Attached files
file | filename |
---|---|
EX-32.1 - EX-32.1 - OPNEXT INC | v56966exv32w1.htm |
EX-32.2 - EX-32.2 - OPNEXT INC | v56966exv32w2.htm |
EX-31.1 - EX-31.1 - OPNEXT INC | v56966exv31w1.htm |
EX-31.2 - EX-31.2 - OPNEXT INC | v56966exv31w2.htm |
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2010
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 001-33306
OPNEXT, INC.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) |
22-3761205 (I.R.S. Employer Identification Number) |
|
46429 Landing Parkway, Fremont, California (Address of principal executive offices) |
94538 (Zip Code) |
(510) 580-8828
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
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 þ NO o
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). YES o NO o
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of large accelerated filer, accelerated filer and smaller reporting
company in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). YES o NO þ
As of August 2, 2010, 89,889,092 shares of the registrants common stock were
outstanding.
Table of Contents
PART I FINANCIAL INFORMATION
Item 1. | Financial Statements |
Opnext, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(in thousands, except share and per share amounts)
June 30, 2010 | March 31, 2010 | |||||||
(unaudited) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents, including
$993 and $1,205 of restricted cash at
June 30 and March 31, 2010, respectively |
$ | 106,886 | $ | 132,643 | ||||
Trade receivables, net, including $5,180
and $3,454 due from related parties at
June 30 and March 31, 2010, respectively |
62,996 | 54,849 | ||||||
Inventories |
101,692 | 93,018 | ||||||
Prepaid expenses and other current assets |
7,819 | 4,755 | ||||||
Total current assets |
279,393 | 285,265 | ||||||
Property, plant, and equipment, net |
63,235 | 60,322 | ||||||
Purchased intangibles |
22,434 | 24,220 | ||||||
Other assets |
449 | 491 | ||||||
Total assets |
$ | 365,511 | $ | 370,298 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Trade payables, including $5,882 and
$4,707 due to related parties at June 30
and March 31, 2010, respectively |
$ | 47,231 | $ | 44,040 | ||||
Accrued expenses |
22,711 | 22,101 | ||||||
Short-term debt |
22,650 | 21,430 | ||||||
Capital lease obligations |
13,227 | 12,515 | ||||||
Total current liabilities |
105,819 | 100,086 | ||||||
Capital lease obligations |
12,086 | 11,202 | ||||||
Other long-term liabilities |
5,873 | 5,470 | ||||||
Total liabilities |
123,778 | 116,758 | ||||||
Commitments and contingencies |
||||||||
Shareholders equity: |
||||||||
Preferred stock, par value $0.01 per
share: 15,000,000 authorized, no shares
issued and outstanding |
| | ||||||
Preferred stock, Series A Junior
Participating, par value $0.01 per
share: 1,000,000 authorized, no shares
issued and outstanding |
| | ||||||
Common stock, par value $0.01 per
share: 150,000,000 authorized shares;
91,215,633 issued, 89,880,632
outstanding, net of 58,630 shares of
treasury stock, at June 30, 2010 and;
91,130,377 issued, 89,857,936
outstanding, net of 58,630 shares of
treasury stock, at March 31, 2010 |
725 | 725 | ||||||
Additional paid-in capital |
718,407 | 716,315 | ||||||
Accumulated deficit |
(489,405 | ) | (473,145 | ) | ||||
Accumulated other comprehensive income |
12,006 | 9,645 | ||||||
Total shareholders equity |
241,733 | 253,540 | ||||||
Total liabilities and shareholders equity |
$ | 365,511 | $ | 370,298 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
3
Table of Contents
Opnext, Inc.
Unaudited Consolidated Statements of Operations
(in thousands, except per share amounts)
(in thousands, except per share amounts)
Three Months Ended June 30, | ||||||||
2010 | 2009 | |||||||
Revenues, including $6,014 and $6,523 from related parties, for the
three-month periods ended June 30, 2010 and 2009, respectively |
$ | 78,866 | $ | 85,309 | ||||
Cost of sales |
62,630 | 67,118 | ||||||
Amortization of acquired developed technology |
1,445 | 1,445 | ||||||
Gross margin |
14,791 | 16,746 | ||||||
Research and development expenses, including $916 and $925 from
related parties, for the three-month periods ended June 30, 2010 and
2009, respectively |
16,382 | 19,064 | ||||||
Selling, general and administrative expenses, including $976 and $809
from related parties, for the three-month periods ended June 30, 2010
and 2009, respectively |
14,276 | 14,440 | ||||||
Amortization of purchased intangibles |
342 | 6,214 | ||||||
(Gain) loss on disposal of property and equipment |
(11 | ) | 9 | |||||
Operating loss |
(16,198 | ) | (22,981 | ) | ||||
Interest expense, net |
(186 | ) | (93 | ) | ||||
Other income (expense), net |
145 | (628 | ) | |||||
Loss before income taxes |
(16,239 | ) | (23,702 | ) | ||||
Income tax expense |
(21 | ) | (15 | ) | ||||
Net loss |
$ | (16,260 | ) | $ | (23,717 | ) | ||
Net loss per share: |
||||||||
Basic |
$ | (0.18 | ) | $ | (0.27 | ) | ||
Diluted |
$ | (0.18 | ) | $ | (0.27 | ) | ||
Weighted average number of shares used in computing net loss per share: |
||||||||
Basic |
89,873 | 88,656 | ||||||
Diluted |
89,873 | 88,656 |
The accompanying notes are an integral part of these consolidated financial statements.
4
Table of Contents
Opnext, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
(in thousands)
Three Months Ended June 30, | ||||||||
2010 | 2009 | |||||||
Cash flows from operating activities |
||||||||
Net loss |
$ | (16,260 | ) | $ | (23,717 | ) | ||
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities: |
||||||||
Depreciation and amortization |
5,754 | 5,724 | ||||||
Amortization of purchased intangibles |
1,787 | 7,659 | ||||||
Stock-based compensation expense associated with the StrataLight
Employee Liquidity Bonus Plan |
| 1,518 | ||||||
Stock-based compensation expense associated with equity awards |
2,053 | 1,647 | ||||||
(Gain) loss on sale of property and equipment |
(11 | ) | 9 | |||||
Changes in assets and liabilities: |
||||||||
Trade receivables, net |
(8,751 | ) | 5,059 | |||||
Inventories |
(5,389 | ) | (2,919 | ) | ||||
Prepaid expenses and other current assets |
(2,888 | ) | (834 | ) | ||||
Other assets |
42 | (80 | ) | |||||
Trade payables |
1,363 | 6,840 | ||||||
Accrued expenses and other liabilities |
2,637 | (48 | ) | |||||
Net cash (used in) provided by operating activities |
(19,663 | ) | 858 | |||||
Cash flows from investing activities |
||||||||
Capital expenditures |
(3,115 | ) | (1,722 | ) | ||||
Net cash used in investing activities |
(3,115 | ) | (1,722 | ) | ||||
Cash flows from financing activities |
||||||||
Payments on capital lease obligations |
(2,635 | ) | (2,789 | ) | ||||
Exercise of stock options |
38 | | ||||||
Net cash used in financing activities |
(2,597 | ) | (2,789 | ) | ||||
Effect of foreign currency exchange rates on cash and cash equivalents |
(382 | ) | 2 | |||||
Decrease in cash and cash equivalents |
(25,757 | ) | (3,651 | ) | ||||
Cash and cash equivalents at beginning of period |
132,643 | 168,909 | ||||||
Cash and cash equivalents at end of period |
$ | 106,886 | $ | 165,258 | ||||
Non-cash financing activities |
||||||||
Capital lease obligations incurred |
$ | (2,865 | ) | $ | (109 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
5
Table of Contents
Opnext, Inc.
Notes to Consolidated Financial Statements
(in thousands, except per share amounts)
1. Background and Basis of Presentation
Opnext, Inc. and subsidiaries (which may be referred to in these financial
statements as OPI, Opnext, the Company, we, us, or our) is a leading designer
and manufacturer of optical subsystems, modules and components that enable high-speed
telecommunications and data communications networks, as well as lasers and infrared LEDs
for industrial and commercial applications.
The
financial information for the Company as of June 30, 2010 and
for the three-month periods ended June 30, 2010 and 2009 is unaudited, and includes all normal and recurring
adjustments that management considers necessary for a fair statement of the financial
information set forth herein, in accordance with generally accepted accounting principles
for interim financial information and rules and regulations of the Securities and
Exchange Commission (SEC). Accordingly, such information does not include all of the
information and footnotes required under generally accepted accounting principles in the
United States (GAAP) for annual financial statements. For further information, please
refer to the consolidated financial statements and footnotes thereto included in the
Companys Annual Report on Form 10-K for the fiscal year ended
March 31, 2010 filed on June 14, 2010.
2. Summary of Significant Accounting Policies
Revenue Recognition
Revenue is derived principally from sales of products and is recognized when
persuasive evidence of an arrangement exists, usually in the form of a purchase order,
delivery has occurred or services have been rendered, title and risk of loss have passed
to the customer, the price is fixed or determinable and collection is reasonably assured
based on the creditworthiness of the customer and certainty of customer acceptance. These
conditions generally exist upon shipment or upon notice from certain customers in Japan
that they have completed their inspection and have accepted the product.
The Company participates in vendor managed inventory (VMI) programs with certain
customers whereby the Company maintains an agreed upon quantity of certain products at a
customer-designated warehouse. Revenue pursuant to the VMI programs is recognized when
the products are physically pulled by the customer, or its designated contract
manufacturer, and put into production in the manufacture of the
customers product. Simultaneous with the inventory pulls, purchase
orders are received from the customer, or its designated contract manufacturer, as
evidence that a purchase request and delivery have occurred and that title has passed to
the customer at a previously agreed upon price.
Warranties
The Company sells certain of its products to customers with a product warranty that
provides repairs at no cost to the customer or the issuance of a credit to the customer.
The length of the warranty term depends on the product being sold, but generally ranges
from one year to five years. In addition to accruing for specific known warranty
exposures, the Company accrues its estimated exposure to warranty claims based upon
historical claim costs as a percentage of sales multiplied by prior sales still under
warranty at the end of any period. Management reviews these estimates on a regular basis
and adjusts the warranty provisions as actual experience differs from historical
estimates or other information becomes available.
Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheets for trade
receivables, trade payables, accrued expenses and short-term debt approximate fair value
due to the immediate to short-term maturity of these financial instruments.
Fair Value Measurements
Fair value is defined as an exit price, representing the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants based on the highest and best use of the asset or liability.
The Company uses valuation techniques to measure fair value that maximize the use of
observable inputs and minimize the use of unobservable inputs. Observable inputs are
inputs that market participants would use in pricing the asset or liability and are based
on market data obtained from sources independent of the Company. Unobservable inputs
reflect assumptions market participants would use in pricing the asset or liability based
on the best information available in the circumstances. The hierarchy is broken down into
three levels based on the reliability of inputs as follows:
6
Table of Contents
| Level 1Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 assets or liabilities. Because valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these assets or liabilities does not entail a significant degree of judgment. | ||
| Level 2Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Valuations for Level 2 assets or liabilities are prepared on an individual asset or liability basis using data obtained from recent transactions for identical assets or liabilities in inactive markets or pricing data for similar assets or liabilities in active and inactive markets. | ||
| Level 3Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
As of June 30 and March 31, 2010, the Company had $56,510 and $82,487, respectively,
of money market funds that were recorded at fair value based on Level 1 quoted market
prices classified as cash and cash equivalents. At June 30, 2010, the Company had three
forward foreign currency exchange contracts classified in other current assets recorded
at a fair value of $386, and at March 31, 2010, the Company had six forward foreign
currency exchange contracts classified in accrued expenses recorded at a fair value of
$251, based on Level 2 inputs that primarily consisted of foreign currency spot and
forward rates quoted by banks or foreign currency dealers. The Company utilizes forward
contracts to mitigate foreign exchange currency risk between the Japanese yen and the
U.S. dollar on forecasted intercompany sales transactions between its subsidiary units.
These foreign currency exchange forward contracts generally have expiration dates of 90
days or less to hedge a portion of this future risk and the notional value of the
contracts did not exceed $12.0 million in aggregate at any point in time during the
three-month period ended June 30, 2010. The total realized benefits from the foreign
currency exchange forward contracts were $125 and $363 for the three-month periods ended
June 30, 2010 and 2009, respectively, and were included in cost of goods sold. The
Company does not enter into foreign currency exchange forward contracts for trading
purposes, but rather as a hedging vehicle to minimize the effect of foreign currency
fluctuations.
