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8-K - FORM 8-K - OPNEXT INC | c20971e8vk.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Contact: Steve Pavlovich
Investor Relations
(510) 743-6833
spavlovich@opnext.com
Investor Relations
(510) 743-6833
spavlovich@opnext.com
OPNEXT REPORTS FIRST QUARTER UNAUDITED OPERATING RESULTS
FREMONT, CA. (August 4, 2011) Opnext, Inc. (NASDAQ: OPXT), a global leader in the design and
manufacturing of optical modules and components, today announced unaudited financial results for
the first fiscal quarter ended June 30, 2011.
Financial Highlights for the First Fiscal Quarter Ended June 30, 2011:
| Revenue of $93.1 million was down 2% sequentially and up 18% compared to the quarter ended June 30, 2010. | ||
| Gross margin of 21.8% was up 2.2 percentage points sequentially and up 3.0 percentage points compared to the quarter ended June 30, 2010. Non-GAAP gross margin of 23.5% was up 2.2 percentage points sequentially and up 2.6 percentage points compared to the quarter ended June 30, 2010. The improvement relative to the quarter ended March 31, 2011 includes a 100 basis point benefit from lower idle capacity and damaged inventory charges resulting from the March 11, 2011 earthquake in Japan, partially offset by a 30 basis point negative effect from foreign currency exchange rate fluctuations. | ||
| EBITDA was $2.0 million compared to $17.3 million in the quarter ended March 31, 2011 and negative $8.5 million in the quarter ended June 30, 2010. Adjusted EBITDA was $1.9 million compared to negative $2.2 million in the quarter ended March 31, 2011 and negative $6.1 million in the quarter ended June 30, 2010. | ||
| Cash used in operations was $1.7 million compared to $2.1 million in the quarter ended March 31, 2011 and $19.7 million in the quarter ended June 30, 2010. | ||
| Cash and cash equivalents was $97.2 million at June 30, 2011. Net of short-term loans payable, cash and cash equivalents was $78.5 million at June 30, 2011. | ||
| Revenues from sales of 40Gbps and above products decreased 11% compared to the quarter ended March 31, 2011 due to lower 40G subsystem sales and 40G DQPSK and 100G CFP module production constraints. | ||
| Cisco and FiberHome each represented 10% or more of total revenue for the quarter ended June 30, 2011, and combined represented 40% of total revenue compared to 28% in the March 2011 quarter. | ||
| GAAP R&D expense of $13.5 million and Non-GAAP R&D expense of $13.1 million were each down $2.1 million compared to the quarter ended March 31, 2011, primarily due to the timing of material and outsourcing costs associated with new product introductions. | ||
| Net gain on sale of technology assets was $2.1 million in the quarter ended June 30, 2011. Net gain on sale of technology assets was $21.4 million in the quarter ended March 31, 2011. |
First | Fourth | First | ||||||||||||||||||
Quarter | Quarter | Quarter | ||||||||||||||||||
Ended | Ended | Ended | Q1FY12 | Q1FY12 | ||||||||||||||||
June 30, | March 31, | June 30, | vs. | vs. | ||||||||||||||||
(in millions, except per share amounts) | 2011 | 2011 | 2010 | Q4FY11 | Q1FY11 | |||||||||||||||
10G and Below |
$ | 50.6 | $ | 48.9 | $ | 55.9 | 4% | (9%) | ||||||||||||
40G and Above |
34.1 | 38.2 | 16.3 | (11%) | 109% | |||||||||||||||
I & C |
8.4 | 8.2 | 6.7 | 2% | 25% | |||||||||||||||
Total Revenue |
$ | 93.1 | $ | 95.3 | $ | 78.9 | (2%) | 18% | ||||||||||||
GAAP Gross Margin |
21.8 | % | 19.6 | % | 18.8 | % | 2.2% | 3.0% | ||||||||||||
GAAP Operating Loss |
$ | (7.8 | ) | $ | (12.0 | ) | $ | (16.2 | ) | $4.2 | $8.4 | |||||||||
GAAP Net (Loss) Income |
$ | (6.2 | ) | $ | 9.0 | $ | (16.3 | ) | $(15.2) | $10.1 | ||||||||||
GAAP Diluted EPS |
$ | (0.07 | ) | $ | 0.10 | $ | (0.18 | ) | $(0.17) | $0.11 | ||||||||||
EBITDA |
$ | 2.0 | $ | 17.3 | $ | (8.5 | ) | $(15.3) | $10.5 | |||||||||||
Non-GAAP Gross Margin |
23.5 | % | 21.3 | % | 20.9 | % | 2.2% | 2.6% | ||||||||||||
Non-GAAP Operating Loss |
$ | (4.2 | ) | $ | (8.4 | ) | $ | (12.0 | ) | $4.2 | $7.8 | |||||||||
Non-GAAP Net Loss |
$ | (4.6 | ) | $ | (8.7 | ) | $ | (12.1 | ) | $4.1 | $7.5 | |||||||||
Non-GAAP Diluted EPS |
