UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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(Mark One)
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[ X ]
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal
year ended June 27, 2010
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or
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Commission File Number
000-31581
OPLINK COMMUNICATIONS,
INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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No. 77-0411346
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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46335 Landing Parkway, Fremont, CA
(Address of principal executive offices)
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94538
(Zip Code)
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Registrants telephone
number, including area code:
(510) 933-7200
Securities registered pursuant
to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which
registered
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Common Stock, $0.001 par value
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The NASDAQ Stock Market LLC
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Securities registered pursuant
to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No x
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the
Act. Yes o No x
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 x 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
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 if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K
or any amendment to this
Form 10-K. x
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. (Check one):
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Large accelerated filer o
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Accelerated filer x
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller reporting company o
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No x
The aggregate market value of voting and non-voting common
equity held by non-affiliates of the registrant, as of
December 31, 2009 (the last trading day of the
registrants most recently completed second fiscal
quarter), was approximately $332.6 million based upon the
closing price reported for such date by the NASDAQ Stock Market.
For purposes of this disclosure, shares of common stock held by
officers and directors and by each person known by the
registrant to own 10% or more of the outstanding common stock
have been excluded. Exclusion of such shares should not be
construed to indicate that such persons possess the power,
direct or indirect, to direct or cause the direction of the
management or policies of the registrant.
As of August 31, 2010, approximately 19,334,651 shares
of the registrants common stock, $0.001 par value,
were outstanding.
Documents Incorporated by
Reference:
The information called for by Part III is incorporated by
reference to specified portions of the registrants proxy
statement for its 2010 Annual Meeting of Stockholders, to be
filed with the Securities and Exchange Commission within
120 days after June 27, 2010, the end of the
registrants fiscal year.
1
Form 10-K
June 27, 2010
TABLE OF CONTENTS
2
PART I
This report on
Form 10-K
contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934,
including, without limitation, statements regarding our
expectations, beliefs, intentions or future strategies that are
signified by the words expect,
anticipate, intend, believe,
estimate or assume or similar language.
All forward-looking statements included in this document are
based on information available to us on the date hereof, and we
assume no obligation to update any such forward-looking
statements. Actual results could differ materially from those
projected in the forward-looking statements. In evaluating our
business, you should carefully consider the information set
forth below and under the captions Risk Factors
contained in Item 1A and Managements Discussion
and Analysis of Financial Condition and Results of
Operations contained in Item 7. We caution you that
our business and financial performance are subject to
substantial risks and uncertainties. We undertake no obligation
to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
Item 1. Business
Overview
Oplink Communications, Inc. (we, Oplink,
or the Company) was incorporated in California in
September 1995 and was later reincorporated in Delaware in
September 2000. We are headquartered in Fremont, California and
have manufacturing, design and research and development
facilities in Zhuhai, Shanghai and Wuhan, China, in Taiwan and
in Woodland Hills, California.
We began selling our products in 1996. We design, manufacture
and sell optical networking components and subsystems. Our
products expand optical bandwidth, amplify optical signals,
monitor and protect wavelength performance, redirect light
signals, ensure signal connectivity and provide signal
transmission and reception within an optical network. Our
products enable greater and higher quality bandwidth over longer
distances, which reduce network congestion, transmission costs
and energy consumption per bit. Our products also enable optical
system manufacturers to provide flexible and scalable bandwidth
to support the increase of data traffic on the Internet and
other public and private networks.
We provide over 350 different products that are sold as
components or are integrated into custom solutions. We provide
customers with high quality optical subsystems and components
that are used for bandwidth creation, bandwidth management and
transmission products. Our products and solutions can be applied
to all segments of the fiber optic network infrastructure
including long-haul networks, metropolitan area networks
(MANs), local area networks (LANs),
wireless backhaul and
fiber-to-the-home
(FTTH) networks.
We provide our solution and products to the exacting
requirements of the worlds leading optical networking
equipment companies, and work closely with customers during the
product design and development cycle. This provides us with the
ability to respond to the volume production requirements of our
customers when their systems are ready for commercial
deployment. We are responsive to our customers volume,
quality and
time-to-market
requirements.
Our product portfolio includes solutions for next-generation,
all-optical dense and coarse wavelength division multiplexing
(DWDM and CWDM, respectively), optical
amplification, switching and routing, monitoring and
conditioning, fiber interconnect/termination/distribution and
line transmission applications. Our addressable markets include
long-haul networks, MANs, LANs, wireless backhaul and FTTH
networks. Our customers include telecommunications, data
communications and cable TV equipment manufacturers located
around the globe.
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As a photonic foundry, we provide design, integration and
optical manufacturing solutions (OMS) for advanced
and cost-effective components and subsystem manufacturing at our
principal in-house design, service and manufacturing facility in
Zhuhai, China and through our contract manufacturer in Dongguan,
China. We offer our customers expert OMS for the production and
packaging of highly-integrated optical subsystems and turnkey
solutions, based upon a customers specific product design
and specifications as well as solutions with lower levels of
component integration for customers that place more value on
flexibility than would be provided with turnkey solutions. Our
OMS customers include telecommunications, data communications
and cable TV equipment manufacturers located around the globe.
Our product portfolio also includes optical transmission
products, including fiber optic transmitters, receivers,
transceivers and transponders. Optical transmission products
convert electronic signals into optical signals and back into
electronic signals, thereby facilitating the transmission of
information over fiber optic communication networks. Our optical
transmission products are used primarily in MAN, LAN, wireless
backhaul and FTTH applications. Our transmission products are
engineered with varying levels of integration to suit customers.
The lowest level of integration involves separate transmitter
and receiver modules, which provides our customers the greatest
flexibility in product design by allowing them to place the
transmitters and the receivers according to their design
specifications. Transceivers provide the next level of
integration. Transceivers place both the transmitter and
receiver in the same package with a dual fiber or connector
interface. We also provide transceivers with build-in transmit
and receive optical multiplexing and demultiplexing optical
filters so only a single fiber or connector interface is needed
for bi-directional optical transmission.
We undertake research and development activities at our
facilities in Wuhan and Zhuhai, China, in Hsinchu and Taipei,
Taiwan, and at facilities in Fremont, California.
Our common stock has been quoted on the NASDAQ Stock Market
under the symbol OPLK since our initial public
offering in October 2000. Our Internet website address is
www.oplink.com. Our website address is given solely for
informational purposes; we do not intend, by this reference,
that our website should be deemed to be part of this Annual
Report on
Form 10-K
or to incorporate the information available at our Internet
address into this Annual Report on
Form 10-K.
We file electronically with the Securities and Exchange
Commission, or SEC, our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended. We make these reports available free of charge
through our Internet website as soon as reasonably practicable
after we have electronically filed such material with the SEC.
These reports can also be obtained from the SECs Internet
website at www.sec.gov or at the SECs Public Reference
Room at 100 F Street, N.E., Washington, D.C.
20549. You may obtain information on the operation of the Public
Reference Room by calling the SEC at
1-800-SEC-0330.
Our fiscal year ends on the Sunday closest to June 30 of each
year. Interim fiscal quarters will end on the Sunday closest to
each calendar quarter end. In this report, for presentation
purposes, we present each fiscal year as if it ended on
June 30, and each fiscal quarter as if it ended on
September 30, December 31 or March 31, as the case may
be. For more information, please see Note 1 of the notes to
consolidated financial statements included at the end of this
report.
Our
Solution
Oplink is a leader in the optical industry and is uniquely
positioned to provide unparalleled OMS to our customers for
leading edge, integrated solutions that can be rapidly and cost
effectively deployed in communications networks around the
world. OMS are customized optical solutions to fit a
customers specific needs.
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The customized, variety-rich and high reliability requirements
of optical equipment manufacturing makes Oplinks OMS
service the ideal solution for meeting the needs of system and
subsystem companies for cost-effective manufacturing of optical
equipment. Oplink possesses the expertise and versatility in
product design and development needed to provide the high
responsiveness and flexibility expected in todays markets.
We are able to offer shortened design cycle times and reduced
production costs with our 182,000 square feet
Class-10K
clean room and a 574,000 square feet manufacturing facility
in Zhuhai, China.
Oplink offers a wide range of engineering and design services,
which include:
- Optic-centric design;
- Electrical system design;
- Software and firmware development;
- Thermal management;
- Mechanical design;
- System Integration; and
- Standards compliance.
Oplink offers customers turnkey solutions including the
following value-added services:
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Optical Product Design and Optimization. Oplink
provides optical design, mechanical design, printed circuit
board (PCB) layout and electrical design and software and
firmware design services to our customers.
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Testing. Oplink carries out full optical and
electrical system and component testing for customers to test
for reliability, compliance and subsystem integration.
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Customer Care. Oplink provides preorder and
post-sales customer support, access to engineering support,
flexible order fulfillment/shipment and customer training around
the globe.
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System Integration. Oplink provides full system
integration with performance testing, validation and guaranteed
product performance. The integration and testing can be
performed with any customer specified hardware or designs.
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Procurement. Oplink leverages its extensive
expertise in the optical industry in its selection of reliable
suppliers with the highest quality products for customers.
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Expert Assembly and Packaging. Oplink offers
extensive experience in integrated assembly and packaging
optimization to meet even the most challenging specifications.
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Comprehensive Supply Chain Management. Oplink
employs a synchronized and fully integrated supply chain model
that addresses integration challenges specific to the optical
environment as well as key logistical concerns.
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Prototyping. To facilitate successful and timely new
product introductions, Oplinks manufacturing team rapidly
delivers small quantities of products, or prototypes, to test
and ensure product functionality and viability prior to volume
production.
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Global Distribution. Oplink provides customers with
the flexible, worldwide shipment of assembled product.
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Our
Strategy
Oplink provides highly integrated optical
sub-systems,
pioneering design services and custom solutions to
telecommunication equipment makers. By leveraging our
well-established core competencies in optical design and
manufacturing, we are able to serve not only equipment makers
selling to end-customers, but also module and component makers
in need of a manufacturing partner.
The core elements of our strategy are:
Strengthening and expanding our leadership in the
passives. Oplink has successfully transformed from a
pure components maker from its inception through IPO to a
supplier today offering a comprehensive product portfolio
encompassing passive components, modules and subsystems. We
believe that our dedication to developing a diversified product
line together with our manufacturing efficiency has
well-positioned Oplink to provide system equipment makers with
state-of-the-art
tools, such as Reconfigurable Optical Add-Drop Multiplexers
(ROADMs), for enhancing bandwidth provisioning and lowering
network costs. It is projected that with the ever-increasing
demand for bandwidth fueled by
peer-to-peer
networking traffic, file sharing, IPTV, internet video content,
online gaming, music downloading and a myriad of other
applications, the network infrastructure build-out will continue
over the coming years. Oplink believes that a focus on
strengthening and expanding our leadership in passive optical
products, which unlike active products are agnostic to the data
rate evolution to
40G/100G, is
central to our business success in the future.
Innovation through integration and miniaturization based on
commercially available technology platforms. Oplink
understands that developing new products requires substantial
investment with long and uncertain profitability cycles. As
such, Oplink seeks to leverage its product development spending
through incremental integration/hybridization and
miniaturization based on existing technology platforms that are
already widely available, including optical thin-film coating,
free-space micro-optics, fused fiber optics,
Micro-Electro-Mechanical Systems (MEMS), Planar Lightwave
Circuit (PLC) or Arrayed-Waveguide Grating (AWG) and Liquid
Crystal (LC). In addition, Oplink is proactively exploring
optical technologies established outside the telecom industry to
cultivate product ideas which could benefit our core business
growth.
Growing market share in 10G and higher speed transceivers for
metro applications. Oplink is focused on seeking to
offer our customers
best-in-class
pluggable transceivers for 10G and higher data rate
metro/aggregation DWDM and CWDM optical networking applications,
capitalizing on the increasing demand for bandwidth upgrade and
industry-wide transition from traditional larger footprint,
higher power consumption 300-pin transponders to smaller, low
power dissipating XFP and SFP+ form factors. We believe that our
global product development model with integrated engineering
teams both in the US and China will enable our worldwide
customers to improve
time-to-market
with best features and performance. To address diverse customer
network deployment conditions, we offer a broad portfolio of 10G
DWDM and CWDM XFP and SFP+ products with a wide range of
operating temperature ranges.
Enhancing engineering capabilities in China. In
parallel to building solid manufacturing operations in China,
Oplink has recognized the equal importance of leveraging the
local talent in product design and development and significantly
increased the engineering workforce in our facilities in Zhuhai
and Wuhan. While R&D resource in the US participates in
customer application support and focuses on developing advanced
IP and prototypes, engineering teams in China have taken on an
increasingly larger role in new product introduction. As a
result, we are able to maintain relative lower overhead expense
to better compete in the marketplace and deliver shareholder
value.
One-Stop-Shop OMS solution provider. As a founder
and leader of the OMS or photonic foundry model, Oplink offers a
one-stop-shop approach or turnkey solutions that are customized
to our customers specific needs. One-stop-shopping is
being increasingly demanded by our customers, the
telecommunications network vendors. Our customers are
increasingly requiring optical component
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suppliers to take advantage of developments in product
integration to provide solutions incorporating multiple optical
components on a single subsystem or module, thereby reducing the
need for component assembly and additional testing. Therefore,
we believe that suppliers like Oplink who are able to offer a
more integrated manufacturing solution to customers will have an
advantage over suppliers who can only offer discrete optical
components. The vertical integration of our design and
manufacturing capability enables us to consistently deliver the
highest quality, lowest cost products to our customers as well
as to respond rapidly to design or specification changes which
would shorten our customers
time-to-market.
We believe that offering a broad range of solutions increases
our penetration of existing and new customers.
Continuous focus on our cost structure. Oplink
maintains vertically integrated photonic manufacturing
facilities in low-cost overseas locations. Our low-cost
manufacturing facilities allow us to do full design work
in-house which enables us to supply cutting edge products at the
lowest possible cost in the industry.
In an industry characterized by intense price competition and at
times price erosion, our low-cost structure is a source of
sustainable competitive advantage. The source of this
sustainability comes from the fact that we believe our design
and manufacturing facilities are difficult and expensive to
replicate by other firms. Despite our existing streamlined cost
structure, we continuously identify and implement cost-saving
programs across our organization.
The increase in the worldwide demand for broadband increases the
demand for our products. With our vertically integrated cost
structure, it further leads to greater capacity utilization and
therefore greater operating leverage as fixed costs are spread
over a greater number of manufactured units, resulting in
improved gross margins.
Customer satisfaction. Oplink places a high value on
our relationships with our customers around the world, large and
small. To date, Oplink has created well over 10,000 customized
product specifications to fulfill customers exacting
requirements. We believe building a long-term mutual trust with
the customers is instrumental to nurture sustainable business
growth and cultivate a healthy ecosystem.
Selectively pursuing acquisitions. From time to time
Oplink engages in strategic discussions with other companies. In
an industry characterized with excess capacity and intense price
competition, we believe there are merits in continued industry
consolidation. We intend to play an active part in the
consolidation of the industry and will consider using
acquisitions as a vehicle to broaden our product portfolio,
obtain critical technologies, strengthen our relationships with
existing customers and add new customers.
Products
and Technologies
We provide a broad line of fiber optic subsystems and components
designed to satisfy the needs of communications equipment
suppliers. We categorize our products by the functionalities
provided within a network, namely, bandwidth creation, bandwidth
management, optical interconnect and transmission products. Some
of our products have attributes that combine multiple functions.
Some of our bandwidth creation and bandwidth management products
utilize telecommunication interfaces to provide local or remote
reporting and control to enhance their function in an optical
network.
Bandwidth
Creation Products
Communications equipment suppliers use our bandwidth creation
products to expand the capacity
and/or
extend the coverage of their customers networks. Other
bandwidth creation products enable optical signals to travel
along more complex network architectures such as mesh networks
and metro networks, or enable optical signals to travel greater
distances over traditional long haul networks.
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Wavelength Expansion Products. In fiber optic
communications, different signals are transmitted over multiple
wavelengths. With increases in the number of wavelengths and
data rates, spacing between the wavelengths narrows and it
becomes increasingly difficult to separate and combine them. We
offer wavelength expansion products that are designed to enable
the combination and separation of a particular wavelength in all
parts of the network including emerging access, metro networks
and long haul networks. Wavelength expansion products enable
wavelength multiplexing (combining), de-multiplexing
(separating), and wavelength interleaving, which combines light
signals from two or more simultaneous sources over a single
fiber. We offer the following products to handle these
tasks:
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Dense Wavelength Division Multiplexers. A dense
wavelength division multiplexer, or DWDM, is a solution for
scalable, reliable, protocol independent bandwidth creation. A
DWDM multiplexer is an integrated optical module or subsystem
that combines two or more wavelengths for transmission over a
single fiber (multiplexing) or separates these wavelengths
(demultiplexing) at the receiving end. Our DWDM module and
subsystem solutions are derived from an array of high
performance technologies including thin film filters and arrayed
wave guides, or AWGs. Our solutions are available in a variety
of channel spacings.
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Coarse Wavelength Division Multiplexers. A
coarse wavelength division multiplexer, or CWDM, is a solution
for cost-effective bandwidth creation in the access, cable TV
and metro environments. A CWDM multiplexer is an integrated
optical module or subsystem that combines two or more
wavelengths, at a channel spacing that is many times wider than
for standard DWDM channel spacing for multiplexing or
demultiplexing.
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Band Wavelength Division Multiplexers. Band
wavelength division multiplexer, or BWDM, products help manage
multiple International Telecommunication Union, or ITU, channels
within multiplexer/demultiplexer (Mux/Demux) or optical add/drop
applications. Our BWDMs pass a band of channels while isolating
the channels adjacent to the band of channels sent. BWDM
products facilitate the design of flexible (pay as you grow) low
loss architectures as well as enable the design of complex mesh
and ring networks. We offer a variety of BWDM products for the
50, 100 and 200 GHz channel spacing plans.
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DWDM Interleavers. A DWDM interleaver is an optical
component that combines two set of light signals each spaced at
alternating ITU channel numbers from two separate fibers into a
single fiber, which effectively doubles the capacity of the
optical network system, or conversely, separates a single light
source into two sets of alternately spaced signals.
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Optical Amplification Products. Optical fiber
amplifiers are widely deployed in optical communications
networks to enhance the optical signal power. Optical signals
naturally lose power and eventually are lost after traveling a
long distance along an optical fiber in traditional long haul
networks. In emerging access or metro networks, optical signals
lose power at add/drop nodes, which are those locations in a
network where wavelength channels enter or exit the node. This
power loss is referred to as attenuation. Through recent
advances in technology, the optical signal can be amplified with
Erbium Doped Fiber Amplifiers, or EDFAs, or with Raman
amplifiers, neither of which require
optical-to-electrical
conversion. The amplifiers are arranged along fiber cable lines
at regular intervals in long haul networks or at selected nodes
in access and metro networks to enable the optical signal to
reach its destination clearly. While amplifiers range in
complexity, a typical amplifier consists of a fiber and a number
of fiber optic components. We offer both EDFA and Raman
amplification products including EDFAs and the components used
in EDFA and Raman amplifier designs. Our optical amplification
products include the following:
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Gain Blocks. Gain blocks are integrated optical
subsystem building blocks consisting of Erbium Doped Fibers
(EDFs) and fiber optic components used in fiber
optic amplifiers to boost the intensity of an incoming optical
signal.
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EDFAs. Erbium Doped Fiber Amplifiers are optical
subsystems that employ gain blocks, advanced electronics,
firmware and software to control the optical gain of an incoming
optical signal.
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Wavelength Division Multiplexers (WDM)
Pump/Signal Combiners. Micro-optic WDM pump/signal combiners
are components that combine power for the optical amplifier.
They are used to efficiently combine light signals with pump
laser sources. Pump lasers are active optical components used in
optical amplifiers such as EDFAs to amplify or regenerate light
signals that naturally suffer loss while traveling over distance
within an optical network.
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Integrated Hybrid Components. Optical amplifier
systems can combine optical components, including isolators, tap
couplers and WDM pump/signal combiners. The main advantage of
hybrid components is that they minimize the amplifier package
size, increase reliability and reduce manufacturing cost.
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WDM Pump Combiners. WDM pump combiners are used to
increase the power of an optical amplifier by combining multiple
pump lasers of different wavelengths into one common pump source
for amplification.
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Polarization Beam Combiners. Polarization beam
combiners are optical components that combine two light sources
of the same or different wavelengths with opposite polarization
to increase the power output of the optical amplifier.
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Gain Flattening Filters. Gain flattening filters are
used to ensure that signals are amplified by equal amounts. Our
thin film filter technology, or the technology in which layers
of thin film separate optical signals, employs multiple layers
of optical materials on glass to adjust optical output at
different wavelengths to meet the needs of next-generation high
power amplifiers.
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Isolators. Isolators are fiber optic devices that
transmit light in only one direction, thus preventing a
reflected light signal from returning to its laser source or
EDF. Reflected light can interfere with a lasers
performance and create noise, which can impair system
performance in optical networks.
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Tap Couplers. Tap couplers transfer a small amount
of optical signals from the main fiber into a secondary fiber.
They are widely used for system monitoring purposes or for power
splitting and have a very low insertion loss.
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Bandwidth
Management Products
Communications equipment suppliers use our bandwidth management
products to add intelligence and flexibility to their systems,
which allows communications service providers to monitor the
performance, control the direction, and condition the amplitude
of light signals throughout the optical network.