3. Restructuring Charges
As of June 30, 2010, the Company had recorded liabilities of $427 related to
facility consolidation charges in connection with the relocation of the Companys
headquarters to Fremont, California. During the three-month periods ended June 30, 2010 and
2009, in connection with the acquisition of StrataLight Communications, Inc.
(StrataLight), the Company recorded charges related to workforce reductions of $213 and
$520, respectively. As of March 31, 2010, the Company had recorded liabilities for
severance and related benefit charges of $121 and facility consolidation charges of $502.
During the period from January 9, 2009, the StrataLight acquisition date, to June 30,
2010, the Company incurred total facility consolidation charges of $819 and severance and
related benefit charges of $1,924. The Company expects that the restructuring activity
will be substantially complete by the end of the fiscal year ending
March 31, 2011.
4. Inventories
Components of inventories are summarized as follows:
June 30, | March 31, | |||||||
2010 | 2010 | |||||||
Raw materials |
$ | 55,440 | $ | 49,859 | ||||
Work-in-process |
16,529 | 14,810 | ||||||
Finished goods |
29,723 | 28,349 | ||||||
Inventories |
$ | 101,692 | $ | 93,018 | ||||
Inventories included $19,887 and $23,599 of inventory consigned to customers
and contract manufacturers at June 30 and March 31, 2010, respectively.
5. Property, Plant, and Equipment
Property, plant, and equipment consist of the following:
June 30, | March 31, | |||||||
2010 | 2010 | |||||||
Machinery, electronic, and other equipment |
$ | 256,764 | $ | 245,154 | ||||
Computer software |
18,349 | 17,928 | ||||||
Building improvements |
5,930 | 6,093 | ||||||
Construction-in-progress |
10,807 | 5,755 | ||||||
Total property, plant, and equipment |
291,850 | 274,930 | ||||||
Less accumulated depreciation and amortization |
(228,615 | ) | (214,608 | ) | ||||
Property, plant, and equipment, net |
$ | 63,235 | $ | 60,322 | ||||
7
Table of Contents
Property, plant and equipment included capitalized leases of $59,913 and
$56,682 at June 30 and March 31, 2010, respectively, and related accumulated depreciation
of $33,177 and $28,782 at June 30 and March 31, 2010, respectively. Amortization
associated with capital leases is recorded in depreciation expense. Amortization of
computer software costs was $190 and $413 for the three-month periods ended June 30, 2010
and 2009, respectively.
6. Intangible Assets
As a result of the StrataLight acquisition, the Company recorded $46,100 of
intangible assets, including $28,900 of developed product research with a weighted
average life of five years, $13,100 assigned to order backlog with a weighted average
life of seven months and $4,100 assigned to customer relationships with a weighted
average life of three years.
The components of the intangible assets at June 30, 2010 were as follows:
Gross Carrying | Accumulated | Net Carrying | ||||||||||
Amount | Amortization | Amount | ||||||||||
Developed product research |
$ | 28,900 | $ | (8,546 | ) | $ | 20,354 | |||||
Order backlog |
13,100 | (13,100 | ) | | ||||||||
Customer relationships |
4,100 | (2,020 | ) | 2,080 | ||||||||
Total intangible assets |
$ | 46,100 | $ | (23,666 | ) | $ | 22,434 | |||||
Intangible assets amortization expense was $1,787 and $7,659 for the
three-month periods ended June 30, 2010 and 2009, respectively. The following table
outlines the estimated future amortization expense related to intangible assets as of
June 30, 2010:
Amount | ||||
Year Ended March 31, | ||||
2011 |
$ | 5,360 | ||
2012 |
6,834 | |||
2013 |
5,780 | |||
2014 |
4,460 | |||
Total |
$ | 22,434 | ||
7. Income Taxes
During the three-month period ended June 30, 2010, the Company recorded $21 of
current income tax expense attributable to income earned in certain foreign tax
jurisdictions and certain state tax jurisdictions. In other profitable tax jurisdictions,
the Company did not record income tax expense as the income tax benefits of prior
operating losses were used to offset any potential income tax expense. For those
jurisdictions in which the Company generated operating losses, the Company recorded a valuation allowance
to offset potential income tax benefits associated with these operating losses. During
the three-month period ended June 30, 2009, the Company recorded $15 of current income
tax expense attributable to income earned in certain foreign tax jurisdictions. In other
tax jurisdictions, the Company generated operating losses and recorded a valuation
allowance to offset potential income tax benefits associated with these operating losses.
Because of the uncertainty regarding the timing and extent of future profitability, the
Company has recorded a valuation allowance to offset potential income tax benefits
associated with operating losses and other net deferred tax assets. There can be no
assurance that deferred tax assets subject to the valuation allowance will ever be
realized.
As of June 30, 2010 and 2009, the Company did not have any material unrecognized tax
benefits, and the Company does not anticipate that its unrecognized tax benefits will
significantly change within the next 12 months. The Company recognizes
interest and penalties on unrecognized tax benefits as components of income tax
expense. The Company did not have any accrued interest or penalties associated with any
unrecognized tax benefits as of June 30 and March 31, 2010.
The Company is subject to taxation in the United States, Japan, Germany and various
state, local and other foreign jurisdictions. The Companys U.S. federal, Japan, Germany
and New Jersey state income tax returns have been examined by the respective taxing
authorities through the fiscal years ended March 31, 2008, March 31, 2006, March 31, 2007
and March 31, 2007, respectively. There are no income tax examinations currently in
progress.
8
Table of Contents
8. Stockholders Equity
Common and Preferred Stock
The Company is authorized to issue 150,000 shares of $0.01 par value common stock
and 15,000 shares of $0.01 par value preferred stock. Each share of the Companys common
stock entitles the holder to one vote on all matters to be voted upon by the
shareholders. The board of directors has the authority to issue preferred stock in one or
more classes or series and to fix the designations, powers, preferences and rights and
qualifications, limitations or restrictions thereof, including the dividend rights,
dividend rates, conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any class or series,
without further vote or action by the stockholders. As of June 30, 2010, no shares of
preferred stock had been issued. In connection with the acquisition of StrataLight, 118
common shares were held in an escrow account as of June 30, 2010 pending final resolution
of indemnification claims.
Rights Agreement
On June 18, 2009, the Companys board of directors adopted a shareholder rights plan
(the Rights Plan) designed to protect the Companys net operating loss carryforwards
and other related tax attributes (NOLs) that the board of directors considered to be a
valuable asset that could be used to reduce future potential federal and state income tax
obligations. The rights were designed to deter stock accumulations made without prior
approval from the Companys board of directors that would trigger an ownership change,
as that term is defined in Section 382 of the Internal Revenue Code of 1986, as amended
(the Code), with the result of limiting the availability for future use of the NOLs to
the Company. The Rights Plan was not adopted in response to any known
accumulation of shares of the Companys stock.
On June 22, 2009, the Company distributed a dividend of one preferred stock purchase
right on each outstanding share of the Companys common stock to holders of record on
such date. Subject to limited exceptions, the rights will be exercisable if a person or
group acquires 4.99% or more of the Companys common stock or announces a tender offer
for 4.99% or more of the common stock. Under certain circumstances, each right will
entitle stockholders to buy one one-hundredth of a share of newly created series A junior
participating preferred stock of the Company at an exercise price of $17.00. The
Companys board of directors is entitled to redeem the rights at a price of $0.01 per
right at any time before a person has acquired 4.99% or more of the outstanding common
stock.
The Rights Plan includes a procedure whereby the board of directors will consider
requests to exempt certain proposed acquisitions of common stock from the applicable
ownership trigger if the board of directors determines that the requested acquisition
will not limit or impair the availability of future use of the NOLs to the Company. The
rights will expire on June 22, 2012 or earlier, upon the closing of a merger or
acquisition transaction that is approved by the board of directors prior to the time at
which a person or group acquires 4.99% or more of the Companys common stock or announces
a tender offer for 4.99% or more of the common stock, or if the board of directors
determines that the NOLs have been fully utilized or are no longer available under
Section 382 of the Code.
If a person acquires 4.99% or more of the outstanding common stock of the Company,
each right will entitle the right holder to purchase, at the rights then-current
exercise price, a number of shares of common stock having a market value at that time of
twice the rights exercise price. The person who acquired 4.99% or more of the
outstanding common stock of the Company is referred to as the acquiring person.
Existing stockholders of the Company who already own 4.99% or more of the Companys
common stock would only be an acquiring person if they acquired additional shares of
common stock. Rights held by the acquiring person will become void and will not be
exercisable. If the Company is acquired in a merger or other business combination
transaction that has not been approved by the Companys board of directors, each right
will entitle its holder to purchase, at the rights then-current exercise price, a number
of shares of the acquiring companys common stock having a market value at that time of
twice the rights exercise price.
On February 8, 2010, Marubeni Corporation filed a Schedule 13G/A reporting events
that, when taken together with other changes in ownership of the Companys common stock
by its five percent or greater stockholders during the prior three-year
period, constituted an ownership change for the Company as such term is defined in
Section 382 of the Code, with the result of limiting the availability of the Companys
NOLs for future use.
9. Net Loss Per Share
Basic net loss per share is computed by dividing net loss by the weighted average
number of common shares outstanding during the periods presented. Diluted net loss per
share includes dilutive common stock equivalents, using the treasury stock method, when
dilutive.
9
Table of Contents
The following table presents the calculation of basic and diluted net loss per share:
Three Months Ended June 30, | ||||||||
2010 | 2009 | |||||||
Numerator: |
||||||||
Net loss, basic and diluted |
$ | (16,260 | ) | $ | (23,717 | ) | ||
Denominator: |
||||||||
Weighted average shares outstanding basic |
89,873 | 88,656 | ||||||
Effect of potentially dilutive options |
| | ||||||
Effect of potentially restrictive share units |
| | ||||||
Weighted average shares outstanding diluted |
89,873 | 88,656 | ||||||
Basic net loss per share |
$ | (0.18 | ) | $ | (0.27 | ) | ||
Diluted net loss per share |
$ | (0.18 | ) | $ | (0.27 | ) | ||
The following table summarizes the shares of common stock of the Company
issuable at the end of each period but that have been excluded from the computation of
diluted net loss per share as their effect is anti-dilutive.
June 30, | ||||||||
2010 | 2009 | |||||||
Stock options |
14,851 | 9,974 | ||||||
Stock appreciation rights |
516 | 543 | ||||||
Restricted stock units and other |
391 | 193 | ||||||
Total |
15,758 | 10,710 | ||||||
10. Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss) as of June 30 and
March 31, 2010 were as follows:
June 30, | March 31, | |||||||
2010 | 2010 | |||||||
Foreign currency translation adjustment |
11,663 | 9,960 | ||||||
Unrealized income (loss) on foreign currency forward contract |
386 | (251 | ) | |||||
Defined benefit plan costs, net |
(43 | ) | (64 | ) | ||||
Accumulated other comprehensive income |
$ | 12,006 | $ | 9,645 | ||||
The components of comprehensive loss for the three-month periods ended June 30,
2010 and 2009 were as follows:
Three Months Ended June 30, | ||||||||
2010 | 2009 | |||||||
Net loss |
$ | (16,260 | ) | $ | (23,717 | ) | ||
Other comprehensive income: |
||||||||
Foreign currency translation adjustment |
1,703 | 1,692 | ||||||
Change in valuation of foreign currency contracts |
637 | 60 | ||||||
Change in defined benefit plan actuarial assumptions |
21 | 19 | ||||||
Total comprehensive loss |
$ | (13,899 | ) | $ | (21,946 | ) | ||
11. Employee Benefits
The Company sponsors the Opnext, Inc. 401(k) Plan (the Plan) to provide retirement
benefits for its U.S. employees. As allowed under Section 401(k) of the Code, the Plan
provides tax-deferred salary deductions for eligible employees. Employees may contribute
from one percent to 60 percent of their annual compensation to the Plan, subject to an
annual limit as set periodically by the Internal Revenue Service. The Company
historically matched employee contributions at a ratio of two-thirds of one dollar for
each dollar an employee contributed up to a maximum of two-thirds of the first six
percent of compensation an employee contributed. All matching contributions vested
immediately. On April 1, 2009, the Company suspended its
matching contributions to the
Plan in order to reduce the Companys cost structure and operating expenses. Accordingly,
the Company made no matching contributions to the Plan in the three-month periods ended
June 30, 2010 and 2009. In addition, the Plan provides for discretionary contributions as
determined by the board of directors. Such contributions to the Plan, if made, are
allocated among eligible participants in the proportion of their salaries to the total
salaries of all participants. No discretionary contributions were made in the three-month
periods ended June 30, 2010 and 2009.
