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OPLINK REPORTS THIRD QUARTER FISCAL 2010 FINANCIAL RESULTS

FREMONT, Calif., Apr 22, 2010 (BUSINESS WIRE) -- Oplink Communications, Inc. (Nasdaq:OPLK), a leading provider of design, integration and optical manufacturing solutions (OMS) for optical networking components, modules and subsystems, today reported its financial results for its fiscal 2010 third quarter, ended March 31, 2010.

Revenues for the quarter were $33.6 million, as compared to $32.7 million reported for the second quarter of fiscal 2010. Net income for the third quarter of fiscal 2010 was $2.6 million, or $0.12 per diluted share, compared to $3.1 million, or $0.14 per diluted share, reported for the second quarter of fiscal 2010.

Non-GAAP net income for the third quarter of fiscal 2010 was $4.8 million, or $0.22 per diluted share, compared to non-GAAP net income of $5.7 million, or $0.26 per diluted share, reported for the second quarter of fiscal 2010. Third quarter of fiscal 2010 non-GAAP results exclude $1.3 million in stock compensation and $958,000 in amortization of intangible assets. Second quarter of fiscal 2010 non-GAAP results exclude $1.6 million in stock compensation and $945,000 in amortization of intangibles.

Oplink closed the quarter with cash, cash equivalents and investments of $184.8 million.

"Despite a shorter quarter, we reported solid revenue and earnings for the period," commented Joe Liu, CEO of Oplink. "We continue to invest in expanding capacity and improving lead times to meet a stronger demand environment, but production ramp-up remains challenging due to labor and materials shortages. We expect improved capabilities in the coming quarters."

Business Outlook for the Quarter Ending June 30, 2010

The Company expects to report revenues in the range of $35 million and $38 million and GAAP net income per diluted share in the range of $0.05 to $0.11. On a non-GAAP basis, excluding stock compensation, amortization of intangible assets and other non-cash or non-recurring charges, Oplink expects earnings per diluted share for the period to be in the range of $0.16 to $0.22.

Conference Call Information

The Company will host a conference call and live webcast at 2:00 p.m. Pacific Time today, April 22, 2010. To access the conference call, dial 877-941-2068 or 480-629-9712 (outside the U.S. and Canada). A live webcast will be available on the Investors section of Oplink's corporate website at www.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 Time on April 22, 2010 until 11:59 p.m. Pacific Time on April 29, 2010, by dialing 800-406-7325 or 303-590-3030 (outside the U.S. and Canada) and entering pass code 4285174#.

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. Oplink 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 Woodland Hills, California and has research facilities in Zhuhai and Wuhan, China and Hsinchu Science-Based Industrial Park in Taiwan. Oplink'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 of fiscal year 2010 that involve risks and uncertainties that may cause results to differ substantially from expectations. These risks include, but are not limited to, the potential for a worsening of the 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,
2010 2009
(Unaudited)

(1)

ASSETS
Current assets:
Cash and cash equivalents $ 44,057 $ 49,702
Short-term investments 125,704 115,774
Accounts receivable, net 28,866 29,023
Inventories 15,723 10,031
Prepaid expenses and other current assets 6,547 2,648

Total current assets

220,897 207,178
Long-term investments 15,000 3,180
Property, plant and equipment, net 31,821 30,318
Goodwill and intangible assets, net 7,201 8,848
Other assets 605 423
Total assets $ 275,524 $ 249,947
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,806 $ 7,580
Accrued liabilities and other current liabilities 14,220 10,688
Accrued transitional costs for contract manufacturing 160 160
Total current liabilities 26,186 18,428
Non-current liabilities 4,971 3,492
Total liabilities 31,157 21,920
Stockholders' equity 244,367 228,027
Total liabilities and stockholders' equity $ 275,524 $ 249,947

