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OPLINK REPORTS FOURTH QUARTER AND FISCAL YEAR 2008 FINANCIAL RESULTS

Company Announces $20 Million Stock Repurchase Program

FREMONT, Calif., Aug 14, 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 fourth quarter and fiscal year ended June 30, 2008.

For the fourth quarter of fiscal 2008, Oplink reported consolidated revenues of $37.3 million, as compared to $37.2 million reported for the fourth quarter of 2007. Consolidated net loss for the fourth quarter of fiscal 2008, calculated in accordance with accounting principles generally accepted in the United States ("GAAP"), was $791,000, or ($0.04) per share. This compares to GAAP net income of $3.0 million, or $0.13 per diluted share, reported for the fourth quarter of fiscal 2007.

Consolidated non-GAAP net income for the fourth quarter of fiscal 2008 was $2.8 million, or $0.13 per diluted share, which excludes approximately $891,000 of inventory adjustments, $451,000 in transitional costs for contract manufacturing, a benefit of $69,000 for impairment charge and other costs, $1.4 million in stock-based compensation expense, and $961,000 in amortization of intangible assets. This compares to non-GAAP net income of $5.6 million, or $0.24 per diluted share, reported for the fourth quarter of fiscal 2007, which excludes $216,000 in transitional costs for contract manufacturing, $1.5 million in merger fees, $1.5 million in stock-based compensation expense, and $242,000 in amortization of intangible assets, and the benefit of $850,000 in minority interest.

Oplink generated $4.1 million in cash from operations and closed the fourth quarter with cash, cash equivalents and investments of $142.1 million, up from $138.3 million held at the close of the third quarter of fiscal 2008.

"We are pleased to report revenue slightly above the outlook we provided last quarter, improved gross margins and increased operating efficiencies in the fourth quarter," commented Joe Liu, president and CEO of Oplink. "We had good sales activity for our passive components through our traditionally large customers and are building our pipeline for future periods. Demand for our active components was strong and, with our offshore manufacturing transition nearly completed, we are now shifting our focus to customer interactions and design win activities. We remain confident in the long-term opportunity for the consolidated business as we move into fiscal year 2009."

The Company also announced that its Board of Directors has approved a new repurchase program, authorizing the Company to repurchase up to $20 million of its common stock. Repurchases under the program will be made in open market or privately negotiated transactions in compliance with Securities and Exchange Commission Rule 10b-18, subject to market conditions, applicable legal requirements and other factors. The repurchase program does not require the Company to acquire a specific number of shares, and may be suspended from time to time or discontinued. The share repurchases will be funded from available working capital. There is no fixed termination date for the repurchase program.

"We believe this share repurchase program communicates our long-term confidence in our business and is a good use of our capital at this time," Liu concluded.

Consolidated revenues for fiscal year 2008 were $176.3 million, an increase from $107.5 million reported for fiscal year 2007 (which only included one month of financial results from Optical Communication Products, Inc. ("OCP"), of which Oplink acquired a majority stake in June 2007 and which became a 100% owned subsidiary in October 2007). Consolidated GAAP net loss for fiscal 2008 was $6.8 million, or $(0.31) per basic and diluted share.

Consolidated non-GAAP net income for fiscal 2008 was $13.9 million, or $0.63 per diluted share, which excludes approximately $7.3 million of inventory adjustments, $2.3 million in transitional costs for contract manufacturing, $626,000 in impairment charge and other costs, $5.9 million in expenses incurred by OCP relating to Oplink's acquisition of OCP, $7.9 million in stock-based compensation expense, $3.3 million in amortization of intangible assets, the benefit of $2.4 million gains on sale of assets, and the benefit of $4.2 million in minority interest. This compares to non-GAAP net income of $19.5 million, or $0.85 per diluted share, which excludes approximately $268,000 in compensation related to stock option modifications, $216,000 in transitional costs for contract manufacturing, $1.5 million in expenses incurred by OCP relating to Oplink's acquisition of OCP, $4.7 million in stock-based compensation expense, $519,000 in amortization of intangible assets and a net benefit of $850,000 in minority interest, reported for fiscal year 2007.

Business Outlook

For the quarter ending September 30, 2008, the Company expects to report consolidated revenues of between $38 million and $42 million and consolidated net income per diluted share of approximately $0.02 to $0.06 on a GAAP basis. On a non-GAAP basis, excluding stock-based compensation expense, amortization of intangible assets, and other non-recurring charges, if any, the Company expects consolidated earnings per diluted share for the quarter ending September 30, 2008 of approximately $0.13 to $0.17.