$ | (0.05 | ) | $ | (0.10 | ) | $ | (0.13 | ) | $0.05 | $0.08 | |||||||||
Adjusted EBITDA |
$ | 1.9 | $ | (2.2 | ) | $ | (6.1 | ) | $4.1 | $8.0 |
Reconciliations between gross margin, operating loss and net loss and R&D expense on a GAAP
basis and a non-GAAP basis and net loss to EBITDA and adjusted EBITDA are provided in the tables
appearing at the end of this release.
Market Observations and Guidance
While production constraints related to 40G DQPSK and 100G CFP modules limited revenue this
quarter, I am nonetheless pleased with our progress, said Harry Bosco, Chairman and Chief
Executive Officer of Opnext. We delivered on our break-even adjusted EBITDA objective and we
improved our working capital management. Cash used in operations was less than $2.0 million this
past quarter and net cash used in the last twelve months was less than $6.0 million.
Looking forward to the next quarter, we expect revenues to be between $89 million and $95 million
in our second fiscal quarter ending in September 2011 as near term demand remains soft, concluded
Mr. Bosco.
Forward-Looking Statements:
Statements made in this press release include forward-looking statements, including, but not
limited to, those related to future revenues, growth of revenues, expected improvements in
production constraints, market position, managements expectations with respect to the Companys
initiatives, position for future growth, the general market outlook and the outlook for the
industry. These statements involve risks and uncertainties that may cause actual results to differ
materially from those set forth in these statements. Among other things:
| projected revenues for the quarter ending September 30, 2011, as well as the general outlook for the future, are based on preliminary estimates, assumptions and projections that management believes to be reasonable at this time, but are beyond managements control; and | ||
| the market in which the Company operates is volatile, implementation of operating strategies may not achieve the desired impact relative to changing market conditions and the success of these strategies will depend on the effective implementation of our strategies while minimizing organizational disruption. |
Other factors that could cause the Companys future, including future financial position and
results from operations, to differ from current expectations include: uncertainty surrounding the
ongoing impact of the earthquake and tsunami in Japan; the impact of natural events such as severe
weather or earthquakes in locations in which Opnext, its customers, its contract manufacturers, or
its suppliers operate; the impact of rapidly changing technologies; the impact of competition on
product development and pricing; the success of the Companys research and development efforts; the
ability of the Company to source critical parts and to react to changes in general industry and
market conditions, including regulatory developments; expenses associated with litigation; rights
to intellectual property; market trends and the adoption of industry standards; the ability of the
Company to realize the value from the acquisition of StrataLight Communications, Inc.; and
consolidations within or affecting the optical modules and components industry. These factors are
not intended to be an all-encompassing list of risks and uncertainties that may affect the
Companys business. Additional information regarding these and other factors can be found in the
Companys reports filed with the Securities and Exchange Commission, including under Risk
Factors, Managements Discussion and Analysis of Financial Condition and Results of Operations,
and Forward-Looking Statements in the Companys Annual Report on Form 10-K filed on June 14,
2011, as amended, as well as the Companys press releases and other periodic filings with the
Securities and Exchange Commission. In providing forward-looking statements, the Company expressly
disclaims any obligation to update these statements, publicly or otherwise, whether as a result of
new information, future events or otherwise, except to comply with applicable federal and state
securities laws.