Wavelength Performance Monitoring and Protection
Products. The ability to monitor wavelengths within an
optical network enables service providers to maintain quality of
service even in the event of an interruption in the signal path,
such as a cut in the fiber. It is significantly more difficult
to monitor signal flow in optical systems as compared to
electrical systems. Monitoring requires that optical signals be
extracted from the fiber without interfering with the optical
signal traveling through the same fiber.
We offer the following products that enable service providers to
monitor network performance and make necessary decisions for
traffic flow and network efficiency:
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Supervisory Channel WDM. Our supervisory channel WDM
is an integrated component that separates the network
supervisory channel from the signal channels for use in
monitoring the network performance.
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Integrated WDM Monitor Arrays. Our integrated WDM
monitor arrays convert optical signals into electrical signals
for network wavelength selective power monitoring. This module
combines multiple network power monitoring functions in a single
module and integrates WDM filters and third-party photo
detectors, a device supplied by other optical component
manufacturers that receives a light signal in an optical network
and converts it into an electrical signal. These integrated
modules allow communications service providers to monitor
whether or not signals are being transmitted properly through
the network.
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Integrated Tap Monitor Arrays. Our integrated tap
monitor arrays convert optical signals into electrical signals
for network signal power monitoring. This module integrates a
tap coupler, a device that splits the light power, and
third-party photo detectors, a device supplied by other optical
component manufacturers that receives a light signal in an
optical network and converts it into an electrical signal. These
integrated modules allow communications service providers to
monitor whether or not optical signals are being transmitted
properly through the network.
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Wavelength Protection Subsystems. Our multi-channel
wavelength protection subsystems are integrated solutions that
combine tap couplers, splitters, switches, electronics,
firmware, software and third-party photo detectors. These
subsystems integrate network switching protection functions and
monitor optical signal quality such as optical power in response
to unexpected disruption in the optical network. They provide
redundant path protection with fast routing and switching with
network fault management and diagnostic capability.
|
Optical Switching and Routing Products. As optical
networks become more complex, there is an increasing demand to
provide switching and routing capability to direct optical
signals across multiple points in the network. We supply optical
fiber switching and routing products that provide all-optical
signal switching between fibers for up to eight different end
destinations. Our optical switching and routing products include
the following:
|
|
|
|
-
|
Optical Add/Drop Multiplexers. Optical add/drop
multiplexers, or OADMs, are used when part of the information
from an optical signal carried on the network is demultiplexed,
or dropped, at an intermediate point and different information
is multiplexed, or added, for subsequent transmission. The
remaining traffic passes through the multiplexer without
additional processing. The OADM is typically used for rerouting
a number of specific optical wavelengths with different end
destinations. OADMs can also include other optical components
such as optical conditioning products or optical monitoring
products for increased functionality.
|
|
|
-
|
Reconfigurable OADMs (ROADMs). ROADMs
combine OADM functionality, optical wavelength selective
switching, or WSS, and conditioning products, electronic
circuitry, integrated firmware and software to add remote
configuration and provisioning flexibility to the network by
allowing the dynamic add/drop of selective optical wavelengths
having variable amplitudes for different end destinations.
|
|
|
-
|
Switches. Optical switches are devices that can
direct optical signals to different end destinations.
|
|
|
-
|
Circulators. Circulators consist of sophisticated
micro-optic components that are used to
re-direct
optical signals. Circulators are also used in dispersion
compensation applications and in DWDM fiber grating based
wavelength expansion products.
|
Wavelength Conditioning Products. For reliable fiber
optic communication systems, the light signal intensity needs to
be controlled. For example, excess input power can overload the
receivers and an optical attenuator is used to reduce the input
signal to the level required by the receiver. Wavelength
conditioning products are used in optical networks along with
DWDM multiplexers and demultiplexers,
10
optical amplifiers, and re-configurable optical add drop
multiplexers to provide the power control functions. Our
wavelength conditioning products include the following:
|
|
|
|
-
|
Variable Optical Attenuators. Variable optical
attenuators, or VOAs, are optical devices that reduce the power
of the optical signal in DWDM networks to ensure that all
optical signals within a network have desired power. The amount
of power reduction of a particular optical signal can be
adjusted to match the power of other optical signals in the
network thereby enhancing network performance and service
quality.
|
|
|
-
|
Variable Multiplexers. Variable Multiplexers combine
multiple ITU channel signals along with the function of
adjusting the power level. The subsystems attenuate the power
level of individual ITU signals to achieve equalization of the
spectrum or blocking specific channels.
|
|
|
-
|
Dynamic Band Equalization Products. Dynamic band
equalization products monitor and adjust power levels of
multiple bands of ITU channels. These subsystems separate
multiple ITU channels into bands of channels, and then monitor
and control the power levels of these bands through standard
telecommunication interfaces such as RS232 and then combine
these multiple bands onto a single fiber. They are used for
power equalization in various parts of the network including
metro and long haul.
|
Optical
Interconnect Products
The acquisition of Emit Technology Co., Ltd. (Emit)
in early 2010 enabled Oplink to offer communications system
equipment makers a broadened suite of precision-made,
cost-effective and reliable optical connectivity products to
establish multiple-use, quick pluggable fiber links among
network devices for bandwidth deployment, as well as in a test
and measurement environment for a wide range of system design
and service applications.
Connectors and Adapters. Offered in different types
and form factors to meet the varying application needs, optical
connectors provide a precise and reliable means to terminate the
fiber end, whereas adapters provide a pluggable solution for a
pair of connectors to be physically coupled repeatedly at
consistently low optical power loss.
Fixed Attenuators. Designed to reduce a
pre-determined amount of light through the fiber to the exact
level for added tolerance in system link budget, these in-line
pluggable style fixed attenuators offer a compact, high accuracy
solution for facile integration into existing systems.
Patchcords. These are simplex or duplex fiber optic
cables assembled at various specified lengths and jacket
ratings, and terminated with connectors of the same or different
types at the two ends, providing light connectivity that endures
environmental factors and human handling.
Termination and Distribution Enclosures. To ensure
end-to-end
signal integrity amid the increasing demand for better space
utilization, this line of products offer a flexible economic
solution in rack-, wall- or pole-mountable enclosures for
organizing and protecting fiber terminations, splices and cable
distribution featuring fiber bend radius control and
strain/slack management in indoor and outdoor applications.
Transmission
Products
The acquisition of Optical Communication Products, Inc.
(OCP) in 2007 and continuing product development
have enabled Oplink to offer a portfolio of transmission
products that broaden the addressable markets as well as the
range of solutions that Oplink can now offer its customers.
Oplinks transmission products consists of a comprehensive
line of high-performance fiber optic modules, including fiber
optic transmitters, receivers, transceivers, and transponders,
primarily for use in
11
MAN, LAN, and FTTH applications. Fiber optic modules are
integrated optoelectronic components and integrated circuits
with embedded control and software that are used to enable
network equipment to transmit data over long distance of optical
fiber. Our transmission products convert electronic signals into
optical signals and back into electronic signals often with
build-in microcontroller based signal monitoring and
conditioning, facilitating the transmission of information over
fiber optic communication networks.
SFP Transceivers. Small form-factor pluggable, or
SFP, transceivers are hot-pluggable optical
transceivers that can be removed or inserted into the equipment
without turning off the power of the system. This feature allows
Oplinks customers to readily reconfigure their systems
without interrupting their network services, thereby,
eliminating system downtime during upgrades and maintenance. SFP
Transceivers are for 4Gbps transmission speed or below.
Oplinks cam latches are color coded to provide the
end-user with an easy way to identify module types in an
installed system.
SFP+ Transceivers. Enhanced small form-factor
pluggable, or SFP+, transceivers are similar products to SFP
while delivering the signal at 6-10Gbps. It is also
hot-pluggable that can be removed or inserted into
the equipment without turning off the power of the system. They
are initially deployed for 10Gbps LAN, SAN (storage area
network) and datacenter applications. With most efficient
measurement in Gbps per watt per cubic centimeters, they are
increasingly deployed for broader range of applications,
including MAN and WDM optical networking applications.
XFP Transceivers. 10 Gigabit small form-factor
pluggable is a hot-pluggable, protocol-independent optical
transceiver with build-in clock and data recovery circuits for
10 Gigabit per second
SONET/SDH,
Fiber Channel, gigabit Ethernet, 10 gigabit Ethernet and other
applications, including CWDM and DWDM optical networks. It
includes digital diagnostics and the electrical interface
specification is a portion of the XFP Multi Source Agreement
specification.
CWDM Transceivers. Coarse wavelength division
multiplexing, or CWDM, transceivers allow the aggregation of
multiple channels of optical signals onto a single optical fiber
by utilizing different wavelengths. The CWDM transceivers use
lasers with wide channel wavelength spacing, typically 20 nm,
which allows the equipment to achieve a lower overall system
cost. This lower cost is the result of a lower transmitter cost
with relaxed temperature and wavelength control, as well as a
lower optical
MUX/DMUX
cost due to wider tolerance on the wavelength stability and
bandwidth.
Oplinks CWDM transceivers are available in all the common
industry standard transceiver footprints of 1x9, 2x9, GBIC, SFF,
SFP, XFP and SFP+, and provide up to 16 wavelength channels at
nominally 1271nm, 1291nm, 1311nm, 1331nm, 1351nm, 1371nm,
1391nm, 1411nm, 1471 nm, 1491 nm, 1511 nm, 1531 nm, 1551
nm, 1571 nm, 1591 nm, and 1611 nm. They are available in a
multi-rate format that allows operation at all speeds from 125
Mb/s Fast Ethernet up to 10Gb/s 10GbE and
OC-192
SONET/SDH. Oplinks CWDM transceiver products are available
in industrial operating temperature option (−40 to +85
degrees Celsius).
Bi-Directional Transceivers. Bi-Directional
transceivers allow full duplex transmission utilizing a single
fiber. These transceivers incorporate lasers, receivers and
optical filters, allowing simultaneous transmission and
reception from a single port or a single fiber. The advantage of
Bi-Directional transceiver modules is lower material cost, lower
installation cost and lower operational cost for fiber
installations, as a result of having to purchase, install,
maintain, and administer fewer fibers.
Oplinks Bi-Directional transceivers are available in
industry standard pluggable modules (SFP) and are compliant to
the industry standard known as EFM (Ethernet for First Mile).
The data transmission rates cover 125Mbps to 2.5Gbps for Fast
Ethernet, Gigabit Ethernet and SONET/SDH applications. Our
Bi-Directional product families are available in an industrial
operating temperature option (−40 to +85 degree
Celsius).
12
DWDM Transceivers. Dense wavelength division
multiplexing, or DWDM, transceivers allow the aggregation of
great channel number of optical signals onto single fiber by
utilizing different wavelengths with close spacing. The DWDM
transceivers use lasers with narrow channel wavelength spacing,
typically 0.8 nm or 0.4nm. DWDM transceivers enable an optical
transport system to increase the transmission capacity
significantly over a single fiber.
Oplinks DWDM transceivers are available in the SFP, XFP
and SFP+ package, and provide up to 88 wavelength channels.
DWDM SFP transceivers are available in a multi-rate format that
allows operation at all speeds from 125Mb/s up to 2.5Gb/s and
accommodate reaches up to 200km. DWDM XFP transceivers are
available to support 10GbE and OC192 SONET data rate with or
without forward error correction (FEC) at modulation speed up to
11.3Gbps. Both DWDM SFP and XFP transceivers are available for
industrial temperature operation (−40 to +85 degree
Celsius). DWDM SFP+ transceivers are available to support 10GbE
applications with smallest size and lowest power dissipation
among all 10Gbps transceivers.
Optical Supervisory Channel Transceivers. Optical
supervisory channel transceiver is an optical transceiver
operating at a pre-determined wavelength outside the EDFA band,
and are used to transmit and receive optical channel monitoring
messages between amplification and add/drop sites, and
throughout the optical networking terminals.
GEPON Products. Oplinks GEPON product offering
supports ONU (optical network unit) and OLT (optical line
terminal) applications. The GEPON modules transmit a duplex
1.25Gb/s optical signal over a single fiber between the OLT and
ONU modules for both 10 kilometer and 20 kilometer transmission
ranges. The OLT module transmits via a 1490nm laser source and
the ONU unit transmits via a 1310nm laser source. Oplink also
offers Turbo GEPON transceivers that support 2x GbE
data rate for increased bandwidth capacity.
Customers
We sell our products worldwide to telecommunications, data
communications and cable TV equipment manufacturers around the
globe. In certain cases, we sell our products to our competitors
or other component manufacturers for their resale or integration
into their own products. During the fiscal year ended
June 30, 2010, we sold our products to over
533 companies worldwide. Our top five customers, although
not the same five customers for each period, together accounted
for 53%, 60% and 60% of our revenues in the fiscal years ended
June 30, 2010, 2009 and 2008, respectively. Tellabs
Operations, Inc. (Tellabs) and Hua Wei Technologies
Co. Ltd. (Huawei) each accounted for greater than
10% of our revenues for the fiscal years ended June 30,
2010, 2009 and 2008. We expect that the majority of our revenues
will continue to depend on sales to a relatively small number of
customers, although potentially not the same customers period to
period. See Concentration of Credit Risk under
Note 2 Summary of Significant Accounting
Policies of Notes to Consolidated Financial Statements.
Backlog
We are substantially dependent upon orders we receive and fill
on a short-term basis. We do not have contracts with our
customers that provide any assurance of future sales, and sales
are typically made pursuant to individual purchase orders, often
with extremely short lead times, and which are frequently
subject to revision or cancellation. Because of the possibility
of changes in delivery or acceptance schedules, cancellations of
orders, returns or price reductions, we do not believe that
backlog is a reliable indicator of our future revenues.
13
Marketing,
Sales and Customer Support
We market and sell our products through both direct sales and
distribution channels. As of June 30, 2010, we employed
38 people in sales, marketing, and customer service and
support in the U.S. and 33 people in sales and
marketing in Asia, who manage key customer accounts and support
our direct sales force, sales representatives and distributors.
We currently have outside sales representatives
and/or
distributors selling our products in Israel, Italy, Japan and
South Korea.
Our marketing team promotes our products within the
communications industry. We gather and analyze market research
data with the intent to become a market-driven supplier that
provides cost-effective, value-add solutions to our customer
base. Our marketing professionals help us to identify and define
next-generation products by working closely with our customers
and our research and development engineers. They also coordinate
our participation in trade shows and design and implement our
advertising effort. Our web site provides customers with a
comprehensive listing of our broad product portfolio. We provide
extensive technical support to our customers during their design
and qualification process as well as ongoing post-sales support.
Research
and Development
As of June 30, 2010, we had 319 engineers involved in
research and development of our products. Our research and
development activities are focused on enhancing our current
optical communications products and developing new technologies
and products to serve the current and next-generation
communication markets. Our engineering team has extensive
design, packaging, processing, electrical, mechanical, firmware
and software experience in the fields of fiber optic components,
integrated optic interfaces and systems.
Our primary product research and development facility is located
in Wuhan, China. We also perform product research and
development at our facilities in Zhuhai, China, Hsinchu, Taiwan,
and Fremont, California. Our research and development expenses,
including non-cash compensation expense, was $11.2 million,
$11.8 million and $15.4 million for the fiscal years
ended June 30, 2010, 2009 and 2008, respectively.
Manufacturing
We currently manufacture substantially all of our subsystems,
modules and components at our manufacturing facilities in
Zhuhai, China and through our contract manufacturer in Dongguan,
China, SAE Magnetics (H.K.) Limited, a wholly-owned subsidiary
of TDK Corporation. We manufacture our optical interconnect
products at our recently acquired Emit facility in Taipei,
Taiwan. We maintain a pilot line at our headquarters in Fremont,
California. Our facility in the Zhuhai Free Trade Zone maintains
complete in-house manufacturing capabilities including component
and module design, integration, production and testing. We plan
to continue to invest resources in manufacturing management,
engineering and quality control. We also plan to continue to
develop automated manufacturing systems to provide higher
throughput, improve yields and reduce manufacturing costs.
We own our facility in the Zhuhai Free Trade Zone totaling
approximately 787,000 square feet. Our facility in the
Zhuhai Free Trade Zone is used for administration,
manufacturing, research and development and employee living
quarters. We currently lease 68,000 square feet of our
facility in the Zhuhai Free Trade Zone to third parties. We plan
to terminate the lease by the end of calendar year 2010 to
accommodate our future production capacity requirement. We also
own the Taipei facility totaling approximately
30,000 square feet which maintains complete in-house
manufacturing capabilities for our optical interconnect products
including product design, supply chain management, quality
control, manufacturing and sales and marketing.
14
A number of critical raw materials used in manufacturing our
products are acquired from single or limited source suppliers.
The inability to obtain sufficient quantities of those materials
may result in delays, increased costs and reductions in our
product shipments.
We are subject to various federal, state and local laws and
regulations relating to the storage, use, discharge and disposal
of toxic or otherwise hazardous or regulated chemicals or
materials used in our manufacturing processes. To date, such
laws and regulations have not materially affected our capital
expenditures, earnings or competitive position. We do not
anticipate any material capital expenditures for environmental
control facilities for the foreseeable future.
Quality
We have established a quality management system to assure that
the products we provide to our customers meet or exceed industry
standards. Oplinks products undergo rigid qualification
tests and studies and are conducted according to Telcordia
standards. Oplinks ongoing reliability testing builds upon
industry standards to establish continuous reliability
improvements through intensive tests and performance measures.
These systems are based on the international standard ISO 9001.
Our U.S. headquarters have been modeled after the ISO
9001-1994
and TL 9000 quality standards in research and manufacturing
since July 1998. Our manufacturing operations at Zhuhai, China
are third-party certified to the ISO
9001-2000
standard, TL 9000 Telecommunications quality standard, and ISO
9001 and ISO 14001 environmental management standards.
Competition
The markets in which we sell our products are highly
competitive. Our overall competitive position depends upon a
number of factors, including:
- competitive pricing;
- the quality of our manufacturing processes and
products;
- the breadth of our product line;
- offering short-lead times;
- availability, performance and reliability of our
products;
- our ability to participate in the growth of
emerging technologies;
- the ability to win designs through prototyping;
- established relationships with key customers;
- ability to provide technical design support;
- the compatibility of our products with existing
communications networks;
- manufacturing capacity and capability; and
- our financial strength.
We believe that our principal competitors are the major
manufacturers of optical subsystems and components, including
both vendors selling to third parties and business divisions
within communications equipment suppliers. The market for fiber
optic modules is highly competitive and we expect competition to
intensify in the future. Our primary competitors include Avago
Technologies, DiCon
15
Fiberoptics, Sumitomo Electric, FDK Corporation, Finisar,
Furukawa, MRV Communications, NEL Hitachi Cable, Oclaro, OpNext,
Santec Corporation, JDS Uniphase Corporation, Accelink,
O-Net and
numerous optical component manufacturers in China. We also face
indirect competition from public and private companies providing
non-fiber optic networking products that address the same
networking needs that our products address. The development of
alternative solutions to fiber optic transmission needs by our
competitors, particularly systems companies that also
manufacture modules, such as JDS Uniphase, could significantly
limit our growth and harm our competitive position.
Many of our current competitors and potential competitors have
significantly greater financial, technical, sales and marketing
resources than we do. As a result, these competitors are able to
devote greater resources to the development, promotion, sale and
support of their products. In addition, those of our competitors
that have large market capitalization or cash reserves are in a
much better position to acquire other companies in order to gain
new technologies or products that may displace our products. Any
of these potential acquisitions could give our competitors a
strategic advantage. In addition, many of our competitors have
much greater brand name recognition, more extensive customer
bases, more developed distribution channels and broader product
offerings than we do. These companies can use their broader
customer bases and product offerings and adopt aggressive
pricing policies to gain market share.
Intellectual
Property
As of June 30, 2010, we had been granted 188 issued patents
and had 7 patent applications pending with the U.S. Patent
and Trademark Office for various technologies and products. The
terms of our patents are computed in accordance with United
States federal patent statutes. In general, this means that a
patent will have a term expiring twenty years from its filing
date. In addition, we currently have 25 issued patents and
3 pending patent applications in the Peoples Republic of
China, 5 issued patents in Taiwan and 3 issued patents in Canada.
While we rely on patent, copyright, trade secret and trademark
law and restrictions on disclosure to protect our technology, we
believe that factors such as the technological and creative
skills of our personnel, new product developments, frequent
product enhancements and reliable product maintenance are
essential to establishing and maintaining a technology
leadership position. We cannot assure you that others will not
develop technologies that are similar or superior to our
technology.
Protecting our intellectual property is critical to the success
of our business. Despite our efforts to protect our proprietary
rights, various unauthorized parties may attempt to copy or
otherwise obtain and use our products or technology. Policing
unauthorized use of our products is difficult, and there can be
no assurance that the steps taken by us will prevent
misappropriation of our technology. Moreover, the laws of some
foreign countries, including China, do not protect our
proprietary rights as fully as in the United States.
Litigation regarding intellectual property rights is common in
the optical communications industry. We cannot make any
assurances that third parties will not claim infringement by us
with respect to our technology. Any such claims, with or without
merit, could be time-consuming to defend, result in costly
litigation, divert managements attention and resources,
cause product shipment delays or require us to enter into
royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms
acceptable to us, if at all. A successful claim of product
infringement against us and our failure or inability to license
the infringed or similar technology could seriously harm our
financial condition.
Employees
As of June 30, 2010, Oplink had 118 full-time
employees located in the United States and 3,703 full-time
employees located in Asia. None of our employees in the United
States are represented by a labor union. All of our employees in
China are represented by a labor union formed on
November 6, 2001, pursuant to the requirements of the
Chinas Labor Union Law. We have not experienced any work
stoppages, and we consider our relations with our employees to
be good.