Conference Call Information

The Company will host a conference call and live webcast at 2:00 p.m. Pacific Daylight Time today, August 14, 2008. To access the conference call, dial 800-240-2430 or 303-262-2131 (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 August 14, 2008 until 11:59 p.m. Pacific Daylight Time on August 22, 2008, by dialing 800-405-2236 or 303-590-3000 (outside the U.S. and Canada) and entering pass code 11118037#.

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, modules 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 offices in Fremont and Calabasas, California and has research facilities in Zhuhai and Wuhan, China and 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 first quarter and of fiscal year 2009, 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)
======================================================================
                                                     Years Ended
                                                      June 30,
                                               -----------------------
                                                  2008        2007
                                               (Unaudited)     (1)
                                               ----------- -----------
ASSETS
Current assets:
   Cash and cash equivalents                   $    72,001 $  111,600
   Short-term investments                           50,077     73,300
   Accounts receivable, net                         34,200     34,795
   Inventories                                      28,290     35,427
   Net assets held for sale                              -     22,200
   Prepaid expenses and other current assets         4,949      6,412
                                               ----------- -----------

      Total current assets                         189,517    283,734

Long-term investments                               20,003     42,978
Property, plant and equipment, net                  34,206     28,907
Goodwill and intangible assets, net                 23,487      7,421
Other assets                                         1,867      5,349
                                               ----------- -----------

      Total assets                             $   269,080 $  368,389
                                               ----------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                            $    16,354 $   14,604
   Accrued liabilities and other current
    liabilities                                     13,522     13,820
   Accrued transitional costs for contract
    manufacturing                                      341      1,234
   Restructuring accrual                               370          -
                                               ----------- -----------

      Total current liabilities                     30,587     29,658

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

      Total liabilities                             30,810     29,865
                                               ----------- -----------

Minority interest                                        -     68,749

Stockholders' equity                               238,270    269,775
                                               ----------- -----------

      Total liabilities and stockholders'
       equity                                  $   269,080 $  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         Years Ended
                         ---------------------------------------------
                                June 30,               June 30,
                            2008        2007        2008       2007
                         ----------- ----------- ---------------------
                         (Unaudited) (Unaudited) (Unaudited)    (1)

Revenues                    $37,323     $37,212    $176,253  $107,499
                         ----------- ----------- ----------- ---------

Cost of revenues:

Cost of revenues             28,040      28,085     140,539    78,588

Stock compensation
 expense                        110         106         456       315
                         ----------- ----------- ----------- ---------

 Total cost of revenues      28,150      28,191     140,995    78,903
                         ----------- ----------- ----------- ---------

Gross profit                  9,173       9,021      35,258    28,596
                         ----------- ----------- ----------- ---------

Operating expenses:

Research and development      3,026       2,432      14,393     6,796

Sales and marketing           2,397       1,941      10,501     6,064

General and
 administrative               3,109       2,367      14,268     7,102

Impairment charge and
 other costs                    (69)          -         626         -

Transitional costs for
 contract manufacturing         451         216       2,285       216

Merger fees                       -       1,451       5,618     1,451

Stock compensation
 expense                      1,259       1,430       7,475     4,396

Amortization of
 intangible and other
 assets                         419         117       1,519       222
                         ----------- ----------- ----------- ---------

 Total operating expenses    10,592       9,954      56,685    26,247
                         ----------- ----------- ----------- ---------

(Loss) income from
 operations                  (1,419)       (933)    (21,427)    2,349

Interest and other
 income, net                    853       2,678       7,518     9,666

(Loss) gain on
 sale/disposal of assets        (88)        (10)      2,305       (18)
                         ----------- ----------- ----------- ---------

(Loss) income before
 minority interest and
 provision for income
 taxes                         (654)      1,735     (11,604)   11,997

Minority interest in loss
 of consolidated
 subsidiaries                     -       1,390       5,891     1,418

Provision for income
 taxes                         (137)       (116)     (1,045)     (241)
                         ----------- ----------- ----------- ---------

Net (loss) income           $  (791)    $ 3,009    $ (6,758) $ 13,174
                         ----------- ----------- ----------- ---------

Net (loss) income per
 share:

Basic                       $ (0.04)    $  0.13    $  (0.31) $   0.60
                         ----------- ----------- ----------- ---------