Conference Call:
The Companys management will conduct a conference call at 1:30 p.m. PT, today, Thursday, August 4,
2011, to discuss these results in detail. You may participate in this conference call by dialing
866-365-3198 (United States) or 702-928-6762 (International) prior to the start of the call and
providing the Opnext, Inc. name and Conference ID# 84633635. A replay of the conference call can
be accessed starting approximately four hours after the call through Thursday, August 18, 2011, by
dialing 855-859-2056 (United States) or 404-537-3406 (International) and using the Conference ID#
84633635. A live webcast of the call will be accessible on the Investor Relations section of the
Companys website at http://www.opnext.com. A replay of the webcast will be available following the
conclusion of the call on the webcast archive page of the Investor Relations section.
(OPXT-G)
About Opnext:
Opnext (NASDAQ:OPXT) is the optical technology partner of choice supplying systems providers and
OEMs worldwide with one of the industrys largest portfolios of 10Gbps and higher next generation
optical products and solutions. The Companys industry expertise, future-focused thinking and
commitment to research and development combine in bringing to market the most advanced technology
to the communications, defense, security and biomedical industries. Formed out of Hitachi, Opnext
has built on more than 30 years experience in advanced technology to establish its broad portfolio
of solutions and solid reputation for excellence in service and delivering value to its customers.
For additional information, visit www.opnext.com.
Opnext, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(in thousands)
June 30, 2011 | March 31, 2011 | |||||||
(unaudited) | ||||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 97,161 | $ | 100,284 | ||||
Trade receivables, net |
60,866 | 70,701 | ||||||
Inventories |
116,814 | 118,588 | ||||||
Prepaid expenses and other current assets |
10,137 | 7,458 | ||||||
Total current assets |
284,978 | 297,031 | ||||||
Property, plant, and equipment, net |
58,401 | 59,992 | ||||||
Purchased intangibles |
15,289 | 17,076 | ||||||
Other assets |
276 | 258 | ||||||
Total assets |
$ | 358,944 | $ | 374,357 | ||||
Liabilities and shareholders equity |
||||||||
Current liabilities: |
||||||||
Trade payables |
$ | 50,190 | $ | 63,383 | ||||
Accrued expenses |
22,392 | 23,771 | ||||||
Short-term debt |
18,623 | 18,055 | ||||||
Capital lease obligations |
13,942 | 13,513 | ||||||
Total current liabilities |
105,147 | 118,722 | ||||||
Capital lease obligations |
12,134 | 12,554 | ||||||
Other long-term liabilities |
7,363 | 6,855 | ||||||
Total liabilities |
124,644 | 138,131 | ||||||
Total shareholders equity |
234,300 | 236,226 | ||||||
Total liabilities and shareholders equity |
$ | 358,944 | $ | 374,357 | ||||
Opnext, Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(in thousands, except per share data)
Three Months Ended June 30, | ||||||||
2011 | 2010 | |||||||
Revenues |
$ | 93,085 | $ | 78,866 | ||||
Cost of sales |
71,338 | 62,630 | ||||||
Amortization of acquired developed technology |
1,445 | 1,445 | ||||||
Gross margin |
20,302 | 14,791 | ||||||
Research and development expenses |
13,478 | 16,382 | ||||||
Selling, general and administrative expenses |
14,451 | 14,276 | ||||||
Amortization of purchased intangibles |
342 | 342 | ||||||
Gain on disposal of property and equipment |
(125 | ) | (11 | ) | ||||
Operating loss |
(7,844 | ) | (16,198 | ) | ||||
Gain on sale of technology assets, net |
2,078 | | ||||||
Interest expense, net |
(219 | ) | (186 | ) | ||||
Other income (expense), net |
(148 | ) | 145 | |||||
Loss before income taxes |
(6,133 | ) | (16,239 | ) | ||||
Income tax expense |
(114 | ) | (21 | ) | ||||
Net loss |
$ | (6,247 | ) | $ | (16,260 | ) | ||
Net loss per share: |
||||||||
Basic |
$ | (0.07 | ) | $ | (0.18 | ) | ||
Diluted |
$ | (0.07 | ) | $ | (0.18 | ) | ||
Weighted average number of shares used in
computing net loss per share: |