16
Financial
Information About Geographic Areas
The geographic breakdown of revenues by customers bill-to
location is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
46,963
|
|
|
$
|
48,154
|
|
|
$
|
72,098
|
|
China
|
|
|
34,698
|
|
|
|
34,529
|
|
|
|
31,713
|
|
Europe
|
|
|
24,012
|
|
|
|
24,001
|
|
|
|
23,664
|
|
Japan
|
|
|
16,624
|
|
|
|
17,462
|
|
|
|
17,783
|
|
Canada
|
|
|
4,163
|
|
|
|
6,949
|
|
|
|
17,912
|
|
Asia-Pacific (excluding China and Japan)
|
|
|
12,349
|
|
|
|
12,637
|
|
|
|
13,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
138,809
|
|
|
$
|
143,732
|
|
|
$
|
176,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The breakdown of property, plant and equipment, net by
geographical location is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
United States
|
|
$
|
5,959
|
|
|
$
|
7,492
|
|
Asia
|
|
|
27,404
|
|
|
|
22,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
33,363
|
|
|
$
|
30,318
|
|
|
|
|
|
|
|
|
|
|
Executive
Officers
The following table sets forth certain information regarding our
executive officers as of August 31, 2010:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Joseph Y. Liu
|
|
|
59
|
|
|
Chairman and Chief Executive Officer
|
Shirley Yin
|
|
|
42
|
|
|
Senior Vice President and Chief Financial Officer
|
Peter Lee
|
|
|
36
|
|
|
Chief Operating Officer
|
River Gong
|
|
|
47
|
|
|
Senior Vice President, Worldwide Sales
|
Stephen M. Welles
|
|
|
42
|
|
|
Vice President, General Counsel and Secretary
|
Joseph Y. Liu, one of our founders, has served as our
Chief Executive Officer since October 2002, and has served as a
member of our Board of Directors since our inception in 1995,
serving as Chairman of the Board since November 2009.
Mr. Liu also served as our Chief Executive Officer from
September 1999 to November 2001, and served as our Chairman of
the Board from our inception in 1995 through May 2000 and again
from November 2001 to August 2002. Mr. Liu currently serves
on the board of directors of BCD Semiconductor Manufacturing
Ltd., a private analog device company, and has done so since
October 2006. From 1994 to 1995, Mr. Liu was the General
Partner of Techlink Technology Ventures. Prior to 1994,
Mr. Liu spent ten years as Chairman and Chief Executive
Officer of Techlink Semiconductor and Equipment Corp., a
semiconductor equipment and technology company. Mr. Liu
received his B.S. from Chinese Cultural University, Taiwan and
his M.S. from California State University, Chico.
Shirley Yin has served as Chief Financial Officer since
August 2007. Ms. Yin joined Oplink in June 2000 as our
Accounting Manager and was promoted to Controller in October
2003. From July 2007 to August 2007, Ms. Yin held the
position of Vice President, Finance, and Acting Chief Financial
Officer.
17
Before joining Oplink, Ms. Yin spent three years at
PricewaterhouseCoopers as a Business Assurance Senior Associate.
She is a Certified Public Accountant. Ms. Yin received a
Bachelor of Economics in Business Management from Zhongshan
University in China and her M.S. in Accountancy from the
University of Southern California.
Peter Lee has served as our Chief Operating Officer since
August 2008. Mr. Lee joined Oplink in August 2000 and held
positions as Production Manager, Product Engineering Manager,
Director of Product Engineering and since April 2005, Senior
Director of Product Line Management (PLM) and
Operations. In May 2007, Mr. Lee was promoted to Vice
President of Marketing and PLM, responsible for managing
activities in PLM, manufacturing, research and development and
strategic planning. Mr. Lee received his B.S. in Electrical
Engineering from National Taiwan University and his M.S. in
Electrical Engineering from Columbia University.
River Gong, our Senior Vice President of Worldwide Sales,
has served as our head of sales since February 2003. From
January 2001 to February 2003, Ms. Gong served as our Sr.
Director of Sales, from May 1999 to January 2001 she was
Director of Sales, and from January 1998 to May 1999 she was
Sales Manager. Prior to joining Oplink, Ms. Gong was
Division Manager and Sales Manager of MP Fiber Optics (now
Global Opticom), a fiber optics company, from January 1995 to
December 1997. Prior to that, she was an architect in China for
five years. Ms. Gong received her B.S. in Architecture from
Harbin Institute University.
Stephen M. Welles has served as our Vice President,
General Counsel and Secretary since May 2008.
Mr. Welles was an associate and of counsel with Wilson
Sonsini Goodrich & Rosati in Palo Alto, California
from October 1999 to April 2008, and was an associate with
Ropes & Gray in Boston, Massachusetts from September
1996 to September 1999. He received his J.D. from Georgetown
University and a B.A. in Economics from Boston College.
Directors
The following table sets forth certain information regarding our
directors as of August 31, 2010:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Joseph Y. Liu
|
|
|
59
|
|
|
Chairman and Chief Executive Officer
|
Chieh Chang
|
|
|
58
|
|
|
Director
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Tim Christoffersen
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Director
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Jesse W. Jack
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Director
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Hua Lee
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Director
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Joseph Y. Lius biography is set forth above under
Executive Officers.
Chieh Chang has been a member of our Board of Directors
since September 1995. Mr. Chang has served as Chief
Executive Officer of BCD Semiconductor Manufacturing Ltd., a
private analog device company, since September 2008.
Mr. Chang served on the board of directors of Genesis
Microchip Inc., a NASDAQ-listed semiconductor company, from
November 2004 until its acquisition by STMicroelectronics in
January 2008. From February 2000 to February 2003,
Mr. Chang served as Chief Executive Officer of Programmable
Microelectronics Company, Inc. (now Chingis Technology
Corporation), a fabless semiconductor design company. From April
1992 to August 1996, Mr. Chang was the Director of
Technology at Cirrus Logic, Inc., a semiconductor company.
Mr. Chang received his B.S. in Electrical Engineering from
the National Taiwan University and his M.S. in Electrical
Engineering from University of California, Los Angeles.
Tim Christoffersen has been a member of our Board of
Directors since November 2009. Mr. Christoffersen served on
the board of directors of Genesis Microchip Inc. from August
2002 until January 2008. From June 2004 to April 2006,
Mr. Christoffersen was Chief Financial Officer of
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Monolithic Power Systems, Inc. (MPS), a semiconductor company,
and served on MPSs board of directors from March 2004 to
July 2004. Mr. Christoffersen served as a financial
consultant to technology companies from 1999 to 2004. Prior to
that, Mr. Christoffersen served as Chief Financial Officer
of NeoParadigm Labs, Inc. from 1998 to 1999 and as Chief
Financial Officer of Chips and Technologies, Inc. from 1994 to
1998. Mr. Christoffersen was Executive Vice President,
Director and Chief Operating Officer of Resonex, Inc. from 1991
to 1992. From 1986 to 1991, Mr. Christoffersen held several
managerial positions with Ford Motor Company.
Mr. Christoffersen is a Phi Beta Kappa graduate of Stanford
University where he earned a B.A. in Economics. He also holds a
Masters degree in Divinity from Union Theological Seminary
in New York City.
Jesse W. Jack has been a member of our Board of Directors
since July 2002. Since January 2003, Mr. Jack has been
self-employed as an attorney with The Law Offices of Jesse Jack.
He is also the Vice President and General Counsel for I-Bus
Corporation, a privately held company. From 1994 until January
2003, Mr. Jack was a partner in the law firm of
Jack & Keegan, a California Limited Liability
Partnership. Mr. Jack served on the board of directors of
The Parkinsons Institute from 1988 through 2000.
Mr. Jack received his B.S. from California State
University, San Jose and his J.D. from Hastings College of
Law.
Hua Lee has been a member of our Board of Directors since
February 2006. Mr. Lee has been Professor of Electrical and
Computer Engineering at the University of California,
Santa Barbara since 1990. Prior to his tenure at the
University of California, Santa Barbara, he was on the
faculty of the University of Illinois at Urbana-Champaign.
Mr. Lee received his B.S. degree in Electrical Engineering
from the National Taiwan University, and M.S. and PhD in
Electrical and Computer Engineering from the University of
California, Santa Barbara.
Item 1A -
Risk Factors
The following risk factors and other information included in
this report should be carefully considered. The risks and
uncertainties described below are not the only ones we face.
Additional risks and uncertainties not presently known to us or
that we presently deem less significant may also impair our
business operations. If any of the events or circumstances
described in the following risk factors actually occurs, our
business, operating results and financial condition could be
materially adversely affected.
A description of the risks and uncertainties associated with our
business is set forth below. You should carefully consider such
risks and uncertainties, together with the other information
contained in this report and in our other public filings. If any
of such risks and uncertainties actually occurs, our business,
financial condition or operating results could differ materially
from the plans, projections and other forward-looking statements
included in the section titled Managements
Discussion and Analysis of Financial Condition and Results of
Operations and elsewhere in this report and in our other
public filings. The following is a discussion that highlights
some of these risks. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial may
also impair our business, operations or financial results.
We operate in a rapidly changing environment that involves many
risks, some of which are beyond our control. The following is a
discussion that highlights some of these risks. Additional risks
and uncertainties not presently known to us or that we currently
deem immaterial may also impair our business, operations or
financial results.
Our
quarterly revenues and operating results may fluctuate
significantly from quarter to quarter, which may cause our stock
price to drop.
It is difficult to forecast our revenues accurately. Our
revenues, expenses and operating results have varied
significantly from quarter to quarter in the past and may
continue to fluctuate significantly in the future. The factors
that are likely to cause these variations include, among others:
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current uncertain macro-economic climate could lead to reduced
demand from our customers,
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increased price competition for our products, and increased risk
of excess and obsolete inventories;
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fluctuations in demand for, and sales of, our products;
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declines in the average selling prices of our products;
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fluctuations in the mix of products sold during a quarter (for
example, the percentage of total sales represented by lower
margin products such as our ROADM products and line transmission
applications products);
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competitive factors in the fiber optic components and subsystems
market, including introductions of new products, new
technologies and product enhancements by competitors,
consolidation of competitors, customers and service provider end
users and pricing pressures;
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the ability of our manufacturing operations in China to timely
produce and deliver products in the quantity and of the quality
our customers require;
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our inability to cut costs quickly in the event of market or
demand downturns, due to the fact that a high percentage of our
expenses, including those related to manufacturing, engineering,
research and development, sales and marketing and general and
administrative functions, are fixed in the short term;
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the availability of materials and components used in our
products or increases in the prices of these materials;
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our ability to develop, introduce, manufacture and ship new and
enhanced optical networking products in a timely manner and in
production quantities without defects or other quality
issues; and
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costs associated with, and the outcomes of, any intellectual
property or other litigation to which we may be a party.
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We
expect volatility in our stock price, which could cause you to
lose all or part of your investment.
We expect the market price of our common stock to fluctuate
significantly. For example, the market price of our common stock
has fluctuated from a high of $22.38 in October 2006 to an
intra-day
low of $5.05 in November 2008. The closing sale price of our
common stock on September 7, 2010 was $17.10. These
fluctuations may occur in response to a number of factors, some
of which are beyond our control, including:
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quarterly variations in our operating results;
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changes in financial estimates by securities analysts
and/or our
failure to meet estimates;
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changes in market values of comparable companies;
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announcements by our competitors or us of new products or of
significant acquisitions, strategic partnerships or joint
ventures;
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any loss by us of a major customer;
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economic fluctuations in the market for optical communications
products, or in the telecommunications industry generally;
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the outcome of, and costs associated with, any litigation to
which we are or may become a party;
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departures of key management or engineering personnel; and
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future sales of our common stock.
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We are
subject to the cyclical nature of the telecommunications
equipment market and any future downturn may reduce demand for
our products and revenue.
The markets in which we compete are tied to the aggregate
capital expenditures by carriers as they build out and upgrade
their network infrastructure. These markets are highly cyclical
and characterized by constant and rapid technological change,
price erosion, evolving standards and wide fluctuations in
product supply and demand. In the past, these markets have
experienced significant downturns, often connected with, or in
anticipation of, the maturation of product cycles
for both manufacturers and their customers
products and with declining general economic
conditions. These downturns have been characterized by
diminished product demand, production overcapacity, high
inventory levels and accelerated erosion of average selling
prices.
Our historical results of operations have been subject to
substantial fluctuations, and we may experience substantial
period-to-period
fluctuations in future results of operations. Any future
downturn in the markets in which we compete could significantly
reduce the demand for our products and therefore may result in a
significant reduction in revenue. It may also increase the
volatility of the price of our common stock. Our revenue and
results of operations may be materially and adversely affected
in the future due to changes in demand from individual customers
or cyclical changes in the markets utilizing our products.
In addition, the communications networks industry from time to
time has experienced and may again experience a pronounced
downturn. To respond to a downturn, many carriers may slow their
capital expenditures, cancel or delay new developments, reduce
their workforces and inventories and take a cautious approach to
acquiring new equipment, which would have a negative impact on
our business. Weakness in the global economy or a future
downturn in the communications networks industry may cause our
results of operations to fluctuate from
year-to-year,
harm our business, and may increase the volatility of the price
of our common stock.
Further, as the communications industry consolidates and
realigns to accommodate technological and other developments,
our customers and service provider end users may consolidate or
align with other entities in a manner that may delay orders and
harms our business. Our customers continued outsourcing
might result in their utilizing large well-established contract
manufacturers to provide final system assembly, rather than
utilizing us for final system assembly. We may therefore be
required to provide lower level components to these contract
manufacturers rather than final system assembly to our current
customers, potentially resulting in reduced revenues and lower
gross margins and profits. Furthermore, these contract
manufacturers may seek other source of components, which could
harm our operating results.
Because
we depend on third parties to supply some of our materials and
components, we may not be able to obtain sufficient quantities
of these materials, which could limit our ability to fill
customer orders and harm our operating results.
We depend on third parties to supply the materials and
components we use to manufacture our products. A number of our
third-party suppliers are currently experiencing capacity
issues, and we are facing shortages
and/or
delays in the availability and delivery of materials and
components. Difficulties in obtaining materials and components
may delay or limit our product shipments, which could result in
lost orders
and/or our
increased lead-times for delivering products to our customers.
We obtain most of our critical materials and components from a
single or limited number of suppliers and generally do not have
long-term supply contracts with them. We could also experience
discontinuation of key components, price increases and late
deliveries from our suppliers. In addition, some of our
suppliers are competitors who may choose not to supply
components to us in the future.
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Shifts
in our product mix may result in declines in gross
margins.
Our gross profit margins vary among our product families, and
our overall gross margins have fluctuated from period to period
as a result of shifts in product mix, the introduction of new
products, decreases in average selling prices for certain
products and our ability to reduce product costs, and these
fluctuations are expected to continue in the future. In
addition, we must purchase the primary components going into
certain of our product families, including our ROADM products,
from third party suppliers, which can limit our ability to
improve gross margin on sales of such products.
Resources
devoted to research and development may not yield new products
that achieve commercial success.
We are currently increasing our expenditures on research and
development, with the goal of developing and introducing new
products to serve our current market as well as products for
expansion into new markets. The research and development process
is expensive, prolonged and entails considerable uncertainty. As
such, we can make no assurances that any of the products we plan
to develop will be commercially successful, and there is a
substantial risk that our research and development expenditures
will fail to generate any meaningful return of the investment of
such resources.
We
depend upon a small number of customers for a substantial
portion of our revenues, and any decrease in revenues from, or
loss of, these customers without a corresponding increase in
revenues from other customers would harm our operating
results.
We depend upon a small number of customers for a substantial
portion of our revenues. Our dependence on orders from a
relatively small number of customers makes our relationship with
each customer critical to our business.
Our top five customers, although not the same five customers for
each period, together accounted for 53%, 60% and 60% of our
revenues in the fiscal years ended June 30, 2010, 2009 and
2008, respectively. Tellabs Operations, Inc.
(Tellabs) and Hua Wei Technologies Co. Ltd.
(Huawei) each accounted for greater than 10% of our
revenues for the fiscal years ended June 30, 2010, 2009 and
2008. We expect that the majority of our revenues will continue
to depend on sales to a relatively small number of customers. We
expect that sales to Tellabs, in particular, may increase as a
percentage of our total sales in the coming quarters.
We may not be the sole source of supply to our customers, and
they may choose to purchase products from other vendors. The
loss of one or more of our significant customers, our inability
to successfully develop relationships with additional customers
or future price reductions could cause our revenue to decline
significantly. Our dependence on a small number of customers may
increase if the fiber optic components and subsystems industry
and our other target markets continue to consolidate.
Our
cost advantage from having our manufacturing and most of our
R&D in China may diminish over time due to increasing labor
costs.
The labor market in China, particularly in the
manufacturing-heavy Southeast region of China where our
manufacturing facilities are located, has become more
challenging for employers, and many companies are facing higher
costs due to increased wages. We have recently increased our
wage rates at our Zhuhai facility by more than 30% due to
government-mandated increases in minimum wage levels. We expect
that we may be required to increase wages even more in the
future due to market conditions
and/or
additional government mandates. If labor costs in China continue
to increase, our gross margins and profit margins and results of
operations may be adversely affected. In addition, our
competitive advantage against competitors with manufacturing in
traditionally higher cost countries would be diminished.
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We may
be involved in intellectual property disputes in the future,
which could divert managements attention, cause us to
incur significant costs and prevent us from selling or using the
challenged technology.
Participants in the communications and fiber optic components
and subsystems markets in which we sell our products have
experienced frequent litigation regarding patent and other
intellectual property rights. Numerous patents in these
industries are held by others, including our competitors. In
addition, from time to time, we have become aware of the
possibility or have been notified that we may be infringing
certain patents or other intellectual property rights of others.
Regardless of their merit, responding to such claims can be time
consuming, divert managements attention and resources and
may cause us to incur significant expenses. In addition,
intellectual property claims against us could invalidate our
proprietary rights and force us to do one or more of the
following:
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obtain from the owner of the infringed intellectual property
right a license to sell or use the relevant technology, which
license may not be available on reasonable terms, or at all;
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stop selling, incorporating or using our products that use the
challenged intellectual property;
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pay substantial monetary damages; or
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redesign the products that use the technology.
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Any of these actions could result in a substantial reduction in
our revenue and could result in losses over an extended period
of time.
On January 5, 2010, Finisar Corporation, or Finisar, filed
a complaint in the United States District Court for the Northern
District of California against Source Photonics, Inc., MRV
Communications, Inc., NeoPhotonics Corporation and us, or
collectively, the co-defendants. In the complaint, Finisar
alleged infringement of certain of its U.S. patents arising
from the co-defendants respective manufacture,
importation, use, sale of or offer to sell certain optical
transceiver products in the United States. Finisar sought to
recover unspecified damages, up to treble the amount of actual
damages, together with attorneys fees, interest and costs.
Finisar alleged that at least some of the patents asserted are a
part of certain digital diagnostic standards for optoelectronics
transceivers and, therefore, are being utilized in such digital
diagnostic standards. On March 23, 2010, we filed an answer
to the complaint and counterclaims against Finisar. On
May 5, 2010, the court dismissed without prejudice all
co-defendants (including us) except Source Photonics, Inc., on
grounds that such claims should have been asserted in four
separate lawsuits, one against each co-defendant. This dismissal
without prejudice does not prevent Finisar from bringing a new
similar lawsuit against us. We and Finisar have agreed to toll
our respective claims and not to refile any claims against each
other until one or more specified events occur resulting in the
partial or complete resolution of the litigation between Source
Photonics and Finisar.
If Finisar brings a new similar lawsuit against us, and if we
are unsuccessful in our defense of the Finisar patent
infringement claims, a license to use the allegedly infringing
technology may not be available to us on commercially reasonable
terms and therefore may limit or preclude us from competing in
the market for optical transceivers in the United States, which
could materially harm our business.
Although we believe that we would have meritorious defenses to
the infringement allegations and intend to defend any new
similar lawsuit vigorously, there can be no assurance that we
will be successful in our defense. Even if we are successful, we
may incur substantial legal fees and other costs in defending
the lawsuit. Further, a new lawsuit, if brought, would be likely
to divert the efforts and attention of our management and
technical personnel, which could harm our business.
We are
under continuous pressure to reduce the prices of our
products.
The communications networks industry has been characterized by
declining product prices over time. We have reduced the prices
of our products in the past and we expect to experience pricing
pressure
23
for our products in the future. When seeking to maintain or
increase their market share, our competitors may also reduce the
prices of their products. In addition, our customers may have
the ability to internally develop and manufacture competing
products at a lower cost than we would otherwise charge, which
would add additional pressure on us to lower our selling prices.
If we are unable to offset any future reductions in our average
selling prices by increasing our sales volume, reducing our
costs and expenses or introducing new products, our gross margin
would suffer.
Our
products may have defects that are not detected until full
deployment of a customers equipment, which could result in
a loss of customers, damage to our reputation and substantial
costs.
Our products are deployed in large and complex optical networks
and must be compatible with other system components. Our
products can only be fully tested for reliability when deployed
in these networks for long periods of time. Our customers may
discover errors, defects or incompatibilities in our products
after they have been fully deployed and operated under peak
stress conditions. Our products may also have errors, defects or
incompatibilities that are not found until after a system
upgrade is installed. Errors, defects, incompatibilities or
other problems with our products could result in:
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loss of customers;
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loss of or delay in revenues;
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loss of market share;
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damage to our brand and reputation;
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inability to attract new customers or achieve market acceptance;
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diversion of development resources;
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increased service and warranty costs;
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legal actions by our customers; and
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increased insurance costs.
