Alliance Fiber Optic Products, Inc. Reports Second Quarter Financial Results.Business Editors/High-Tech Writers SUNNYVALE, Calif.--(BUSINESS WIRE)--July 26, 2001 Alliance Fiber Optic Products, Inc. (Nasdaq:AFOP AFOP Alliance Fiber Optic Products, Inc. AFOP Association of Farmworker Opportunity Programs AFOP Association Française des industries de l'Optique et de la Photonique AFOP and for other purposes AFOP acute fibrinous and organizing pneumonia ), a supplier of fiber optic components and integrated modules for the optical network equipment market, today reported its financial results for the second quarter ended June 30, 2001. Revenues for the second quarter totaled $4,568,000, an increase of 7% from a year ago, and decrease of 38% from the first quarter of 2001. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net loss for the second quarter of 2001 was $1,988,000, or $0.06 per share based on 33.0 million basic shares outstanding. This compares to pro forma net income of $230,000, or $0.01 per share on 36.2 million diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. shares outstanding, for the first quarter of 2001, and pro forma net loss of $166,000, or breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations per share on 25.3 million diluted shares outstanding for the second quarter of 2000. Due to the adverse effects of the industry slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. and the current economic outlook, the Company recorded an inventory provision of $6,543,000 and an impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge of $3.0 million against the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of production equipment in the second quarter. The impairment charge reduces the value of equipment that is estimated to be in excess of the Company's production capacity requirements. The impairment charge is preliminary and is subject to further analysis and review. Any changes will be incorporated in the second quarter financial results to be filed with the Securities and Exchange Commission on Form 10-Q Form 10-Q See 10-Q. by August 14, 2001. Both the inventory reserve and the preliminary impairment charge are included in the preliminary GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). financial statements. The pro forma calculations exclude the non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. for the $6,543,000 inventory provision and the $3.0 million preliminary asset impairment charge taken in the second quarter of 2001, as well as the amortization of deferred stock-based compensation. The number of shares used in the calculation of the pro forma net income per share figures assume the conversion of the Company's convertible preferred stock Convertible Preferred Stock Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". into common stock, if applicable, and the dilutive effect Dilutive effect Result of a transaction that decreases earnings per common share (EPS). of stock options, if any. The conversion of preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. was completed in conjunction with the Company's initial public offering in November 2000. Without the pro forma adjustments to eliminate the inventory provision, the preliminary impairment charge, the deferred stock compensation charges and conversion of the Company's preferred stock into common stock, the Company recorded a net loss for the second quarter of 2001 of $14,280,000, or $0.43 per share based on 33.0 million shares outstanding. This compares to a net loss for the first quarter of 2001 of $2,776,000, or $0.09 per share based on 31.9 million shares outstanding, and a net loss for the second quarter of 2000 of $920,000, or $0.17 per share based on 5.4 million shares outstanding. Peter Chang, president and chief executive officer, commented, "Our second quarter pro forma results met the revised guidance that we issued last month and reflect the challenging environment faced by the industry. While visibility remains low, we believe that the demand for our products across all lines will increase over time, and that we are taking the necessary actions to best capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. our many growth opportunities that should exist once economic conditions improve." "During the second quarter we continued to work on customer prospects, focused marketing programs, and new products and technologies. We are encouraged by our increased backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. , which is above $7 million and rose by approximately 10% from last quarter. We are also pleased with the early progress of our cost-control initiatives and we are continuing to look for ways to run our business more efficiently," continued Chang. "As we announced last month, we have reduced our production capacity and consolidated manufacturing shifts, which has enabled us to reduce our headcount. Our quarter-end cash position remained strong at $57.3 million. We believe that our restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). actions, together with our strong cash position, will give us the ability to successfully navigate (1) "Surfing the Web." To move from page to page on the Web. (2) To move through the menu structure in a software application. through the current industry downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. and to position AFOP for a return to growth in the future," stated Chang. "Looking ahead we expect that this difficult operating environment In computing, an operating environment is the environment in which users run programs, whether in a command line interface, such as in MS-DOS or the Unix shell, or in a graphical user interface, such as in the Macintosh operating system. will continue to affect our customers' sales, limiting their visibility and, as a result, ours. However, we continue to believe that the long-term need for advanced fiber optic solutions for the optical network equipment market remains intact. Additionally, with positive initial customer feedback on our latest generation of DWDM (Dense WDM) The term given to wavelength division multiplexing (WDM) when significantly more channels were being added. Since WDM is increasingly more "dense" all the time, both terms are used synonymously. See WDM. DWDM - wavelength division multiplexing , VOA (Variable Optical Attenuator) A device that can incrementally adjust the power of the optical signal passing through it. and SODA products, we believe we will be ready to leverage our product strength when the economy and our customers' businesses recover," concluded Chang. Conference Call Management will host a conference call at 2:00 p.m. Pacific Time on July 26, 2001 to discuss AFOP's second quarter 2001 financial results. To participate in AFOP's conference call, please call 303/262-2127 at least ten minutes prior to the call in order for the operator to connect you. The confirmation number for the call is 358637. AFOP will also provide