Attached files

file filename
EX-32.1 - EX-32.1 - APPLIED OPTOELECTRONICS, INC.aaoi-20180930ex321efd7e5.htm
EX-31.2 - EX-31.2 - APPLIED OPTOELECTRONICS, INC.aaoi-20180930ex312d545c3.htm
EX-31.1 - EX-31.1 - APPLIED OPTOELECTRONICS, INC.aaoi-20180930ex311bc2721.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2018

 

OR

 

☐ 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: 001-36083

 

Applied Optoelectronics, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware

76-0533927

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

13139 Jess Pirtle Blvd.

Sugar Land, TX 77478

(Address of principal executive offices)

 

(281) 295-1800

(Registrant’s telephone number)

 

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 (“Exchange Act”) 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 ☒ No 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

            Yes ☒ No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

Large accelerated filer

 

 

 

Accelerated filer

 

 

 

Non-accelerated filer

 

 

 

Smaller reporting company

 

 

 

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.                    ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

            Yes ☐ No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: as of November 1, 2018 there were 19,798,663 shares of the registrant’s Common Stock outstanding.

 

 

 


 

Applied Optoelectronics, Inc.

Table of Contents

 

 

 

Page

Part I. Financial Information 

 

 

 

Item 1. 

Condensed Consolidated Financial Statements (Unaudited)

3

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2018 (Unaudited) and December 31, 2017

3

 

 

 

 

Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2018 and 2017 (Unaudited)

4

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months ended September 30, 2018 and 2017 (Unaudited)

5

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months ended September 30, 2018 and 2017 (Unaudited)

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2018 and 2017 (Unaudited)

7

 

 

 

 

Notes To Condensed Consolidated Financial Statements (Unaudited)

8

 

 

 

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

 

 

 

Item 3. 

Quantitative and Qualitative Disclosures About Market Risk

31

 

 

 

Item 4. 

Controls and Procedures

31

 

 

 

Part II. Other Information 

 

 

 

Item 1. 

Legal Proceedings

32

 

 

 

Item 1A. 

Risk Factors

33

 

 

 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

53

 

 

 

Item 3. 

Defaults Upon Senior Securities

53

 

 

 

Item 4. 

Mine Safety Disclosures

53

 

 

 

Item 5. 

Other Information

53

 

 

 

Item 6. 

Exhibits

53

 

 

 

 

Signatures

55

 

 

2


 

Part I. Financial Information

 

Item 1. Condensed Consolidated Financial Statements

 

Applied Optoelectronics, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

 

 

    

2018

    

2017

 

ASSETS

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

56,380

 

$

82,936

 

Restricted cash

 

 

1,695

 

 

1,012

 

Short-term investments

 

 

6,022

 

 

36

 

Accounts receivable - trade, net of allowance of $31 and $33, respectively

 

 

32,028

 

 

59,850

 

Inventories

 

 

107,905

 

 

75,768

 

Prepaid income tax

 

 

763

 

 

1,394

 

Prepaid expenses and other current assets

 

 

10,377

 

 

8,701

 

Total current assets

 

 

215,170

 

 

229,697

 

Property, plant and equipment, net

 

 

222,545

 

 

197,943

 

Land use rights, net

 

 

5,832

 

 

804

 

Intangible assets, net

 

 

3,971

 

 

4,007

 

Deferred income tax assets

 

 

18,493

 

 

12,801

 

Other assets, net

 

 

15,074

 

 

7,732

 

TOTAL ASSETS

 

$

481,085

 

$

452,984

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Current portion of notes payable and long-term debt

 

$

8,275

 

$

559

 

Accounts payable

 

 

53,706

 

 

43,624

 

Accrued income taxes

 

 

 —

 

 

7,422

 

Accrued liabilities

 

 

20,723

 

 

19,103

 

Total current liabilities

 

 

82,704

 

 

70,708

 

Notes payable and long-term debt, less current portion

 

 

62,896

 

 

49,000

 

TOTAL LIABILITIES

 

