UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16
Under the Securities Exchange Act of 1934

EXFO Electro-Optical Engineering Inc.

(Translation of registrant’s name into English)

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  þ                    Form 40-F  o

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  o                    No  þ

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-___.

 

 

On October 20, 2005, EXFO Electro-Optical Engineering Inc., a Canadian corporation, reported its results of operations for the fourth fiscal quarter and year end for the fiscal year ended August 31, 2005. This report on Form 6-K sets forth the news release relating to EXFO’s announcement and certain information relating to EXFO’s financial condition and results of operations for the fourth fiscal quarter of the 2005 fiscal year. This press release and information relating to EXFO’s financial condition and results of operations for the fourth fiscal quarter of the 2005 fiscal year are hereby incorporated as a document by reference to Form F-3 (Registration Statement under the Securities Act of 1933) declared effective as of July 30, 2001 and to Form F-3 (Registration Statement under the Securities Act of 1933) declared effective as of March 11, 2002 and to amend certain material information as set forth in these two Form F-3 documents.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

EXFO Reports Sales Growth of 30.3% for Fiscal 2005

•		Achieves GAAP profitability in the last three quarters
•		Generates US$14.0 million in cash flows from operating activities
•		Derives 42.4% of sales from new products
•		Increases sales for eighth consecutive quarter

QUEBEC CITY, CANADA, October 20, 2005—EXFO Electro-Optical Engineering Inc. (NASDAQ: EXFO, TSX: EXF.SV) reported today sales growth of 30.3% year-over-year for fiscal 2005.

Sales improved to US$97.2 million in the fiscal year ended August 31, 2005 from US$74.6 million in 2004. In the fourth quarter of 2005, sales reached US$26.3 million compared to US$26.2 million in the previous quarter and US$21.3 million in the fourth quarter of 2004. Net bookings totaled US$24.6 million for a book-to-bill ratio of 0.94 in the fourth quarter of fiscal 2005 compared to US$28.9 million in the third quarter of 2005 and US$20.4 million in the fourth quarter of 2004.

Gross margin increased to 54.7% of sales in fiscal 2005 from 53.7% in 2004. In the fourth quarter of 2005, gross margin amounted to 54.7% compared to 56.2% in the previous quarter and 55.1% in the fourth quarter of 2004.

GAAP net loss totaled US$1.6 million, or US$0.02 per diluted share, in fiscal 2005 compared to a net loss of US$8.4 million, or US$0.13 per diluted share, in 2004. GAAP net loss included US$4.8 million in amortization of intangible assets, US$1.0 million in stock-based compensation costs and US$0.3 million in restructuring and other charges in 2005. GAAP net loss was negatively affected by a foreign-exchange loss of US$1.3 million in fiscal 2005.

In the fourth quarter of 2005, GAAP net earnings amounted to US$0.5 million, or US$0.01 per diluted share, compared to net earnings of US$0.3 million, or US$0.00 per diluted share, in the third quarter of 2005 and a net loss of US$2.3 million, or US$0.03 per diluted share, in the fourth quarter of 2004. GAAP net earnings included US$1.2 million in amortization of intangible assets and US$0.3 million in stock-based compensation costs in the fourth quarter.

“Upon celebrating our 20^th anniversary, I am delighted with EXFO’s exceptional growth, progress towards profitability, as well as uniquely strong strategic position and balance sheet,” said Germain Lamonde, EXFO’s Chairman, President and CEO. “I am equally pleased with our market-driven ability to turn new business opportunities into solid operational and financial results. We increased sales 30.3% year-over-year and sequentially in the last eight quarters. We reduced our GAAP net loss by more than 80% year-over-year and were profitable in the last three quarters of 2005. As well, we generated US$14.0 million in cash flows from operating activities. Clearly, these results are among the strongest in our industry. All of these performance highlights are the result of EXFO’s long-term focus to tap into new, revenue-generating market opportunities, such as FTTx and converged, IP network testing, and the commitment of all our dedicated EXFO employees, whom I thank for making the difference year-in and year-out for the last 20 years.”

Selected Financial Information
(In thousands of US dollars)

 

Forward-Looking Statements

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

—30—

For more information
Vance Oliver
Manager, Investor Relations
(418) 683-0913, Ext. 3733
vance.oliver@exfo.com

EXFO Electro-Optical Engineering Inc.

Interim Consolidated Balance Sheet

(in thousands of US dollars)

		As at				As at
		August 31,				August 31,
		2005				2004
		(unaudited)
Assets
Current assets
Cash		$	7,119			$	5,159
Short-term investments			104,883				83,969
Accounts receivable
Trade, less allowance for doubtful accounts of $352 ($510 as at August 31, 2004)			13,945				12,080
Other			2,007				1,532
Income taxes and tax credits recoverable			2,392				7,836
Inventories			17,749				15,371
Prepaid expenses			1,112				1,513
			149,207				127,460
Income taxes and tax credits recoverable			459				449
Property, plant and equipment			13,719				15,442
Long-lived asset held for sale			1,600				1,600
Intangible assets			5,602				9,447
Goodwill			20,370				18,393
		$	190,957			$	172,791
Liabilities
Current liabilities
Accounts payable and accrued liabilities		$	12,201			$	11,393
Deferred revenue			1,584				805
Current portion of long-term debt			134				121
			13,919				12,319
Deferred revenue			1,568				1,123
Government grants			1,872				1,690
Long-term debt			198				332
			17,557				15,464
Shareholders’ Equity
Share capital			521,875				521,733
Contributed surplus			2,949				1,986
Deficit			(381,846	)			(380,212	)
Cumulative translation adjustment			30,422				13,820
			173,400				157,327
		$	190,957			$	172,791

EXFO Electro-Optical Engineering Inc.

