to tangible fixed assets and inventory respectively relating to the closure, have been included in the results for the year.
29 Claims and Litigation
On 7 November 2001, a class action complaint was filed against the Company and others in the United States District Court for the Southern District of New York. The complaint names as defendants the Company, Goldman, Sachs & Co. and FleetBoston Robertson Stephens Inc., two of the underwriters of the Company's initial public offering in April 2000 (the "Underwriters"), and Andrew G. Rickman, Stephen J. Cockrell and David Simpson, each of whom was an officer and/or Director at the time of the initial public offering. The complaint asserts claims under certain provisions of the security laws of the United States.
The complaint alleges, among other things, that the prospectus for the Company's initial public offering was materially false and misleading in describing the compensation to be earned by the Underwriters in connection with the offering, and in not disclosing certain alleged arrangements among the Underwriters and initial purchasers of ordinary shares from the Underwriters. The complaint seeks unspecified damages (or in the alternative rescission for those class members who no longer hold Ordinary Shares), costs, attorneys' fees, experts' fees, interest and other expenses. The Company believes it has meritorious defences and indemnification rights to such claims and therefore believes that such claims will not have a material effect on the Company.
F-33
30 Differences between UK GAAP and US GAAP
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United Kingdom ("UK GAAP") which differ in certain material respects from US generally accepted accounting principles ("US GAAP"). The differences applicable to the Group are presented below.
The following table provides a reconciliation of the loss for the financial year, total assets and equity shareholders' funds prepared under UK GAAP to the equivalent information prepared under US GAAP:
|
|
2002 |
2001 |
2000 |
||||||
---|---|---|---|---|---|---|---|---|---|---|
|
|
£000 |
£000 |
£000 |
||||||
Loss for the financial year under UK GAAP | (101,360 | ) | (113,238 | ) | (29,065 | ) | ||||
US GAAP Adjustments: | ||||||||||
National insurance contributions on stock options | (a) | | (907 | ) | 1,073 | |||||
Decrease amortisation of goodwill | (b) | 442 | 340 | | ||||||
Additional amortisation of intangible assets | (b) | (1,684 | ) | | | |||||
Decrease impairment of intangible assets | (b) | | 6,114 | | ||||||
Decrease depreciation of tangible assets | (b) | 1,453 | | | ||||||
In-process research and development | (b) | (8,810 | ) | (6,454 | ) | | ||||
Net loss as adjusted to accord with US GAAP | (109,959 | ) | (114,145 | ) | (27,992 | ) |
|
|
2002 |
2001 |
2000 |
||||||
---|---|---|---|---|---|---|---|---|---|---|
|
|
£000 |
£000 |
£000 |
||||||
Equity shareholders' funds under UK GAAP | 180,438 | 210,870 | 304,062 | |||||||
US GAAP Adjustments: | ||||||||||
Goodwill | ||||||||||
Cost | (b) | (35,352 | ) | (17,169 | ) | | ||||
Amortization | (b) | 442 | 17,169 | | ||||||
Net | | (34,910 | ) | | | |||||
Intangible assets | ||||||||||
Cost | (b) | 19,460 | (6,085 | ) | | |||||
Amortization | (b) | (680 | ) | 6,085 | | |||||
Net | 18,780 | | | |||||||
Tangible assets | ||||||||||
Cost | (b) | (60,598 | ) | (32,957 | ) | | ||||
Amortization | (b) | 50,626 | 32,957 | | ||||||
Net | (9,972 | ) | | | ||||||
Provision for liabilities and charges | ||||||||||
National insurance contributions on stock options | (a) | 79 | 79 | 988 | ||||||
Shareholders' equity under US GAAP | 154,415 | 210,949 | 305,050 |
(a) National Insurance contributions on share option gains Under UK legislation, National Insurance Contributions are payable by employers on gains made by employees under certain share option schemes. The payment only falls due when the employee realizes a gain on the exercise of a share option. Under UK GAAP, provision is made for the potential future cost to the Company by
F-34
charging the expected future cost on a straight-line basis over the vesting period of the options, making adjustment at each balance sheet date for changes in value of the expected gain. Under US GAAP, provision for National Insurance liabilities on share options is only made during the period to the extent that the options have been exercised.