10
Table of Contents
The Company sponsors a defined contribution plan and a defined benefit plan to
provide retirement benefits for its employees in Japan. Under the defined contribution
plan, contributions are provided based on grade level and totaled $215 and $204 for the
three-month periods ended June 30, 2010 and 2009, respectively. The employee can elect to
receive the benefit as additional salary or contribute the benefit to the plan on a
tax-deferred basis.
Under the defined benefit plan, the Company calculates benefits based on an
employees individual grade level and years of service. Employees are entitled to a lump
sum benefit upon retirement or upon certain instances of termination. As of June 30 and
March 31, 2010, there were no plan assets. Net periodic benefit costs for the three-month
periods ended June 30, 2010 and 2009 were as follows:
Three Months Ended June 30, | ||||||||
2010 | 2009 | |||||||
Pension benefit: |
||||||||
Service cost |
$ | 239 | $ | 225 | ||||
Interest cost |
25 | 19 | ||||||
Amortization of prior service cost |
21 | 20 | ||||||
Net pension plan loss |
$ | 285 | $ | 264 | ||||
Weighted average assumptions used to determine net pension plan loss: |
||||||||
Discount rate |
2.00 | % | 2.00 | % | ||||
Salary increase rate |
2.7 | % | 2.8 | % | ||||
Expected residual active life |
15.5 years | 15.8 years |
The reconciliation of the actuarial present value of the projected benefit obligations
for the defined benefit pension plan follows:
Three Months Ended June 30, | ||||||||
2010 | 2009 | |||||||
Benefit obligation at beginning of period |
$ | 4,957 | $ | 3,828 | ||||
Service cost |
239 | 225 | ||||||
Interest cost |
25 | 19 | ||||||
Realized actuarial loss (gain) |
| | ||||||
Benefits paid |
(35 | ) | (7 | ) | ||||
Foreign currency translation |
292 | 107 | ||||||
Benefit obligation at end of period |
$ | 5,478 | $ | 4,172 | ||||
June 30, | March 31, | |||||||
2010 | 2010 | |||||||
Amount recognized in the consolidated balance sheet: |
||||||||
Accrued liabilities |
$ | 107 | $ | 85 | ||||
Other long-term liabilities |
5,371 | 4,872 | ||||||
Net amount recognized |
$ | 5,478 | $ | 4,957 | ||||
Amounts recognized in accumulated other comprehensive income: |
||||||||
Net unrealized actuarial gain |
$ | 264 | $ | 258 | ||||
Prior service cost |
(307 | ) | (322 | ) | ||||
Accumulated other comprehensive income |
$ | (43 | ) | $ | (64 | ) | ||
The Company estimates the future benefit payments for the defined benefits plan
will be as follows; $85 in 2011, $154 in 2012, $105 in 2013, $323 in 2014, $205 in 2015
and $2,658 in total over the five years 2016 through 2020.
12. Stock-Based Incentive Plans
The Companys Second Amended and Restated 2001 Long-Term Stock Incentive Plan
provides for the grant of restricted common shares, restricted stock units, stock options
and stock appreciation rights to eligible employees, consultants and directors of the
Company and its affiliates. As of June 30, 2010, this plan had 3,408 shares of common
stock available for future grants.
Restricted Stock
Restricted stock units represent the right to receive a share of Opnext stock at a
designated time in the future, provided that the stock unit is vested at the time.
Restricted stock units granted to non-employee directors generally vest over a one-year
period
11
Table of Contents
from the grant date. The restricted stock units are convertible into common shares
on a one-for-one basis on or within 15 days following the earliest to occur of the date
of the directors separation from service, the date of the directors death or the date
of a change in control of the Company. Recipients of restricted stock units do not pay
any cash consideration for the restricted stock units or the underlying shares and do not
have the right to vote or any other rights of a shareholder until such time as the
underlying shares of stock are distributed.
The following table presents a summary of restricted stock unit activity: |
Weighted- | Average | |||||||||||||||
Restricted | Average | Aggregate | Remaining | |||||||||||||
Stock | Grant Date | Intrinsic | Vesting | |||||||||||||
Units | Fair Value | Value | Period | |||||||||||||
(per share) | (in years) | |||||||||||||||
Non-vested balance at March 31, 2010 |
166 | $ | 1.90 | |||||||||||||
Vested |
(20 | ) | 1.72 | |||||||||||||
Converted |
| | ||||||||||||||
Non-vested balance at June 30, 2010 |
146 | $ | 1.92 | $ | 241 | 0.6 | ||||||||||
Vested at June 30, 2010 |
193 | $ | 2.55 | $ | 319 | |||||||||||
During the three-month period ended June 30, 2010, the Company did not issue
any restricted stock units. All previous issuances were to non-employee members of the
board of directors as compensation for services to be performed. Total compensation
expense of $78 and $94 was recognized for all awards in the three-month periods ended
June 30, 2010 and 2009, respectively. Total unamortized compensation expense to be
recognized over the remaining vesting period for all non-forfeited awards was $161 at
June 30, 2010.
Employee Incentive Award Program
On May 17, 2010, an annual incentive award program (the Program) for the Companys
fiscal year ending March 31, 2011 was approved by the Compensation Committee (the
Committee) of the Companys board of directors, which provides for the
payment of fully vested shares of the Companys common stock under the Opnext, Inc.
Second Amended and Restated 2001 Long-Term Stock Incentive Plan based upon the
achievement of pre-established corporate and individual performance objectives. Employees
of the Company at specified grade levels, including the Companys executive officers, are
eligible to participate in the Program. The individual performance objectives relate to
certain functional goals established by the Committee based on the recipients position
within the Company, and include, without limitation, goals relating to product delivery,
organizational and leadership development, customer revenue, financial statement
objectives, and supplier related objectives. The Company performance objectives relate to
the Companys achievement of a minimum level of earnings before interest, taxes,
depreciation and amortization (EBITDA) and, for certain recipients, the achievement of
other financial goals established for the Company or particular business units of the
Company, including, without limitation, operating profit, revenue and operational
objectives. The achievement of any performance objectives will be determined by the
Committee in its sole discretion. An employees right to receive a stock bonus under the
Program is subject to and conditioned on his or her active employment with the Company in
good standing on the date on which the shares related to such stock bonus are issued. Any
payments under the Program are expected to be made following the first regularly
scheduled meeting of the Committee that occurs after the close of the Companys fiscal
year ending March 31, 2011 in accordance with the Companys equity grant policies.
As of June 30, 2010, 1,017 shares with a fair value of $2.34 were anticipated to be
distributed. During the three months ended June 30, 2010, total compensation expense of
$329 was recorded, with $2,051 of additional compensation expense anticipated to be
recorded over the remainder of the fiscal year ending March 31, 2011.
Stock Options
Stock option awards to employees generally become exercisable with respect to
one-quarter or one-third of the shares awarded on each one-year anniversary of the date
of grant and generally have a ten- or seven-year life. At March 31, 2010 and 2009, the
Company had 1,010 and 1,000 outstanding options that were granted to Hitachi and Clarity
Partners, L.P., respectively, in connection with the appointment of their employees as
directors of the Company. The non-employee options expire ten years from the grant date
and were fully vested as of November 2004. Accordingly, no costs were incurred in
connection with non-employee options during the three-month periods ended June 30, 2010
and 2009, respectively.
12
Table of Contents
The fair value of each option award is estimated on the date of grant using the
Black-Scholes option valuation and the assumptions noted in the following table:
Three Months Ended June 30, | ||||||||
2010 | 2009 | |||||||
Expected term (in years) |
4.75 | 3.60 | ||||||
Volatility |
83.8 | % | 88.8 | % | ||||
Risk-free interest rate |
1.92 | % | 1.48 | % | ||||
Dividend yield |
| | ||||||
Forfeiture rate |
10.0 | % | 10.0 | % |
Compensation expense for employee stock option awards was $1,634 and $1,482 for the
three-month periods ended June 30, 2010 and 2009, respectively. At June 30, 2010, the
total compensation costs related to unvested stock option awards granted under the
Companys stock-based incentive plan but not recognized was $15,727 and will be
recognized over the remaining weighted average vesting period of three years. The
weighted average fair value of options granted during the three-month periods ended June
30, 2010 and 2009 was $1.33 and $1.40, respectively.
A summary of stock option activity follows:
Weighted | Average | |||||||||||||||
Average | Aggregate | Remaining | ||||||||||||||
Exercise | Intrinsic | Contractual | ||||||||||||||
Shares | Price | Value | Life | |||||||||||||
(per share) | (in years) | |||||||||||||||
Balance at March 31, 2010 |
13,355 | $ | 6.16 | |||||||||||||
Granted |
2,036 | 2.04 | ||||||||||||||
Forfeited or expired |
(517 | ) | 4.23 | |||||||||||||
Exercised |
(23 | ) | 1.68 | |||||||||||||
Balance at June 30, 2010 |
14,851 | $ | 5.67 | $ | 18 | 7.4 | ||||||||||
Options exercisable at June 30, 2010 |
5,258 | $ | 10.43 | $ | 18 | 4.5 | ||||||||||
The following table summarizes information concerning outstanding and
exercisable options at June 30, 2010:
Options Outstanding | Options Exercisable | |||||||||||||||||||||||
Weighted | Weighted | Weighted | Weighted | |||||||||||||||||||||
Average | Average | Average | Average | |||||||||||||||||||||
Number | Remaining | Exercise | Number | Remaining | Exercise | |||||||||||||||||||
Range of Exercise Prices | Outstanding | Life | Price | Exercisable | Life | Price | ||||||||||||||||||
(in years) | (in years) | |||||||||||||||||||||||
$0.78 $1.68 |
1,496 | 7.2 | $ | 1.67 | 638 | 5.2 | $ | 1.65 | ||||||||||||||||
$1.74 $2.73 |
7,274 | 6.4 | 2.14 | 571 | 5.6 | 2.30 | ||||||||||||||||||
$4.47 $8.89 |
2,559 | 5.8 | 5.98 | 810 | 5.6 | 6.07 | ||||||||||||||||||
$11.34 $15.00 |
3,522 | 2.6 | 14.44 | 3,239 | 2.2 | 14.68 | ||||||||||||||||||
Total |
14,851 | 5,258 | ||||||||||||||||||||||
Stock Appreciation Rights (SAR)
The Company has awarded stock appreciation rights to its employees in Japan. The
awards generally vested with respect to one-third or one-quarter of the shares on each of
the first three or four anniversaries of the date of grant and have a ten-year life. As
of June 30, 2010, the Company had 555 SARs outstanding, 516 requiring settlement in the
Companys stock with average remaining lives of 3.9 years and 39 requiring settlement in
cash with average remaining lives of 3.9 years. The Company did not grant any stock
appreciation rights during the three months ended June 30, 2010.
Compensation expense for vested stock appreciation rights requiring settlement in
the Companys stock was $12 and $24 for the three-month periods ended June 30, 2010 and
2009, respectively. At June 30, 2010, the total compensation
expense related to these stock
appreciation rights to be recognized over the remaining weighted average vesting period
of three months was $11, net of estimated forfeitures. Stock appreciation rights
requiring cash settlement are revalued at the end of each reporting period.
13
Table of Contents
13. Short-Term Debt
The Company entered into a $20,060 short-term yen-denominated loan with The Sumitomo
Trust Bank on March 28, 2008, which is due monthly unless renewed. As of June 30 and
March 31, 2010, the outstanding balance was $22,650 and $21,430, respectively. Interest
is paid monthly on the loan at TIBOR plus a premium. The total interest expense and
weighted average interest rates for the three-month periods ended June 30, 2010 and 2009 were
$77 and 1.41%, and $74 and 1.44%, respectively.
14. Concentrations of Risk
At June 30 and March 31, 2010, cash and cash equivalents consisted primarily of
investments in overnight money market funds with several major financial institutions in
the United States.
The Company sells primarily to customers involved in the application of laser
technology and the manufacture of data and telecommunications
products. For the three-month period ended June 30, 2010, sales to three customers in aggregate, Alcatel-Lucent, Cisco
Systems, Inc. and subsidiaries (Cisco) and Huawei
Technologies Co., Ltd. (Huawei),
represented 51.0% of total revenues. For the three-month period ended June 30, 2009,
sales to three customers in aggregate, Ciena Corporation, Cisco and Nokia Siemens Network
(NSN), represented 57.6% of total revenues. No other customer accounted for more than
10% of total revenues in any of these periods. At June 30, 2010, Alcatel-Lucent and
Huawei accounted for 25.2% of total accounts receivable and at March 31, 2010,
Alcatel-Lucent and NSN accounted for 26.0% of accounts receivable.
