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OPLINK REPORTS FINANCIAL RESULTS FOR THIRD QUARTER OF FISCAL 2008

FREMONT, Calif., May 01, 2008 (BUSINESS WIRE) -- Oplink Communications, Inc. (Nasdaq:OPLK), a leading provider of photonic components, intelligent modules, and subsystem solutions, today reported its financial results for its third quarter of fiscal 2008, ended March 31, 2008.

For the third quarter of fiscal 2008, Oplink reported consolidated revenues of $40.8 million, an increase of 47.8% over $27.6 million reported for the third quarter of 2007 (which did not include results from Optical Communication Products, Inc. ("OCP"), a 100% owned subsidiary of Oplink since October 31, 2007). Consolidated net loss for the third quarter of fiscal 2008, calculated in accordance with accounting principles generally accepted in the United States ("GAAP"), was $3.9 million, or ($0.19) per basic and diluted share. This compares to a GAAP net income of $4.3 million, or $0.19 per diluted share, reported for the third quarter of fiscal 2007.

Consolidated non-GAAP net income for the third quarter of fiscal 2008, which excludes approximately $6.4 million in provision for excess and obsolete inventory, $547,000 in transitional costs for contract manufacturing, $69,000 for impairment charge and other costs, a benefit of $371,000 adjustment for merger fees, $1.3 million in stock-based compensation expense, $976,000 in amortization of intangible assets, as well as a $2.4 million gain on sale of assets, was $2.5 million, or $0.12 per diluted share. This compares to non-GAAP net income of $5.3 million, or $0.23 per diluted share, reported for the third quarter of fiscal 2007, which excluded $995,000 in stock-based compensation expense and $35,000 in amortization of intangible assets.

The Company closed the third quarter with cash, cash equivalents and investments of $138.3 million, which is up from $117.3 million held at the close of the second quarter of fiscal 2008. During the quarter, the Company completed its sale of OCP's facility at Woodland Hills and sold the wafer fab equipment from OCP Asia in Taiwan, realizing a net of $26.2 million in cash.

"We continued to make significant progress transitioning OCP's business to Oplink's model," commented Joe Liu, president and CEO of Oplink. "Transferring OCP's production to China and other measures we have taken to reduce OCP's cost structure contributed to our sequentially higher gross margins. Revenue in the quarter decreased from the previous quarter due to reduced ROADM sales, softness in orders from Europe and the transfer of OCP's manufacturing to China. We believe that these factors will continue to affect our revenue for the June quarter. However, we remain optimistic about our broader product portfolio and long-term opportunities once we complete the transition and release new product designs in the coming quarters."

Business Outlook

For the quarter ending June 30, 2008, the Company expects to report consolidated revenues of between $33.0 and $37.0 million, primarily due to a further decrease in ROADM sales, and consolidated net income per diluted share of approximately ($0.03) to $0.01 on a GAAP basis. On a non-GAAP basis, excluding stock-based compensation expense, charges related to Oplink's acquisition and integration of OCP, amortization of intangible assets, and other non-recurring charges, if any, the Company expects consolidated earnings per diluted share for the quarter ending June 30, 2008 of approximately $0.08 to $0.12.

Conference Call Information

The Company will host a conference call and live webcast at 2:00 p.m. Pacific Daylight Time today, May 1, 2008. To access the conference call, dial 800-390-5312 or 719-785-9446 (outside the U.S. and Canada). The webcast will be available live on the Investor Relations section of the Company's corporate website at http://investor.oplink.com and via replay beginning approximately two hours after the completion of the call until the Company's announcement of its financial results for the next quarter. An audio replay of the call will also be available to investors beginning at approximately 5:00 p.m. Pacific Daylight Time on May 1, 2008 until 11:59 p.m. Pacific Daylight Time on May 7, 2008, by dialing 888-203-1112 or 719-457-0820 (outside the U.S. and Canada) and entering pass code 7590419#.

Non-GAAP Financial Measures

In this earnings release and during the earnings conference call and webcast as described above, Oplink will discuss certain non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. A reconciliation between non-GAAP and GAAP measures can be found in the accompanying tables. Oplink believes that, while these non-GAAP measures are not a substitute for GAAP results, they provide a basis for evaluating the Company's cash requirements for ongoing operating activities. These non-GAAP measures have been reconciled to the nearest GAAP measure as required under Securities and Exchange Commission rules.

About Oplink

Incorporated in 1995, Oplink is a leading provider of design, integration and optical manufacturing solutions (OMS) for optical networking components and subsystems. The company offers advanced and cost-effective optical-electrical components and subsystem manufacturing through its facilities in Zhuhai and Shanghai, China. In addition, Oplink maintains optical-centric front-end design, application, and customer service functions at its headquarters in Fremont, California and has research facilities in Zhuhai and Wuhan, China, Hsinchu Science-Based Industrial Park in Taiwan. The company's customers include telecommunications, data communications and cable TV equipment manufacturers around the globe. Oplink is committed to providing fully customized, Photonic Foundry services incorporating its subsystems manufacturing capabilities. To learn more about Oplink, visit its web site at: http://www.oplink.com/.