(b) Acquisition accounting
(i) Determination of cost of investment, fair value of assets acquired and treatment of identifiable intangible fixed assets. Under UK GAAP the total consideration, including contingent consideration, has been recorded as an investment by Bookham Technology plc. The fair value of consideration in the form of ordinary shares is measured at the completion (closing) date. The identifiable assets acquired and liabilities assumed are those of the acquired entity that existed at the date of acquisition. Identifiable assets and liabilities are those that are capable of being disposed of or settled separately, without disposing of the business of the entity, and are measured at fair values that reflect the condition at acquisition. Separately identifiable intangible fixed assets are only recognised to the extent that they do not increase or create negative goodwill. Under US GAAP, the consideration paid, excluding the contingent consideration that has not been earned, has been recorded as an investment. The fair value of consideration in the form of ordinary shares is measured at the date of announcement, rather than the date of completion, of the acquisition. The consideration is allocated to all identifiable assets acquired and liabilities and independent valuations are used as an aid in determining estimated fair values. If negative goodwill arises after the initial allocation of the consideration to all identifiable assets and liabilities, then the values of the tangible assets are reduced proportionally so as to eliminate the negative goodwill arising.
In the case of the acquisition of Measurement Microsystems A-Z Inc. in 2001, under UK GAAP additional consideration in excess of that recorded under US GAAP was recognized, representing the expected contingent consideration at the date of acquisition. This additional consideration was fully impaired in 2001 along with all of the cost of investment in Measurement Microsystems A-Z Inc.
In the case of the acquisition of MOC in 2002, no difference arose on the value of the consideration under UK GAAP and US GAAP; however, different fair values were ascribed to the intangible and tangible assets acquired under UK GAAP to those under US GAAP due to the different asset recognition criteria described above. Although identical economic useful lives are used under both UK GAAP and US GAAP, as a result of these different asset values, a difference arises between UK GAAP and US GAAP on the amortization and depreciation charged on the assets.
In the case of the acquisition of NNOC in 2002 under UK GAAP consideration in excess of that recorded under US GAAP was recognized due to the increase in Bookham Technology plc's share price between the date of announcement of the acquisition and the date of completion of the acquisition. Different fair values were ascribed to the intangible and tangible assets acquired under UK GAAP to those under US GAAP due to the different asset recognition criteria described above. Although identical economic useful lives are used under both UK GAAP and US GAAP, as a result of these different asset values, a difference arises between UK GAAP and US GAAP on the amortization and depreciation charged on the assets.
(ii) In-process research and development (IPR&D). Under UK GAAP the excess of the total consideration over the fair value of the net assets acquired represents goodwill and is included in intangible assets on the balance sheet. Under US GAAP the excess of the total consideration over the
F-35
fair value of the net assets and in-process research and development (IPR&D) represents goodwill and is included in intangible assets on the balance sheet. IPR&D is charged to the profit and loss account at the date of the acquisition.
(iii) Impairment charges Under UK and US GAAP intangible fixed assets and tangible fixed assts are reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable. Under UK GAAP the assessment is carried out using discounted cash flows whereas under US GAAP discounted cash flows are only used in the event that undiscounted cash flows indicate an impairment may exist. In the event that an impairment charge is required, this is reflected through an increase in accumulated amortisation/depreciation for the asset but under US GAAP, this is reflected through a reduction in the cost element of the asset.