15. Commitments and Contingencies
The Company leases buildings and certain other property. Rental expense under these
operating leases was $870 and $928 for three-month periods ended June 30, 2010 and 2009,
respectively. Operating leases associated with leased buildings include escalating lease
payment schedules. Expense associated with these leases is recognized on a straight-line
basis. In addition, the
Company has entered into capital leases with Hitachi Capital Corporation for certain
equipment. The table below shows the future minimum lease payments due under
non-cancelable capital leases with Hitachi Capital Corporation and operating leases at
June 30, 2010:
Capital | Operating | |||||||
Leases | Leases | |||||||
Year ending March 31: | ||||||||
2011 |
$ | 10,991 | $ | 2,719 | ||||
2012 |
8,471 | 1,292 | ||||||
2013 |
5,371 | 364 | ||||||
2014 |
907 | 248 | ||||||
2015 |
676 | | ||||||
Thereafter |
195 | | ||||||
Total minimum lease payments |
26,611 | $ | 4,623 | |||||
Less amount representing interest |
(1,298 | ) | ||||||
Present value of capitalized payments |
25,313 | |||||||
Less current portion |
(13,227 | ) | ||||||
Long-term portion |
$ | 12,086 | ||||||
As of June 30, 2010, the Company had outstanding purchase commitments of
$85,874, primarily for the purchase of raw materials expected to be transacted within the
next fiscal year.
The Companys accrual for and the change in its product warranty liability, which is
included in accrued expenses, are as follows:
Three Months Ended June 30, | ||||||||
2010 | 2009 | |||||||
Beginning balance |
$ | 7,583 | $ | 11,922 | ||||
Warranty provision on new product sold |
326 | 956 | ||||||
Warranty claims processed including warranty expirations |
(937 | ) | (2,412 | ) | ||||
Foreign currency translation and other adjustments |
95 | 53 | ||||||
Ending balance |
$ | 7,067 | $ | 10,519 | ||||
On March 27, 2008, Furukawa Electric Co. (Furukawa) filed a complaint
against Opnext Japan, Inc., the Companys wholly owned subsidiary (Opnext Japan), in the Tokyo
District Court, alleging that certain laser diode modules sold by
Opnext Japan infringe Furukawas
Japanese Patent No. 2,898,643 (the Furukawa Patent). The complaint sought an injunction
as well as 300 million
14
Table of Contents
yen in royalty damages. Opnext Japan filed its answer on May 7, 2008 stating therein
its belief that it does not infringe the Furukawa Patent and that the Furukawa Patent is
invalid. On February 24, 2010, the Tokyo District Court entered judgment in favor of
Opnext Japan, which judgment was appealed by Furukawa to the Intellectual Property High
Court on March 9, 2010. We intend to defend ourselves vigorously in this litigation.
16. Related Party Transactions
OPI was incorporated on September 18, 2000 (date of inception) in Delaware as a
wholly owned subsidiary of Hitachi, Ltd. (Hitachi), a corporation organized under the
laws of Japan. Opnext Japan, Inc. (OPJ or Opnext Japan) was established on September
28, 2000, and on January 31, 2001, Hitachi contributed the fiber optic components
business of its telecommunications system division (the Predecessor Business) to OPJ.
On July 31, 2001, Hitachi contributed 100% of the shares of OPJ to OPI in exchange for
100% of OPIs capital stock. In a subsequent transaction on July 31, 2001, Clarity
Partners, L.P., Clarity Opnext Holdings I, LLC, and Clarity Opnext Holdings II, LLC
together purchased a 30% interest in OPIs capital stock.
Opto Device, Ltd. (OPD) was established on February 8, 2002, and on October 1,
2002 OPD acquired the opto device business (the OPD Predecessor Business) from
Hitachi. Also on October 1, 2002, OPI acquired 100% of the shares of OPD from Hitachi.
Effective March 1, 2003, OPD was merged into OPJ.
The Company enters into transactions with Hitachi and its subsidiaries in the normal
course of business. Sales to Hitachi and its subsidiaries were $6,014 and $6,523 for the
three-month periods ended June 30, 2010 and 2009, respectively. Purchases from Hitachi
and its subsidiaries were $6,219 and $5,748 for the three-month periods ended June 30,
2010 and 2009, respectively. Amounts paid for services and certain facility leases
provided by Hitachi and its subsidiaries were $556 and $629 for the three-month periods
ended June 30, 2010 and 2009, respectively. At June 30 and March 31, 2010, the Company
had accounts receivable from Hitachi and its subsidiaries of $5,180 and $3,454,
respectively. In addition, at June 30 and March 31, 2010, the Company had accounts
payable to Hitachi and its subsidiaries of $5,882 and $4,707, respectively. The Company
has also entered into capital equipment leases with Hitachi Capital Corporation as
described in Note 15.
Opnext Japan, Inc. Related Party Agreements
In connection with the transfer of the Predecessor Business from Hitachi to OPJ and
the contribution of the stock of OPJ to the Company, the following related party
agreements were entered into:
Sales Transition Agreement
Under the terms and conditions of the Sales Transition Agreement, Hitachi, through a
wholly owned subsidiary, provides certain logistic services to Opnext in Japan. Specific
charges for such services were $399 and $161 for the three-month periods ended June 30,
2010 and 2009, respectively.
Intellectual Property License Agreements
Opnext Japan and Hitachi are parties to an intellectual property license agreement
pursuant to which Hitachi licenses certain intellectual property rights to Opnext Japan
on the terms and subject to the conditions stated therein on a fully paid,
nonexclusive basis and Opnext Japan licenses certain intellectual property rights to
Hitachi on a fully paid, nonexclusive basis. Hitachi has also agreed to sublicense
certain intellectual property to Opnext Japan to the extent that Hitachi has the right to
make available such rights to Opnext Japan in accordance with the terms and subject to
the conditions stated therein.
In October 2002, Opnext Japan and Hitachi Communication Technologies, Ltd., a wholly
owned subsidiary of Hitachi, entered into an intellectual property license agreement
pursuant to which Hitachi Communication licenses certain intellectual property rights to
Opnext Japan on a fully paid, nonexclusive basis, and Opnext Japan licenses certain
intellectual property rights to Hitachi Communication on a fully paid, nonexclusive
basis, in each case on the terms and subject to the conditions stated therein.
Opnext Japan Research and Development Agreement
Opnext Japan and Hitachi are parties to a research and development agreement,
pursuant to which Hitachi provides certain research and development support to Opnext
Japan in accordance with the terms and conditions of the Opnext Japan Research and
Development Agreement. Intellectual property resulting from certain research and
development projects is owned by Opnext Japan and licensed to Hitachi on a fully paid,
nonexclusive basis. Intellectual property resulting from certain other research and
development projects is owned by Hitachi and licensed to Opnext Japan on a fully paid,
nonexclusive basis. Certain other intellectual property is jointly owned. This agreement
was amended on October 1, 2002 to include OPD under the same terms and conditions as OPJ
and to expand the scope to include research and development support related to the OPD
Predecessor Business. The term of agreement expires on February 20, 2012. The research and
development expenditures relating to this
15
Table of Contents
agreement are generally negotiated semi-annually on a fixed-fee project basis and were $841 and $853 for the three-month
periods ended June 30, 2010 and 2009, respectively.
Opnext Research and Development Agreement
Opnext and Hitachi are parties to a research and development agreement pursuant to
which Hitachi provides certain research and development support to Opnext and/or its
affiliates other than Opnext Japan. Opnext is charged for research and development
support on the same basis that Hitachis wholly owned subsidiaries are allocated research
and development charges for their activities. Additional fees may be payable by Opnext to
Hitachi if Opnext desires to purchase certain intellectual property resulting from
certain research and development projects.
Intellectual property resulting from certain research and development projects is
owned by Opnext and licensed to Hitachi on a fully paid, nonexclusive basis and
intellectual property resulting from certain other research and development projects is
owned by Hitachi and licensed to Opnext on a fully paid, nonexclusive basis in accordance
with the terms and conditions of the Opnext Research and Development Agreement. Certain
other intellectual property is jointly owned. The term of agreement expires on February
20, 2012.
Preferred Provider and Procurement Agreements
Pursuant to the terms and conditions of the Preferred Provider Agreement, subject
to Hitachis product requirements, Hitachi agreed to purchase all of its optoelectronics
component requirements from Opnext, subject to product availability, specifications,
pricing, and customer needs as defined in the agreement. Pursuant to the terms and
conditions of the Procurement Agreement, Hitachi agreed to provide Opnext each month
with a rolling three-month forecast of products to be purchased, the first two months of
such forecast to be a firm and binding commitment to purchase. Although each of these
agreements was terminated on July 31, 2008 by mutual agreement
of the parties, Opnext has
continued to sell to Hitachi and its subsidiaries under the arrangements established by
these agreements. Sales under these arrangements were $6,014 and $6,523 for the
three-month periods ended June 30, 2010 and 2009, respectively.
Raw Materials Supply Agreement
Pursuant to the terms and conditions of the Raw Materials Supply Agreement, Hitachi
agreed to continue to make available for purchase by Opnext laser chips, other
semiconductor devices and all other raw materials that were provided by Hitachi to the
business prior to or as of July 31, 2001 for the production of Opnext optoelectronics
components. By mutual agreement of the parties, the agreement was terminated on July 31,
2008. However, Opnext has continued to make purchases from Hitachi and its subsidiaries
under the arrangement established by the agreement. Purchases under the arrangement were
$6,219 and $5,748 for the three-month periods ended June 30, 2010 and 2009, respectively.
At June 30, 2010, Opnext had accounts payable to Hitachi and its subsidiaries of $5,882
pursuant to such purchases.
Outsourcing Agreement
Pursuant to the terms and conditions of the Outsourcing Agreement, Hitachi agreed to
provide on an interim, transitional basis various data processing services,
telecommunications services and corporate support services, including: accounting,
financial management, information systems management, tax, payroll, human resource
administration, procurement and other general support. By mutual agreement of the
parties, the agreement was terminated on July 31, 2008. However, Hitachi has continued to
make various services available to Opnext under the arrangements established pursuant to
the Outsourcing Agreement. Expenses pursuant to this agreement were $556 and $453 for the
three-month periods ended June 30, 2010 and 2009, respectively.
Logistics and Distribution Agreements
Opnext entered into a Logistics Agreement on April 1, 2002 with Hitachi Transport
System, Ltd., or Hitachi Transport, a wholly owned subsidiary of Hitachi, pursuant to
which Hitachi Transport provides to Opnext and its subsidiaries logistic services, such
as transportation, delivery and warehouse storage. The agreement had an initial term of
one year with automatic one-year renewals. Specific charges for such distribution
services are based on volume at fixed per transaction rates generally negotiated on a
semi-annual basis. Expenses were $399 and $161 for the three-month periods ended June 30,
2010 and 2009, respectively, in connection with the agreement.
Opnext
sells its products directly to end users and through distributors.
During the
three-month period ended June 30, 2010, certain subsidiaries or
affiliates of Hitachi, including
Hitachi High Technologies, Renesas Technology and Renesas Devices, acted as distributors for Opnext in Japan
pursuant to distribution agreements entered into with such parties. These agreements were entered into for
initial one-year terms and are automatically renewable for one-year periods.
16
Table of Contents
Such agreements are basic distributor contracts. Sales pursuant to these agreements
were $2,677 and $414 for the three-month periods ended June 30, 2010 and 2009,
respectively.
Software User License Agreement with Renesas Technology
Opnext Japan and Renesas Technology are parties to a software user license
agreement, pursuant to which Renesas Technology grants to Opnext Japan a non-exclusive
royalty-free, fully paid right to duplicate, modify or alter proprietary software for use
in developing, manufacturing and selling Opnext Japans products, which includes Renesas
Technologys microcomputer product or a version of the program for such product. The
agreement also grants Opnext Japan the right to sublicense to third parties the right to
use a copy of such proprietary software as a component part of Opnext Japans products,
including the right to sublicense to a third party service provider for purposes of
production of such software or manufacturing of Opnext Japans products. The initial
agreement had a term of one year with automatic one-year renewals unless terminated
earlier by mutual agreement. The current term expires on October 20, 2010.
Capital Leases with Hitachi Capital Corporation
Opnext Japan has entered into capital leases with Hitachi Capital Corporation to
finance certain equipment purchases. As of June 30, 2010, Opnext Japan had outstanding
capital leases with Hitachi Capital Corporation of $25,313. The terms of the leases
generally range from three to five years and the equipment can be purchased at the
residual value upon expiration. Opnext Japan can terminate the leases at its discretion
in return for a penalty payment.