Cautionary Statement

This news release contains forward-looking statements, including without limitation the guidance given for anticipated results for the fourth quarter and of fiscal year 2008, that involve risks and uncertainties that may cause results to differ substantially from expectations. These risks include, but are not limited to, the risk that Oplink will not realize the synergies or cost reductions it hopes to achieve after the OCP acquisition, the potential for a downturn in the telecommunications industry or the overall economy in the United States and other parts of the world, possible reductions in customer orders, Oplink's reliance upon third parties to supply components and materials for its products, intense competition in Oplink's target markets and potential pricing pressure that may arise from changing supply or demand conditions in the industry, and other risks detailed from time to time in Oplink's periodic reports filed with the Securities and Exchange Commission, including the Company's latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

The foregoing information represents Oplink's outlook only as of the date of this press release, and Oplink undertakes no obligation to update or revise any forward-looking statements, whether as a result of new developments or otherwise.


======================================================================
OPLINK COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)
======================================================================

                                                March 31,   June 30,
                                               ----------- -----------
                                                  2008        2007
                                               (Unaudited)     (1)
                                               ----------- -----------
ASSETS
Current assets:
  Cash and cash equivalents                    $    86,434 $  111,600
  Short-term investments                            46,876     73,300
  Accounts receivable, net                          33,300     34,795
  Inventories                                       25,630     35,427
  Net assets held for sale                               -     22,200
  Prepaid expenses and other current assets          4,377      6,412
                                               ----------- -----------

    Total current assets                           196,617    283,734

Long-term investments                                5,000     42,978
Property, plant and equipment, net                  34,087     28,907
Goodwill and intangible assets, net                 24,606      7,421
Other assets                                         1,975      5,349
                                               ----------- -----------

    Total assets                               $   262,285 $  368,389
                                               ----------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                             $    10,849 $   14,604
  Accrued liabilities and other current
   liabilities                                      14,177     13,820
  Accrued transitional costs for contract
   manufacturing                                       503      1,234
  Restructuring accrual                              1,445          -
                                               ----------- -----------

    Total current liabilities                       26,974     29,658

Non-current liabilities                                223        207
                                               ----------- -----------

    Total liabilities                               27,197     29,865
                                               ----------- -----------

Minority interest                                        -     68,749

Stockholders' equity                               235,088    269,775
                                               ----------- -----------

    Total liabilities and stockholders' equity $   262,285 $  368,389
                                               ----------- -----------

(1) The June 30, 2007 condensed consolidated balance sheet has been
     derived from audited consolidated financial statements at that
     date.


======================================================================
OPLINK COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)
======================================================================
                         Three Months Ended       Nine Months Ended
                       -----------------------------------------------
                              March 31,               March 31,
                          2008        2007        2008        2007
                       ----------------------- -----------------------
                       (Unaudited) (Unaudited) (Unaudited) (Unaudited)

Revenues               $   40,836  $   27,620  $  138,930  $   70,287
                       ----------- ----------- ----------- -----------

Cost of revenues:

Cost of revenues           37,464      20,515     112,499      50,503

Stock compensation
 expense                      103          69         346         209
                       ----------- ----------- ----------- -----------

  Total cost of
   revenues                37,567      20,584     112,845      50,712
                       ----------- ----------- ----------- -----------

Gross profit                3,269       7,036      26,085      19,575
                       ----------- ----------- ----------- -----------

Operating expenses:

Research and
 development                3,325       1,364      11,367       4,364

Sales and marketing         2,461       1,461       8,104       4,123

General and
 administrative             3,141       1,464      11,159       4,735

Impairment charge and
 other costs                   69           -         695           -

Transitional costs for
 contract
 manufacturing                547           -       1,834           -

Merger fees                  (371)          -       5,618           -

Stock compensation
 expense                    1,185         926       6,216       2,966

Amortization of
 intangible and other
 assets                       433          35       1,100         105
                       ----------- ----------- ----------- -----------

  Total operating
   expenses                10,790       5,250      46,093      16,293
                       ----------- ----------- ----------- -----------

(Loss) income from
 operations                (7,521)      1,786     (20,008)      3,282

Interest and other
 income, net                1,513       2,504       6,665       6,988

Gain (loss) on
 sale/disposal of
 assets                     2,433          (8)      2,393          (8)
                       ----------- ----------- ----------- -----------

(Loss) income before
 minority interest and
 provision for income
 taxes                     (3,575)      4,282     (10,950)     10,262

Minority interest in
 loss of consolidated
 subsidiaries                   -           7       5,891          28

Provision for income
 taxes                       (365)        (10)       (908)       (125)
                       ----------- ----------- ----------- -----------