||||||||
Basic |
90,206 | 89,873 | ||||||
Diluted |
90,206 | 89,873 |
Opnext, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
(in thousands)
Three Months Ended June 30, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities |
||||||||
Net loss |
$ | (6,247 | ) | $ | (16,260 | ) | ||
Adjustments to reconcile net loss to net cash used in operating
activities: |
||||||||
Depreciation and amortization |
6,157 | 5,754 | ||||||
Stock-based compensation expense |
1,902 | 2,053 | ||||||
Amortization of purchased intangibles |
1,787 | 1,787 | ||||||
Gain on disposal of property and equipment |
(125 | ) | (11 | ) | ||||
Gain on sale of technology assets, net |
(2,078 | ) | | |||||
Changes in assets and liabilities |
(3,124 | ) | (12,986 | ) | ||||
Net cash used in operating activities |
(1,728 | ) | (19,663 | ) | ||||
Cash flows from investing activities |
||||||||
Capital expenditures |
(1,601 | ) | (3,115 | ) | ||||
Proceeds from sale of technology assets, net |
2,078 | | ||||||
Proceeds from disposal of property and equipment |
148 | | ||||||
Net cash provided by (used in) investing activities |
625 | (3,115 | ) | |||||
Cash flows from financing activities |
||||||||
Payments on capital lease obligations |
(2,297 | ) | (2,635 | ) | ||||
Restricted shares repurchased |
(145 | ) | | |||||
Exercise of stock options |
85 | 38 | ||||||
Net cash used in financing activities |
(2,357 | ) | (2,597 | ) | ||||
Effect of foreign exchange rates on cash and cash equivalents |
337 | (382 | ) | |||||
Decrease in cash and cash equivalents |
(3,123 | ) | (25,757 | ) | ||||
Cash and cash equivalents at beginning of period |
100,284 | 132,643 | ||||||
Cash and cash equivalents at end of period |
$ | 97,161 | $ | 106,886 | ||||
Non-cash financing activities |
||||||||
Capital lease obligations incurred |
$ | (1,487 | ) | $ | (2,865 | ) |
Opnext Non-GAAP Financial Measures
Management excludes certain charges and expenses from its gross margin and operating loss GAAP
financial measures and excludes certain gains and losses on assets from its GAAP net income (loss)
financial measures for the purpose of assessing the Companys operating performance. Accordingly,
the Company provides these non-GAAP measures as supplemental information, in addition to the GAAP
presentation, in an effort to provide greater transparency and insight into managements method of
analysis. The Company also provides non-GAAP net income (loss) and net income (loss) per share
financial measures to demonstrate the impact of its non-GAAP operating performance measures on
these financial measures.
Our non-GAAP financial measures exclude the following items, each of which (with the exception of
stock-based compensation expense and the gain on sale of technology assets, net) represents an
acquisition-related expense of the Company, for the reasons set forth below:
Amortization of acquired developed technology and purchased intangibles: In connection with the
acquisition of StrataLight Communications, Inc. (StrataLight), the Company acquired certain
intangible assets related to developed product technology, order backlog and customer
relationships, all of which were recorded at fair-value. The useful lives of the intangible assets
range up to five years and the intangible assets are being amortized on a straight-line basis over
their respective useful lives. The Company believes these acquisition-related expenses are not
indicative of its core operating performance.
Restructuring activities: Subsequent to the acquisition of StrataLight, effective April 1, 2009,
the Company relocated its corporate headquarters from Eatontown, NJ, to Fremont, CA, and during the
quarter ended March 31, 2009, began to incur workforce-related charges, such as severance payments,
retention bonuses and employee relocation costs related to a formal restructuring plan and building
costs for facilities not required for ongoing operations. The Company believes these
acquisition-related expenses are not indicative of its core operating performance.