Secondment Agreements
Opnext Japan and Hitachi entered into a one-year secondment agreement effective
February 1, 2001 with automatic annual renewals. Per the agreement, Opnext may offer
employment to any seconded employee, however, approval must be obtained from Hitachi in
advance. All employees listed in the original agreement have either been employed by
Opnext or have returned to Hitachi. In addition to the original agreement, additional
secondment agreements have been entered into with terms that range from two to three
years, however, Hitachi became entitled to terminate these agreements after July 31,
2005. The seconded employees are covered by the Hitachi, Ltd. Pension Plan. There were
eight and five seconded employees at June 30 and March 31, 2010, respectively.
Lease Agreements
Opnext Japan leases certain manufacturing and administrative premises from Hitachi
located in Totsuka, Japan. The term of the original lease agreement was annual and began
on February 1, 2001. The lease was amended effective October 1, 2006 to extend the term
until September 30, 2011, and will be renewable annually thereafter provided neither
party notifies the other of its contrary intent. The annual lease payments for these
premises were $189 and $179 for the three-month periods ended June 30, 2010 and 2009,
respectively.
OPD Related Party Agreements
In connection with the transfer of the OPD Predecessor Business from Hitachi to OPD
and the acquisition of OPD by the Company, the following related party agreements were
entered into:
Intellectual Property License Agreement
OPD and Hitachi are parties to an intellectual property license agreement pursuant
to which Hitachi licenses certain intellectual property rights to OPD on the terms and
subject to the conditions stated therein on a fully paid, nonexclusive basis, and OPD
licenses certain intellectual property rights to Hitachi on a fully paid, nonexclusive
basis. Hitachi has also agreed to sublicense certain intellectual property to OPD, to the
extent that Hitachi has the right to make available such rights to OPD, in accordance
with the terms and conditions of the Intellectual Property License Agreement.
Secondment Agreements
OPD, Hitachi and one of Hitachis wholly owned subsidiaries entered into a one-year
secondment agreement effective October 1, 2002 with automatic annual renewals. Per the
agreement, Opnext may offer employment to any seconded employee, however, approval must
be obtained from Hitachi in advance. All employees listed in the original agreement have
either been employed by Opnext or have returned to Hitachi. In addition to the original
agreement, additional secondment agreements have been entered into with individuals with
terms that range from two to three years, however, Hitachi became entitled to terminate
these agreements after September 30, 2006. The seconded employees are covered by the
pension plans of Hitachi and its subsidiaries. There were no seconded employees at June
30, 2010, and one seconded employee at March 31, 2010.
17
Table of Contents
Lease Agreement
OPD leases certain manufacturing and administrative premises from an entity in which
Hitachi is a joint venture partner. The lease expires on March 31, 2011, with a five-year
extension, subject to either party notifying the other of its contrary intent. The lease
payments for these properties were $12 and $16 for the three-month periods ended June 30,
2010 and 2009, respectively.
17. Operating Segments and Geographic Information
Operating Segments
The Company operates in one business segment optical subsystems, modules and
components. Optical subsystems, modules and components transmit and receive data
delivered via light in telecommunication, data communication, industrial and commercial
applications.
Geographic Information
Three Months Ended June 30, | ||||||||
2010 | 2009 | |||||||
Revenues: |
||||||||
North America |
$ | 34,822 | $ | 41,728 | ||||
Europe |
17,275 | 27,894 | ||||||
Asia Pacific |
16,354 | 7,625 | ||||||
Japan |
10,415 | 8,062 | ||||||
Total |
$ | 78,866 | $ | 85,309 | ||||
Revenues attributed to geographic areas are based on the bill to location of the
customer.
June 30, | March 31, | |||||||
2010 | 2010 | |||||||
Assets: |
||||||||
North America |
$ | 211,556 | $ | 230,851 | ||||
Japan |
132,468 | 121,122 | ||||||
Europe |
21,487 | 18,325 | ||||||
Total |
$ | 365,511 | $ | 370,298 | ||||
The geographic designation of assets represents the country in which title is
held.
18. Subsequent Events
The Company has determined that there are no material recognized or unrecognized
subsequent events.
18
Table of Contents
Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
Forward-Looking Statements
The following discussion relates to our consolidated financial statements and should
be read in conjunction with the financial statements and notes thereto appearing
elsewhere in this report. Statements contained in this Managements Discussion and
Analysis of Financial Condition and Results of Operations that are not historical facts
may be forward-looking statements. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from the
forward-looking statement. Although the information is based on our current expectations,
actual results could vary from expectations stated in this report. Numerous factors will
affect our actual results, some of which are beyond our control. These include current
and future economic conditions and events and their impact on us and our customers, the
strength of telecommunications and data communications markets, competitive market
conditions, interest rate levels, volatility in our stock price, and capital market
conditions. You are cautioned not to place undue reliance on this information, which
speaks only as of the date of this quarterly report. We assume no obligation to update
publicly any forward-looking information, whether as a result of new information, future
events or otherwise, except to the extent we are required to do so in connection with our
ongoing requirements under federal securities laws to disclose material information. For
a discussion of important risks related to our business, and related to investing in our
securities, including risks that could cause actual results and events to differ
materially from results and events referred to in the forward-looking information, see
Part I, Item 1A of our Annual Report on Form 10-K filed with the SEC on June 14, 2010.
The following discussion and analysis should be read in conjunction with the unaudited
consolidated financial statements and the notes thereto included in Item 1 of this report
and our audited consolidated financial statements and notes for the fiscal year ended
March 31, 2010, included in our Annual Report on Form 10-K filed with the SEC on June 14,
2010,.
Overview and Background
We were incorporated as a wholly owned subsidiary of Hitachi, Ltd., or Hitachi, in
September of 2000. In July of 2001, Clarity Partners, L.P. and related investment
vehicles invested in us and we became a majority owned subsidiary of Hitachi. In
October 2002, we acquired Hitachis opto device business and expanded our product line
into select industrial and commercial products. In June 2003, we acquired Pine Photonics
Communication Inc., or Pine, and expanded our product line of SFP transceivers with data
rates less than 10Gbps that are sold to telecommunication and data communication
customers. In February 2007, we completed our initial public offering of common stock on
the NASDAQ market. On January 9, 2009, we completed our acquisition of StrataLight
Communications, Inc. (StrataLight), which expanded our product line to include 40Gbps
subsystems. We presently have sales and marketing offices in the United States, Europe,
Japan and China, which are strategically located in close proximity to our major
customers. We also have research and development facilities that are co-located with each
of our manufacturing facilities in the United States and Japan. In addition, we use
contract manufacturers that are located in China, Japan, the Philippines, Taiwan,
Thailand and the United States. Certain of our contract manufacturers that assemble or
produce modules are strategically located close to our customers contract manufacturing
facilities to shorten lead times and enhance flexibility.
Revenues
Through our direct sales force supported by manufacturer representatives and
distributors, we sell products to many of the leading network systems vendors throughout
North America, Europe, Japan and Asia. Our customers include many of the top
telecommunications and data communications network systems vendors in the world. We also
supply components to several major transceiver module companies and we sell to select
industrial and commercial customers. Sales to telecommunication and data communication
customers, our communication sales, accounted for 91.5% and 97.3% of our total revenues
during the three-month periods ended June 30, 2010 and 2009, respectively. Also
during the three-month periods ended June 30, 2010 and 2009, sales of our
communication products with 10Gbps or lower data rates, which we refer to as our 10Gbps
and below products, represented 70.8% and 56.2% of our total revenues, respectively,
while sales of our communications products with 40Gbps or higher rates, which we refer to
as our 40Gbps and above products, represented 19.3% and 41.0% of our total revenues,
respectively. The term sales when used herein in reference to our 40Gbps and above
products includes revenues received pursuant to research and development agreements.
The
number of leading network systems vendors that supply the global
telecommunications and data communications markets is concentrated and so, in turn, is
our customer base. For the three-month period ended June 30, 2010, sales to three
customers in aggregate, Alcatel-Lucent, Cisco Systems, Inc. and subsidiaries (Cisco)
and Huawei Technologies Co., Ltd. (Huawei), represented 51.0% of total revenues. For the
three-month period ended June 30, 2009, sales to three customers in aggregate, Ciena
Corporation (Ciena), Cisco and Nokia Siemens Networks, represented 57.6% of total
revenues. Although we continue to attempt to expand our customer base, we anticipate that
a small number of customers will continue to represent a significant portion of our total
revenues.
19
Table of Contents
During the three-month periods ended June 30, 2010 and 2009, sales attributed North
America represented 44.2% and 48.9% of revenues, sales attributed to Europe represented
21.9% and 32.7% of revenues, sales attributed to Asia Pacific (excluding Japan) represented
20.7% and 8.9% of sales, and sales attributed to Japan represented 13.2% and 9.5% of
revenues, respectively.
Because certain sales transactions and the related assets and liabilities are
denominated in currencies other than the U.S. dollar, primarily the Japanese yen, our
revenues are exposed to market risks related to fluctuations in foreign currency exchange
rates. For example, for the three-month periods ended June 30, 2010 and 2009, 13.8% and
9.5% of our sales were denominated in Japanese yen, respectively. To the extent we
continue to generate a significant portion of our sales in currencies other than the U.S.
dollar, our revenues will continue to be affected by foreign currency exchange rate
fluctuations.
Cost of Sales and Gross Margin
Our cost
of sales primarily consists of materials, including components, that are
either (i) assembled at one of our three internal manufacturing facilities or at one of our contract manufacturers or (ii) procured from third-party vendors. Because
of the complexity and proprietary nature of laser manufacturing, and the advantage of
having our internal manufacturing resources co-located with our research and development
staffs, most of the lasers used in our optical module and component products are
manufactured in our facilities in Komoro and Totsuka, Japan. Our materials include
certain parts and components that are purchased from a limited number of suppliers or, in
certain situations, from a single supplier. Our cost of sales also includes labor costs
for employees and contract laborers engaged in the production of our components and the
assembly of our finished goods, outsourcing costs, the cost and related depreciation of
manufacturing equipment, as well as manufacturing overhead costs, including the costs for
product warranty repairs and inventory adjustments for excess and obsolete inventory.
Our cost of sales is exposed to market risks related to fluctuations in foreign
currency exchange rates because a significant portion of our costs and the related assets
and liabilities are denominated in Japanese yen. Our cost of sales denominated in
Japanese yen was 41.1% and 28.7% during the three-month periods ended June 30, 2010 and
2009, respectively. The increase in the portion of our cost of sales denominated in
Japanese yen during the three-month period ended June 30, 2010 was primarily attributable
to the decline in sales of 40Gbps subsystems, which are denominated in U.S. dollars.
Our gross margins vary among our product lines and are generally higher on our
40Gbps and above and longer distance 10Gbps products. Our gross margins are also
generally higher on products where we enjoy a greater degree of vertical integration with
respect to the subcomponents of such products. Our overall gross margins primarily
fluctuate as a result of our overall sales volumes, changes in average selling prices and
product mix, the introduction of new products and subsequent generations of existing
products, manufacturing yields, our ability to reduce product costs, and fluctuations in
foreign currency exchange rates. Our gross margins are also impacted by amortization of
acquired developed technology resulting from the acquisition of StrataLight.
Research and Development Expenses
Research and development expenses consist primarily of salaries and benefits of
personnel related to the design, development and quality testing of new products or
enhancement of existing products, as well as outsourced services provided by Hitachis
research laboratories pursuant to our contractual agreements. We incurred $0.8 million
and $0.9 million of expenses in connection with these agreements during the three-month
periods ended June 30, 2010 and 2009, respectively. In addition, our research and
development expenses include the cost of developing prototypes and material costs
associated with the testing of products prior to shipment, the cost and related
depreciation of equipment used in the testing of products prior to shipment, and the
expenses associated with other contract research and development related services.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries and
benefits for our employees that perform our sales and related support, marketing, supply
chain management, finance, legal, information technology, human resource and other
general corporate functions, as well as internal and outsourced logistics and
distribution costs, commissions paid to our manufacturers representatives, professional
fees and other corporate related expenses. Selling, general and administrative expenses
are also impacted by the continuing costs associated with pending litigation.