Net (loss) income      $   (3,940) $    4,279  $   (5,967) $   10,165
                       ----------- ----------- ----------- -----------

Net (loss) income per
 share:

  Basic                $    (0.19) $     0.19  $    (0.27) $     0.46
                       ----------- ----------- ----------- -----------

  Diluted              $    (0.19) $     0.19  $    (0.27) $     0.44
                       ----------- ----------- ----------- -----------

Shares used in per
 share calculation:

  Basic                    20,633      22,202      21,811      21,920
                       ----------- ----------- ----------- -----------

  Diluted                  20,633      23,011      21,811      22,886
                       ----------- ----------- ----------- -----------


RECONCILIATION OF GAAP NET (LOSS) INCOME TO NON-GAAP NET INCOME

                       ======================= =======================
                         Three Months Ended       Nine Months Ended
                       -----------------------------------------------
                              March 31,               March 31,
                          2008        2007        2008        2007
                       ----------------------- -----------------------

Net (loss) income,
 GAAP                  $   (3,940) $    4,279  $   (5,967) $   10,165

Adjustments to measure
 non-GAAP:

Provision for excess
 and obsolete
 inventory included in
 cost of revenues           6,383           -       6,383           -


Compensation related
 to stock option
 modification                   -           -           -         268

Transitional costs for
 contract
 manufacturing                547           -       1,834           -

Impairment charge and
 other costs                   69           -         695           -

Merger fees                  (371)          -       5,857           -

Stock compensation
 expense                    1,288         995       6,562       3,175

Amortization of
 intangible and other
 assets                       976          35       2,381         105

Gain on sale/disposal
 of assets                 (2,433)          -      (2,433)          -

Minority interest in
 loss of consolidated
 subsidiaries                   -           -      (4,217)          -

                       ----------- ----------- ----------- -----------

Non-GAAP net income    $    2,519  $    5,309  $   11,095  $   13,713
                       ----------- ----------- ----------- -----------

Net income per share,
 non-GAAP:

  Basic                $     0.12  $     0.24  $     0.51  $     0.63
                       ----------- ----------- ----------- -----------

  Diluted              $     0.12  $     0.23  $     0.49  $     0.60
                       ----------- ----------- ----------- -----------

Shares used in per
 share calculation:

  Basic                    20,633      22,202      21,811      21,920
                       ----------- ----------- ----------- -----------

  Diluted                  21,239      23,011      22,748      22,886
                       ----------- ----------- ----------- -----------


======================================================================
OPLINK COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
======================================================================
                                                   Nine Months Ended
                                                 ---------------------
                                                       March 31,
                                                    2008       2007
                                                 ---------------------
                                                      (Unaudited)
Cash flows from operating activities:
  Net (loss) income                              $  (5,967) $  10,165
  Adjustments to reconcile net (loss) income to
   net cash provided by operating activities:
    Depreciation and amortization                    5,466      3,582
    Provision for excess and obsolete inventory      6,383          -
    Amortization of intangible assets                2,381        277
    Stock compensation expense                       6,562      3,175
    (Gain) loss on sale/disposal of assets          (2,393)         -
    Impairment charge and other costs                  695          -
    Transitional costs for contract
     manufacturing                                   1,834          -
    Minority interest in loss of consolidated
     subsidiaries                                   (5,891)       (27)
    Other                                             (510)       120
    Change in assets and liabilities                (4,986)    (9,270)
                                                 ---------- ----------
      Net cash provided by operating activities      3,574      8,022
                                                 ---------- ----------

Cash flows from investing activities:
  Net sales of investments                          65,173      8,816
  Net sales (purchases) of property and
   equipment                                        20,404     (1,626)
  Net sales of equity investments                    4,600          -
  Acquisition of businesses, net of cash
   acquired                                        (81,445)      (500)
                                                 ---------- ----------
      Net cash provided by investing activities      8,732      6,690
                                                 ---------- ----------

Cash flows from financing activities:
  Proceeds from issuance of common stock             2,514      7,516
  Repurchase of common stock                       (40,000)         -
                                                 ---------- ----------
      Net cash (used in) provided by financing
       activities                                  (37,486)     7,516
                                                 ---------- ----------

Effect of exchange rate changes on cash and cash
 equivalents                                            14         30

Net (decrease) increase in cash and cash
 equivalents                                       (25,166)    22,258

Cash and cash equivalents, beginning of period     111,600      7,856
                                                 ---------- ----------

Cash and cash equivalents, end of period         $  86,434  $  30,114
                                                 ---------- ----------

SOURCE: Oplink Communications, Inc.

for Oplink Communications, Inc.
Investor Relations:
Erica Abrams, 415-217-5864
erica@blueshirtgroup.com
Matthew Hunt, 415-489-2194
matt@blueshirtgroup.com

Copyright Business Wire 2008

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