Interim Unaudited Consolidated Statements of Earnings

(in thousands of US dollars, except share and per share data)

		Three months				Twelve months				Three months				Twelve months
		ended				ended				ended				ended
		August 31, 2005				August 31, 2005				August 31, 2004				August 31, 2004
Sales		$	26,304			$	97,216			$	21,332			$	74,630
Cost of sales (1,2)			11,925				44,059				9,576				34,556
Gross margin			14,379				53,157				11,756				40,074
Operating expenses
Selling and administrative (1)			8,072				31,782				6,347				25,890
Net research and development (1)			3,287				12,190				2,748				12,390
Amortization of property, plant and equipment			1,011				4,256				1,121				4,935
Amortization of intangible assets			1,198				4,836				1,243				5,080
Impairment of long-lived assets			—				—				620				620
Restructuring and other charges			—				292				1,729				1,729
Total operating expenses			13,568				53,356				13,808				50,644
Earnings (loss) from operations			811				(199	)			(2,052	)			(10,570	)
Interest and other income			558				2,524				370				1,438
Foreign exchange loss			(507	)			(1,336	)			(402	)			(278	)
Earnings (loss) before income taxes			862				989				(2,084	)			(9,410	)
Income taxes			408				2,623				259				(986	)
Net earnings (loss) for the period		$	454			$	(1,634	)		$	(2,343	)		$	(8,424	)
Basic and diluted net earnings (loss) per share		$	0.01			$	(0.02	)		$	(0.03	)		$	(0.13	)
Basic weighted average number of shares outstanding (000’s)			68,562				68,526				68,431				66,020
Diluted weighted average number of shares outstanding (000’s)			68,996				68,981				68,983				66,615
(1)  Stock-based compensation costs included in:
Cost of sales		$	42			$	143			$	25			$	62
Selling and administrative			184				626				91				265
Net research and development			62				194				44				122
		$	288			$	963			$	160			$	449

(2)

The cost of sales is exclusive of amortization, shown separately.

EXFO Electro-Optical Engineering Inc.

Interim Unaudited Consolidated Statements of Cash Flows

(in thousands of US dollars)

		Three months				Twelve months				Three months				Twelve months
		ended				ended				ended				ended
		August 31, 2005				August 31, 2005				August 31, 2004				August 31, 2004
Cash flows from operating activities
Net earnings (loss) for the period		$	454			$	(1,634	)		$	(2,343	)		$	(8,424	)
Add (deduct) items not affecting cash
Discount on short-term investments			(565	)			(302	)			(164	)			197
Stock-based compensation costs			288				963				160				449
Amortization			2,209				9,092				2,364				10,015
Impairment of long-lived assets			—				—				620				620
Restructuring and other charges			—				—				1,261				1,261
Deferred revenue			133				977				118				1,404
Government grants			—				—				369				154
			2,519				9,096				2,385				5,676
Change in non-cash operating items
Accounts receivable			382				(838	)			(506	)			(2,677	)
Income taxes and tax credits			1,023				6,096				(843	)			(2,464	)
Inventories			2,616				(699	)			1,297				1,016
Prepaid expenses			258				544				(193	)			(449	)
Accounts payable and accrued liabilities			(1,227	)			(164	)			(627	)			(351	)
			5,571				14,035				1,513				751
Cash flows from investing activities
Additions to short-term investments			(96,710	)			(585,665	)			(146,604	)			(653,348	)
Proceeds from disposal and maturity of short-term investments			94,345				574,207				145,983				624,722
Additions to property, plant and equipment and intangible assets			(275	)			(1,501	)			(278	)			(851	)
Business combination			—				—				—				(241	)
			(2,640	)			(12,959	)			(899	)			(29,718	)
Cash flows from financing activities
Repayment of long-term debt			(32	)			(121	)			(29	)			(109	)
Net proceeds of offering			—				—				—				29,164
Share issue expenses			—				(6	)			34				(137	)
Exercise of stock options			18				148				8				254
Redemption of share capital			—				—				(2	)			(5	)
Resale of share capital			—				—				10				23
			(14	)			21				21				29,190
Effect of foreign exchange rate changes on cash			245				863				218				(430	)
Change in cash			3,162				1,960				853				(207	)
Cash — Beginning of period			3,957				5,159				4,306				5,366
Cash — End of period		$	7,119			$	7,119			$	5,159			$	5,159