Inventory
Certain of our more significant customers have implemented a supply chain management
tool called vendor managed inventory (VMI) that requires suppliers, such as us, to
assume responsibility for maintaining an agreed upon level of consigned inventory at the
customers location or at a third-party logistics provider based on the customers demand
forecast. Notwithstanding the fact that we build and ship the inventory, the customer
does not purchase the consigned inventory until the inventory is drawn or pulled by the
customer or third-party logistics provider to be used in the manufacture of the
customers product. Though the consigned inventory may be at the customers or the
third-party logistics providers physical location, it
20
Table of Contents
remains inventory owned by us until the inventory is drawn or pulled, which is the
time at which the sale takes place. Given that under such programs we are subject to the
production schedule and inventory management decisions of the customer or the third-party
logistics provider, our participation in VMI programs generally requires us to carry
higher levels of finished goods inventory than we might otherwise plan to carry. As of
June 30, and March 31, 2010, inventories included inventory consigned to customers or
their third-party logistics providers pursuant to VMI arrangements of $7.2 million and
$7.5 million, respectively.
Income Taxes
We are subject to taxation in the United States, Japan, Germany and various state,
local and other foreign jurisdictions. Our U.S. federal, Japan, Germany and New Jersey
state income tax returns have been examined by the respective taxing authorities through
the fiscal years ended March 31, 2008, March 31, 2006, March 31, 2007 and March 31, 2007,
respectively. There are no income tax examinations currently in progress.
Factors That May Influence Future Results of Operations
Global Economic Conditions
The credit and financial markets continue to experience significant volatility
characterized by the bankruptcy, failure, collapse or sale of various financial
institutions, increased volatility in securities prices, severely diminished liquidity
and credit availability, concern over the economic stability of certain economies in
Europe and a significant level of intervention from the United States and other
governments, as applicable. Continued concerns about the systemic impact of potential
long-term or widespread recession, unemployment, energy costs, geopolitical issues
including government deficits, the availability and cost of credit, and reduced consumer
confidence have contributed to increased market volatility and diminished expectations
for most developed and emerging economies. While recent economic data reflect a
stabilization of the economy and credit markets, the cost and availability of credit
may continue to reflect volatility and uncertainty. Continued turbulence in the United
States and international markets and global economies could restrict our ability and the
ability of our customers to refinance indebtedness, increase the costs of borrowing,
limit access to capital necessary to meet liquidity needs and materially harm operations
or the ability to implement planned business strategies. With respect to our customers,
these factors could also negatively impact the timing and amount of infrastructure
spending, further negatively impacting our sales. For a more detailed discussion of our
capital needs, please see the section Managements Discussion and Analysis of Financial
Conditions and Results of OperationsLiquidity and Capital Resources in our Annual
Report on Form 10-K for the fiscal year ended March 31, 2010.
Expense Reduction Actions
On April 1, 2009, we announced certain plans to reduce our cost structure and
operating expenses, including, but not limited to: an approximately ten percent reduction
in our global workforce, elimination of bonuses for the fiscal year ended March 31, 2009,
a ten percent reduction in executive salaries and director cash compensation, a five
percent reduction in salaries for other employees and suspension of our matching
contribution to the 401(k) plan, each for a period of not less than six months. The ten
percent reduction in executive salaries and director cash compensation, the five percent
reduction in salaries for other employees and the suspension of our matching contribution
to the 401(k) plan were each subsequently extended through the end of the fiscal year
ended March 31, 2010. In addition, in October 2009 we further reduced our global
workforce by approximately five percent. As of April 1, 2010, executive and other
employee salaries and director cash compensation were restored to their levels prior to
the reduction. Such restored compensation is expected to increase our annualized cost and operating expense
structure by approximately $4.5 million in the fiscal year ending March 31, 2011 relative to the
level of such expenses in the fiscal year ended March 31, 2010. Our matching contribution to the 401(k) plan
remains suspended pending further determination.
Revenues
Our
revenues are affected by the capital spending of our customers for
telecommunications and data communications networks and for lasers and infrared LEDs used
in select industrial and commercial markets. The primary markets for our products
continue to be generally characterized by increasing volumes. The increasing demand for our
products is primarily driven by increases in traditional telecommunication and data
communication traffic and increasing demand for high bandwidth applications, such as
video and music downloads and streaming, on-line gaming, peer-to-peer file sharing and
IPTV, as well as new industrial and commercial laser applications.
The increased unit volumes as service providers deploy network systems has
contributed along with intense price competition among optical component manufacturers,
excess capacity, and the introduction of next generation products to the market for
optical components continuing to be characterized by declining average selling prices. In
recent years, we have observed a modest acceleration in the decline of average selling
prices. We anticipate that our average selling prices will continue to decrease in future
periods, although we cannot predict the extent of these decreases for any particular
period.
Our revenues are also impacted by our ability to procure critical component parts
for our products from our suppliers. During the last several years, the number of
suppliers of components has decreased significantly and, more recently, demand for
21
Table of Contents
components has increased significantly. Any supply
deficiencies relating to the quality or
quantities of components we use to manufacture our products can adversely affect our
ability to fulfill customer orders and, therefore, our results of operations. For
example, during each of the quarters ended June 30 and March 31, 2010, we experienced
significant limitations on the components available from certain of our suppliers
resulting in losses of anticipated sales. While we cannot predict the duration or extent
of these supply limitations, we anticipate that such limitations will continue to impact
us to some extent during our fiscal year ending March 31, 2011.
Our revenues are exposed to market risks related to fluctuations in foreign currency
exchange rates because certain sales transactions and the related assets and liabilities
are denominated in currencies other than the U.S. dollar, primarily the Japanese yen. Our
sales denominated in U.S. dollars represented 85.3% and 90.2% of our revenues, and our
sales denominated in Japanese yen represented 13.8% and 9.5% of our revenues, for the
three-month periods ended June 30, 2010 and 2009, respectively. To the extent we generate sales
in currencies other than the U.S. dollar, our future revenues will be affected by foreign
currency exchange rate fluctuations, and could be materially adversely affected.
During the year ended March 31, 2010, we began to enter into development agreements
to design, develop and manufacture complex products, primarily 40Gbps and 100Gbps optical
modules and subsystems, according to the specifications of the customer. Given that such
agreements may in the future represent significant revenue for us, the timing of
execution and delivery on the requirements of any such agreement may have a substantial
effect on our ability to recognize revenue for a particular period. In addition, since
the receipt of payments and recognition of revenue pursuant to such development
agreements are generally subject to the completion of milestones, the revenue related to
any such agreement may be subject to deferral or may not be recognized at all if the
relevant milestone is not achieved. Finally, since the revenue associated with such
agreements can have nominal corresponding cost of sales, these agreements can have a
substantial effect on our gross margin during the period in which such revenue and
associated cost of sales is recognized.
Cost of Sales and Gross Margin
Our cost of sales is and will continue to be exposed to market risks related to fluctuations in foreign
currency exchange rates because a significant portion of our costs and the related assets
and liabilities are denominated in Japanese yen. For example, our cost of sales denominated in
Japanese yen was 41.1% and 28.7% during the three-month periods ended June 30, 2010 and
2009, respectively.
In recent periods, certain of our products that operate at 10Gbps data rates have
generated reduced gross margins, which reduced margins we believe are attributable to,
among other factors, the increased average age of such products, delays in the
development of certain internal subcomponents, the level of vertical integration, and
intensified competition in such product groups. To the extent that we are unable to
introduce, or experience delays in introducing, the next generation of such products, or
to the extent we are unsuccessful in achieving a desirable level of vertical integration
with respect to the subcomponents of such products, we may continue to experience
diminished gross margins in connection with the sales of such products.
We experienced several sequential quarterly declines in sales of our 40Gbps
subsystems products in our most recent quarterly periods. Continuation of this
unfavorable sales trend could negatively affect future gross margins, given that our
gross margins are generally higher on our 40Gbps and above products.
Potential Impairment of Long-Lived Assets
While we continue to believe that the acquisition of StrataLight complements our
core of high speed client technologies, StrataLight has not contributed the level of
revenues that we initially anticipated. For example, StrataLight contributed revenues of
$8.5 million in the quarter ended June 30, 2010 as compared to revenues of $32.3 million
in the quarter ended June 30, 2009. As of March 31, 2009, we recorded a goodwill
impairment charge that represented the full amount of goodwill recorded in connection
with such acquisition. Continuation of this unfavorable level of contribution from StrataLight
could result in the impairment of the long-lived assets associated with the StrataLight
business, including the remaining intangible assets which were valued at $22.4 million as
of June 30, 2010, and could adversely affect our future financial results.
Research and Development Expense
Our research and development expense will vary with our efforts to meet the
anticipated market demand for our new and planned products and to support enhancements to
our existing products. We will continue to invest in our research and development
efforts.
Selling, General and Administrative Expenses
We expect that out selling, general and administrative expenses will fluctuate with
sales volume and be impacted by the continuing costs associated with pending litigation.
22
Table of Contents
Critical Accounting Policies
There have been no significant changes in our critical accounting policies, which
are described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2010.
Results of Operations for the Three-Month Periods Ended June 30, 2010 and 2009
The following table reflects the results of our operations in U.S. dollars and as a
percentage of sales. Our historical operating results may not be indicative of the
results of any future period.
Three Months Ended June 30, | ||||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in dollars) | (as a percentage of sales) | |||||||||||||||
Revenues |
$ | 78,866 | $ | 85,309 | 100.0 | % | 100.0 | % | ||||||||
Cost of sales |
62,630 | 67,118 | 79.4 | % | 78.7 | % | ||||||||||
Amortization of developed product research |
1,445 | 1,445 | 1.8 | % | 1.7 | % | ||||||||||
Gross margin |
14,791 | 16,746 | 18.8 | % | 19.6 | % | ||||||||||
Research and development expenses |
16,382 | 19,064 | 20.8 | % | 22.3 | % | ||||||||||
Selling, general and administrative expenses |
14,276 | 14,440 | 18.1 | % | 16.9 | % | ||||||||||
Amortization of purchased intangibles |
342 | 6,214 | 0.4 | % | 7.3 | % | ||||||||||
(Gain) loss on disposal of property and equipment |
(11 | ) | 9 | (0.0 | )% | 0.0 | % | |||||||||
Operating loss |
(16,198 | ) | (22,981 | ) | (20.6 | )% | (26.9 | )% | ||||||||
Interest (expense) income, net |
(186 | ) | (93 | ) | (0.2 | )% | (0.1 | )% | ||||||||
Other income (expense), net |
145 | (628 | ) | 0.2 | % | (0.7 | )% | |||||||||
Loss before income taxes |
(16,239 | ) | (23,702 | ) | (20.6 | )% | (27.8 | )% | ||||||||
Income tax expense |
(21 | ) | (15 | ) | (0.0 | )% | (0.0 | )% | ||||||||
Net loss |
$ | (16,260 | ) | $ | (23,717 | ) | (20.6 | )% | (27.8 | )% | ||||||
Comparison of the Three-Month Periods Ended June 30, 2010 and 2009
Revenues. Revenues decreased $6.4 million, or 7.5%, to $78.9 million, compared to
$85.3 million for the three-month period ended June 30, 2009. Revenue from sales of
40Gbps and above products decreased $18.6 million, or 53.3%, to $16.3 million compared to
the three-month period ended June 30, 2009, primarily as a result of a decline in 40Gbps
subsystems sales, partially offset by increased sales of 40Gbps and 100Gbps modules.
Revenue from sales of 10Gbps and below products increased $7.8 million, or 16.3%, to
$55.8 million compared to the three-month period ended June 30, 2009 due to higher sales
of XFP and SFP+ modules, partially offset by decreased sales of Xenpak and SFP modules.
Revenue from sales of our industrial and commercial products increased $4.4 million, or
191.3%, to $6.7 million compared to the three-month period ended June 30, 2009.
Gross Margin. Gross margin decreased $2.0 million, or 12.0%, to $14.8 million in the
three-month period ended June 30, 2010, from $16.7 million in the three-month period
ended June 30, 2009. Gross margin for the three-month period ended June 30, 2010 includes
a $2.0 million negative effect from fluctuations in foreign currency exchange rates, net
of the benefit from our hedging program. Gross margin for each of the three-month periods ended June 30, 2010
and 2009 included $1.4 million of developed product technology amortization expense
associated with the acquisition of StrataLight. Additional costs associated with the StrataLight acquisition that
were incurred during the three-month period ended June 30, 2009 included a $1.0 million
charge attributable to purchase price accounting adjustments for inventory sold during
the period and $0.5 million of Employee Liquidity Bonus Plan expense. In addition, gross
margin for the three-month periods ended June 30, 2010 and 2009 included charges of $0.7
million and $1.8 million, respectively, for excess and obsolete inventory reserves.
Gross
margin as a percentage of sales decreased to 18.8% for the three-month period ended
June 30, 2010, from 19.6% for the corresponding period in 2009 due to the unfavorable
impact of lower 40Gbps and above product sales, lower average selling prices and the
negative effect from fluctuations in foreign currency exchange rates, partially offset by
lower average per unit material and outsourcing costs and lower excess and obsolete
inventory charges.