The overall differences between UK GAAP and US GAAP arising from (i), (ii) and (iii) above and their impact on the net loss as adjusted to accord with US GAAP is summarised below:
|
|
2002 |
2001 |
2000 |
|||||
---|---|---|---|---|---|---|---|---|---|
|
|
£000 |
£000 |
£000 |
|||||
Decrease amortisation of goodwill | |||||||||
Measurement Microsystems A-Z Inc. | (i) | | 340 | | |||||
NNOC | (i) | 442 | | | |||||
442 | 340 | | |||||||
Additional amortisation of intangible assets | |||||||||
MOC | (i) | (1,294 | ) | | | ||||
NNOC | (i) | (390 | ) | | | ||||
(1,684 | ) | | | ||||||
Decrease impairment of intangible assets | |||||||||
Measurement Microsystems A-Z Inc. | (iii) | | 6,114 | | |||||
| 6,114 | | |||||||
Decrease depreciation of tangible assets | |||||||||
MOC | (i) | 1,351 | | | |||||
NNOC | (i) | 102 | | | |||||
1,453 | | | |||||||
In-process research and development | |||||||||
Measurement Microsystems A-Z Inc. | (ii) | | (6,454 | ) | | ||||
MOC | (ii) | (4,197 | ) | | | ||||
NNOC | (ii) | (4,613 | ) | | | ||||
(8,810 | ) | (6,454 | ) | | |||||
F-36
The overall differences between UK GAAP and US GAAP arising from points (i), (ii) and (iii) above and their impact on shareholders equity under US GAAP is summarised below:
|
|
2002 |
2001 |
2000 |
||||||
---|---|---|---|---|---|---|---|---|---|---|
|
|
£000 |
£000 |
£000 |
||||||
Goodwill | ||||||||||
Cost | ||||||||||
Measurement Microsystems A-Z Inc. | (i) | | (7,056 | ) | | |||||
Measurement Microsystems A-Z Inc. | (iii) | | (10,113 | ) | | |||||
NNOC | (i) | (35,352 | ) | | | |||||
(35,352 | ) | (17,169 | ) | | ||||||
Amortization | ||||||||||
Measurement Microsystems A-Z Inc. | (i) | | 7,056 | | ||||||
Measurement Microsystems A-Z Inc. | (iii) | | 10,113 | | ||||||
NNOC | (i) | 442 | | | ||||||
442 | 17,169 | | ||||||||
Intangible assets | ||||||||||
Cost | ||||||||||
Measurement Microsystems A-Z Inc. | (i) | | 879 | | ||||||
Measurement Microsystems A-Z Inc. | (iii) | | (6,993 | ) | | |||||
MOC | (i) | 6,173 | | | ||||||
NNOC | (i) | 14,292 | | | ||||||
Impairment of other intangible fixed assets | (iii) | (1,005 | ) | |||||||
19,460 | (6,114 | ) | | |||||||
Amortization | ||||||||||
Measurement Microsystems A-Z Inc. | (i) | | (879 | ) | | |||||
Measurement Microsystems A-Z Inc. | (iii) | | 6,993 | | ||||||
MOC | (i) | (1,294 | ) | | | |||||
NNOC | (i) | (390 | ) | | | |||||
Impairment of other intangible fixed assets | (iii) | 1,005 | ||||||||
Net | (680 | ) | 6,114 | | ||||||
Tangible assets | ||||||||||
Cost | ||||||||||
MOC | (i) | (6,173 | ) | | | |||||
NNOC | (i) | (5,252 | ) | | | |||||
Impairment of other tangible fixed assets | (iii) | (49,173 | ) | (32,957 | ) | | ||||
(60,598 | ) | (32,957 | ) | | ||||||
Amortization | ||||||||||
MOC | (i) | (1,351 | ) | |||||||
NNOC | (i) | (102 | ) | | | |||||
Impairment of other tangible fixed assets | (iii) | 49,173 | 32,957 | | ||||||
50,626 | 32,957 | | ||||||||
(c) Non-employee compensation Under US GAAP, the fair value of warrants and options issued to non-employees is recognised as an asset and credited to a separate capital reserve on issue and
F-37
taken to the profit and loss account over the period in which the related services are received. The non-employee stock compensation attributable to research and development, cost of net revenues, and selling and general administrative expenses is disclosed on the face of the financial statements. Under UK GAAP, the fair value is charged to the profit and loss account on the same basis as for US GAAP but the full credit is not immediately recognised in shareholders' equity. The charge to the profit and loss account is credited to other reserves each year.
(d) Discontinued Operations Under UK GAAP Measurement Microsystems A-Z Inc. has been treated as a discontinued operation. Under US GAAP Measurement Microsystems A-Z Inc. is not a discontinued operation as Bookham has retained a 25% shareholding.