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We
have incurred substantial losses in the past, and if we are
unable to continue to increase our revenues while controlling
our costs and operating expenses, we may be unable to sustain
our profitability.
Although we were profitable in fiscal 2010 with net income of
$11.1 million, we did incur losses of $13.8 million
and $6.8 million, for fiscal years ended June 30, 2009
and 2008, respectively. As of June 30, 2010, we had an
accumulated deficit of $222.2 million. We will need to
increase or maintain our revenues while continuing to control
costs and operating expenses to maintain our profitability.
If we
do not successfully increase our manufacturing capacity, we may
face capacity constraints that could harm our
business.
We have been working to expand our production capacity at our
primary manufacturing facility in Zhuhai, China. To successfully
increase our manufacturing capacity, we must hire, train and
manage substantial numbers of additional production personnel.
If we cannot successfully expand our capacity on a timely basis,
our revenue growth will be constrained and our ability to
acquire and retain customers may be harmed, which could
adversely affect our operating results.
We have recently increased our overall headcount from 2,718 at
December 31, 2009 to 3,821 at June 30, 2010, primarily
due to an increase in our manufacturing headcount, and we have
plans for additional hiring in manufacturing. However, the labor
market in China, particularly in the manufacturing-heavy
Southeast region of China where our facilities are located, has
become more challenging for employers, and many companies are
facing a shortage of qualified workers
and/or
higher costs due to
24
increased wages. In addition, we need to devote significant time
and resources to train newly-hired employees before they are
able to contribute meaningfully to production. There is
typically at least a six month lag between the hiring of new
manufacturing personnel and the resulting benefit from such
personnel in terms of increased production capacity. Also, the
additional headcount and related measures to increase capacity
increase our overhead and operating expense. Therefore, our
operating results are likely to be negatively affected in the
near term because we must increase expenses before we receive
the expected benefit of increase revenue. Moreover, the expected
demand for our increased capacity may not materialize, and our
operating results could be further harmed.
Our
sales are mostly made pursuant to short-lead-time purchase
orders, and therefore our revenue and financial results are
difficult to predict.
We are substantially dependent on orders we receive and fill on
a short-term basis. We do not have contracts with our customers
that provide any assurance of future sales, and sales are
typically made pursuant to individual purchase orders, often
with extremely short lead times. Accordingly, our customers:
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may stop purchasing our products or defer their purchases on
short notice;
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are free to purchase products from our competitors;
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are not required to make minimum purchases; and
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may cancel orders that they place with us on short notice.
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As a result, we cannot rely on orders in backlog as a reliable
and consistent source of future revenue. Moreover, our expense
levels are based in part on our expectations of future revenue,
and we may be unable to adjust costs in a timely manner in
response to further revenue shortfalls. This can result in
significant quarterly fluctuations in our operating results.
If we
are unable to develop new products and product enhancements that
achieve market acceptance, our revenues could decline, which
would harm our operating results.
The market for our products is characterized by rapid
technological change, new and improved product introductions,
changes in customer requirements and evolving industry
standards. Our future success will depend to a substantial
extent on our ability to develop, introduce and support
cost-effective new products and technologies on a timely basis.
Our failure to predict market needs accurately or to develop or
obtain through acquisition new products or product enhancements
in a timely manner may harm market acceptance and sales of our
products. If the development of our products or any other future
products takes longer than we anticipate, or if we are unable to
develop and introduce these products to market, our revenues
could suffer and we may not gain market share. Even if we are
able to develop and commercially introduce new products, the new
products may not achieve widespread market acceptance.
Furthermore, we have implemented, and may continue to implement
in the future, significant cost-cutting measures such as
reductions in our workforce, including reductions in research
and development and manufacturing personnel, that may weaken our
research and development efforts or cause us to have difficulty
responding to sudden increases in customer orders.
The development of new, technologically advanced products is a
complex and uncertain process requiring high levels of
innovation and highly skilled engineering and development
personnel, as well as the accurate anticipation of technological
and market trends. Because the costs for research and
development of new products and technology are expensed as
incurred, such costs will have a negative impact on our reported
net operating results until such time, if ever, that we generate
revenue from products or technology resulting from such research
and development. If we fail to develop and deploy
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new cost-effective products and technologies or enhancements of
existing products on a timely basis, or if we experience delays
in the development, introduction or enhancement of our products
and technologies, our products may no longer be competitive, our
revenue will decline and we may have inventory that may become
obsolete or in excess of future customer demand. Furthermore, we
cannot assure you that our new products will gain market
acceptance or that we will be able to respond effectively to
product announcements by competitors, technological changes or
emerging industry standards. Our failure to respond to product
announcements, technological changes or industry changes in
standards would likely prevent our products from gaining market
acceptance and harm our competitive position.
Our
ROADM Optical Switching and Routing product accounts for a
significant portion of our revenues.
Our ROADM products account for a substantial portion of our
revenues. Quarterly revenues from our ROADM products have
fluctuated significantly, and we expect the fluctuations to
continue. For example, our ROADM revenues fluctuated from a high
of $13.7 million in the second quarter of fiscal 2008 to a
low of $4.2 million in the fourth quarter of fiscal 2010.
We expect the fluctuations in ROADM revenues to continue in the
near and medium term.
There is intense competition in the industry to supply ROADM
products to our customers. Currently, our ROADM product is sold
primarily to one customer. We are not the sole source supplier
for our customer, and we must compete with other suppliers for
the business of our ROADM customer.
Further, because the primary components of our ROADM product are
available from third party vendors, our competitors may be able
to introduce additional competing ROADM products without
significant expenditures of resources and without long delays to
market. The vendor that provides the primary and critical
component to our ROADM product could begin to compete with us by
selling completed ROADM products or could be acquired by another
company, which could result in us losing all of our current
ROADM business.
Our
markets are highly competitive, some of our customers are also
our competitors, and our other customers may choose to purchase
our competitors products rather than our products or
develop internal capabilities to produce their own fiber optic
modules.
The market for fiber optic components, modules and subsystems is
highly competitive and we expect competition to intensify in the
future. Our primary competitors include Avago Technologies,
Oclaro, DiCon Fiberoptics, Sumitomo Electric, FDK Corporation,
Finisar, Furukawa, MRV Communications, NEL Hitachi Cable,
OpNext, Santec Corporation, JDS Uniphase Corporation, Accelink,
O-Net and
numerous optical component manufacturers in China. We also face
indirect competition from public and private companies providing
non-fiber optic networking products that address the same
networking needs that our products address. The development of
alternative solutions to fiber optic transmission needs by our
competitors, particularly systems companies that also
manufacture modules, such as JDS Uniphase, could significantly
limit our growth and harm our competitive position.
Many of our current competitors and potential competitors have
significantly greater financial, technical, sales and marketing
resources than we do. As a result, these competitors are able to
devote greater resources to the development, promotion, sale and
support of their products. In addition, those of our competitors
that have large market capitalization or cash reserves are in a
much better position to acquire other companies in order to gain
new technologies or products that may displace our products. Any
of these potential acquisitions could give our competitors a
strategic advantage. In addition, many of our competitors have
much greater brand name recognition, more extensive customer
bases, more developed distribution channels and broader product
offerings than we do. These companies can use their broader
customer bases and product offerings and adopt aggressive
pricing policies to gain market share.
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In addition, existing and potential customers, especially in
Japan and other international markets may also become
competitors. These customers have the internal capabilities to
integrate their operations by producing their own optical
modules or by acquiring our competitors or the rights to produce
competitive products or technologies, which may allow them to
reduce their purchases or cease purchasing from us.
We expect our competitors to introduce new and improved products
with lower prices, and we will need to do the same to remain
competitive. We may not be able to compete successfully against
either current or future competitors with respect to new
products. We believe that competitive pressures may result in
price reductions, reduced margins, additional write down of
inventory and our loss of market share.
If our
customers do not approve our manufacturing processes and qualify
our products, we will lose significant customer sales and
opportunities.
Customers generally will not purchase any of our products before
they qualify them and approve our manufacturing processes and
quality control system. If particular customers do not approve
of our manufacturing processes, we will lose the sales
opportunities with those customers.
Our customers typically expend significant efforts in evaluating
and qualifying our products and manufacturing process prior to
placing an order. This evaluation and qualification process
frequently results in a lengthy sales cycle, typically ranging
from nine to twelve months and sometimes longer. Generally,
customers consider a wide range of issues before purchasing our
products, including interoperation with other components,
product performance and reliability. Even after this evaluation
process, it is possible that a potential customer will not
purchase our products. In addition, our customers product
purchases are frequently subject to unplanned processing and
other delays, particularly with respect to larger customers for
which our products represent a very small percentage of their
overall purchase activity. If sales forecasts to specific
customers are not realized, our revenue and results of
operations may be negatively impacted. Long sales cycles may
cause our revenues and operating results to vary significantly
and unexpectedly from quarter to quarter, which could cause
volatility in our stock price.
If we
are unable to successfully integrate acquired businesses or
technologies, our operating results may be harmed.
We have pursued and expect to continue to pursue acquisitions of
businesses and technologies, or the establishment of joint
venture arrangements, that could expand our business. The
negotiation of potential acquisitions or joint ventures, as well
as the integration of an acquired or jointly developed business
or technology, could cause diversion of managements time
and other resources or disrupt our operations. Future
acquisitions could result in:
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additional operating expenses without additional revenues;
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potential dilutive issuances of equity securities;
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the incurrence of debt and contingent liabilities;
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intangible asset write-offs;
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research and development write-offs;
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other acquisition-related expenses; and
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cannibalization of product lines leading to revenue attrition.
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Our acquisition of businesses or technologies will require
significant commitment of resources. We may be required to pay
for any acquisition with cash, but we cannot be certain that
additional capital will
27
be available to us on favorable terms, if at all. Potential
acquisitions also involve numerous risks, including:
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problems assimilating the purchased operations, technologies or
products;
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unanticipated costs associated with the acquisition;
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diversion of managements attention from our core business;
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adverse effects on existing business relationships with
suppliers and customers;
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risks associated with entering markets in which we have no or
limited prior experience; and
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potential loss of key employees of purchased organizations.
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If we
fail to effectively manage our manufacturing capability, produce
products that meet our customers quality requirements and
achieve acceptable production yields in China, we may not be
able to deliver sufficient quantities of products that meet all
of our customers order requirements in a timely manner,
which would harm our operating results.
We manufacture substantially all of our products in our
facilities in China. The quality of our products and our ability
to ship products on a timely basis may suffer if we cannot
effectively maintain the necessary expertise and resources to
effectively manage our manufacturing activities in China.
Because manufacturing our products involves complex and precise
processes and the majority of our manufacturing costs are
relatively fixed, manufacturing yields are critical to our
results of operations. Factors that affect our manufacturing
yields include the quality of raw materials used to make our
products, the quality of workmanship, the prior experience in
manufacturing the specific product and our manufacturing
processes. The inadvertent use by our suppliers in using
defective materials could significantly reduce our manufacturing
yields.
Changes in our manufacturing processes or those of our suppliers
could also impact our yields. In some cases, existing
manufacturing techniques, which involve substantial manual
labor, may not allow us to meet our manufacturing yield goals
cost-effectively so that we maintain acceptable gross margins
while meeting the cost targets of our customers. We will need to
develop new manufacturing processes and techniques that will
involve higher levels of automation in order to increase our
gross margins and help achieve the targeted cost levels of our
customers. We may not achieve manufacturing cost levels that
will allow us to achieve acceptable gross margins or fully
satisfy customer demands. Additionally, our competitors are
automating their manufacturing processes. If we are unable to
achieve higher levels of automation and our competitors are
successful, it will harm our gross margins. Additional risks
associated with managing our manufacturing processes and
capability in China include:
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our ability to procure the necessary raw materials and equipment
on a timely basis;
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a potential lack of availability of qualified management and
manufacturing personnel;
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our ability to maintain quality;
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our ability to effectively manage headcount, particularly if we
undertake to expand our manufacturing operations; and
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our ability to quickly and efficiently implement an adequate set
of financial controls to effectively track and control inventory
levels and inventory mix and to accurately predict inventory
requirements.
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Communications equipment suppliers typically require that their
vendors commit in advance to provide specified quantities of
products over a given period of time. We may not be able to
pursue many large orders from these suppliers if we do not have
sufficient manufacturing capabilities to enable us to commit to
provide them with their specified quantities of products. If we
are unable to commit to deliver
28
sufficient quantities of our products to satisfy a
customers anticipated needs, we likely will lose the order
and the opportunity for significant sales to that customer for a
lengthy period of time. Furthermore, if we fail to fulfill
orders to which we have committed, we will lose revenue
opportunities and our customer relationships may be harmed.
If we
fail to predict our manufacturing requirements accurately, we
could incur additional carrying costs and have excess and
obsolete inventory or we could experience manufacturing delays,
which could cause us to lose orders or customers.
We currently use historical data, a backlog of orders and
estimates of future requirements to determine our demand for
components and materials. We must accurately predict both the
demand for our products and the lead time required to obtain the
necessary components and materials. Lead times for components
and materials vary significantly depending on factors such as
the specific supplier, the size of the order, contract terms and
demand for each component at a given time. As a result, we
generally maintain high levels of inventories that periodically
cause us to have excess and obsolete inventory. However, if we
were to underestimate our purchasing requirements, manufacturing
could be interrupted, resulting in delays in shipments, which
could have an adverse effect on our revenues and margins.
We
depend on key personnel to manage our business effectively in a
rapidly changing market, and if we are unable to retain our key
employees and hire additional personnel, our ability to sell our
products could be harmed.
Our future success depends upon the continued services of our
executive officers and other key engineering, finance, sales,
marketing, manufacturing and support personnel. In addition, we
depend substantially upon the continued services of key
management personnel at our Chinese subsidiaries. In addition,
we do not have key person life insurance policies
covering any of our employees. Our loss of any key employee, the
failure of any key employee to perform in his or her current
position, or the inability of our officers and key employees to
expand, train and manage our employee base may prevent us from
executing our growth strategy.
Our ability to continue to attract and retain highly-skilled
personnel will be a critical factor in determining whether we
will be successful in the future. Competition for highly-skilled
personnel is intense. We may not be successful in attracting,
assimilating or retaining qualified personnel to fulfill our
current or future needs. In addition, our management team has
experienced significant personnel changes over the past and may
continue to experience changes in the future.
We are
exposed to currency rate fluctuations and exchange controls that
could adversely impact our operating results.
Significant portions of our operations are conducted in
currencies other than the United States dollar, particularly in
Chinese Renminbi and the new Taiwan dollar. Our operating
results are therefore subject to fluctuations in foreign
currency exchange rates. Any significant revaluation of the
Renminbi may materially and adversely affect our cash flows,
revenues, operating results and financial position. We will
continue to experience foreign currency gains and losses.
Moreover, Chinas government imposes controls on the
convertibility of Renminbi into foreign currencies and the
remittance of currency out of China. Any shortages in the
availability of foreign currency may restrict the ability of our
Chinese subsidiaries to obtain and remit sufficient foreign
currency. Our business could be negatively impacted if we are
unable to convert and remit our sales received in Renminbi into
U.S. dollars.
29
If our
liability for U.S. and foreign taxes is greater than we have
anticipated and reserved for, our operating results may
suffer.
We are subject to taxation in the United States and in foreign
jurisdictions in which we do business, including China. We
believe that we have adequately estimated and reserved for our
income tax liability. However, our business operations,
including our transfer pricing for transactions among our
various business entities operating in different tax
jurisdictions, may be audited at any time by the U.S., Chinese
or other foreign tax authorities. In addition, we have estimated
our U.S. tax liability assuming the benefit of substantial
net operating loss carryforwards. The use of our net operating
loss carryforwards prior to 1999 are subject to certain
limitations due to certain changes in our ownership in 1999 and
1998. If the use of our net operating loss carryforwards is
limited to a further extent than we anticipate, our operating
results may suffer.
The
tax benefits available to our subsidiaries located in China are
currently being phased out, which will result in higher taxes
required to be paid by our Chinese subsidiaries than were
required in the past.
Our subsidiaries located in China formerly enjoyed tax benefits
in the form of tax holidays in China that were generally
available to foreign investment enterprises, or FIEs. In the
past, our subsidiaries in China have qualified for the
preferential tax treatment provided to FIEs and have not been
obligated to pay income tax. However, the new Enterprise Income
Tax Law, or EIT Law, which took effect on January 1, 2008,
imposes a unified income tax rate of 25% on all
domestic-invested enterprises and FIEs, unless they qualify
under certain limited exceptions. The EIT Law provided a
five-year grandfather or phase-in period for FIEs
established before the new law was adopted. As such, we had a
full exemption from tax for calendar years 2007 and 2008 and
have reduced tax rates for calendar years 2009, 2010 and 2011.
Beginning with calendar 2012, our China subsidiaries may be
subject to the full income tax rate. The increased taxes to be
paid by our China subsidiaries may have an adverse effect on our
financial results.
If we
are unable to protect our proprietary technology, our ability to
succeed will be harmed.
Our ability to compete successfully and achieve future growth
will depend, in part, on our ability to protect our proprietary
technology. We rely on a combination of patent, copyright,
trademark, and trade secret laws and restrictions on disclosure
to protect our intellectual property rights. However, the steps
we have taken may not prevent the misappropriation of our
intellectual property, particularly in foreign countries, such
as China, where the laws may not protect our proprietary rights
as fully as in the United States. If we are unable to
protect our proprietary technology, our ability to succeed will
be harmed. We may in the future initiate claims or litigation
against third parties for infringement of our proprietary
rights. These claims could result in costly litigation and the
diversion of the attention of our technical and management
personnel.
Our
failure to comply with governmental regulations could subject us
to liability. New laws could be enacted that increase the risks
and costs to Oplink.
Failure to comply with a variety of federal, state and local
laws and regulations in the United States, China and Taiwan
could subject us to criminal, civil and administrative penalties.
Our products are subject to U.S. export control laws and
regulations that regulate the export of products and disclosure
of technical information to foreign countries and citizens. In
some instances, these laws and regulations may require licenses
for the export of products to, and disclosure of technology in,
some countries, including China and Taiwan, and disclosure of
technology to foreign citizens. We have generally relied on
self-classification in determining whether an export license is
required and have determined that export licenses are not
required. As we develop and commercialize new products and
30
technologies, the list of products and technologies subject to
U.S. export controls changes, or in the event that the
relevant export authorities disagree with the outcome of our
self-classification, we may be required to obtain export
licenses or other approvals with respect to those products and
technologies and may possibly be subject to penalties under
applicable laws. We cannot predict whether these licenses and
approvals will be required and, if so, whether they will be
granted. The failure to obtain any required license or approval
could harm our business.
We ship inventory and other materials to and from our facilities
in China and Taiwan and, as a result, are subject to various
Chinese, Taiwanese and U.S. customs-related laws. Given the
geographic distance and changing regulations and governmental
standards, it can be difficult to monitor and enforce compliance
with customs laws. Our customs practices in China have been
reviewed by local governmental authorities in China and will be
reviewed periodically in the future. The authorities may
determine that additional duties must be paid or that certain of
our practices must be changed. The U.S. Customs Service may
also require us to revise product classifications from time to
time with respect to various items imported into the United
States. In such cases we may be required to pay any increase in
customs duty to account for the difference in duty actually paid
by Oplink and the duty owed under the amended product
classification, and may also be subject to penalties under
applicable laws.
In addition, from time to time we enter into transfer pricing
arrangements with our subsidiaries to establish sales prices for
internal distributions of goods that have the effect of
allocating taxes between the parent corporation and our
subsidiaries. In general, these transfer prices have not been
approved by any governmental entity and, therefore, may be
challenged by the applicable tax authorities. China tax
authorities have recently announced that they plan to increase
transfer-pricing audits, and have specifically identified
telecommunications companies, among others, as priority targets.
We employ a number of foreign nationals in our
U.S. operations and, as a result, we are subject to various
laws related to the status of those employees with the Bureau of
Citizenship and Immigration Services. We also send our
U.S. employees to China and Taiwan from time to time and
for varying durations of time to assist with our Chinese
operations. Depending on the durations of such arrangements, we
may be required to withhold and pay personal income taxes in
respect of the affected U.S. employees directly to the
Chinese and Taiwanese tax authorities, and the affected
U.S. employees may be required to register with various
Chinese and Taiwanese governmental authorities. If we fail to
comply with the foregoing laws and regulations or any other
applicable laws and regulations, we may incur liabilities.
In addition, we are subject to laws relating to the storage,
use, discharge and disposal of toxic or otherwise hazardous or
regulated chemicals or materials used in our manufacturing
processes. While we believe that we are currently in compliance
in all material respects with these laws and regulations, if we
fail to store, use, discharge or dispose of hazardous materials
appropriately, we could be subject to substantial liability or
could be required to suspend or adversely modify our
manufacturing operations.
On January 1, 2008, a new labor contract law
(LCL) went into effect in China. We believe that the
new law will reduce our flexibility in hiring employees and in
terminating the employment of employees, could increase the risk
of hiring employees, and could increase the cost of any future
restructuring that involves our Chinese facilities, which could
result in a material adverse impact on our profitability and
liquidity.
Changes
in existing financial accounting standards or practices may
adversely affect our results of operations.