 

145,600

 

 

119,708

 

Stockholders' equity:

 

 

 

 

 

 

 

Preferred Stock; 5,000 shares authorized at $0.001 par value; no shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively

 

 

 —

 

 

 —

 

Common Stock; 45,000 shares authorized at $0.001 par value; 19,758 and 19,451 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively

 

 

20

 

 

19

 

Additional paid-in capital

 

 

290,070

 

 

285,376

 

Accumulated other comprehensive income

 

 

835

 

 

9,743

 

Retained earnings

 

 

44,560

 

 

38,138

 

TOTAL STOCKHOLDERS' EQUITY

 

 

335,485

 

 

333,276

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

481,085

 

$

452,984

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

Applied Optoelectronics, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 

 

Nine months ended September 30, 

 

 

    

2018

    

2017

    

2018

    

2017

    

Revenue, net

 

$

56,386

 

$

88,879

 

$

209,447

 

$

302,474

 

Cost of goods sold

 

 

38,849

 

 

49,507

 

 

132,211

 

 

168,348

 

Gross profit

 

 

17,537

 

 

39,372

 

 

77,236

 

 

134,126

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

14,180

 

 

9,190

 

 

38,561

 

 

24,695

 

Sales and marketing

 

 

2,370

 

 

2,551

 

 

7,221

 

 

6,612

 

General and administrative

 

 

10,591

 

 

9,580

 

 

29,945

 

 

26,188

 

Total operating expenses

 

 

27,141

 

 

21,321

 

 

75,727

 

 

57,495

 

Income (loss) from operations

 

 

(9,604)

 

 

18,051

 

 

1,509

 

 

76,631

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

86

 

 

61

 

 

223

 

 

166

 

Interest expense

 

 

(274)

 

 

(248)

 

 

(624)

 

 

(792)

 

Other income (expense), net

 

 

766

 

 

(354)

 

 

1,320

 

 

(898)

 

Total other income (expense), net

 

 

578

 

 

(541)

 

 

919

 

 

(1,524)

 

Income (loss) before income taxes

 

 

(9,026)

 

 

17,510

 

 

2,428

 

 

75,107

 

Income tax (expense) benefit

 

 

5,294

 

 

1,865

 

 

3,994

 

 

(6,872)

 

Net income (loss)

 

$

(3,732)

 

$

19,375

 

$

6,422

 

$

68,235

 

Net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.19)

 

$

1.00

 

$

0.33

 

$

3.59

 

Diluted

 

$

(0.19)

 

$

0.95

 

$

0.32

 

$

3.39

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares used to compute net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

19,707,036

 

 

19,294,022

 

 

19,597,181

 

 

18,993,068

 

Diluted

 

 

19,707,036

 

 

20,422,609

 

 

20,038,657

 

 

20,133,644

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

Applied Optoelectronics, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 

 

Nine months ended September 30, 

 

 

    

2018

    

2017

    

2018

    

2017

    

Net income (loss)

 

$

(3,732)

 

$

19,375

 

$

6,422

 

$

68,235

 

Gain (loss) on foreign currency translation adjustment

 

 

(4,798)

 

 

2,032

 

 

(8,908)

 

 

7,285

 

Comprehensive income (loss)

 

$

(8,530)

 

$

21,407

 

$

(2,486)

 

$

75,520

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


 

Applied Optoelectronics, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three and Nine months ended September 30, 2018 and 2017

(Unaudited, in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Preferred Stock

 

Common Stock 

 

Additional

 

other

 

 

 

 

 

 

 

 

Number

 

 

 

 

Number

 

 

 

 

paid-in

 

comprehensive

 

Retained

 

Stockholders'

 

 

    

of shares

    

Amount

    

of shares

    

Amount

    

capital

    

gain (loss)

    

earnings

    

equity

 

July 1, 2018

 

 —

 

$

 —

 

19,634

 

$

20

 

$

288,686

 

$

5,633

 

$

48,292

 