(e) Consolidated statement of cash flows The US GAAP cash flow statement reports changes in cash and cash equivalents, which include short-term highly liquid investments. Only three categories of cash flow are reported: operating activities (including tax and interest); investing activities (being capital expenditure, acquisitions and disposals); and financing activities. Under UK GAAP cash does not include short term deposits and investments which cannot be withdrawn without notice, and without incurring a penalty. Such items are shown as short term investments. Under US GAAP, deposits with a maturity of less than three months at inception which are convertible into known amounts of cash are included as cash and cash equivalents except amounts held in collateral accounts as security for outstanding obligations which are classified as restricted cash.
(f) Comprehensive income statement The requirement of FAS 130 to provide a comprehensive income statement is met by the Statement of total recognised gains and losses (page F-5). If comprehensive income were presented in accordance with US GAAP, the difference would be the difference between the loss for the financial year under UK GAAP and the net loss under US GAAP as described above.
Condensed consolidated US GAAP financial information in UK sterling and US dollars
The following information is provided for the convenience of US shareholders. The sterling amounts have been translated solely for the convenience of the reader at US$1.61 = £1.
F-38
BOOKHAM TECHNOLOGY PLC
CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNTS UNDER US GAAP
for the year ended December 31,
|
2002 |
2002 |
2001 |
2000 |
||||||
---|---|---|---|---|---|---|---|---|---|---|
|
$000 |
£000 |
£000 |
£000 |
||||||
Net revenues: | 55,711 | 34,603 | 21,921 | 26,301 | ||||||
Cost of net revenues | 88,125 | 54,736 | 36,109 | (31,989 | ) | |||||
Gross loss | (32,414 | ) | (20,133 | ) | (14,14,269 | ) | (5,687 | ) | ||
Operating expenses | ||||||||||
Research and development | 55,622 | 34,548 | 39,152 | 17,355 | ||||||
Selling, general and administrative | 28,339 | 17,602 | 15,830 | 13,875 | ||||||
IPR&D | 14,184 | 8,810 | 6,454 | | ||||||
Impairment loss | 45,172 | 28,057 | 48,879 | | ||||||
Closure costs | 8,254 | 5,127 | | | ||||||
National insurance on stock options | | | 127 | 171 | ||||||
Stock-based compensation | 230 | 143 | 242 | 393 | ||||||
Total costs and expenses | 151,882 | 94,337 | 110,771 | 31,932 | ||||||
Operating loss | (184,215 | ) | (114,420 | ) | (124,953 | ) | (37,481 | ) | ||
Other income/(expense) | ||||||||||
Grant and other income | 283 | 176 | 76 | 61 | ||||||
Interest income | 9,330 | 5,795 | 11,405 | 10,144 | ||||||
Interest expense | (731 | ) | (454 | ) | (478 | ) | (574 | ) | ||
Gain/(loss) on foreign exchange | (1,700 | ) | (1,056 | ) | (195 | ) | (316 | ) | ||
Total other income, net | 7,182 | 4,461 | 10,808 | 9,315 | ||||||
Loss before income taxes | (177,033 | ) | (109,959 | ) | (114,145 | ) | (28,166 | ) | ||
Provision for income taxes | | | | | ||||||
Net loss before effect of change in accounting policy | (177,033 | ) | (109,959 | ) | (114,145 | ) | (28,116 | ) | ||
Cumulative effect of change in accounting policy | | | | 174 | ||||||
Net loss | (177,033 | ) | (109,959 | ) | (114,145 | ) | (27,992 | ) | ||
Before cumulative effect of change in accounting policy and net loss per ordinary share and ADS (basic and diluted) (£) |
(1.17 |
) |
(0.73 |
) |
(0.89 |
) |
(0.24 |
) |
||
Weighted average ordinary shares outstanding | 150,996,196 | 150,996,196 | 128,533,108 | 116,231,841 | ||||||
Stock-based compensation, as below is excluded from the following categories: | ||||||||||