Changes in existing accounting rules or practices, new
accounting pronouncements or varying interpretations of current
accounting pronouncements could have a significant adverse
effect on our results of operations or the manner in which we
conduct our business. Further, such changes could potentially
affect our reporting of transactions completed before such
changes are effective.
31
Disruption
to commercial activities in the United States or in other
countries, particularly in China and Taiwan, may adversely
impact our results of operations, our ability to raise capital
or our future growth.
We derive a substantial portion of our revenues from customers
located outside the United States and substantial portions of
our operations are located in China and Taiwan. Our
international operations expose us to a number of additional
risks associated with international operations, including,
without limitation:
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disruptions to commercial activities or damage to our facilities
as a result of natural disasters, political unrest, war,
terrorism, labor strikes, and work stoppages;
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disruptions of telecommunications networks due to natural
disasters;
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difficulties and costs of staffing and managing foreign
operations with personnel who have expertise in optical network
technology;
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unexpected changes in regulatory or certification requirements
for optical systems or networks;
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disruptions in the transportation of our products and other
risks related to the infrastructure of foreign countries;
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economic instability;
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any future outbreak of severe acute respiratory syndrome, avian
influenza and other epidemics or illnesses; and
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power shortages at our manufacturing facilities in China, which
may lead to production delays.
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To the extent that such disruptions interfere with our
commercial activities, our results of operations could be harmed.
Substantially all of Oplinks manufacturing operations are
located in China and are subject to the laws and regulations of
China. Our operations in China may be adversely affected by
changes in the laws and regulations of China, such as those
relating to taxation, import and export tariffs, environmental
regulations, land use rights, property and other matters.
Chinas central or local governments may impose new,
stricter regulations or interpretations of existing regulations,
which would require additional expenditures. Our results of
operations and financial condition may be harmed by changes in
the political, economic or social conditions in China.
Provisions
of our charter documents and Delaware law and other arrangements
may have
anti-takeover
effects that could prevent any change in control, which could
negatively affect your investment.
Provisions of Delaware law and of our certificate of
incorporation and bylaws could make it more difficult for a
third party to acquire us, even if doing so would be beneficial
to our stockholders. These provisions permit us to:
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issue preferred stock with rights senior to those of the common
stock without any further vote or action by the stockholders;
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provide for a classified board of directors;
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eliminate the right of the stockholders to call a special
meeting of stockholders;
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eliminate the right of stockholders to act by written
consent; and
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impose various procedural and other requirements, which could
make it difficult for stockholders to effect certain corporate
actions.
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32
In addition, on March 18, 2002, our Board of Directors
adopted a share purchase rights plan, which has certain
additional anti-takeover effects. Specifically, the terms of the
plan provide for a dividend distribution of one preferred share
purchase right for each outstanding share of common stock. These
rights would cause substantial dilution to a person or group
that attempts to acquire us on terms not approved by our Board
of Directors. Any of the foregoing provisions could limit the
price that certain investors might be willing to pay in the
future for shares of our common stock.
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Item 1B.
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Unresolved
Staff Comments
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None.
We own the following facilities as of June 30, 2010:
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We own our building in Fremont, California, totaling
approximately 51,000 square feet. The building is our
headquarters and is used for administration, sales and
marketing, and research and development.
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We own our facility in the Zhuhai Free Trade Zone, China,
totaling approximately 787,000 square feet. Our facility in
the Zhuhai Free Trade Zone is our principal manufacturing center
and is also used for administration, research and development,
and employee living quarters. We currently lease
68,000 square feet of our facility in the Zhuhai Free Trade
Zone to third parties. We plan to terminate the lease by the end
of calendar year 2010 to accommodate our future production
capacity requirement.
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We own our facility in Taipei, Taiwan, totaling approximately
30,000 square feet which is used to maintain complete
in-house manufacturing capabilities for our optical interconnect
products including product design, supply chain management,
quality control, manufacturing and sales and marketing.
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We also own a 61,000 square feet research and development
facility in Wuhan, China, of which 20,000 square feet is
currently leased to third parties.
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We lease the following facilities as of June 30, 2010:
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We lease a total of approximately 46,000 square feet in
Shanghai, China. Our Shanghai facilities are used for
manufacturing, administration, and research and development. The
lease for our Shanghai facilities expires in July 2011.
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We lease a research and development site in Hsinchu, Taiwan.
This lease is for an 8,400 square feet facility and expires
on December 31, 2012.
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We lease a small facility in Woodland Hills, California. The
facility is used for sales and marketing and supply chain
management. The lease expires in January 2011.
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We believe that our facilities are currently adequate for our
purposes. We believe that suitable additional or replacement
spaces, if needed, will be available in the future on
commercially reasonable terms.
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Item 3.
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Legal
Proceedings
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Information with respect to this item may be found in under the
caption Litigation in Note 14 to the
Consolidated Financial Statements in Item 8, which is
incorporated herein by reference.
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Item 4.
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(Removed
and Reserved)
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33
Part II
Item 5. Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
Market
for Registrants Common Equity
Our common stock has been quoted on the NASDAQ Stock Market
under the symbol OPLK since our initial public
offering in October 2000. Prior to that time, there was no
public market for our common stock. The following table sets
forth the range of high and low closing sale prices for our
common stock for each period indicated:
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High
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Low
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Fiscal 2010:
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Quarter ended June 30, 2010
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$
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19.60
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$
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13.40
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Quarter ended March 31, 2010
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$
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19.16
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$
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14.80
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Quarter ended December 31, 2009
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$
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18.00
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$
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14.40
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Quarter ended September 30, 2009
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$
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14.37
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$
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11.16
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Fiscal 2009:
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Quarter ended June 30, 2009
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$
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12.99
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$
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7.56
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Quarter ended March 31, 2009
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$
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8.60
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$
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5.95
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Quarter ended December 31, 2008
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$
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12.31
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$
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5.14
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Quarter ended September 30, 2008
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$
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14.00
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$
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9.39
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As of August 31, 2010, there were approximately 72
stockholders of record of our common stock, and we believe a
substantially greater number of beneficial owners. We have never
declared or paid any cash dividends on our capital stock. We
currently expect to retain future earnings, if any, for use in
the operation and expansion of our business and do not
anticipate paying any cash dividends in the foreseeable future.
34
Stock
Performance Graphs and Cumulative Total Return
The graph below compares the cumulative total stockholder return
on our common stock with the cumulative total return on the
NASDAQ Composite and the NASDAQ Telecommunications Index for
each of the last five fiscal years ended June 30, assuming
an investment of $100 at the beginning of such period and the
reinvestment of any dividends. The comparison in the graphs
below are based upon historical data and are not indicative of,
nor intended to forecast, future performance of our common stock.
COMPARISON
OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among
Oplink Communications, Inc., the NASDAQ Composite Index
and the NASDAQ Telecommunications Index
*$100 invested on 6/30/05 in stock
or index, including reinvestment of dividends.
Fiscal year ending June 30.
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6/05
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6/06
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6/07
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6/08
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6/09
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6/10
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Oplink Communications, Inc.
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100.00
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158.58
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129.91
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83.14
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98.73
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124.11
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NASDAQ Composite
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100.00
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|
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|
107.08
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|
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|
130.99
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|
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|
114.02
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90.79
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105.54
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NASDAQ Telecommunications
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100.00
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|
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|
104.77
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148.09
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|
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|
129.55
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|
101.24
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105.45
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Use of
Proceeds from Sales of Registered Securities
On October 3, 2000, the SEC declared effective our
Registration Statement on
Form S-1
(No. 333-41506).
Pursuant to this Registration Statement, we completed an initial
public offering of 2,250,714 shares of common stock. We
incurred expenses of approximately $22.6 million, of which
$19.9 million represented underwriting discounts and
commissions and $2.7 million represented other related
expenses. The net offering proceeds to Oplink after total
expenses were $261.0 million. As of June 30, 2010, we
had $160.3 million in cash, cash equivalents, short-term
and long-term investments.
35
Repurchases
of Equity Securities
The following table provides information with respect to the
shares of common stock we repurchased during our fiscal quarter
ended June 30, 2010:
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Total Number of
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Approximate Dollar
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Shares Purchased
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Value of Shares that
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Total Number
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as Part of Publicly
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may yet be
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of Shares
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Average Price
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Announced Plans
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Purchased Under the
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Month
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Purchased
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Paid per Share
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or Programs
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Plans or Programs
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March 29 April 25, 2010
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$
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|
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|
$
|
16.5 million (1
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)
|
April 26 May 23, 2010
|
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|
639,100
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|
|
|
14.76
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639,100
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$
|
7.1 million
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May 24 June 27, 2010
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883,805
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14.21
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883,805
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$
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34.5 million (2
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)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,522,905
|
|
|
$
|
14.44
|
|
|
|
1,522,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
In August 2008, Oplink announced a
share repurchase program authorizing the repurchase up to
$20 million of its common stock. Approximately
$3.5 million of common stock was repurchased under this
program during fiscal 2009. No shares were purchased under this
program during the first ten months of fiscal 2010.
|
|
(2)
|
|
On June 1, 2010, Oplink
announced a new program authorizing the repurchase up to an
additional $40 million of its common stock.
|
Equity
Compensation Plan Information
Information regarding our equity compensation plans, including
both stockholder approved plans and non-stockholder approved
plans, will be contained in our definitive Proxy Statement with
respect to our Annual Meeting of Stockholders under the caption
Equity Compensation Plan Information, and is
incorporated by reference into this report.
|
|
Item 6.
|
Selected
Financial Data
|
The following selected consolidated financial data should be
read in conjunction with, and are qualified by reference to, our
consolidated financial statements and related notes and
Managements Discussion and Analysis of Financial
Condition and Results of Operations. The selected
consolidated statement of operations data for the three fiscal
years ended June 30, 2010, 2009 and 2008 and the selected
consolidated balance sheet data as of June 30, 2010 and
2009 are derived from, and qualified by reference to, the
audited consolidated financial statements included in
Item 8 of this
Form 10-K.
The selected consolidated statement of operations data for the
fiscal years ended June 30, 2007 and 2006 and the selected
consolidated balance sheet data as of June 30, 2008, 2007
and 2006 are derived from audited financial statements not
included in this
Form 10-K.
Our fiscal year ends on the Sunday closest to June 30. For
presentation purposes, we present each fiscal year as if it
ended on June 30. Fiscal years 2010, 2009, 2008, 2007 and
2006 consisted of 52 weeks. Fiscal 2011 will be a 53-week
fiscal year, one week more than a typical fiscal year. For more
information, please see Note 1 of the notes to consolidated
financial statements included in Item 8 of this
Form 10-K.
In June 2007, we acquired 58% of Optical Communication Products,
Inc.s (OCP) outstanding common stock with the
remaining 42% being acquired in October 2007. As a result,
fiscal years 2010, 2009 and 2008 had a full year of financial
results from OCP while fiscal year 2007 had one month of
financial results from OCP.
In January 2010, we acquired approximately 91.2% of the
outstanding shares of Emit Technology Co., Ltd.
(Emit) and acquired additional 2.9% of Emits
outstanding shares subsequent to the acquisition date. As a
result, fiscal year 2010 included financial results from Emit
since the acquisition date.
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except per share data)
|
|
|
Consolidated Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
138,809
|
|
|
$
|
143,732
|
|
|
$
|
176,253
|
|
|
$
|
107,499
|
|
|
$
|
54,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
94,265
|
|
|
|
110,611
|
|
|
|
140,539
|
|
|
|
78,588
|
|
|
|
39,121
|
|
Stock compensation expense
|
|
|
373
|
|
|
|
459
|
|
|
|
456
|
|
|
|
315
|
|
|
|
248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
94,638
|
|
|
|
111,070
|
|
|
|
140,995
|
|
|
|
78,903
|
|
|
|
39,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
44,171
|
|
|
|
32,662
|
|
|
|
35,258
|
|
|
|
28,596
|
|
|
|
15,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
10,097
|
|
|
|
10,819
|
|
|
|
14,393
|
|
|
|
6,796
|
|
|
|
6,140
|
|
Stock compensation expense
|
|
|
1,061
|
|
|
|
980
|
|
|
|
1,022
|
|
|
|
618
|
|
|
|
557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total research and development
|
|
|
11,158
|
|
|
|
11,799
|
|
|
|
15,415
|
|
|
|
7,414
|
|
|
|
6,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
8,238
|
|
|
|
8,076
|
|
|
|
10,501
|
|
|
|
6,064
|
|
|
|
4,092
|
|
Stock compensation expense
|
|
|
1,368
|
|
|
|
1,105
|
|
|
|
1,001
|
|
|
|
733
|
|
|
|
580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales and marketing
|
|
|
9,606
|
|
|
|
9,181
|
|
|
|
11,502
|
|
|
|
6,797
|
|
|
|
4,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
7,623
|
|
|
|
9,639
|
|
|
|
14,268
|
|
|
|
7,102
|
|
|
|
6,300
|
|
Stock compensation expense
|
|
|
3,218
|
|
|
|
2,848
|
|
|
|
5,452
|
|
|
|
3,045
|
|
|
|
1,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total general and administrative
|
|
|
10,841
|
|
|
|
12,487
|
|
|
|
19,720
|
|
|
|
10,147
|
|
|
|
7,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charge
|
|
|
|
|
|
|
10,829
|
|
|
|
626
|
|
|
|
|
|
|
|
|
|
Transitional costs for contract manufacturing, other charges and
restructuring costs
|
|
|
|
|
|
|
|
|
|
|
2,285
|
|
|
|
216
|
|
|
|
(72
|
)
|
Merger fees
|
|
|
|
|
|
|
|
|
|
|
5,618
|
|
|
|
1,451
|
|
|
|
|
|
In-process research and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,120
|
|
Amortization of goodwill, intangible and other assets
|
|
|
1,651
|
|
|
|
1,648
|
|
|
|
1,519
|
|
|
|
222
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
33,256
|
|
|
|
45,944
|
|
|
|
56,685
|
|
|
|
26,247
|
|
|
|
20,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
10,915
|
|
|
|
(13,282
|
)
|
|
|
(21,427
|
)
|
|
|
2,349
|
|
|
|
(4,591
|
)
|
Interest and other income, net
|
|
|
867
|
|
|
|
3,066
|
|
|
|
7,518
|
|
|
|
9,666
|
|
|
|
7,030
|
|
Gain (loss) on sale or disposal of assets
|
|
|
942
|
|
|
|
(1,533
|
)
|
|
|
2,305
|
|
|
|
(18
|
)
|
|
|
(458
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for income taxes
|
|
|
12,724
|
|
|
|
(11,749
|
)
|
|
|
(11,604
|
)
|
|
|
11,997
|
|
|
|
1,981
|
|
Provision for income taxes
|
|
|
(1,645
|
)
|
|
|
(2,074
|
)
|
|
|
(1,045
|
)
|
|
|
(241
|
)
|
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
11,079
|
|
|
|
(13,823
|
)
|
|
|
(12,649
|
)
|
|
|
11,756
|
|
|
|
1,908
|
|
Net loss attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
(5,891
|
)
|
|
|
(1,418
|
)
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Oplink Communications, Inc.
|
|
$
|
11,079
|
|
|
$
|
(13,823
|
)
|
|
$
|
(6,758
|
)
|
|
$
|
13,174
|
|
|
$
|
1,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oplink Communications, Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.54
|
|
|
$
|
(0.67
|
)
|
|
$
|
(0.31
|
)
|
|
$
|
0.60
|
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.51
|
|
|
$
|
(0.67
|
)
|
|
$
|
(0.31
|
)
|
|
$
|
0.57
|
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in per share calculation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
20,699
|
|
|
|
20,589
|
|
|
|
21,533
|
|
|
|
22,071
|
|
|
|
21,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
21,631
|
|
|
|
20,589
|
|
|
|
21,533
|
|
|
|
22,942
|
|
|
|
22,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents, and short-term and long-term investments
|
|
$
|
160,343
|
|
|
$
|
168,656
|
|
|
$
|
142,081
|
|
|
$
|
227,878
|
|
|
$
|
188,280
|
|
Working capital
|
|
|
182,606
|
|
|
|
188,750
|
|
|
|
159,696
|
|
|
|
254,076
|
|
|
|
138,276
|
|
Total assets
|
|
|
259,598
|
|
|
|
249,947
|
|
|
|
268,740
|
|
|
|
368,389
|
|
|
|
237,955
|
|
Long-term liabilities
|
|
|
4,923
|
|
|
|
3,492
|
|
|
|
989
|
|
|
|
207
|
|
|
|
30
|
|
Total stockholders equity
|
|
$
|
228,649
|
|
|
$
|
228,027
|
|
|
$
|
238,270
|
|
|
$
|
269,775
|
|
|
$
|
227,140
|
|
37
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
This discussion contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act
of 1934, including, without limitation, statements regarding our
anticipated revenues, gross margins and expense levels for
future periods, and other statements reflecting our
expectations, beliefs, intentions or future strategies that are
signified by the words expect,
anticipate, intend, believe,
estimate or assume or similar language.
All forward-looking statements included herein are based on
information available to us on the date hereof, and we assume no
obligation to update any such forward-looking statements. We
caution you that our business and financial performance are
subject to substantial risks and uncertainties. Actual results
could differ materially from those projected in the
forward-looking statements. In evaluating our business, you
should also carefully consider the information set forth under
the caption Risk Factors contained in Item 1A
above in addition to the information contained in this
Item 7. We undertake no obligation to update publicly any
forward-looking statements, whether as a result of new
information, future events or otherwise.
The following discussion of our financial condition and results
of operations should be read in conjunction with
Item 6. Selected Financial Data and our
consolidated financial statements and related notes thereto in
Item 8. Financial Statements and Supplementary
Data.
Overview
We design, manufacture and sell optical networking components
and subsystems. Our products expand optical bandwidth, amplify
optical signals, monitor and protect wavelength performance,
redirect light signals, ensure bandwidth distribution
connectivity and provide signal transmission and reception
within an optical network. Our products enable greater and
higher quality bandwidth over longer distances, which reduces
network congestion and transmission cost per bit. Our products
also enable optical system manufacturers to provide flexible and
scalable bandwidth to support the increase of data traffic on
the Internet and other public and private networks.
We offer our customers design, integration and optical
manufacturing solutions (OMS) for the production and
packaging of highly-integrated optical subsystems and turnkey
solutions, based upon a customers specific product design
and specifications. We also offer solutions with lower levels of
component integration for customers that place more value on
flexibility than would be provided with turnkey solutions.
Our fiscal year ends on the Sunday closest to June 30. For
presentation purposes, we present each fiscal year as if it
ended on June 30. Fiscal years 2010, 2009 and 2008
consisted of 52 weeks. Fiscal 2011 will be a 53-week fiscal
year, one week more than a typical fiscal year.
Revenues. We generate substantially all of our
revenues from the sale of fiber optic components and subsystems.
Our products are generally categorized into the four following
major groups: (1) bandwidth creation products, which
include wavelength expansion and optical amplification products;
(2) bandwidth management products, which include optical
switching products and wavelength performance monitoring and
protection products; (3) transmission products, which
include fiber optic transmitters, receivers, transceivers and
transponders; and (4) optical interconnect products, which
include signal connectivity and distribution products.
Cost of Revenues. Our cost of revenues consists of
raw material, salaries including stock compensation expense and
related personnel expenses, manufacturing overhead, provisions
for excess and obsolete inventories, amortization of intangible
assets, and warranty costs. We expect cost of revenues, as a
percentage of revenues, to fluctuate from period to period. Our
gross margins will primarily be affected by mix of products
sold, salaries and related personnel expenses, manufacturing
volume, pricing policies, production yield, costs incurred in
improving manufacturing processes, provisions for excess and
obsolete inventories and warranty costs.
38
Research and Development Expenses. Our research and
development expenses consist primarily of salaries including
stock compensation expense and related personnel costs,
depreciation, non-recurring engineering charges and prototype
costs, patent filing costs and fees paid to consultants and
outside service providers, all of which relate to the design,
development, testing, pre-manufacturing and significant
improvement of our products. We expense our research and
development costs as they are incurred.
Sales and Marketing Expenses. Our sales and
marketing expenses consist primarily of salaries including stock
compensation expense and related expenses for marketing, sales,
customer service and application engineering support personnel,
commissions paid to internal and external sales representatives,
as well as costs associated with trade shows and other marketing
expenses.
General and Administrative Expenses. Our general and
administrative expenses consist primarily of salaries including
stock compensation expense and related expenses for executive,
finance, accounting, and human resources personnel, professional
fees and other corporate expenses.
Stock Compensation Expense. We account for
stock-based compensation in accordance with the provisions of
FASB Accounting Standards Codification (ASC) Topic 718,
Compensation-Stock Compensation (ASC
718), which establishes accounting for stock-based awards
exchanged for employee services. Accordingly, stock-based
compensation cost is measured at grant date, based on the fair
value of the award, and is recognized as expense over the
employee requisite service period. Our stock compensation is
generally accounted for as an equity instrument. Stock
compensation expense recorded in cost of revenues, research and
development, sales and marketing, and general and administrative
is the amortization of the fair value of share-based payments
made to employees and members of our board of directors,
primarily in the form of stock options, restricted stock awards
and units (RSAs and RSUs) and purchases
under the employee stock purchase plan pursuant to the
provisions of ASC 718.
As of June 30, 2010, the unrecorded deferred stock
compensation balance related to stock options to purchase Oplink
common stock was $4.2 million which will be recognized over
an estimated weighted average amortization period of
2.1 years. The unrecorded deferred stock compensation
balance related to RSUs was $4.4 million which will be
recognized over an estimated weighted average amortization
period of 3.2 years. Approximately $8,000 of stock
compensation was capitalized as inventory at June 30, 2010
and 2009. During the year ended June 30, 2010, we issued
501,813 restricted stock awards and units, with a total
grant-date fair value of $7.0 million.