Research and Development Expenses. Research and development expenses decreased
$2.7 million to $16.4 million for the three-month period ended June 30, 2010, from
$19.1 million for the three-month period ended June 30, 2009, despite a $0.4 million
increase from fluctuations in foreign currency exchange rates. Research and development
expenses decreased as a percentage of sales to 20.8% for the three-month period ended
June 30, 2010, from 22.3% for the corresponding period in 2009
23
Table of Contents
as a result of the elimination of Employee Liquidity Bonus Plan payments made during
the three months ended June 30, 2009 as well as employee headcount reductions and reduced
outsourcing services and material costs.
Selling, General and Administrative Expenses. Selling, general and administrative
expenses decreased $0.1 million to $14.3 million for the three-month period ending
June 30, 2010, from $14.4 million for the three-month period ended June 30, 2009.
Selling, general and administrative expenses increased as a percentage of sales to 18.1%
for the three-month period ended June 30, 2010, from 16.9% for the corresponding period
in 2009.
Amortization of Purchased Intangibles. Amortization of purchased intangibles related
to the acquisition of StrataLight was $0.3 million for the three-month period ended June
30, 2010, and all of such amortization related to customer relationships. Amortization of
purchased intangibles related to the acquisition of StrataLight was $6.2 million for the
three-month period ended June 30, 2009 and consisted of $5.9 million related to order
backlog and $0.3 million related to customer relationships.
Interest Expense, Net. Interest expense, net, increased $0.1 million to $0.2 million
in the three-month period ended June 30, 2010, from $0.1 million in the corresponding
period in 2009. Interest expense, net, for each of the three-month periods ended June 30,
2010 and 2009 consisted of interest expense on short-term debt and interest earned on
cash and cash equivalents. The increase in interest expense, net, primarily reflected the
decrease in interest income earned on cash and cash equivalent balances over the
respective periods.
Other Income (Expense). Other income (expense) consisted of other income of
$0.1 million for the three-month period ended June 30, 2010 and other expense of
$0.6 million for the three-month period ended June 30, 2009. Other income (expense)
consisted primarily of net exchange gains and losses on foreign currency transactions.
Income Taxes. During the three-month period ended June 30, 2010, we recorded $21,000
of current income tax expense attributable to income earned in certain foreign tax
jurisdictions and certain state tax jurisdictions. In other profitable tax jurisdictions,
we did not record income tax expense as the income tax benefits of prior operating losses
were used to offset any potential income tax expense. For those
jurisdictions in which we generated operating losses, we recorded a valuation allowance to offset potential income
tax benefits associated with these operating losses. During the three-month period ended
June 30, 2009, we recorded $15,000 of current income tax expense attributable to income
earned in certain foreign tax jurisdictions. In other tax jurisdictions, we generated
operating losses and recorded a valuation allowance to offset potential income tax
benefits associated with these operating losses. Because of the uncertainty regarding the
timing and extent of future profitability, we have recorded a valuation allowance to
offset potential income tax benefits associated with operating losses and other net
deferred tax assets. There can be no assurance that deferred tax assets subject to the
valuation allowance will ever be realized.
We
are subject to taxation in the United States, Japan, Germany and various state, local and
other foreign jurisdictions. Our U.S. federal, Japan, Germany and New Jersey state
income tax returns have been examined by the respective taxing authorities through the
fiscal years ended March, 31, 2008, March 31, 2006, March 31, 2007 and March 31, 2007
respectively. There are no income tax examinations currently in progress.
Liquidity and Capital Resources
During the three-month period ended June 30, 2010, cash and cash equivalents
decreased by approximately $25.8 million to $106.9 million from $132.6 million at
March 31, 2010. This decrease consisted of $19.7 million of net cash used in operating
activities, $3.1 million of capital expenditures, $2.6 million of capital lease and other
financing payments and $0.4 million from the effect of foreign exchange rates on cash.
Net cash used in operating activities reflected our net loss of $16.3 million and an
increase in net current assets excluding cash and cash equivalents of $13.1 million,
partially offset by depreciation and amortization of $5.8 million, non-cash stock-based
compensation expense of $2.1 million and amortization of purchased intangibles of $1.8
million. The increase in net current assets excluding cash and cash equivalents primarily
resulted from an increase in accounts receivable and higher inventory levels. During the
three-month period ended June 30, 2010, we also entered into $2.9 million of new capital
lease obligations.
We believe that existing cash and cash equivalents will be sufficient to fund our
anticipated cash needs for at least the next twelve months. However, we may require
additional financing to fund our operations in the future and there can be no assurance
that additional funds will be available, especially if we experience operating results
below expectations, or, if available, there can be no assurance as to the terms on which
funds might be available. If adequate financing is not available as required, or is not
available on favorable terms, our business, financial position and results of operations
will be adversely affected.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet financing arrangements or unconsolidated
special purpose entities.
24
Table of Contents
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Our
exposure to market risk consists of foreign currency exchange rate fluctuations
related to our international sales and operations and changes in interest rates on cash
and cash equivalents and short-term debt.
To
the extent we generate sales in currencies other than the U.S. dollar, our revenues
will be affected by foreign currency exchange rate fluctuations. For the three-month
periods ended June 30, 2010 and 2009, 13.8% and 9.5%, respectively, of our sales were
denominated in Japanese yen and 0.9% and 0.3%, respectively, of our sales were
denominated in euros. The remaining sales were denominated in U.S. dollars.
To the extent we manufacture our products in Japan, our cost of sales will be
affected by foreign currency exchange fluctuations. During the three-month periods ended
June 30, 2010 and 2009, approximately 41.1% and 28.7%, respectively, of our cost of sales
were denominated in Japanese yen. While we anticipate that we will continue to have a
substantial portion of our cost of sales denominated in Japanese yen, we anticipate the
percentage of cost of sales denominated in Japanese yen to diminish as we plan to expand
the use of contract manufacturers outside of Japan and procure more raw materials in U.S.
dollars.
To the extent we perform research and development activities and selling, general
and administrative functions in Japan, our operating expenses will be affected by foreign
currency exchange rate fluctuations. During the three-month periods ended June 30, 2010
and 2009, approximately 35.8% and 31.0%, respectively, of our operating expenses were
denominated in Japanese yen. We anticipate that a substantial portion of our operating
expenses will continue to be denominated in Japanese yen in the foreseeable future.
As of June 30 and March 31, 2010, we had a net payable position of $5.5 million and
a net receivable position of $1.2 million, subject to foreign currency exchange risk
between the Japanese yen and the U.S. dollar. We are also exposed to foreign currency
exchange risk between the Japanese yen and the U.S. dollar on intercompany sales
transactions involving the Japanese yen and the U.S. dollar. At June 30, 2010, we had
three contracts in place with a nominal value of $6.0 million, and at March 31, 2010, we
had six contracts in place with a nominal value of $12.0 million, with expiration dates
of 90 days or less to hedge a portion of this risk. We do not enter into foreign currency
exchange forward contracts for trading purposes but rather as a hedging vehicle to
minimize the effects of foreign currency exchange fluctuations. Gains or losses on these
derivative instruments are not anticipated to have a material impact on our financial
results.
We
have entered into short-term yen-denominated loan with The Sumitomo Trust Bank which is due monthly unless renewed.
At June 30 and March 31, 2010, the loan balance was
$22.6 million and $21.4 million, respectively. The increase of $1.2 million was due to
changes in foreign currency exchange rates. Interest is paid monthly at TIBOR plus a
premium and ranged from 1.26% to 1.50% and 1.36% to 1.57% during the three-month periods ended
June 30, 2010 and 2009, respectively.
To the extent we maintain significant cash balances in money market accounts, our
interest income will be affected by interest rate fluctuations. As of June 30 and
March 31, 2010, we had $106.9 million and $132.6 million, respectively, of cash balances invested
primarily in traded institutional money market funds or money market deposit accounts at
banking institutions.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures.
Our Chief Executive Officer and Chief Financial Officer, after evaluating with
management the effectiveness of our disclosure controls and procedures (as defined in
Rules 13a-15(e) or Rule15d-15(e) under the Exchange Act) as of June 30, 2010, have
concluded that, as of such date, our disclosure controls and procedures were effective at
the reasonable assurance level based on their evaluation of these controls and procedures
required by paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act.
Our management, including our Chief Executive Officer and Chief Financial Officer,
does not expect that our disclosure controls and procedures or our internal controls will
prevent all error and all fraud. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the objectives of the
control system are met. Further, the design of a control system must reflect the fact
that there are resource constraints and the benefits of controls must be considered
relative to their costs. Due to inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues and
instances of fraud, if any, have been detected.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal controls over financial reporting (as
defined in Rule 13a-15(f) or Rule 15d-15(f) under the Exchange Act), which were
identified in connection with managements evaluation required by paragraph (d) of Rules
13a-15 and 15d-15 under the Exchange Act, that occurred during the three-month period
ended June 30, 2010, that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.
25
Table of Contents
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
We refer you to Part I, Item 3, Legal Proceedings, of our Annual Report on Form 10-K
for the fiscal year ended March 31, 2010, filed on June 14, 2010 (the Annual Report),
for a description of material legal proceedings not in the ordinary course of business as
updated through the filing date of such Annual Report. There have been no material
developments with respect to legal proceedings since the filing of the Annual Report.
Item 1A. Risk Factors.
There have been no material changes to our risk factors as previously disclosed in
the Annual Report on Form 10-K for the fiscal year ended March 31, 2010.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. (Removed and Reserved)
Item 5. Other Information.
None.