Research and development | 26 | 16 | 36 | 37 | ||||||
Selling, general and administrative expenses | 204 | 127 | 206 | 356 | ||||||
Total | 230 | 143 | 242 | 393 | ||||||
Stock-based compensation, as below is included in the following categories: | ||||||||||
Cost of net revenues | 81 | 50 | 87 | 138 | ||||||
Total | 81 | 50 | 87 | 138 |
F-39
BOOKHAM TECHNOLOGY PLC
CONDENSED CONSOLIDATED BALANCE SHEETS UNDER US GAAP
as at December 31,
|
2002 |
2002 |
2001 |
|||||
---|---|---|---|---|---|---|---|---|
|
$000 |
£000 |
£000 |
|||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | 169,723 | 105,418 | 184,814 | |||||
Accounts receivable | 28,627 | 17,781 | 822 | |||||
Inventories | 38,123 | 23,679 | 2,564 | |||||
Prepaid expenses and other current assets | 5,835 | 3,624 | 4,179 | |||||
Total current assets | 242,308 | 150,502 | 192,379 | |||||
Intangible assets, net | 42,541 | 26,423 | 1,666 | |||||
Property and equipment, net | 66,767 | 41,470 | 34,579 | |||||
351,616 | 218,395 | 228,624 | ||||||
Liabilities and shareholders' equity |
||||||||
Current liabilities | ||||||||
Accounts payable | 19,180 | 11,913 | 7,093 | |||||
Short-term capital lease obligations | | | 897 | |||||
Accrued expenses and other liabilities | 27,996 | 17,389 | 9,685 | |||||
47,176 | 29,302 | 17,675 | ||||||
Loans | 50,440 | 31,329 | | |||||
Other long-term liabilities | 5,392 | 3,349 | | |||||
Total liabilities | 103,008 | 63,980 | 17,675 | |||||
Shareholders' equity: | ||||||||
Ordinary shares: | ||||||||
1/3p nominal value; 200,100,000 and 300,000,000 authorized; 130,160,413 and 204,950,872 issued and outstanding | 1,100 | 683 | 434 | |||||
Ordinary share warrants and options issued to non-employees | 9,489 | 5,894 | 3,939 | |||||
Additional paid-in capital | 702,813 | 436,530 | 385,630 | |||||
Deferred compensation | | | (276 | ) | ||||
Accumulated other comprehensive income | 10 | 6 | (39 | ) | ||||
Accumulated deficit | (464,804 | ) | (288,698 | ) | (178,739 | ) | ||
Total shareholders' equity | 248,608 | 154,415 | 210,949 | |||||
351,616 | 218,395 | 228,624 |
F-40
BOOKHAM TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW UNDER US GAAP
for the year ended December 31,
|
2002 |
2002 |
2001 |
2000 |
||||||
---|---|---|---|---|---|---|---|---|---|---|
|
$000 |
£000 |
£000 |
£000 |
||||||
Cash flows used in operating activities: | ||||||||||
Net loss | (177,034 | ) | (109,959 | ) | (114,145 | ) | (27,992 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||
In-process research and development | 14,184 | 8,810 | 6,454 | | ||||||
Depreciation, amortisation and impairment | 61,932 | 38,467 | 59,726 | 4,607 | ||||||
Stock-based compensation | 311 | 193 | 329 | 531 | ||||||
Expense related to warrants issued for services | 134 | 83 | 173 | 1,603 | ||||||
Loss/(gain) on sale of property and equipment | (71 | ) | (44 | ) | (8 | ) | 20 | |||
Assets and liabilities: | ||||||||||
Restricted cash | | | 450 | 1,800 | ||||||
Accounts receivable, net | (22,785 | ) | (14,152 | ) | 8,187 | (7,193 | ) | |||
Inventories, net | 20,342 | 12,635 | 4,397 | (6,204 | ) | |||||
Prepaid expenses and other current assets | (5,926 | ) | (3,681 | ) | 51 | (3,320 | ) | |||
Accounts payable | 7,760 | 4,820 | (3,136 | ) | 8,202 | |||||
Accrued expenses and other liabilities | 10,331 | 6,417 | 4,687 | 1,623 | ||||||
Deferred revenue | | | | (276 | ) | |||||
Net cash used in operating activities | (90,822 | ) | (56,411 | ) | (32,835 | ) | (26,599 | ) | ||
Cash flows used in investing activities | ||||||||||
Purchase of intangible assets | (153 | ) | (95 | ) | (1,812 | ) | (486 | ) | ||