Use of
Estimates and Critical Accounting Policies
The preparation of our consolidated financial statements in
conformity with accounting principles generally accepted in the
United States of America (GAAP) requires us to make
estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses and related
disclosures. On an ongoing basis, we evaluate our estimates,
including those related to product returns, accounts receivable,
inventories, tangible and intangible assets, warranty
obligations, stock compensation, income taxes, contingencies and
litigation. We base our estimates on historical experience and
on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates due to actual
outcomes being different from those on which we based our
assumptions. These estimates and judgments are reviewed by
management on an ongoing basis and by the Audit Committee at the
end of each quarter prior to the public release of our financial
results. We believe the following critical accounting policies,
and our procedures relating to these policies, affect our more
significant judgments and estimates used in the preparation of
our consolidated financial statements.
We have identified the policies below as critical to our
business operations and understanding of our financial condition
and results of operations. A critical accounting policy is one
that is both material to
39
the presentation of our consolidated financial statements and
requires us to make difficult, subjective or complex judgments
that could have a material effect on our financial condition and
results of operations. These policies may require us to make
assumptions about matters that are highly uncertain at the time
of the estimate, and different estimates that we could have
used, or changes in the estimate that are reasonably likely to
occur, may have a material impact on our financial condition or
results of operations. Our critical accounting policies cover
the following areas:
Revenue
Recognition and Product Returns
We recognize revenue from product sales upon delivery of the
product or customer acceptance, whichever is later, provided
that persuasive evidence of an arrangement exists, delivery has
occurred and no significant obligations remain, the fee is fixed
or determinable and collectibility is reasonably assured. We
recognize revenue associated with contract-related cancellation
payments from customers when a formal agreement is signed or a
purchase order is issued by the customer covering these payments
and we determine the collectibility of the cancellation payments
to be reasonably assured. In addition, we estimate future
product returns based upon actual historical return rates and
reduce our revenue by these estimated future returns. If the
historical data we use to calculate these estimates does not
properly reflect future returns, future estimates could be
revised accordingly.
Depreciation
and Amortization Expenses
Depreciation expenses are computed using the straight-line
method based upon the useful lives of the assets. Estimated
useful lives of 20 to 30 years are used for buildings and 3
to 10 years are used for manufacturing and engineering
equipment. Estimated useful lives of 2 to 5 years are used
for computer hardware and software. Leasehold improvements are
amortized using the straight-line method based upon the shorter
of the estimated useful lives or the lease term of the
respective assets. Land and construction in progress are not
depreciated. Improvements and betterments are capitalized if
they extend the useful life of the asset. Repair and maintenance
costs are charged to expense as incurred. Gain (loss) related to
retirement or disposition of fixed assets is recognized in the
period which the gain (loss) occurs.
Accrued
Warranty
We provide reserves for the estimated cost of product warranties
at the time revenue is recognized based on historical experience
of known product failure rates and expected material and labor
costs to provide warranty services. We generally provide a
one-year warranty on our products. Additionally, from time to
time, specific warranty accruals may be made if unforeseen
technical problems arise. Alternatively, if estimates are
determined to be greater than the actual amounts necessary, we
may reverse a portion of such provisions in future periods.
Allowance
for Doubtful Accounts
Our accounts receivable are derived from revenue earned from
customers located in the United States, Canada, Europe,
China, Japan and other Asia-Pacific countries. We perform
ongoing credit evaluations of our customers financial
condition and currently require no collateral from our
customers. We maintain an allowance for doubtful accounts for
estimated losses in anticipation of the inability or
unwillingness of customers to make required payments. When we
become aware that a specific customer is unable to meet its
financial obligations, such as the result of bankruptcy or
deterioration in the customers operating results or
financial position, we record a specific allowance equal to the
amount due to reflect the level of credit risk in the
customers outstanding receivable balance. We are not able
to predict changes in the financial condition of customers, nor
are we able to predict whether a customer experiencing financial
difficulties will ultimately pay us the amounts owed. If the
condition or circumstances of our customers deteriorates,
estimates of the recoverability of trade receivables could be
materially affected and we may be required to record additional
allowances, which
40
would negatively affect our operating results in that period.
Alternatively, if our estimates are determined to be greater
than the actual amounts necessary, we may reverse a portion of
such allowance in future periods based on actual collection
experience, which would positively increase our operating
results in future periods.
Excess
and Obsolete Inventory
We regularly assess the valuation of inventories and write down
those inventories which are obsolete or in excess of forecasted
usage to their estimated realizable value. Estimates of
realizable value are based upon our analysis and assumptions
including, but not limited to, forecasted sales levels by
product, expected product lifecycle, product development plans
and future demand requirements. If market conditions are less
favorable than our forecast or actual demand from customers is
lower than our estimates, we may be required to record
additional inventory write-downs. At the point of write down, a
new, lower-cost basis for that inventory is established, and
subsequent changes in facts and circumstances do not result in
the restoration or increase in that newly established cost
basis. If there were to be a sudden and significant decrease in
demand for our products, or if there were a higher incidence of
inventory obsolescence because of rapidly changing technology
and customer requirements, we could be required to increase
inventory write-downs, and our gross margin could be adversely
affected. If demand is higher than expected, we may sell
inventories that had previously been written down as was the
case in the years ended June 30, 2010, 2009 and 2008. In
such instances, our gross margins were positively impacted by
the utilization of previously reserved inventory of
$5.8 million, $4.0 million and $1.2 million in
fiscal 2010, 2009 and 2008, respectively.
Impairment
of Investments
We determine the appropriate classification of our investments
in marketable securities at the time of purchase and reevaluate
such designation as of each balance sheet date. Our marketable
securities may be classified as either
held-to-maturity
or
available-for-sale.
Held-to-maturity
securities represent those securities that we have both the
intent and ability to hold to maturity and are carried at
amortized cost.
Available-for-sale
securities represent those securities that do not meet the
classification of
held-to-maturity
or trading securities and are carried at fair value. Should a
decline in the fair value of an individual security or
securities be judged to be other than temporary, the cost basis
of the security would be written down to fair value and the
amount of the write-down would be accounted for as a realized
loss. Factors considered in determining whether a loss is
temporary include the magnitude of the decline in market value,
the length of time the fair value has been below the cost basis
of the security, our ability and intent to hold the security for
a reasonable period of time sufficient for a forecasted recovery
of fair value up to (or beyond) the cost of the security, and
whether a credit loss exists.
Impairment
of Long-Lived Asset
We evaluate the recoverability of the carrying value of
property, plant and equipment and identifiable intangible
assets, whenever certain events or changes in circumstances
indicate that the carrying amount may not be recoverable. These
events or circumstances include, but are not limited to, a
prolonged industry downturn, a significant decline in our market
value, or significant reductions in projected future cash flows.
In assessing the recoverability of long-lived assets, we
generally compare the carrying value to the undiscounted future
cash flows the assets are expected to generate. If the total of
the undiscounted future cash flows is less than the carrying
amount of the assets, we would write down such assets based on
the excess of the carrying amount over the fair value of the
assets. Fair value is generally determined by calculating the
discounted future cash flows using a discount rate based upon
our weighted average cost of capital, and specific appraisal in
certain instances. Significant judgments and assumptions are
required in the forecast of future operating results used in the
preparation of the estimated future cash flows, including
long-term forecasts of the amounts and timing of overall market
growth and our percentage of that market, groupings of assets,
discount rate and terminal growth rates. Changes in these
41
estimates could have a material adverse effect on the assessment
of long-lived assets, thereby requiring us to write down the
assets. In fiscal 2008, a charge of $517,000 was recorded based
upon an impairment analysis of the carrying amount of the
purchased intangible assets related to the acquisition of F3
Inc. (F3) in fiscal 2006. There was no impairment
charge related to long-lived assets recorded in fiscal 2010 or
2009.
Impairment
of Goodwill and Other Intangible Assets
Goodwill represents the excess of the consideration paid for a
business acquisition over the fair value of net tangible and
intangible assets acquired. Goodwill and intangible assets with
indefinite useful lives should not be amortized but rather be
tested for impairment at least annually or sooner whenever
events or changes in circumstances indicate that they may be
impaired. These events or circumstances could include a
significant change in the business climate, legal factors,
operating performance indicators, competition, or sale or
disposition of a significant portion of a reporting unit. The
impairment test is a two-step process. In the event that we
determine that the value of goodwill has become impaired, we
will record an impairment loss during the fiscal quarter in
which the determination is made.
Application of the goodwill impairment test requires us to make
estimates and assumptions. Changes in these estimates and
assumptions could materially affect the determination of fair
value and goodwill impairment. In fiscal 2009, we recorded an
impairment charge of $10.8 million related to goodwill
acquired as part of Oplinks acquisition of Optical
Communication Products, Inc. (OCP) in fiscal 2008
and 2007 and F3 and Fibercom Optics Communication Corp
(Fibercom) in fiscal 2006. We did not record any
goodwill impairment charge in fiscal 2010 or 2008.
Fair
Value Accounting
Fair value is defined as the price that would be received from
selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
When determining the fair value measurements for assets and
liabilities, which are required to be recorded at fair value, we
consider the principal or most advantageous market in which we
would transact and the market-based risk measurements or
assumptions that market participants would use in pricing the
asset or liability, such as inherent risk, transfer restrictions
and credit risk.
The fair value of our Level 1 financial assets is based on
quoted prices in active markets for identical underlying
securities and generally include money market funds. Determining
fair value for Level 1 instruments generally does not
require significant management judgment.
The fair value of our Level 2 financial assets is based on
inputs observable for the underlying securities other than
quoted prices included within Level 1 and generally include
United States Treasury securities, United States government
agency debt securities, certificates of deposit, commercial
paper, and corporate bonds. These Level 2 instruments
require more management judgment and subjectivity compared to
Level 1 instruments which include determining which
instruments are most similar to the instrument being priced,
determining whether the market is active and determining which
model-derived valuations are to be used when calculating fair
value. We do not hold any financial assets or liabilities
measured at fair value using Level 3 inputs, which requires
significant management judgment.
Business
Combinations
In fiscal 2010, we adopted ASC Topic 805, Business
Combination (ASC 805), which revised the
accounting guidance that we used to account for our acquisitions
prior to fiscal 2010. In accordance with ASC 805, we
recognize separately from goodwill, the identifiable assets
acquired, the liabilities assumed, and any noncontrolling
interests in the acquiree generally at their fair values as
defined by ASC Topic 820, Fair Value Measurements and
Disclosures (ASC 820). Goodwill as of the
acquisition
42
date is measured as the excess of consideration transferred,
which is generally measured at fair value, and the net of the
acquisition date amounts of the identifiable assets acquired and
the liabilities assumed. Acquisition-related transaction costs
and costs associated with restructuring activities initiated by
us are accounted for as expenses in the periods in which the
costs are incurred. We record the values of assets and
liabilities based on independent valuations and internal
estimate. The determination of fair value requires our
management to make significant estimates and assumptions, and
accordingly, our financial position or results of operations may
be affected by changes in these estimates and assumptions.
Income
Taxes
We account for income taxes under the liability method, which
recognizes deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the tax
bases of assets and liabilities and their financial statement
reported amounts, and for net operating loss and tax credit
carryforwards. Deferred income tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred
taxes of a change in tax rates is recognized in income in the
period that includes the enactment date. We record a valuation
allowance against deferred tax assets when it is more likely
than not that such assets will not be realized.
As a multinational corporation, we are subject to taxation in
the United States and in foreign jurisdictions. The taxation of
our business is subject to the application of multiple and
sometimes conflicting tax laws and regulations as well as
multinational tax conventions. Our effective tax rate is highly
dependent upon the geographic distribution of our worldwide
earnings or losses, the tax regulations and tax holidays in each
geographic region, and the availability of tax credits and
carryforwards. The application of tax laws and regulations is
subject to legal and factual interpretation, judgment and
uncertainty. Tax laws themselves are subject to change as a
result of changes in fiscal policy, changes in legislation, and
the evolution of regulations and court rulings. Consequently,
taxing authorities may impose tax assessments or judgments
against us that could materially impact our tax liability
and/or our
effective income tax rate.
We are subject to income tax audits by the respective tax
authorities in all of the jurisdictions in which we operate. The
determination of tax liabilities in each of these jurisdictions
requires the interpretation and application of complex and
sometimes uncertain tax laws and regulations. We recognize
liabilities for uncertain tax positions based on the provisions
of ASC Topic 740, Income Taxes (ASC
740). If we ultimately determine that the payment of such
a liability is not necessary, then we reverse the liability and
recognize a tax benefit during the period in which the
determination is made that the liability is no longer necessary.
See Note 11 Income Taxes in the
consolidated financial statements for additional information.
Stock
Compensation
We account for stock-based compensation in accordance with the
provision of ASC 718. We utilize the Black-Scholes option
valuation model to estimate the grant-date fair value of
employee stock options, which requires the input of highly
subjective assumptions, including expected volatility and
expected life. Historical volatility was used in estimating the
fair value of our stock compensation awards, while the expected
life for our options was estimated based on historical trends
since our initial public offering. Further, we estimate
forfeitures for stock compensation awards that are not expected
to vest. Changes in these inputs and assumptions can materially
affect the measure of estimated fair value of our stock
compensation. We expense the estimated fair value to earnings on
a straight-line basis over the vesting period of the underlying
awards, which is generally four years for our stock compensation
awards and up to two years for purchase rights under our
employee stock purchase plan.
The Black-Scholes option valuation model was developed for use
in estimating the fair value of traded options that have no
vesting restrictions and are fully transferable. As our stock
options and
43
employee stock purchase plan awards have characteristics that
differ significantly from traded options, and as changes in the
subjective assumptions can materially affect the estimated
value, our estimate of fair value may not accurately represent
the value assigned by a third party in an arms-length
transaction. There currently is no market-based mechanism to
verify the reliability and accuracy of the estimates derived
from the Black-Scholes option valuation model or other allowable
valuation models, nor is there a method to compare and adjust
the estimates to actual values. While our estimate of fair value
and the associated charge to earnings materially affects our
results of operations, it has no impact on our cash position.
There are significant variations among allowable valuation
models, and there is a possibility that we may adopt a different
valuation model or refine the inputs and assumptions under our
current valuation model in the future resulting in a lack of
consistency in future periods. Our current or future valuation
model and the inputs and assumptions we make may also lack
comparability to other companies that use different models,
inputs, or assumptions, and the resulting differences in
comparability could be material.
Loss
Contingencies
We are or have been subject to proceedings, lawsuits and other
claims arising in the ordinary course of business. We evaluate
contingent liabilities including threatened or pending
litigation in accordance with GAAP. If the potential loss from
any claim or legal proceedings is considered probable and the
amount can be estimated, we accrue a liability for the estimated
loss. Because of uncertainties related to these matters,
accruals are based upon managements judgment and the best
information available to management at the time. As additional
information becomes available, we reassess the potential
liability related to pending claims and litigation and may
revise our estimates, which could materially impact our results
of operations, financial position and cash flows.
Results
of Operations for Fiscal 2010, 2009 and 2008
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
2010
|
|
2009
|
|
Change
|
|
Change
|
|
|
2009
|
|
2008
|
|
Change
|
|
Change
|
|
|
(In thousands, except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
138,809
|
|
|
$
|
143,732
|
|
|
$
|
(4,923
|
)
|
|
|
−3.4
|
%
|
|
|
$
|
143,732
|
|
|
$
|
176,253
|
|
|
$
|
(32,521
|
)
|
|
|
−18.5
|
%
|
The acquisition of Emit Technology Co., Ltd. (Emit)
contributed approximately $2.6 million of revenues for
fiscal 2010. Excluding the impact of the Emit acquisition,
revenues for fiscal 2010 decreased $7.5 million compared to
fiscal 2009. The decrease was mainly due to decreased unit
shipments of our line transmission application product, ROADM
optical switching and routing product and monitoring and
conditioning product, partially offset by increased revenues of
our multiplexer product and optical amplification product. A
decline in average selling prices, which is a characteristic of
the industry in which we operate, also contributed to the
decrease in revenues in fiscal 2010 compared to fiscal 2009.
Our ROADM optical switching and routing product, of which the
primary and majority of the components are obtained from third
party vendors accounted for approximately 13% of revenues for
fiscal 2010 compared to 16% of revenues for fiscal 2009. Our
line transmission application product accounted for
approximately 26% and 31% of revenues for 2010 and 2009,
respectively.
Revenues for fiscal 2009 decreased $32.5 million compared
to fiscal 2008. The decrease was mainly due to decreased unit
shipments in our ROADM optical switching and routing product,
line transmission application product, wavelength expansion
product and monitoring and conditioning product, partially
offset by increased revenue of our optical amplification
product. Our ROADM optical switching and routing product and
line transmission application product accounted for 56% and 30%
of the decrease in
44
revenues, respectively. The decrease in unit shipments was
primarily due to a decrease in spending activity in the
telecommunications industry. A decline in average selling prices
also contributed to the decrease in revenues in fiscal 2009
compared to fiscal 2008.
Our ROADM optical switching and routing product accounted for
approximately 16% of revenues for fiscal 2009 compared to 23% of
revenues for fiscal 2008. Our line transmission application
product accounted for approximately 31% of revenues for both
fiscal 2009 and 2008.
Historically, a relatively small number of customers have
accounted for a significant portion of our revenue. Our top five
customers, although not the same five customers for each period,
together accounted for 53%, 60% and 60% of our revenues in the
fiscal years ended June 30, 2010, 2009 and 2008,
respectively. We expect that revenues from our top five
customers as a percentage of total revenues will increase in
fiscal 2011.
Gross
Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
Years Ended
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
2010
|
|
2009
|
|
Change
|
|
Change
|
|
|
2009
|
|
2008
|
|
Change
|
|
Change
|
|
|
(In thousands, except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
44,171
|
|
|
$
|
32,662
|
|
|
$
|
11,509
|
|
|
|
35.2
|
%
|
|
|
$
|
32,662
|
|
|
$
|
35,258
|
|
|
$
|
(2,596
|
)
|
|
|
−7.4
|
%
|
Gross profit margin
|
|
|
31.8
|
%
|
|
|
22.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
22.7
|
%
|
|
|
20.0
|
%
|
|
|
|
|
|
|
|
|
The increase in gross profit for fiscal 2010 compared to fiscal
2009 primarily reflected lower material costs, lower provision
for excess and obsolete inventory, higher utilization of
previously reserved inventory, and lower manufacturing overhead
expenses, partially offset by lower revenues and higher direct
labor costs. The higher labor costs were primarily due to
increases in employee headcount and higher employee compensation
expenses in China. We have recently increased our wage rates at
our manufacturing facilities in Zhuhai by more than 30% due to
government-mandated increases in minimum wage levels. We expect
our labor costs to continue to increase in fiscal 2011 due to
increased headcount
and/or
increased wage rates. In fiscal 2009, we recorded a provision
for excess and obsolete inventory of $4.1 million which was
primarily related to our line transmission application product.
Our gross profit for fiscal 2010 was positively impacted by
sales of inventory that had been previously reserved of
$5.8 million, compared to sales of previously-reserved
inventory of $4.0 million in fiscal 2009.
Our gross profit margin increased in fiscal 2010 compared to
fiscal 2009 primarily due to lower material costs as a
percentage of revenues, lower provision for excess and obsolete
inventory, and higher utilization of previously reserved
inventory, partially offset by higher labor costs and
manufacturing overhead expenses as a percentage of revenues. In
general, gross profit margins for our ROADM optical switching
and routing product for which the primary and majority of the
components are obtained from third party vendors are below the
average margins of our other products. Should the ROADM optical
switching and routing product revenues grow faster than the
revenues of our other products, our gross profit margins will
decline. We expect revenues from our ROADM optical switching and
routing product to increase in fiscal 2011.
The decrease in gross profit for fiscal 2009 compared to fiscal
2008 was mainly due to lower revenues, partially offset by lower
provision for excess and obsolete inventory, lower labor costs
and lower manufacturing overhead expenses. The decrease in labor
costs and manufacturing overhead expenses reflected the costs
savings associated with OCPs manufacturing being
transitioned from higher cost facilities in the United States to
lower cost facilities in China, further integration of OCP and
other cost reduction efforts. Our gross profit for fiscal 2009
was positively impacted by sales of inventory that had been
previously reserved of $4.0 million, compared to sales of
previously-reserved inventory of $1.2 million in fiscal
2008.
45
Our gross profit margin increased slightly in fiscal 2009
compared to fiscal 2008. The increase was mainly driven by lower
provision for excess and obsolete inventory, a higher
utilization of inventory that had been previously reserved and
lower labor costs and manufacturing overhead expenses as a
percentage of revenues, partially offset by higher material
costs as a percentage of revenues.
Research
and Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
2010
|
|
2009
|
|
Change
|
|
Change
|
|
|
2009
|
|
2008
|
|
Change
|
|
Change
|
|
|
(In thousands, except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
11,158
|
|
|
$
|
11,799
|
|
|
$
|
(641
|
)
|
|
|
−5.4
|
%
|
|
|
$
|
11,799
|
|
|
$
|
15,415
|
|
|
$
|
(3,616
|
)
|
|
|
−23.5
|
%
|
Research and development expenses decreased $641,000 for fiscal
2010 compared to fiscal 2009 and $3.6 million for fiscal
2009 compared to fiscal 2008. The decrease was mainly driven by
cost savings as a result of continued integration of OCP, more
research and development programs being transitioned from higher
cost facilities in the United States to lower cost facilities in
China, and other cost reduction measures.