Item 6. Exhibits
Exhibit | ||
No. | Description of Document | |
3.1
|
Form of Amended and Restated Certificate of Incorporation of Opnext, Inc.(1) | |
3.2
|
Form of Amended and Restated Bylaws of Opnext, Inc.(1) | |
3.3
|
Specimen of stock certificate for common stock.(1) | |
4.1
|
Pine Stockholder Agreement, dated as of June 4, 2003, by and among Opnext, Inc. and the Stockholders of Pine Photonics Communications, Inc.(1) | |
4.2
|
Registration Rights Agreement, entered into as of July 31, 2001, by and among Opnext, Inc., Clarity Partners, L.P., Clarity Opnext Holdings I, LLC, Clarity Opnext Holdings II, LLC, and Hitachi, Ltd.(1) | |
4.3
|
Stockholders Agreement, dated as of July 31, 2001, between Opnext, Inc. and each of Hitachi, Ltd., Clarity Partners, L.P., Clarity Opnext Holdings I, LLC and Clarity Opnext Holdings II, LLC, as amended.(1) | |
10.1+
|
Pine Photonics Communications, Inc. 2000 Stock Plan.(1) | |
10.2+
|
Form of Pine Photonics Communications, Inc. 2000 Stock Plan: Stock Option Agreement.(1) | |
10.3+
|
Opnext, Inc. 2001 Long-Term Stock Incentive Plan.(1) | |
10.4+
|
Form of Opnext, Inc. 2001 Long-Term Stock Incentive Plan, Nonqualified Stock Option Agreement.(1) | |
10.4a+
|
Form of Opnext, Inc. 2001 Long-Term Stock Incentive Plan, Nonqualified Stock Option Agreement for Senior Executives.(1) | |
10.4b+
|
Form of Opnext, Inc. 2001 Long-Term Stock Incentive Plan, Stock Appreciation Right Agreement.(1) | |
10.4c+
|
Form of Amendment to Stock Appreciation Right Agreement.(4) | |
10.5
|
Form of Hitachi, Ltd. and Clarity Management, L.P. Nonqualified Stock Option Agreement.(1) | |
10.6+
|
Opnext, Inc. Amended and Restated 2001 Long-Term Stock Incentive Plan.(1) | |
10.7+
|
Form of Opnext, Inc. Restricted Stock Agreement.(1) | |
10.8
|
Research and Development Agreement, dated as of July 31, 2001, by and among Hitachi, Ltd., Opnext Japan, Inc. and Opto Device, Ltd. as amended.(1) |
26
Table of Contents
Exhibit | ||
No. | Description of Document | |
10.9
|
Research and Development Agreement, dated as of July 31, 2002, by and between Hitachi, Ltd. and Opnext, Inc., as amended.(1) | |
10.10
|
Intellectual Property License Agreement, dated as of July 31, 2001, by and between Hitachi, Ltd. and Opnext Japan, Inc., as amended.(1) | |
10.11
|
Intellectual Property License Agreement, dated as of October 1, 2002, by and between Hitachi, Ltd. and Opnext Japan, Inc., as amended.(1) | |
10.12
|
Intellectual Property License Agreement, effective as of October 1, 2002, by and between Hitachi Communication Technologies, Ltd. and Opnext Japan, Inc.(1) | |
10.13
|
Trademark Indication Agreement, dated as of October 1, 2002, by and between Hitachi, Ltd. and Opnext Japan, Inc., as amended.(1) | |
10.14
|
Trademark Indication Agreement, dated as of July 31, 2001, by and between Hitachi, Ltd., Opnext, Inc. and Opnext Japan, Inc., as amended.(1) | |
10.15
|
Lease Agreement, made as of July 31, 2001, between Hitachi Communication Technologies, Ltd. and Opnext Japan, Inc., as amended.(1) | |
10.16
|
Lease Agreement, made as of October 1, 2002, between Renesas Technology Corp. and Opnext Japan, Inc., as amended.(1) | |
10.17
|
Agreement on Bank Transactions between Opnext Japan, Inc. and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as amended.(1) | |
10.18
|
Software User License Agreement, dated as of October 20, 2003, by and between Renesas Technology Corp. and Opnext Japan, Inc.(1) | |
10.19
|
Logistics Agreement, effective as of April 1, 2002, between Opnext, Inc. and Hitachi Transport System, Ltd.(1) | |
10.20
|
Distribution Agreement, dated April 1, 2001, between Hitachi Electronic Devices Sales, Inc. and Opnext Japan, Inc.(1) | |
10.21
|
Distribution Agreement, dated April 1, 2003, between Opnext Japan, Inc. and Renesas Technology Sale Co., Ltd.(1) | |
10.22
|
Distribution Agreement, dated July 1, 2003, between Opnext Japan, Inc. and Hitachi High-Technologies Corp.(1) | |
10.23+
|
Employment Agreement, dated as of November 1, 2007, between Opnext, Inc. and Gilles Bouchard, together with the form of the Nonqualified Stock Option Agreement and Restricted Stock Agreement to be entered into between the Company and Mr. Bouchard.(2) | |
10.24+
|
Non-Competition Agreement, dated as of November 1, 2007, between Opnext, Inc. and Gilles Bouchard.(2) | |
10.25+
|
Indemnification Agreement, dated as of November 1, 2007, between Opnext, Inc. and Gilles Bouchard.(2) | |
10.26+
|
Amended and Restated Employment Agreement, dated as of July 29, 2008, between Opnext, Inc. and Michael C. Chan.(4) | |
10.27+
|
Amended and Restated Employment Agreement, dated as of December 31, 2008, between Opnext, Inc. and Robert J. Nobile.(5) | |
10.28+
|
Amended and Restated Employment Agreement, dated as of May 15, 2009, between Opnext, Inc. and Gilles Bouchard.(6) | |
10.29+
|
Opnext, Inc. Second Amended and Restated 2001 Long-Term Stock Incentive Plan, dated as of January 6, 2009.(7) | |
10.30
|
Lease Agreement, made as of September 15, 2008, between Fremont Ventures LLC and Opnext, Inc.(7) | |
10.31
|
Lease Agreement, made as of March 14, 2006 , between Los Gatos Business Park and StrataLight Communications, Inc.(7) | |
10.32
|
Lease Agreement, made as of February 1, 2008, and amended June 2, 2008, between Los Gatos Business Park and StrataLight Communications, Inc.(7) | |
10.33+
|
Employment Agreement, dated as of February 18, 2009, between Opnext, Inc. and Shrichand Dodani.(7) | |
10.34+
|
First Amendment to Employment Agreement, dated as of May 15, 2009, between Opnext, Inc. and Michael Chan.(6) | |
31.1*
|
Certification of Principal Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2*
|
Certification of Principal Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1**
|
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2**
|
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
(1) | Filed as an exhibit to the Form S-1 Registration Statement (No. 333-138262) declared effective on February 14, 2007 and incorporated herein by reference. |
27
Table of Contents
(2) | Filed as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on November 1, 2007 and incorporated herein by reference. | |
(3) | Filed as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on December 12, 2007 and incorporated herein by reference. | |
(4) | Filed as an exhibit to Form 10-K/A (Amendment No. 1) as filed with the Securities and Exchange Commission on July 29, 2008 and incorporated herein by reference. | |
(5) | Filed as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on January 7, 2009 and incorporated herein by reference. | |
(6) | Filed as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on May 19, 2009 and incorporated herein by reference. | |
(7) | Filed as an exhibit to Form 10-K/A (Amendment No. 1) as filed with the Securities and Exchange Commission on July 29, 2009 and incorporated herein by reference. | |
* | Filed herewith. | |
** | Furnished herewith and not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. | |
+ | Management contract or compensatory plan or arrangement. |
28
Table of Contents
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.
Opnext, Inc. |
||||
By: | /s/ Gilles Bouchard | |||
Gilles Bouchard | ||||
President and Chief Executive Officer | ||||
By: | /s/ Robert J. Nobile | |||
Robert J. Nobile | ||||
Chief Financial Officer & Senior Vice President, Finance | ||||
Date: August 9, 2010
29
Table of Contents
Exhibit Index
Exhibit | ||
No. | Description of Document | |
3.1
|
Form of Amended and Restated Certificate of Incorporation of Opnext, Inc.(1) | |
3.2
|
Form of Amended and Restated Bylaws of Opnext, Inc.(1) | |
3.3
|
Specimen of stock certificate for common stock.(1) | |
4.1
|
Pine Stockholder Agreement, dated as of June 4, 2003, by and among Opnext, Inc. and the Stockholders of Pine Photonics Communications, Inc.(1) | |
4.2
|
Registration Rights Agreement, entered into as of July 31, 2001, by and among Opnext, Inc., Clarity Partners, L.P., Clarity Opnext Holdings I, LLC, Clarity Opnext Holdings II, LLC, and Hitachi, Ltd.(1) | |
4.3
|
Stockholders Agreement, dated as of July 31, 2001, between Opnext, Inc. and each of Hitachi, Ltd., Clarity Partners, L.P., Clarity Opnext Holdings I, LLC and Clarity Opnext Holdings II, LLC, as amended.(1) | |
10.1+
|
Pine Photonics Communications, Inc. 2000 Stock Plan.(1) | |
10.2+
|
Form of Pine Photonics Communications, Inc. 2000 Stock Plan: Stock Option Agreement.(1) | |
10.3+
|
Opnext, Inc. 2001 Long-Term Stock Incentive Plan.(1) | |
10.4+
|
Form of Opnext, Inc. 2001 Long-Term Stock Incentive Plan, Nonqualified Stock Option Agreement.(1) | |
10.4a+
|
Form of Opnext, Inc. 2001 Long-Term Stock Incentive Plan, Nonqualified Stock Option Agreement for Senior Executives.(1) | |
10.4b+
|
Form of Opnext, Inc. 2001 Long-Term Stock Incentive Plan, Stock Appreciation Right Agreement.(1) | |
10.4c+
|
Form of Amendment to Stock Appreciation Right Agreement.(4) | |
10.5
|
Form of Hitachi, Ltd. and Clarity Management, L.P. Nonqualified Stock Option Agreement.(1) | |
10.6+
|
Opnext, Inc. Amended and Restated 2001 Long-Term Stock Incentive Plan.(1) | |
10.7+
|
Form of Opnext, Inc. Restricted Stock Agreement.(1) | |
10.8
|
Research and Development Agreement, dated as of July 31, 2001, by and among Hitachi, Ltd., Opnext Japan, Inc. and Opto Device, Ltd. as amended.(1) | |
10.9
|
Research and Development Agreement, dated as of July 31, 2002, by and between Hitachi, Ltd. and Opnext, Inc., as amended.(1) | |
10.10
|
Intellectual Property License Agreement, dated as of July 31, 2001, by and between Hitachi, Ltd. and Opnext Japan, Inc., as amended.(1) | |
10.11
|
Intellectual Property License Agreement, dated as of October 1, 2002, by and between Hitachi, Ltd. and Opnext Japan, Inc., as amended.(1) | |
10.12
|
Intellectual Property License Agreement, effective as of October 1, 2002, by and between Hitachi Communication Technologies, Ltd. and Opnext Japan, Inc.(1) | |
10.13
|
Trademark Indication Agreement, dated as of October 1, 2002, by and between Hitachi, Ltd. and Opnext Japan, Inc., as amended.(1) | |
10.14
|
Trademark Indication Agreement, dated as of July 31, 2001, by and between Hitachi, Ltd., Opnext, Inc. and Opnext Japan, Inc., as amended.(1) | |
10.15
|
Lease Agreement, made as of July 31, 2001, between Hitachi Communication Technologies, Ltd. and Opnext Japan, Inc., as amended.(1) | |
10.16
|
Lease Agreement, made as of October 1, 2002, between Renesas Technology Corp. and Opnext Japan, Inc., as amended.(1) | |
10.17
|
Agreement on Bank Transactions between Opnext Japan, Inc. and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as amended.(1) | |
10.18
|
Software User License Agreement, dated as of October 20, 2003, by and between Renesas Technology Corp. and Opnext Japan, Inc.(1) | |
10.19
|
Logistics Agreement, effective as of April 1, 2002, between Opnext, Inc. and Hitachi Transport System, Ltd.(1) | |
10.20
|
Distribution Agreement, dated April 1, 2001, between Hitachi Electronic Devices Sales, Inc. and Opnext Japan, Inc.(1) | |
10.21
|
Distribution Agreement, dated April 1, 2003, between Opnext Japan, Inc. and Renesas Technology Sale Co., Ltd.(1) | |
10.22
|
Distribution Agreement, dated July 1, 2003, between Opnext Japan, Inc. and Hitachi High-Technologies Corp.(1) | |
10.23+
|
Employment Agreement, dated as of November 1, 2007, between Opnext, Inc. and Gilles Bouchard, together with the form of the Nonqualified Stock Option Agreement and Restricted Stock Agreement to be entered into between the Company and Mr.Bouchard.(2) |
30
Table of Contents
Exhibit | ||
No. | Description of Document | |
10.24+
|
Non-Competition Agreement, dated as of November 1, 2007, between Opnext, Inc. and Gilles Bouchard.(2) | |
10.25+
|
Indemnification Agreement, dated as of November 1, 2007, between Opnext, Inc. and Gilles Bouchard.(2) | |
10.26+
|
Amended and Restated Employment Agreement, dated as of July 29, 2008, between Opnext, Inc. and Michael C. Chan.(4) | |
10.27+
|
Amended and Restated Employment Agreement, dated as of December 31, 2008, between Opnext, Inc. and Robert J. Nobile.(5) | |
10.28+
|
Amended and Restated Employment Agreement, dated as of May 15, 2009, between Opnext, Inc. and Gilles Bouchard.(6) | |
10.29+
|
Opnext, Inc. Second Amended and Restated 2001 Long-Term Stock Incentive Plan, dated as of January 6, 2009.(7) | |
10.30
|
Lease Agreement, made as of September 15, 2008, between Fremont Ventures LLC and Opnext, Inc.(7) | |
10.31
|
Lease Agreement, made as of March 14, 2006 , between Los Gatos Business Park and StrataLight Communications, Inc.(7) | |
10.32
|
Lease Agreement, made as of February 1, 2008, and amended June 2, 2008, between Los Gatos Business Park and StrataLight Communications, Inc.(7) | |
10.33+
|
Employment Agreement, dated as of February 18, 2009, between Opnext, Inc. and Shrichand Dodani.(7) | |
10.34+
|
First Amendment to Employment Agreement, dated as of May 15, 2009, between Opnext, Inc. and Michael Chan.(6) | |
31.1*
|
Certification of Principal Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2*
|
Certification of Principal Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1**
|
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2**
|
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
(1) | Filed as an exhibit to the Form S-1 Registration Statement (No. 333-138262) declared effective on February 14, 2007 and incorporated herein by reference. | |
(2) | Filed as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on November 1, 2007 and incorporated herein by reference. | |
(3) | Filed as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on December 12, 2007 and incorporated herein by reference. | |
(4) | Filed as an exhibit to Form 10-K/A (Amendment No. 1) as filed with the Securities and Exchange Commission on July 29, 2008 and incorporated herein by reference. | |
(5) | Filed as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on January 7, 2009 and incorporated herein by reference. | |
(6) | Filed as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on May 19, 2009 and incorporated herein by reference. | |
(7) | Filed as an exhibit to Form 10-K/A (Amendment No. 1) as filed with the Securities and Exchange Commission on July 29, 2009 and incorporated herein by reference. | |
* | Filed herewith. | |
** | Furnished herewith and not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. | |
+ | Management contract or compensatory plan or arrangement. |
31