Purchase of property and equipment | (16,264 | ) | (10,102 | ) | (39,896 | ) | (28,280 | ) | ||
Proceeds from sale of property and equipment | 71 | 44 | 96 | 31 | ||||||
Acquisitions of businessnet cash acquired | (19,417 | ) | (12,060 | ) | (6,796 | ) | | |||
Net cash used in investing activities | (35,763 | ) | (22,213 | ) | (48,408 | ) | (28,735 | ) | ||
Cash flows provided by financing activities | ||||||||||
Proceeds from issuance of ordinary shares | 201 | 125 | 1,256 | 338,238 | ||||||
Issuance costs | | | | (24,270 | ) | |||||
Share subscriptions receivable | | | | 2 | ||||||
Repayment of capital lease obligations | (1,444 | ) | (897 | ) | (1,357 | ) | (1,377 | ) | ||
Net cash (used in) provided by financing activities | (1,243 | ) | (772 | ) | (101 | ) | 312,593 | |||
Effect of exchange rate on cash | | | | (1 | ) | |||||
Net (decrease)/increase in cash and cash equivalents | (127,828 | ) | (79,396 | ) | (81,344 | ) | 257,258 | |||
Cash and cash equivalents at beginning of year | 297,551 | 184,814 | 266,158 | 8,900 | ||||||
Cash and cash equivalents at end of year | 169,723 | 105,418 | 184,814 | 266,158 | ||||||
Supplemental disclosure of non-cash transactions |
||||||||||
Warrants and share options issued for services | | | | 1,076 | ||||||
Warrants and shares issued for acquisitions | 85,906 | 53,358 | 29,993 | | ||||||
Supplemental cash flow disclosure | ||||||||||
Interest paid | 731 | 454 | 281 | 374 |
F-41
Exhibit number |
Description of Exhibit |
|
---|---|---|
1.1 |
Memorandum of Association of Bookham Technology plc (previously filed as Exhibit 3.1 to Registration Statement on Form F-1, as amended (file no. 333-11698) dated April 11, 2000, and incorporated herein by reference). |
|
1.2 |
Articles of Association of Bookham Technology plc, as amended through November 5, 2002 (previously filed as Exhibit 1.2 to Annual Report on Form 20-F for the year ended December 31, 2002, and incorporated herein by reference). |
|
2.1 |
Specimen Ordinary Share Certificate (previously filed as Exhibit 4.1 to Registration Statement on Form F-1, as amended (file no. 333 -11698) dated April 11, 2000, and incorporated herein by reference). |
|
2.2 |
Form of Deposit Agreement (previously filed as Exhibit 4.2 to Registration Statement on Form F-1, as amended (file no. 333 -11698) dated April 11, 2000, and incorporated herein by reference). |
|
2.3 |
Form of ADR Certificate (included in Exhibit 2.2) (previously filed as Exhibit 4.3 to Registration Statement on Form F-1, as amended (file no. 333-11698) dated April 11, 2000, and incorporated herein by reference). |
|
4.1 |
Acquisition Agreement dated as of October 7, 2002 between Nortel Networks Corporation and Bookham Technology plc (previously filed as Exhibit 1 to Schedule 13D filed by Nortel Networks Corporation on October 17, 2002, and incorporated herein by reference). |
|
4.2* |
Letter Agreement dated November 8, 2002 between Nortel Networks Corporation and Bookham Technology plc amending the Acquisition Agreement referred to in Exhibit 4.1. |
|
4.3* |
Optical Components Supply Agreement, dated November 8, 2002, by and between Nortel Networks Limited and Bookham Technology plc (previously filed as Exhibit 4.3 to Amendment No. 1 to Annual Report on Form 20-F for the year ended December 31, 2002, and incorporated herein by reference). |
|
4.4 |
Relationship Deed dated November 8, 2002 between Nortel Networks Corporation and Bookham Technology plc (previously filed as Exhibit 4.4 to Annual Report on Form 20-F for the year ended December 31, 2002, and incorporated herein by reference). |
|
4.5 |