We believe that developing customer solutions at the prototype
stage is critical to our strategic product development
objectives. We further believe that, in order to meet the
changing requirements of our customers, we will need to fund
investments in several concurrent product development projects
and to assign more employees to these projects. In addition, we
intend to devote more resources to development of new products
to serve our current market as well as products for expansion
into new markets. As a result, we expect our research and
development expenses in fiscal 2011 will increase compared to
fiscal 2010. The research and development process can be
expensive and prolonged and entails considerable uncertainty. As
such, we can make no assurances that any of the products we plan
to develop will be commercially successful, and there is a
substantial risk that our research and development expenditures
will fail to generate any meaningful return of the investment of
such resources.
Sales and
Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
June 30,
|
|
|
|
Percentage
|
|
|
2010
|
|
2009
|
|
Change
|
|
Change
|
|
|
2009
|
|
2008
|
|
Change
|
|
Change
|
|
|
(In thousands, except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
$
|
9,606
|
|
|
$
|
9,181
|
|
|
$
|
425
|
|
|
|
4.6
|
%
|
|
|
$
|
9,181
|
|
|
$
|
11,502
|
|
|
$
|
(2,321
|
)
|
|
|
−20.2
|
%
|
Sales and marketing expenses increased slightly for fiscal 2010
compared to fiscal 2009. The acquisition of Emit accounted for
approximately $106,000 of the total increase in sales and
marketing expenses. Excluding the impact of the Emit
acquisition, the increase in sales and marketing expenses was
mainly due to higher stock compensation expense.
The decrease in sales and marketing expenses for fiscal 2009
compared to fiscal 2008 was mainly driven by the cost savings
associated with the integration of OCP and lower sales
commission expenses as a result of decreased revenues.
General
and Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
|
|
Percentage
|
|
|
|
June 30,
|
|
|
|
|
|
Percentage
|
|
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
Change
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
Change
|
|
|
|
(In thousands, except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
$
|
10,841
|
|
|
$
|
12,487
|
|
|
$
|
(1,646
|
)
|
|
|
−13.2
|
%
|
|
|
$
|
12,487
|
|
|
$
|
19,720
|
|
|
$
|
(7,233
|
)
|
|
|
−36.7
|
%
|
46
The decrease in general and administrative expenses for fiscal
2010 compared to fiscal 2009 mainly reflected reduced
professional fees, the cost savings associated with the further
integration of OCP and other cost reduction measures and lower
provision for doubtful accounts, partially offset by higher
stock compensation expense. We do not expect a similar level of
decrease in general and administrative expenses in fiscal 2011
from fiscal 2010 level.
The decrease in general and administrative expenses for fiscal
2009 compared to fiscal 2008 was mainly driven by the cost
savings associated with the integration of OCP and other cost
control efforts. Lower stock compensation expense further
contributed to the decrease in general and administrative
expenses for fiscal 2009 compared to fiscal 2008. The
acquisition of OCP by Oplink resulted in the accelerated vesting
of OCP stock options pursuant to
change-in-control
provisions, which contributed $2.7 million in stock
compensation expense for fiscal 2008.
Stock
Compensation Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
|
|
Percentage
|
|
|
|
June 30,
|
|
|
|
|
|
Percentage
|
|
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
Change
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
Change
|
|
|
|
(In thousands, except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation expense
|
|
$
|
6,020
|
|
|
$
|
5,392
|
|
|
$
|
628
|
|
|
|
11.6
|
%
|
|
|
$
|
5,392
|
|
|
$
|
7,931
|
|
|
$
|
(2,539
|
)
|
|
|
−32.0
|
%
|
Stock compensation expense recorded in cost of revenues,
research and development, sales and marketing, and general and
administrative is the amortization of the fair value of
share-based payments granted to employees and members of our
board of directors, primarily in the form of stock options,
RSAs, RSUs and purchases under the employee stock purchase plan
(see Note 2 of the notes to the consolidated financial
statements). The fair value of stock options and purchase rights
granted to purchase our common stock under the employee stock
purchase plan is estimated using a Black-Scholes valuation model
and is recognized as expense over the employee requisite service
period. The compensation expense incurred for RSAs and RSUs is
based on the closing market price of Oplinks common stock
on the date of grant and is amortized on a straight-line basis
over the requisite service period.
Stock compensation expense increased $628,000 in fiscal 2010
compared to fiscal 2009. The increase was primarily due to the
amortization of RSUs which were granted in the beginning of
fiscal 2010 and additional grants to new and existing employees
during the year.
Stock compensation expense decreased $2.5 million, or 32.0%
in fiscal 2009 compared to fiscal 2008. The acquisition of OCP
by Oplink resulted in the accelerated vesting of OCP stock
options pursuant to
change-in-control
provisions, which contributed $2.7 million in stock
compensation expense for fiscal 2008. Excluding the impact of
the OCP acquisition, stock compensation expense increased
slightly in fiscal 2009 compared to fiscal 2008 as a result of
additional grants to new and existing employees. Stock
compensation expense for fiscal 2009 includes the continued
amortization of previously-granted stock options.
Impairment Charge and Other Costs. There was no
impairment charge in fiscal 2010. Oplink had goodwill of
$10.8 million at June 30, 2008, which was acquired as
part of Oplinks acquisition of OCP in fiscal 2008 and 2007
and F3 and Fibercom in fiscal 2006. Due to the financial
liquidity crisis, the economic recession, changes to our
operating results and forecasts, and a significant reduction in
our market capitalization, in the second quarter of fiscal 2009,
and in connection with our annual goodwill impairment testing,
we performed an impairment analysis. As a result, we concluded
that the carrying value of the goodwill exceeded its implied
fair value and recorded an impairment charge of
$10.8 million in fiscal 2009.
In fiscal 2008, we noted impairment indicators that the carrying
value of purchased intangible assets recorded in connection with
the acquisition of F3 in fiscal 2006, a majority-owned
subsidiary of Oplink,
47
may not be recoverable and performed an impairment review. As a
result, an impairment charge of $517,000 was recorded based on
the amounts by which the carrying amounts of these assets
exceeded their fair value in the consolidated statement of
operations for fiscal 2008.
Restructuring expenses of $109,000 were incurred during fiscal
2008, as a result of restructuring initiatives implemented at
F3, a majority-owned subsidiary of Oplink. We did not incur any
restructuring costs during fiscal 2010 or 2009.
Transitional Costs for Contract Manufacturing. On
November 1, 2006, OCP reached an agreement with SAE
Magnetics (H.K.) Limited (SAE), a wholly-owned
subsidiary of TDK Corporation, which enabled OCP to begin
manufacture of certain of its product lines in China in July
2007. As a result of the decision to transfer the manufacturing
of certain of its product lines from its Woodland Hills,
California and OCPA facilities to SAE, we incurred
$2.3 million transitional costs for contract manufacturing
in fiscal 2008. These transitional charges are primarily related
to estimated severance and retention payments, along with
expenses incurred to relocate certain fixed assets and product
qualification associated with the manufacturing of certain of
our product lines in China. We did not incur any transitional
costs for contract manufacturing in fiscal 2010 or 2009 as the
manufacturing transfer was substantially completed by
June 30, 2008.
A summary of accrued transitional costs for contract
manufacturing in fiscal 2010, 2009 and 2008 is as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidation of
|
|
|
|
|
|
|
Workforce
|
|
|
Excess Facilities
|
|
|
|
|
|
|
Reduction
|
|
|
and Other Charges
|
|
|
Total
|
|
|
Balance at June 30, 2007
|
|
$
|
1,234
|
|
|
$
|
|
|
|
$
|
1,234
|
|
Additional charge
|
|
|
553
|
|
|
|
1,732
|
|
|
|
2,285
|
|
Other adjustment
|
|
|
(100
|
)
|
|
|
|
|
|
|
(100
|
)
|
Cash payments
|
|
|
(1,346
|
)
|
|
|
(1,732
|
)
|
|
|
(3,078
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008
|
|
|
341
|
|
|
|
|
|
|
|
341
|
|
Reclassification
|
|
|
(199
|
)
|
|
|
160
|
|
|
|
(39
|
)
|
Cash payments
|
|
|
(142
|
)
|
|
|
|
|
|
|
(142
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2009
|
|
|
|
|
|
|
160
|
|
|
|
160
|
|
Other adjustment
|
|
|
|
|
|
|
(160
|
)
|
|
|
(160
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2010
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger Fees. We did not record any merger fees in
fiscal 2010 or 2009. Merger fees for fiscal 2008 were
$5.6 million and reflected costs incurred in connection
with the acquisition of OCP, specifically, the cost of entering
into employee retention programs, legal expenses, and investment
banking fees.
Amortization of Intangible and Other
Assets. Amortization expenses related to acquired
intangible assets and other costs was approximately
$3.8 million for each of the years ended June 30, 2010
and 2009 and $2.2 million was included in the cost of
revenues for each of the years ended June 30, 2010 and
2009. For fiscal 2008, we recorded approximately
$3.3 million of amortization expenses of intangible and
other assets and $1.8 million was included in the cost of
revenues.
48
Interest
and Other Income, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
|
|
Percentage
|
|
|
|
June 30,
|
|
|
|
|
|
Percentage
|
|
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
Change
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
Change
|
|
|
|
(In thousands, except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income, net
|
|
$
|
867
|
|
|
$
|
3,066
|
|
|
$
|
(2,199
|
)
|
|
|
−71.7
|
%
|
|
|
$
|
3,066
|
|
|
$
|
7,518
|
|
|
$
|
(4,452
|
)
|
|
|
−59.2
|
%
|
Interest and other income for fiscal 2010 included other
expenses of approximately $300,000. Interest and other income
for fiscal 2009 included a release of escrow account of
approximately $466,000 which was primarily related to a previous
acquisition by OCP. Excluding the impact of these two items,
interest and other income for fiscal 2010 decreased
approximately $1.4 million compared to fiscal 2009. The
decrease was mainly due to lower yields on our investments. The
average rate of return for fiscal 2010 and 2009 was 0.47% and
1.5%, respectively.
The decrease in interest and other income for fiscal 2009
compared to fiscal 2008 was primarily due to the declining
average rate of return. The average rate of return for fiscal
2009 and 2008 was 1.5% and 4.4%, respectively.
Gain (Loss) on Sale or Disposal of Assets. In fiscal
2010, we recognized a gain of $200,000 on sales of certain
intellectual property and recorded a gain of approximately
$632,000 on the dissolution of our subsidiaries. The gain on the
dissolution of our subsidiaries primarily reflected the
resolution of liabilities related to employee pension and
compensation.
We recorded a loss of $808,000 on disposal of fixed assets in
fiscal 2009. In addition, in the fourth quarter of fiscal 2009,
we recognized a loss of $725,000 on a promissory note. In
January 2008, OCP completed its sale to DS Ventures, LLC, of its
property located at Woodland Hills, California. The transaction
resulted in a gain on sale of assets of $1.6 million. The
consideration for a portion of the gain was in the form of a
promissory note for $1,250,000 payable in July 2010. $725,000 of
the note was secured by a personal guarantee and was recognized
as a gain in the third quarter of fiscal 2008, while the
remaining balance of the note was deferred. In the fourth
quarter of fiscal 2009, we determined that the collectibility of
the promissory note was unlikely. As a result, we recognized a
loss of $725,000 in our consolidated statement of operations
during fiscal 2009.
Provision for Income Taxes. We recorded tax
provisions of $1.6 million, $2.1 million and
$1.0 million in fiscal 2010, 2009 and 2008, respectively.
The decrease in provision for income taxes for fiscal 2010
compared to fiscal 2009 was primarily due to decreased income
from our foreign jurisdictions, partially offset by higher
income in US and a higher effective tax rate. The increase in
provision for income taxes for fiscal 2009 compared to fiscal
2008 was mainly due to increase in income in foreign
jurisdictions and a higher tax rate in foreign jurisdictions as
a result of the expiration of certain tax holidays.
At June 30, 2010, we have approximately $66.4 million
of federal and $61.3 million of state net operating loss
carryforwards. Because of certain changes in ownership of Oplink
in 1999 and 1998, there is an annual limitation of approximately
$600,000 on the use of the net operating loss carryforwards
generated prior to 1999 pursuant to section 382 of the
Internal Revenue Code. We may have additional limitations on the
losses generated after 1999 under Section 382 that could
further limit the future use of these losses. Based on the
available objective evidence at June 30, 2010, management
believes that sufficient uncertainty exists regarding the
realizability of the deferred tax assets such that a valuation
allowance of $53.7 million has been recorded at
June 30, 2010 to substantially offset the entire deferred
tax assets. Included in the June 30, 2010 valuation
allowance is approximately $3.6 million related to stock
options, which will be credited to stockholders equity
when realized for tax purposes.
Noncontrolling Interest. On June 5, 2007, we
consummated the acquisition from Furukawa of
49
Furukawas 58% interest in OCP. On October 31, 2007,
we completed the acquisition of the remaining 42% of outstanding
shares of common stock of OCP that we did not already own. As a
result, a noncontrolling interest of $5.9 million was
recorded in Oplinks consolidated statement of operations
for fiscal 2008, primarily reflecting the 42% minority share of
OCPs net loss between July 2, 2007 and
October 31, 2007.
Quarterly
Results of Operations
The following table presents our operating results for the last
eight quarters. The information for each of these quarters is
unaudited but has been prepared on the same basis as the audited
consolidated financial statements. In the opinion of management,
all necessary adjustments, consisting only of normal recurring
adjustments, have been included to present fairly the unaudited
quarterly results when read in
50
conjunction with the audited consolidated financial statements
and the related notes. These operating results are not
necessarily indicative of the results of any future period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
June 30,
|
|
|
Mar. 31,
|
|
|
Dec. 31,
|
|
|
Sept. 30,
|
|
|
|
2010
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
|
(In thousands, except per share data)
|
|
|
|
(Unaudited)
|
|
|
Revenues
|
|
$
|
38,878
|
|
|
$
|
33,623
|
|
|
$
|
32,743
|
|
|
$
|
33,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
26,426
|
|
|
|
22,562
|
|
|
|
21,643
|
|
|
|
23,634
|
|
Stock compensation expense
|
|
|
105
|
|
|
|
81
|
|
|
|
88
|
|
|
|
99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
26,531
|
|
|
|
22,643
|
|
|
|
21,731
|
|
|
|
23,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
12,347
|
|
|
|
10,980
|
|
|
|
11,012
|
|
|
|
9,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
3,030
|
|
|
|
2,574
|
|
|
|
2,268
|
|
|
|
2,225
|
|
Stock compensation expense
|
|
|
306
|
|
|
|
241
|
|
|
|
245
|
|
|
|
269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total research and development
|
|
|
3,336
|
|
|
|
2,815
|
|
|
|
2,513
|
|
|
|
2,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
2,152
|
|
|
|
2,077
|
|
|
|
1,923
|
|
|
|
2,086
|
|
Stock compensation expense
|
|
|
350
|
|
|
|
329
|
|
|
|
361
|
|
|
|
328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales and marketing
|
|
|
2,502
|
|
|
|
2,406
|
|
|
|
2,284
|
|
|
|
2,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
2,168
|
|
|
|
1,924
|
|
|
|
1,810
|
|
|
|
1,721
|
|
Stock compensation expense
|
|
|
703
|
|
|
|
651
|
|
|
|
914
|
|
|
|
950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total general and administrative
|
|
|
2,871
|
|
|
|
2,575
|
|
|
|
2,724
|
|
|
|
2,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible and other assets
|
|
|
434
|
|
|
|
410
|
|
|
|
403
|
|
|
|
404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
9,143
|
|
|
|
8,206
|
|
|
|
7,924
|
|
|
|
7,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
3,204
|
|
|
|
2,774
|
|
|
|
3,088
|
|
|
|
1,849
|
|
Interest and other income, net
|
|
|
108
|
|
|
|
292
|
|
|
|
193
|
|
|
|
274
|
|
Gain on sale or disposal of assets
|
|
|
600
|
|
|
|
4
|
|
|
|
214
|
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
3,912
|
|
|
|
3,070
|
|
|
|
3,495
|
|
|
|
2,247
|
|
Provision for income taxes
|
|
|
(333
|
)
|
|
|
(516
|
)
|
|
|
(358
|
)
|
|
|
(438
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
3,579
|
|
|
$
|
2,554
|
|
|
$
|
3,137
|
|
|
$
|
1,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.17
|
|
|
$
|
0.12
|
|
|
$
|
0.15
|
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.17
|
|
|
$
|
0.12
|
|
|
$
|
0.14
|
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in per share calculation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
20,534
|
|
|
|
20,907
|
|
|
|
20,797
|
|
|
|
20,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
21,387
|
|
|
|
21,792
|
|
|
|
21,694
|
|
|
|
21,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
June 30,
|
|
|
Mar. 31,
|
|
|
Dec. 31,
|
|
|
Sept. 30,
|
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
|
(In thousands, except per share data)
|
|
|
|
(Unaudited)
|
|
|
Revenues
|
|
$
|
32,364
|
|
|
$
|
30,805
|
|
|
$
|
37,611
|
|
|
$
|
42,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
23,009
|
|
|
|
22,018
|
|
|
|
28,939
|
|
|
|
36,645
|
|
Stock compensation expense
|
|
|
107
|
|
|
|
108
|
|
|
|
126
|
|
|
|
118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
23,116
|
|
|
|
22,126
|
|
|
|
29,065
|
|
|
|
36,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
9,248
|
|
|
|
8,679
|
|
|
|
8,546
|
|
|
|
6,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
2,275
|
|
|
|
2,477
|
|
|
|
2,785
|
|
|
|
3,282
|
|
Stock compensation expense
|
|
|
239
|
|
|
|
266
|
|
|
|
252
|
|
|
|
223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total research and development
|
|
|
2,514
|
|
|
|
2,743
|
|
|
|
3,037
|
|
|
|
3,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
2,057
|
|
|
|
1,817
|
|
|
|
1,945
|
|
|
|
2,257
|
|
Stock compensation expense
|
|
|
271
|
|
|
|
252
|
|
|
|
267
|
|
|
|
315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales and marketing
|
|
|
2,328
|
|
|
|
2,069
|
|
|
|
2,212
|
|
|
|
2,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
1,940
|
|
|
|
2,331
|
|
|
|
2,702
|
|
|
|
2,666
|
|
Stock compensation expense
|
|
|
590
|
|
|
|
624
|
|
|
|
723
|
|
|
|
911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total general and administrative
|
|
|
2,530
|
|
|
|
2,955
|
|
|
|
3,425
|
|
|
|
3,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charges and other costs
|
|
|
|
|
|
|
|
|
|
|
10,829
|
|
|
|
|
|
Amortization of intangible and other assets
|
|
|
412
|
|
|
|
412
|
|
|
|
412
|
|
|
|
412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
7,784
|
|
|
|
8,179
|
|
|
|
19,915
|
|
|
|
10,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
1,464
|
|
|
|
500
|
|
|
|
(11,369
|
)
|
|
|
(3,877
|
)
|
Interest and other income, net
|
|
|
429
|
|
|
|
297
|
|
|
|
1,300
|
|
|
|
1,040
|
|
Loss on sale or disposal of assets
|
|
|
(740
|
)
|
|
|
(182
|
)
|
|
|
(492
|
)
|
|
|
(119
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before (provision) benefit for income taxes
|
|
|
1,153
|
|
|
|
615
|
|
|
|
(10,561
|
)
|
|
|
(2,956
|
)
|
(Provision) benefit for income taxes
|
|
|
(904
|
)
|
|
|
(729
|
)
|
|
|
15
|
|
|
|
(456
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
249
|
|
|
$
|
(114
|
)
|
|
$
|
(10,546
|
)
|
|
$
|
(3,412
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.01
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.01
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in per share calculation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
20,447
|
|
|
|
20,468
|
|
|
|
20,686
|
|
|
|
20,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
20,892
|
|
|
|
20,468
|
|
|
|
20,686
|
|
|
|
20,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our revenues and operating results are likely to vary
significantly from quarter to quarter and, as a result, we
believe that
quarter-to-quarter
comparisons of our operating results will not be meaningful. You
should not rely on our results for any one quarter as an
indication of our future performance. Many of the factors that
are likely to cause our quarterly results to vary are discussed
in this report in Item 1A Risk Factors.
52
Liquidity
and Capital Resources
Since our inception, we have financed our operations primarily
through cash generated from operating activities and through
issuances of equity, which totaled approximately
$319.4 million in aggregate net proceeds, partially offset
by $66.2 million in common stock repurchases, net of
proceeds from exercise of stock options, employee stock purchase
plan awards and warrants, through June 30, 2010. As of
June 30, 2010, we had cash, cash equivalents and short-term
and long-term investments of $160.3 million and working
capital of $182.6 million.
We believe that our current cash, cash equivalent and short-term
and long-term investment balances will be sufficient to meet our
operating and capital requirements for at least the next
12 months. We may use cash and cash equivalents from time
to time to fund our acquisition of businesses and technologies.
We may be required to raise funds through public or private
financings, strategic relationships or other arrangements. We
cannot assure you that such funding, if needed, will be
available on terms attractive to us, or at all. Furthermore, any
additional equity financing may be dilutive to stockholders, and
debt financing, if available, may involve restrictive covenants.
Our failure to raise capital when needed could harm our ability
to pursue our business strategy and achieve and maintain
profitability.