Diluted                     $ (0.04)    $  0.13    $  (0.31) $   0.57
                         ----------- ----------- ----------- ---------

Shares used in per share
 calculation:

Basic                        20,700      22,524      21,533    22,071
                         ----------- ----------- ----------- ---------

Diluted                      20,700      23,252      21,533    22,942
                         ----------- ----------- ----------- ---------



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

                         ======================= =====================
                           Three Months Ended         Years Ended
                         ----------------------- ---------------------
                                June 30,               June 30,
                              2008        2007       2008      2007
                         ----------- ----------- ----------- ---------

Net (loss) income, GAAP     $  (791)    $ 3,009    $ (6,758) $ 13,174

Adjustments to measure
 non-GAAP:

Inventory adjustments
included in cost of
 revenues                       891           -       7,274         -

Compensation related to
 stock option
 modification                     -           -           -       268

Transitional costs for
 contract manufacturing         451         216       2,285       216

Impairment charge and
 other costs                    (69)          -         626         -

Merger fees                       -       1,451       5,857     1,451

Stock compensation
 expense                      1,369       1,536       7,931     4,711

Amortization of
 intangible and other
 assets                         961         242       3,342       519

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

Minority interest in loss
 of consolidated
 subsidiaries                     -        (850)     (4,217)     (850)

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

Non-GAAP net income         $ 2,812     $ 5,604    $ 13,907  $ 19,489
                         ----------- ----------- ----------- ---------

Net income per share,
 non-GAAP:

Basic                       $  0.14     $  0.25    $   0.65  $   0.88
                         ----------- ----------- ----------- ---------

Diluted                     $  0.13     $  0.24    $   0.63  $   0.85
                         ----------- ----------- ----------- ---------

Shares used in per share
 calculation:

Basic                        20,700      22,524      21,533    22,071
                         ----------- ----------- ----------- ---------

Diluted                      21,147      23,252      22,085    22,942
                         ----------- ----------- ----------- ---------

(1)The condensed consolidated statement of operations for the year
    ended June 30, 2007 has been derived from audited consolidated
    financial statements at that date.


OPLINK COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
======================================================================
                                                      Years Ended
                                                       June 30,
                                                 ---------------------
                                                    2008       2007
                                                 (Unaudited)    (1)
                                                 ----------- ---------
Cash flows from operating activities:
   Net (loss) income                             $   (6,758) $ 13,174
    Adjustments to reconcile net (loss) income to
     net cash provided by operating activities:
     Depreciation and amortization                    7,107     4,918
     Inventory adjustments                            7,274         -
     Amortization of intangible assets                3,342       519
     Stock compensation expense                       7,931     4,711
     (Gain) loss on sale/disposal of assets          (2,305)       18
     Impairment charge and other costs                  626         -
     Minority interest in loss of consolidated
      subsidiaries                                   (5,891)   (1,418)
     Other                                             (119)      611
     Change in assets and liabilities                (3,578)   (9,868)
                                                 ----------- ---------
       Net cash provided by operating activities      7,629    12,665
                                                 ----------- ---------

Cash flows from investing activities:
   Net sales of investments                          47,070    89,023
   Net sales (purchases) of property and
    equipment                                        19,324    (2,623)
   Net sales of equity investments                    4,600         -
   Acquisition of businesses, net of cash
    acquired                                        (81,445)   (3,917)
                                                 ----------- ---------
       Net cash (used in) provided by investing
        activities                                  (10,451)   82,483
                                                 ----------- ---------

Cash flows from financing activities:
   Proceeds from issuance of common stock             3,217     8,550
   Repurchase of common stock                       (40,000)        -
                                                 ----------- ---------
       Net cash (used in) provided by financing
        activities                                  (36,783)    8,550
                                                 ----------- ---------

Effect of exchange rate changes on cash and cash
 equivalents                                              6        46

Net (decrease) increase in cash and cash
 equivalents                                        (39,599)  103,744

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

Cash and cash equivalents, end of year           $   72,001  $111,600
                                                 ----------- ---------

Supplemental non-cash investing and financing
 activities:
   Common stock issued upon business combination $        -  $ 14,217
                                                 ----------- ---------

(1)The condensed consolidated statement of cash flows for the year
    ended June 30, 2007 has been derived from audited consolidated
    financial statements at that date.

SOURCE: Oplink Communications, Inc.

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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