a live webcast of its second quarter 2001 conference call at AFOP's website www.afop.com. A replay will be available beginning at approximately 5:00 p.m. Pacific Time on July 26, 2001 through 5:00 p.m. Pacific Time on August 2nd on both the AFOP website, and by dialing 800/405-2236; confirmation number 358637. About AFOP Founded in 1995, Alliance Fiber Optic Products, Inc. designs, manufactures and markets a broad range of high performance fiber optic components and integrated modules. AFOP's products are used by leading and emerging communications equipment manufacturers to deliver optical networking Communications between computers, telephones and other electronic devices using light. An optical network is far more reliable and has far greater potential transmission capacity than networking in the electrical domain. See optical fiber. systems to the long-haul, metropolitan and last mile access segments of the communications network The transmission channels interconnecting all client and server stations as well as all supporting hardware and software. . AFOP offers a broad product line of passive optical components including interconnect (1) To attach one device to another. (2) A physical port (plug, socket) or wireless port (transmitter, receiver) used to attach one device to another. systems, couplers and splitters, thin film DWDM components and modules, fixed and variable optical attenuators An optical attenuator is a device used to reduce the power level of an optical signal, either in free space or in an optical fiber. They are commonly used in fiber optic communications. , and depolarizers. AFOP is headquartered in Sunnyvale, Calif., with manufacturing and product development capabilities in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , Taiwan and China. AFOP's website is located at http://www.afop.com. Except for the historical information contained herein, the matters set forth in this press release, including statements as to demand for AFOP's products, the existence of future opportunities and growth, the success of AFOP's cost reduction measures, AFOP's anticipated revenue growth, the rate of customer orders, financial performance, the magnitude of AFOP's impairment charge for the second quarter, prospects of AFOP's products, and the long-term need for advanced fiber optic solutions are forward looking statements within the meaning of the "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. are subject to risks and uncertainties that may cause actual results to differ materially, including, but not limited to, the impact of competitive products and pricing, the economy remaining the same or worsening wors·en tr. & intr.v. wors·ened, wors·en·ing, wors·ens To make or become worse. Noun 1. worsening - process of changing to an inferior state decline in quality, deterioration, declension , timely design acceptance by our customers, the level of order cancellations, the need for and magnitude of future inventory write downs or impairment charges, timely introduction of new technologies, ability to ramp new products into volume production, industry-wide shifts in supply and demand for optical components and modules, industry overcapacity o·ver·ca·pac·i·ty n. Too great a capacity for production of commodities or delivery of services in relation to actual need: the problem of overcapacity in many large industries. , failure of cost-control initiatives, financial stability in foreign markets, and other risks detailed from time to time in SEC reports, including AFOP's most recent Form 10-Q for the quarter ended March 31, 2001. These forward-looking statements speak only as of the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" . AFOP disclaims any intention or obligation to update or revise any forward-looking statements. For additional information contact Alliance Fiber Optic Products, Inc. at 735 North Pastoria Ave., Sunnyvale, CA USA 94085; Tel: 408/736-6900. Fax: 408/736-4882. Email: ir@afop.com. Website: http://www.afop.com.
ALLIANCE FIBER OPTIC PRODUCTS, INC.
Preliminary Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
June 30, Dec. 31,
2001 2000
------- -------
ASSETS
Current assets:
Cash and short-term investments $57,348 $66,677
Accounts receivable, net 2,869 5,302
Inventories 6,386 6,792
Other current assets 465 835
------- -------
Total current assets 67,068 79,606
Property and equipment, net 8,936 8,590
Other assets 713 329
------- -------
Total assets $76,717 $88,525
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 2,674 $ 3,234
Accrued expenses 2,409 2,611
------- -------
Total current liabilities 5,083 5,845
Long-term liabilities 161 181
Stockholders' equity 71,473 82,499
------- -------
Total liabilities and stockholders' equity $76,717 $88,525
======= =======
ALLIANCE FIBER OPTIC PRODUCTS, INC.
Pro Forma Condensed Consolidated Statements of Operations
Excluding Stock-Based Compensation and One-Time Charges
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
June 30, March 31, June 30,
2001 2001 2000
-------- -------- --------
Revenues $ 4,568 $ 7,369 $ 4,271
Cost of revenues 3,556 4,557 2,374
-------- -------- --------
Gross profit 1,012 2,812 1,897
Operating expenses:
Research and development 1,784 1,674 1,183
Sales and marketing 733 809 487
General and administrative 1,116 959 424
-------- -------- --------
Total operating expenses 3,633 3,442 2,094
-------- -------- --------
Loss from operations (2,621) (630) (197)
Interest and other income, net 636 983 67
-------- -------- --------
Loss before income taxes (1,985) 353 (130)
Income tax provision 3 123 36
-------- -------- --------
Net income/(loss) $ (1,988) $ 230 $ (166)
======== ======== ========
Net income/(loss) per share $ (0.06) $ 0.01 $ (0.01)
Shares used in computing net loss
per share 33,000 36,200 25,300
======== ======== ========
ALLIANCE FIBER OPTIC PRODUCTS, INC.
Preliminary Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
June 30, March 31, June 30,
2001 2001 2000
-------- -------- --------
Revenues $ 4,568 $ 7,369 $ 4,271
Cost of revenues 13,067 4,557 2,374
Stock-based compensation charge 427 485 74
-------- -------- --------
Total cost of revenues 13,494 5,042 2,448
-------- -------- --------
Gross profit (8,926) 2,327 1,823
Operating expenses:
Research and development 1,784 1,674 1,183
Sales and marketing 733 809 487
General and administrative 1,148 959 424
Stock-based compensation charge 2,322 2,521 680
-------- -------- --------
Total operating expenses 5,987 5,963 2,774
-------- -------- --------
Loss from operations (14,913) (3,636) (951)
Interest and other income, net 636 983 67
-------- -------- --------
Loss before income taxes (14,277) (2,653) (884)
Income tax provision 3 123 36
-------- -------- --------
Net loss $(14,280) $ (2,776) $ (920)
======== ======== ========
Net loss per share $ (0.43) $ (0.09) $ (0.17)
Shares used in computing net loss
per share 32,987 31,876 5,397
======== ======== ========
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