Stock-based compensation expense: Depending upon the size, timing and the terms of stock-based
awards, the related non-cash compensation expense may vary significantly. The Company believes
these non-cash expenses are not indicative of its core operating performance.
Gain on sale of technology assets, net: On February 9, 2011, Opnext Subsystems, Inc., a wholly
owned subsidiary of the Company, entered into an asset purchase agreement with Juniper Networks,
Inc. to sell certain technology assets related to modem Application Specific Integrated Circuits
used for long haul/ultra-long optical transmission for $26 million, $23.5 million of which was paid
simultaneously with the execution of the asset purchase agreement and $2.5 million of which was
paid on May 6, 2011. The Company believes that the proceeds from the sale of these assets are not
indicative of its core operating performance.
Opnext, Inc.
Reconciliation of GAAP Measures to Non-GAAP Measures
(in thousands, except per share data)
Reconciliation of GAAP Measures to Non-GAAP Measures
(in thousands, except per share data)
Three Months | ||||||||||||
Three Months Ended | Ended | |||||||||||
June 30, | June 30, | March 31, | ||||||||||
2011 | 2010 | 2011 | ||||||||||
GAAP gross margin |
$ | 20,302 | $ | 14,791 | $ | 18,703 | ||||||
GAAP gross margin % |
21.8 | % | 18.8 | % | 19.6 | % | ||||||
Gross margin adjustments: |
||||||||||||
Amortization of acquired developed technology |
$ | 1,445 | $ | 1,445 | $ | 1,445 | ||||||
Cost of sales adjustments: |
||||||||||||
Stock-based compensation expense |
109 | 213 | 133 | |||||||||
Restructuring costs |
| 28 | | |||||||||
Total cost of sales adjustments |
$ | 109 | $ | 241 | $ | 133 | ||||||
Non-GAAP gross margin |
$ | 21,856 | $ | 16,477 | $ | 20,281 | ||||||
Non-GAAP gross margin % |
23.5 | % | 20.9 | % | 21.3 | % | ||||||
GAAP research and development expense |
$ | (13,478 | ) | $ | (16,382 | ) | $ | (15,559 | ) | |||
Stock-based compensation expense |
394 | 387 | 364 | |||||||||
Restructuring costs |
| 156 | | |||||||||
Total research and development adjustments |
$ | 394 | $ | 543 | $ | 364 | ||||||
Non-GAAP research and development expense |
$ | (13,084 | ) | $ | (15,839 | ) | $ | (15,195 | ) | |||
GAAP operating loss |
$ | (7,844 | ) | $ | (16,198 | ) | $ | (12,022 | ) | |||
GAAP operating loss % |
(8.4 | )% | (20.5 | )% | (12.6 | )% | ||||||
Operating loss adjustments: |
||||||||||||
Amortization of acquired developed technology |
$ | 1,445 | $ | 1,445 | $ | 1,445 | ||||||
Amortization of purchased intangibles |
342 | 342 | 342 | |||||||||
Total cost of sales adjustments |
109 | 241 | 133 | |||||||||
Total research and development adjustments |
394 | 543 | 364 | |||||||||
Selling, general and administrative adjustments: |
||||||||||||
Stock-based compensation expense |
$ | 1,402 | $ | 1,453 | $ | 1,363 | ||||||
Restructuring costs |
| 159 | 5 | |||||||||
Total selling, general and administrative adjustments |
$ | 1,402 | $ | 1,612 | $ | 1,368 | ||||||
Non-GAAP operating loss |
$ | (4,152 | ) | $ | (12,015 | ) | $ | (8,370 | ) | |||
Non-GAAP operating loss % |
(4.5 | )% | (15.2 | )% | (8.8 | )% | ||||||
GAAP net (loss) income |
$ | (6,247 | ) | $ | (16,260 | ) | $ | 9,035 | ||||
GAAP net (loss) income % |
(6.7 | )% | (20.6 | )% | 9.5 | % | ||||||
GAAP net (loss) income per share: |
||||||||||||
Basic |
$ | (0.07 | ) | $ | (0.18 | ) | $ | 0.10 | ||||
Diluted |
$ | (0.07 | ) | $ | (0.18 | ) | $ | 0.10 | ||||
Shares |
||||||||||||
Basic |
90,206 | 89,873 | 89,964 | |||||||||
Diluted |