$

342,631

 

Stock options exercised, net of shares withheld for employee tax

 

 —

 

 

 —

 

43

 

 

 —

 

 

(845)

 

 

 —

 

 

 —

 

 

(845)

 

Issuance of restricted stock, net of shares withheld for employee tax

 

 —

 

 

 —

 

81

 

 

 —

 

 

(665)

 

 

 —

 

 

 —

 

 

(665)

 

Share-based compensation

 

 —

 

 

 —

 

 —

 

 

 —

 

 

2,894

 

 

 —

 

 

 —

 

 

2,894

 

Foreign currency translation adjustment

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(4,798)

 

 

 —

 

 

(4,798)

 

Net income (loss)

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(3,732)

 

 

(3,732)

 

September 30, 2018

 

 —

 

$

 —

 

19,758

 

$

20

 

$

290,070

 

$

835

 

$

44,560

 

$

335,485

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Preferred Stock

 

Common Stock 

 

Additional

 

other

 

 

 

 

 

 

 

 

Number

 

 

 

 

Number

 

 

 

 

paid-in

 

comprehensive

 

Retained

 

Stockholders'

 

 

    

of shares

    

Amount

    

of shares

    

Amount

    

capital

    

gain (loss)

    

earnings

    

equity

 

July 1, 2017

 

 —

 

$

 —

 

19,192

 

$

19

 

$

290,067

 

$

4,369

 

$

13,047

 

$

307,502

 

Stock options exercised, net of shares withheld for employee tax

 

 —

 

 

 —

 

93

 

 

 —

 

 

(4,753)

 

 

 —

 

 

 —

 

 

(4,753)

 

Issuance of restricted stock, net of shares withheld for employee tax

 

 —

 

 

 —

 

74

 

 

 —

 

 

(1,795)

 

 

 —

 

 

 —

 

 

(1,795)

 

Share-based compensation

 

 —

 

 

 —

 

 —

 

 

 —

 

 

2,081

 

 

 —

 

 

 —

 

 

2,081

 

Foreign currency translation adjustment

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

2,032

 

 

 —

 

 

2,032

 

Other

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(1)

 

 

 1

 

 

 —

 

Net income

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

19,375

 

 

19,375

 

September 30, 2017

 

 —

 

$

 —

 

19,359

 

$

19

 

$

285,600

 

$

6,400

 

$

32,423

 

$

324,442

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Preferred Stock

 

Common Stock 

 

Additional

 

other

 

 

 

 

 

 

 

 

Number

 

 

 

 

Number

 

 

 

 

paid-in

 

comprehensive

 

Retained

 

Stockholders'

 

 

    

of shares

    

Amount

    

of shares

    

Amount

    

capital

    

gain (loss)

    

earnings

    

equity

 

January 1, 2018

 

 —

 

$

 —

 

19,451

 

$

19

 

$

285,376

 

$

9,743

 

$

38,138

 

$

333,276

 

Stock options exercised, net of shares withheld for employee tax

 

 —

 

 

 —

 

121

 

 

 —

 

 

(2,073)

 

 

 —

 

 

 —

 

 

(2,073)

 

Issuance of restricted stock, net of shares withheld for employee tax

 

 —

 

 

 —

 

186

 

 

 1

 

 

(1,595)

 

 

 —

 

 

 —

 

 

(1,594)

 

Share-based compensation

 

 —

 

 

 —

 

 —

 

 

 —

 

 

8,362

 

 

 —

 

 

 —

 

 

8,362

 

Foreign currency translation adjustment

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(8,908)

 

 

 —

 

 

(8,908)

 

Net income

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

6,422

 

 

6,422

 

September 30, 2018

 

 —

 

$

 —

 

19,758

 

$

20

 

$

290,070

 

$

835

 

$

44,560

 

$

335,485

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Preferred Stock

 

Common Stock 

 

Additional

 

other

 

 

 

 

 

 

 

 

Number

 

 

 

 

Number

 

 

 