(1) The June 30, 2009 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, December 31, March 31, March 31, March 31,
2010 2009 2009 2010 2009
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues $ 33,623 $ 32,743 $ 30,805 $ 99,931 $ 111,368
Cost of revenues:
Cost of revenues 22,562 21,643 22,018 67,839 87,602
Stock compensation expense 81 88 108 268 352
Total cost of revenues 22,643 21,731 22,126 68,107 87,954
Gross profit 10,980 11,012 8,679 31,824 23,414
Operating expenses:
Research and development 2,574 2,268 2,477 7,067 8,544
Sales and marketing 2,077 1,923 1,817 6,086 6,019
General and administrative 1,924 1,810 2,331 5,455 7,699
Stock compensation expense 1,221 1,520 1,142 4,288 3,833
Impairment charges and other costs - - - - 10,829
Amortization of intangible and other assets 410 403 412 1,217 1,236
Total operating expenses 8,206 7,924 8,179 24,113 38,160
Income (loss) from operations 2,774 3,088 500 7,711 (14,746 )
Interest and other income, net 292 193 297 759 2,637
Gain (loss) on sale/disposal of assets 4 214 (182 ) 342 (793 )
Income (loss) before provision for income taxes 3,070 3,495 615 8,812 (12,902 )
Provision for income taxes (516 ) (358 ) (729 ) (1,312 ) (1,170 )
Net income (loss) $ 2,554 $ 3,137 $ (114 ) $ 7,500 $ (14,072 )
Net income (loss) per share:
Basic $ 0.12 $ 0.15 $ (0.01 ) $ 0.36 $ (0.68 )
Diluted $ 0.12 $ 0.14 $ (0.01 ) $ 0.35 $ (0.68 )
Shares used in per share calculation:
Basic 20,907 20,797 20,468 20,754 20,637
Diluted 21,792 21,694 20,468 21,563 20,637
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except per share amounts)
Three Months Ended Nine Months Ended
March 31, December 31, March 31, March 31, March 31,
Reconciliation of GAAP net income (loss) 2010 2009 2009 2010 2009
to non-GAAP net income:
Net income (loss), GAAP $ 2,554 $ 3,137 $ (114 ) $ 7,500 $ (14,072 )
Adjustments to measure non-GAAP:
Related to cost of revenues:
Provision for excess and obsolete inventory - - - - 4,065
Stock compensation expense 81 88 108 268 352
Amortization of intangible and other assets 548 542 538 1,632 1,622
Total related to cost of revenues 629 630 646 1,900 6,039
Related to operating expenses:
Stock compensation expense 1,221 1,520 1,142 4,288 3,833
Impairment charges and other costs - - - - 10,829
Amortization of intangible and other assets 410 403 412 1,217 1,236
Total related to operating expenses 1,631 1,923 1,554 5,505 15,898
Total related to net income (loss) 2,260 2,553 2,200 7,405 21,937
Non-GAAP net income $ 4,814 $ 5,690 $ 2,086 $ 14,905 $ 7,865
Net income per share, non-GAAP:
Basic $ 0.23 $ 0.27 $ 0.10 $ 0.72 $ 0.38
Diluted $ 0.22 $ 0.26 $ 0.10 $ 0.69 $ 0.37
Shares used in per share calculation:
Basic 20,907 20,797 20,468 20,754 20,637
Diluted 21,792 21,694 20,761 21,563 21,026
Reconciliation of GAAP gross profit
to non-GAAP gross profit:
GAAP gross profit $ 10,980 $ 11,012 $ 8,679 $ 31,824 $ 23,414

Provision for excess and obsolete inventory included in cost of revenues

- - - - 4,065

Stock compensation expense included in cost of revenues

81 88 108 268 352

Amortization of intangible and other assets included in cost of revenues

548 542 538 1,632 1,622
Non-GAAP gross profit $ 11,609 $ 11,642 $ 9,325 $ 33,724 $ 29,453
GAAP gross margin rate 32.7 % 33.6 % 28.2 % 31.8 % 21.0 %
Non-GAAP gross margin rate 34.5 % 35.6 % 30.3 % 33.7 % 26.4 %
OPLINK COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended
March 31,
2010 2009
(Unaudited)
Cash flows from operating activities:
Net income (loss) $ 7,500 $ (14,072 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 4,918 5,469
Inventory adjustments - 4,065
Impairment charge and other costs - 10,829
Amortization of intangible and other assets 2,849 2,858
Stock compensation expense 4,556 4,185
(Gain) loss on sale/disposal of assets (342 ) 793
Other 277 (829 )
Change in assets and liabilities (2,804 ) 7,481
Net cash provided by operating activities 16,954 20,779
Cash flows from investing activities:
Net purchases of investments (20,718 ) (4,165 )
Net purchases of property and equipment (2,036 ) (2,952 )
Acquisition of business, net of cash acquired (3,698 ) -
Net cash used in investing activities (26,452 ) (7,117 )
Cash flows from financing activities:
Proceeds from issuance of common stock 3,827 846
Repurchase of common stock - (3,356 )
Net cash provided by (used in) financing activities 3,827 (2,510 )
Effect of exchange rate changes on cash and cash equivalents 26 (594 )
Net (decrease) increase in cash and cash equivalents (5,645 ) 10,558
Cash and cash equivalents, beginning of period 49,702 72,001
Cash and cash equivalents, end of period $ 44,057 $ 82,559

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

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