90,206 | 89,873 | 91,974 | |||||||||
Net (loss) income adjustments: |
||||||||||||
Amortization of acquired developed technology |
$ | 1,445 | $ | 1,445 | $ | 1,445 | ||||||
Amortization of purchased intangibles |
342 | 342 | 342 | |||||||||
Gain on sale of technology assets, net |
(2,078 | ) | | (21,436 | ) | |||||||
Total cost of sales adjustments |
109 | 241 | 133 | |||||||||
Total research and development adjustments |
394 | 543 | 364 | |||||||||
Total selling, general & administrative adjustments |
1,402 | 1,612 | 1,368 | |||||||||
Non-GAAP net loss |
$ | (4,633 | ) | $ | (12,077 | ) | $ | (8,749 | ) | |||
Non-GAAP net loss % |
(5.0 | )% | (15.3 | )% | (9.2 | )% | ||||||
Non-GAAP net loss per share: |
||||||||||||
Basic |
$ | (0.05 | ) | $ | (0.13 | ) | $ | (0.10 | ) | |||
Diluted |
$ | (0.05 | ) | $ | (0.13 | ) | $ | (0.10 | ) | |||
Weighted average shares used in computing GAAP and Non-GAAP net loss per share: |
||||||||||||
Basic |
90,206 | 89,873 | 89,964 | |||||||||
Diluted |
90,206 | 89,873 | 89,964 |
EBITDA and Adjusted EBITDA
Earnings before interest, taxes, depreciation and amortization (EBITDA) is calculated as net
income (loss) excluding the impact of net interest expense, income tax expense, depreciation and
amortization of property, plant and equipment and amortization of purchased intangibles. Adjusted
EBITDA represents EBITDA excluding non-GAAP financial measures as previously described herein. The
non-GAAP financial measures are excluded from EBITDA internally when evaluating our operating
performance and allow investors to make a more meaningful comparison between our core business
operating results over different periods of time as well as those of other similar companies.
Management believes that EBITDA and adjusted EBITDA, when viewed with the Companys GAAP results
and the accompanying reconciliation, provide useful information about operating performance and
period-over-period growth, and provide additional information that is useful for evaluating the
operating performance of our core business without regard to potential distortions. Additionally,
management believes that EBITDA and adjusted EBITDA permit investors to gain an understanding of
the factors and trends affecting our ongoing cash earnings, from which capital investments are made
and debt is serviced. However, EBITDA and adjusted EBITDA are not measures of financial performance
or liquidity under GAAP and, accordingly, should not be considered as alternatives to net income
(loss) or cash flow from operating activities as indicators of operating performance or liquidity.
The table below provides a reconciliation of net income (loss), EBITDA and adjusted EBITDA.
Three Months | ||||||||||||
Three Months Ended | Ended | |||||||||||
June 30, | June 30, | March 31, | ||||||||||
2011 | 2010 | 2011 | ||||||||||
Reconciliation of net income (loss) to EBITDA and adjusted EBITDA: |
||||||||||||
Net income (loss) |
$ | (6,247 | ) | $ | (16,260 | ) | $ | 9,035 | ||||
Depreciation and amortization of property, plant and equipment |
6,157 | 5,754 | 6,266 | |||||||||
Amortization of purchased intangibles |
1,787 | 1,787 | 1,787 | |||||||||
Interest expense, net |
219 | 186 | 209 | |||||||||
Income tax expense |
114 | 21 | 30 | |||||||||
EBITDA |
$ | 2,030 | $ | (8,512 | ) | $ | 17,327 | |||||
Stock-based compensation expense |
1,905 | 2,053 | 1,860 | |||||||||
Restructuring costs |
| 343 | 5 | |||||||||
Gain on sale of technology assets, net |
(2,078 | ) | | (21,436 | ) | |||||||
Adjusted EBITDA |
$ | 1,857 | $ | (6,116 | ) | $ | (2,244 | ) | ||||