 

paid-in

 

comprehensive

 

Retained

 

Stockholders'

 

 

    

of shares

    

Amount

    

of shares

    

Amount

    

capital

    

gain (loss)

    

earnings

    

equity

 

January 1, 2017

 

 —

 

$

 —

 

18,400

 

$

18

 

$

265,264

 

$

(885)

 

$

(37,013)

 

$

227,384

 

Public offering of common stock, net

 

 —

 

 

 —

 

459

 

 

 1

 

 

21,571

 

 

 —

 

 

 —

 

 

21,572

 

Stock options exercised, net of shares withheld for employee tax

 

 —

 

 

 —

 

356

 

 

 —

 

 

(4,930)

 

 

 —

 

 

 —

 

 

(4,930)

 

Issuance of restricted stock, net of shares withheld for employee tax

 

 —

 

 

 —

 

144

 

 

 —

 

 

(2,161)

 

 

 —

 

 

 —

 

 

(2,161)

 

Share-based compensation

 

 —

 

 

 —

 

 

 

 

 —

 

 

5,849

 

 

 —

 

 

 —

 

 

5,849

 

Cumulative effect of previously unrecognized tax benefits

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,207

 

 

1,207

 

Foreign currency translation adjustment

 

 —

 

 

 —

 

 

 

 

 —

 

 

 —

 

 

7,285

 

 

 —

 

 

7,285

 

Other

 

 —

 

 

 —

 

 

 

 

 —

 

 

 7

 

 

 —

 

 

(6)

 

 

 1

 

Net income

 

 —

 

 

 —

 

 

 

 

 —

 

 

 —

 

 

 —

 

 

68,235

 

 

68,235

 

September 30, 2017

 

 —

 

$

 —

 

19,359

 

$

19

 

$

285,600

 

$

6,400

 

$

32,423

 

$

324,442

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6


 

Applied Optoelectronics, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30, 

 

 

    

2018

    

2017

    

Operating activities:

 

 

 

 

 

 

 

Net income

 

$

6,422

 

$

68,235

 

Adjustments to reconcile net income to net cash provided by

 

 

 

 

 

 

 

operating activities:

 

 

 

 

 

 

 

Lower of cost or market reserve adjustment to inventory

 

 

5,546

 

 

1,365

 

Depreciation and amortization

 

 

21,807

 

 

14,332

 

Deferred income taxes, net

 

 

(5,734)

 

 

(2,495)

 

Loss (gain) on disposal of assets

 

 

(5)

 

 

51

 

Share-based compensation

 

 

8,362

 

 

5,849

 

Unrealized foreign exchange gain

 

 

(580)

 

 

(308)

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable, trade

 

 

27,822

 

 

(23,261)

 

Prepaid income tax

 

 

653

 

 

 —

 

Inventories

 

 

(41,288)

 

 

(21,113)

 

Other current assets

 

 

(2,013)

 

 

(6,062)

 

Accounts payable

 

 

10,082

 

 

14,618

 

Accrued income taxes

 

 

(7,390)

 

 

4,360

 

Accrued liabilities

 

 

1,941

 

 

1,927

 

Net cash provided by operating activities

 

 

25,625

 

 

57,498

 

Investing activities:

 

 

 

 

 

 

 

Purchase of short-term investments

 

 

(15,023)

 

 

 —

 

Maturities of short-term investments

 

 

9,036

 

 

 8

 

Purchase of property, plant and equipment

 

 

(52,268)

 

 

(46,529)

 

Purchase of land use rights

 

 

(5,591)

 

 

 —

 

Proceeds from disposal of equipment

 

 

697

 

 

171

 

Deposits and prepaid for equipment

 

 

(7,533)

 

 

(2,369)

 

Purchase of intangible assets

 

 

(343)

 

 

(407)

 

Net cash used in investing activities

 

 

(71,025)

 

 

(49,126)

 

Financing activities:

 

 

 

 

 

 

 

Proceeds from issuance of notes payable and long-term debt