Registration Rights Agreement dated as of November 8, 2002 among Nortel Networks Corporation, the Nortel Subsidiaries listed on the signature pages and Bookham Technology plc (previously filed as Exhibit 4.5 to Annual Report on Form 20-F for the year ended December 31, 2002, and incorporated herein by reference). |
|
4.6 |
Series A Senior Unsecured Note Due 2007, as amended to change the identity of the Lender (previously filed as Exhibit 4.6 to Annual Report on Form 20-F for the year ended December 31, 2002, and incorporated herein by reference). |
|
4.7 |
Series B Senior Secured Note Due 2005, as amended to change the identity of the Lender (previously filed as Exhibit 4.7 to Annual Report on Form 20-F for the year ended December 31, 2002, and incorporated herein by reference). |
|
4.8 |
Agreement relating to the Sale and Purchase of the Business of Marconi Optical Components Limited, dated December 17, 2001, among Bookham Technology plc, Marconi Optical Components Limited and Marconi Corporation plc (previously filed as Exhibit 4.1 to Annual Report on Form 20-F for the year ended December 31, 2001, and incorporated herein by reference). |
|
4.9 |
Supplemental Agreement to the Agreement relating to the Sale and Purchase of the Business of Marconi Optical Components Limited, dated January 31, 2002, among Bookham Technology plc, Marconi Optical Components Limited and Marconi Corporation plc (previously filed as Exhibit 4.2 to Annual Report on Form 20-F for the year ended December 31, 2001, and incorporated herein by reference). |
|
4.10* |
Global Procurement Agreement dated February 1, 2001 between Marconi Communications, Inc. and Bookham Technology plc (previously filed as Exhibit 4.3 to Annual Report on Form 20-F for the year ended December 31, 2001, and incorporated herein by reference). |
|
4.11* |
Letter Agreement dated January 10, 2003 between Marconi Communications, Inc. and Bookham Technology plc amending the Global Procurement Agreement referred to in Exhibit 4.10 (previously filed as Exhibit 4.11 to Amendment No. 1 to Annual Report on Form 20-F for the year ended December 31, 2002, and incorporated herein by reference). |
|
4.12 |
Service Agreement dated July 23, 2001, between Bookham Technology plc and Andrew G. Rickman (previously filed as Exhibit 4.4 to Annual Report on Form 20-F for the year ended December 31, 2001, and incorporated herein by reference). |
|
4.13 |
Service Agreement dated July 23, 2001 between Bookham Technology plc and Giorgio Anania (previously filed as Exhibit 4.5 to Annual Report on Form 20-F for the year ended December 31, 2001, and incorporated herein by reference). |
|
4.14 |
Lease dated May 21, 1997, between Bookham Technology plc and Landsdown Estates Group Limited, with respect to 90 Milton Park, Abingdon, England (previously filed as Exhibit 10.1 to Registration Statement on Form F-1, as amended (file no. 333-11698) dated April 11, 2000, and incorporated herein by reference). |
|
4.15 |
Bonus Scheme 2002 (previously filed as Exhibit 4.12 to Annual Report on Form 20-F for the year ended December 31, 2001, and incorporated herein by reference). |
|
8.1 |
List of Bookham Technology plc subsidiaries (previously filed as Exhibit 8.1 to Annual Report on Form 20-F for the year ended December 31, 2002, and incorporated herein by reference). |
|
10.1 |
Consent of Ernst & Young LLP. |
|
10.2 |
Consent of PricewaterhouseCoopers. |
|
12.1 |
Rule 13a-14(a)/15(d)-14(a) Certification of Chief Executive Officer. |
|
12.2 |
Rule 13a-14(a)/15(d)-14(a) Certification of Chief Financial Officer. |
|
13.1 |
Section 1350 Certification of Chief Executive Officer. |
|
13.2 |
Section 1350 Certification of Chief Financial Officer. |