Fiscal
2010
Our operating activities provided cash of $16.9 million in
fiscal 2010 as a result of a net income of $11.1 million
for the period adjusted by $10.3 million in non-cash
charges of depreciation and amortization, and $6.0 million
in non-cash stock-based compensation expenses, partially offset
by a decrease in cash of $10.1 million as a result of a net
change in assets and liabilities and other non-cash items of
$433,000.
The change in net assets and liabilities was primarily the
result of an increase in inventory of $10.2 million, an
increase in prepaid expenses and other current assets of
$5.1 million, partially offset by a decrease in accounts
receivables of $415,000 and an increase in accounts payable of
$4.8 million.
Accounts receivable provided $415,000 of cash mainly driven by
improved collections of receivables in fiscal 2010, partially
offset by slightly higher shipments in the fourth quarter of
fiscal 2010. Days sales outstanding (DSO) at the end
of fiscal years ended June 30, 2010 and 2009 were
77 days and 80 days, respectively. We typically bill
customers on an open account basis with net thirty to ninety day
payment terms. We would generally expect the level of accounts
receivable at the end of any quarter to reflect the level of
sales in that quarter and to change from one period to another
in a direct relationship to the change in the level of sales.
Our level of accounts receivable would increase if shipments are
made closer to the end of the quarter, if customers delayed
their payments, or if we offered extended payment terms to our
customers.
Inventory used $10.2 million of cash in fiscal 2010
primarily due to an increased level of inventory purchases as a
result of anticipated higher shipments. In order to maintain an
adequate supply of product for our customers, we must carry a
certain level of inventory. Our inventory level may vary based
primarily upon orders received from our customers, our forecast
of demand for these products and lead-time for materials. These
considerations are balanced against risk of obsolescence or
potentially excess inventory levels. We generally expect the
level of inventory to vary from one period to another as a
result of changes in the level of sales. We currently do not
expect a similar increase in our inventory level in fiscal 2011.
Prepaid expenses and other current assets used $5.1 million
of cash in fiscal 2010 primarily reflecting increased balance of
bankers acceptance notes.
Accounts payable provided cash of $4.8 million in fiscal
2010 primarily due to an increased level of
53
inventory purchases to support increased revenue levels and as a
result of the timing of payments to our vendors.
Our investing activities used cash of $10.6 million in
fiscal 2010 as a result of purchases of
available-for-sale
and
held-to-maturity
investments of $231.0 million, net cash used in the
acquisitions of Emit and Oridus, Inc. (Oridus) of
$5.8 million, and purchases of equipment of
$5.5 million, partially offset by sales and maturities of
available-for-sale
and
held-to-maturity
investments of $231.1 million and equipment sales of
approximately $566,000. Approximately $749,000 of our property
and equipment purchases was for the construction of a second
dormitory in Zhuhai, China. We currently expect capital
expenditures to be in the range of $8.0 million and
$10.0 million in fiscal 2011.
Our financing activities used $15.3 million of cash in
fiscal 2010 due to cash usage of $20.8 million for the
repurchases of our common stock, partially offset by
$5.5 million in proceeds from issuance of common stock in
connection with the exercise of stock options and purchase of
our common stock through our employee stock purchase plan.
Fiscal
2009
Our operating activities provided cash of $32.1 million in
fiscal 2009 as a result of a net loss of $13.8 million for
the period adjusted by non-cash charges of $10.9 million in
depreciation and amortization charges, $5.4 million in
stock-based compensation expenses, $4.1 million in
provision for excess and obsolete inventory, $10.8 million
in impairment charges of goodwill primarily related to our OCP
acquisition, other items of $996,000, and an increase in cash of
$13.7 million as a result of a net change in assets and
liabilities.
The increase in net assets and liabilities was primarily the
result of a decrease in inventory, accounts receivable, and
prepaid expenses and other assets of $14.5 million,
$4.8 million, and $3.0 million, respectively,
partially offset by a decrease of $8.5 million in accounts
payables.
Accounts receivable generated $4.8 million of cash
primarily driven by decreased shipments in fiscal 2009 compared
to fiscal 2008. DSO at the end of fiscal years ended
June 30, 2009 and 2008 were 80 days and 71 days,
respectively.
Inventories provided $14.5 million of cash in fiscal 2009
primarily due to a change in the level of inventory purchases as
a result of lower volume of sales.
Prepaid expenses and other assets generated $3.0 million of
cash in fiscal 2009 largely due to a decreased balance of
bankers acceptance notes.
Accounts payable decreased $8.5 million in fiscal 2009
primarily as a result of lower levels of inventory purchases
driven by decreased revenues.
Our investing activities used cash of $52.1 million in
fiscal 2009 due to purchase of investments of
$154.1 million and equipment purchases of
$4.1 million, partially offset by sales or maturities of
investments of $105.6 million and equipment sales of
$608,000. $1.5 million of our property and equipment
purchases was for the construction of a second dormitory in
Zhuhai, China.
Our financing activities used cash of $1.8 million in
fiscal 2009 due to cash usage of $3.5 million for the
repurchases of our common stocks, partially offset by
$1.7 million in proceeds from the issuance of our common
stock in connection with the exercise of stock options and the
employee stock purchase plan.
Fiscal
2008
Our operating activities provided $7.7 million of cash in
fiscal 2008 as a result of a net loss of
54
$12.6 million for the period adjusted by $10.4 million
in non-cash depreciation and amortization charges,
$7.9 million in non-cash stock-based compensation expense,
and $7.3 million in provision for excess and obsolete
inventory, partially offset by other non-cash items of
$1.6 million and a decrease in cash of $3.6 million as
a result of a net change in assets and liabilities.
The increase in net assets and liabilities was mainly due to an
increase of $3.1 million in inventories and a decrease of
$5.3 million in accrued liabilities, partially offset by
decreases in accounts receivable of $1.6 million, prepaid
expenses and other current assets of $2.0 million, and an
increase in accounts payable of $1.0 million.
Accounts receivable generated $1.6 million of cash
primarily driven by the slight improvement in collection. DSOs
at the end of the fiscal years ended June 30, 2008 and 2007
were 71 days and 82 days, respectively.
Inventories used $3.1 million of cash during fiscal 2008
mainly due to increased number of unit sales and associated
purchases of inventories required to meet customer demand.
Prepaid expenses and other current assets decreased and
therefore generated $2.0 million in cash, largely due to
cash received from an income tax refund, interest income being
paid out to us from our investment portfolio, and lower interest
income receivable as a result of lower cash balance.
Accounts payable generated $1.0 million of cash as a result
of higher inventory purchases driven by higher anticipated sales
in the first quarter of fiscal 2009.
Accrued liabilities consumed $5.3 million of cash in fiscal
2008 mainly due to payments associated with the acquisition of
OCP.
Our investing activities used $10.5 million of cash
primarily due to $81.4 million in cash consideration given
to purchase the remaining 42% of the outstanding shares of OCP
common stock, purchase of marketable investment securities of
$178.2 million, $8.0 million in property and equipment
purchases, and an investment of $400,000 in a
start-up
company, partially offset by sales or maturities of investment
of $225.2 million and sales of property and equipment of
$27.3 million primarily as a result of the acquisition of
OCP, and the sale of OCPs investment in Stratalight of
$5.0 million.
Our financing activities used cash of $36.9 million in
fiscal 2008 due to cash usage of $40.0 million for the
repurchase of our common stock, partially offset by
$3.1 million in proceeds from the issuance of our common
stock in connection with the exercise of stock options and
purchases of our common stock through our employee stock
purchase plan.
Off-Balance-Sheet
Arrangements
As of June 30, 2010, we did not have any off-balance-sheet
financing arrangements and have never established any special
purpose entities.
55
Contractual
Obligations
Our contractual obligations as of June 30, 2010 have been
summarized below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual Obligations Due by Period
|
|
|
|
|
|
|
Less Than
|
|
|
1-3
|
|
|
4-5
|
|
|
After 5
|
|
Contractual Obligations
|
|
Total
|
|
|
1 Year
|
|
|
Years
|
|
|
Years
|
|
|
Years
|
|
|
Purchase obligations
|
|
$
|
23,908
|
|
|
$
|
23,908
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Operating leases
|
|
|
308
|
|
|
|
236
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
Capital expenditure
|
|
|
108
|
|
|
|
86
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
24,324
|
|
|
$
|
24,230
|
|
|
$
|
72
|
|
|
$
|
22
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recent
Accounting Pronouncements
In December 2007, the FASB issued a revision of business
combinations guidance, which was later codified under ASC Topic
805, Business Combinations (ASC 805).
This guidance replaces the previous FASB guidance on business
combinations and establishes principles and requirements for how
an acquirer recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed, and
any noncontrolling interest in the acquiree in a business
combination. It also establishes principles around how goodwill
acquired in a business combination or a gain from a bargain
purchase should be recognized and measured, as well as provides
guidelines on the disclosure requirements on the nature and
financial impact of the business combination. In addition, the
guidance establishes a model to account for certain
pre-acquisition contingencies. This guidance was effective on a
prospective basis for all business combinations for which the
acquisition date is on or after the beginning of the first
annual period subsequent to December 15, 2008. We accounted
for the acquisitions of Emit and Oridus in accordance with this
new accounting guidance in fiscal 2010.
In August 2009, the FASB issued Accounting Standards Update
2009-05,
Fair Value Measurements and Disclosures
Measuring Liabilities at Fair Value. This update provides
amendments to ASC Topic
820-10,
Fair Value Measurements and Disclosures-Overall, for
the fair value measurement of liabilities. This update is
effective for the first reporting period (including interim
periods) beginning after issuance. The implementation did not
have a material impact on our consolidated financial position,
results of operations or cash flows.
In January 2010, the FASB issued Accounting Standards Update
2009-16 to
amend the disclosure requirements related to recurring and
nonrecurring fair value measurements. The guidance requires new
disclosures on the transfers of assets and liabilities between
Level 1 and Level 2 of the fair value measurement
hierarchy, including the reasons and the timing of the
transfers. Additionally, the guidance requires a roll forward of
activities on purchases, sales, issuance, and settlements of the
assets and liabilities measured using significant unobservable
inputs (Level 3 fair value measurements). The guidance will
be applied prospectively to new transfers of financial assets
occurring in fiscal years beginning after November 15,
2009. We do not believe that the implementation will have a
material impact on our consolidated financial position, results
of operations or cash flows.
In various areas, including revenue recognition, stock option
and purchase accounting, accounting standards and practices
continue to evolve. We believe that we are in compliance with
all of the rules and related guidance as they currently exist.
However, any changes to accounting principles generally accepted
in the United States of America in these areas could impact the
future accounting of our operations.
56
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
We are exposed to market risk related to fluctuations in
interest rates and in foreign currency exchange rates:
Interest
Rate Exposure
The primary objective of our investment activities is to
preserve principal while maximizing the income we receive from
our investments without significantly increasing risk. Some of
the securities that we invest in are subject to market risk. To
minimize this risk, we maintain our portfolio of cash
equivalents and investments in a variety of securities,
including commercial paper, money market funds, government and
non-government debt securities and corporate bonds.
As of June 30, 2010, all of our short-term investments were
in certificates of deposit, high quality corporate bonds and
government and government agency debt securities. Our long-term
investments primarily consisted of government agency debt
securities with effective maturities of up to two years. We
invest our excess cash in short-term and long-term investments
to take advantage of higher yields generated by these
investments. We do not hold any instruments for trading
purposes. As of June 30, 2010, we had $33,000 gross
unrealized losses on our investments classified as
available-for-sale
primarily due to decreases in the fair value of these debt
securities as a result of changes in market interest rates.
Gross unrealized losses on our investments classified as
held-to-maturity
were immaterial. We have the intent and the ability to hold
these investments for a reasonable period of time sufficient for
a forecasted recovery of fair value up to (or beyond) the
initial cost of the investments. We expect to realize the full
value of all of these investments upon maturity. In addition, we
do not believe that we will be required to sell these securities
to meet our cash or working capital requirements or contractual
or regulatory obligations. Therefore, we have determined that
the gross unrealized losses on our debt securities as of
June 30, 2010 are temporary in nature. However, liquidating
investments before maturity could have a material impact on our
interest earnings. Declines in interest rates could have a
material impact on interest earnings for our investment
portfolio. The following table summarizes our investment
securities (in thousands, except percentages) for the last two
years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Average Rate
|
|
|
Carrying
|
|
|
Average Rate
|
|
|
|
Value at
|
|
|
of Return at
|
|
|
Value at
|
|
|
of Return at
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
|
|
|
|
(Annualized)
|
|
|
|
|
|
(Annualized)
|
|
|
Investment Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents variable rate
|
|
$
|
8,423
|
|
|
|
0.1
|
%
|
|
$
|
24,813
|
|
|
|
0.3
|
%
|
Cash equivalents fixed rate
|
|
|
9,759
|
|
|
|
0.2
|
%
|
|
|
4,999
|
|
|
|
0.2
|
%
|
Short-term investments variable rate
|
|
|
|
|
|
|
|
|
|
|
14,362
|
|
|
|
1.2
|
%
|
Short-term investments fixed rate
|
|
|
109,632
|
|
|
|
1.0
|
%
|
|
|
101,412
|
|
|
|
1.4
|
%
|
Long-term investments variable rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term investments fixed rate
|
|
|
10,000
|
|
|
|
1.4
|
%
|
|
|
3,180
|
|
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
137,814
|
|
|
|
|
|
|
$
|
148,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected Fiscal Year Maturity Date
|
|
|
2011
|
|
2012
|
|
Total
|
|
Fair Value
|
|
Long-term investments fixed rate
|
|
$
|
|
|
|
$
|
10,000
|
|
|
$
|
10,000
|
|
|
$
|
10,002
|
|
Average interest rate
|
|
|
|
|
|
|
1.4
|
%
|
|
|
1.4
|
%
|
|
|
|
|
57
Foreign
Currency Exchange Rate Exposure
We operate in the United States, primarily manufacture in China,
and the majority of our sales to date have been made in
U.S. dollars. The majority of expenses from our China
operations are incurred in the Chinese Renminbi
(RMB). As a result, currency fluctuations between
the U.S. dollar and the RMB could cause foreign currency
transaction gains or losses that we would recognize in the
period incurred. A 10% fluctuation in the dollar at
June 30, 2010 would have an immaterial impact on our net
dollar position in outstanding trade receivables and payables.
We use the U.S. dollar as the reporting currency for our
consolidated financial statements. Any significant revaluation
of the RMB may materially and adversely affect our results of
operations upon translation of our Chinese subsidiaries
financial statements into U.S. dollars. We generate a
significant amount of our revenue in RMB and the majority of our
labor and manufacturing overhead expenses are in RMB.
Additionally, a significant portion of our operating expenses
are in RMB. Therefore, a fluctuation in RMB against the
U.S. dollar could impact our gross profit, gross profit
margin and operating expenses upon translation to
U.S. dollars. A 10% appreciation or depreciation in RMB
against the U.S. dollar would have an immaterial impact on
our results of operations for fiscal 2010.
We expect our international revenues to continue to be
denominated largely in U.S. dollars. We also believe that
our China operations will likely expand in the future if our
business continues to grow. As a result, we anticipate that we
may experience increased exposure to the risks of fluctuating
currencies and may choose to engage in currency hedging
activities to reduce these risks. However, we cannot be certain
that any such hedging activities will be effective, or available
to us at commercially reasonable rates.
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
The consolidated financial statements, related notes thereto and
financial statement schedule required by this item are set forth
beginning on
page F-1
at the end of this report. Supplementary financial information
regarding quarterly financial information required by this item
is set forth under the caption Quarterly Results of
Operations in Item 7
Managements Discussion and Analysis of Financial Condition
and Results of Operations.
Item 9. Changes
In and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
|
|
Item 9A.
|
Controls
and Procedures
|
Evaluation
of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive
Officer, Joseph Y. Liu, and Chief Financial Officer, Shirley
Yin, of the effectiveness of the design and operation of our
disclosure controls and procedures as of the end of the period
covered in this report. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective to ensure that
information required to be disclosed by Oplink in reports that
it files under the Securities and Exchange Act of 1934 is
recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms.
Managements
Report on Internal Control Over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over our financial reporting. A
companys internal control over financial reporting is a
process designed to provide
58
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles.
There are inherent limitations in the effectiveness of any
system of internal control, including the possibility of human
error and the circumvention or overriding of controls.
Accordingly, even effective internal controls can provide only
reasonable assurances with respect to financial statement
preparation. Further, because of changes in conditions, the
effectiveness of internal control may vary over time.
Our management assessed the effectiveness of our internal
control over financial reporting as of June 30, 2010. In
making this assessment, our management used the criteria set
forth by the Committee of Sponsoring Organizations (COSO) of the
Treadway Commission in Internal Control
Integrated Framework. Based on its assessment using those
criteria, our management concluded that, as of June 30,
2010, our internal control over financial reporting is effective.
The effectiveness of our internal control over financial
reporting as of June 30, 2010, has been audited by Burr
Pilger Mayer, Inc., an independent registered public accounting
firm, as stated in their report appearing below.
Changes
in Internal Controls
There were no changes in our internal control over financial
reporting that occurred during the year covered by this report
that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
59
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Oplink Communications, Inc.
We have audited the internal control over financial reporting of
Oplink Communications, Inc. and its subsidiaries (the
Company) as of June 30, 2010, based on criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Companys management is responsible for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting included in the accompanying
Managements Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the
effectiveness of the Companys internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Oplink Communications, Inc. and its subsidiaries
maintained, in all material respects, effective internal control
over financial reporting as of June 30, 2010, based on the
COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Oplink Communications, Inc. and
its subsidiaries as of June 30, 2010 and 2009 and the
related consolidated statements of operations,
stockholders equity and cash flows for each of the three
years in the period ended June 30, 2010 and the related
financial statement schedule and our report dated
September 9, 2010 expressed an unqualified opinion on those
consolidated financial statements and the related financial
statement schedule.
/s/ Burr Pilger Mayer, Inc.
San Jose, California
September 9, 2010
60
|
|
Item 9B.
|
Other
Information
|
None.
|
|
Item 10.
|
Directors
and Executive Officers and Corporate Governance
|
The information required by this item is incorporated by
reference to the information set forth in the subsection
entitled Information Concerning the Nominees and
Continuing Directors in the section entitled
Election of Directors, and in the subsections
entitled Committees of the Board of Directors,
Compensation of Directors, Consideration of
Director Nominees and Section 16(a) Beneficial
Ownership Reporting Compliance in the section entitled
Corporate Governance and Information Regarding the Board
and its Committees in the proxy statement for our 2010
Annual Meeting of Stockholders (the 2010 Proxy
Statement) to be filed with the SEC within 120 days
after June 27, 2010, the end of our fiscal year.
Information regarding our executive officers and directors is
also included Item 1. Business of this Annual
Report on
Form 10-K
is incorporated by reference into this Item 10.
|
|
Item 11.
|
Executive
Compensation
|
The information required by this item is incorporated by
reference to the information set forth in the section of our
2010 Proxy Statement entitled Executive Compensation.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information required by this item is incorporated by
reference to the information set forth in the sections of our
2010 Proxy Statement entitled Security Ownership of
Certain Beneficial Owners and Management and Equity
Compensation Plan Information.
|
|
Item 13.
|
Certain
Relationships and Related Transactions
|
The information required by this item is incorporated by
reference to the information set forth in the section of our
2010 Proxy Statement entitled Certain Relationships and
Related Transactions.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
The information required by this item is incorporated by
reference to the information set forth in the in the section of
our 2010 Proxy Statement entitled Independent
Auditors Fees in the section entitled
Ratification of Selection of Independent Registered Public
Accounting Firm.
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules.
|
1. Financial Statements
See Item 8 of this Annual Report.
2. Financial Statement Schedules
See Item 8 and Schedule II of this Annual Report
immediately following the financial statements. Other schedules
have been omitted because they are inapplicable or the requested
information is shown in the financial statements or related
notes.
61
3. Exhibits
|
|
|
Exhibit No.
|
|
Description
|
|
3.1(1)
|
|
Amended and Restated Certificate of Incorporation of the
Registrant.
|
3.2(2)
|
|
Bylaws of the Registrant.
|
3.3(3)
|
|
Certificate of Designation of Series A Junior Participating
Preferred Stock of the Registrant.
|
3.4(4)
|
|
Certificate of Amendment to Amended and Restated Certificate of
Incorporation of the Registrant.
|
3.5(5)
|
|
Certificate of Amendment to Amended and Restated Certificate of
Incorporation of the Registrant.
|
3.6(6)
|
|
Amendment to Bylaws of the Registrant
|
4.1(7)
|
|
Rights Agreement, dated as of March 18, 2002, between the
Registrant and The Bank of New York.
|
10.1(8)
|
|
State-owned Land Use Rights Assignment Contract dated
May 16, 2000 by and between the Registrant and Zhuhai
Bonded Area Management Committee.
|
10.2(9)*
|
|
2000 Equity Incentive Plan.
|
10.3(10)*
|
|
Amended and Restated 2000 Employee Stock Purchase Plan.
|
10.4(11)
|
|
2009 Equity Incentive Plan
|
10.5(12)*
|
|
Form of Indemnity Agreement between the Registrant and each of
its directors and executive officers.
|
10.6(13)*
|
|
Form of Stock Option Amendment between the Registrant and its
non-employee directors.
|
10.7(14)*
|
|
Executive Corporate Event Agreement, dated March 21, 2003,
between the Registrant and Joseph Y. Liu.
|
10.8(15)*
|
|
Form of Executive Corporate Event Agreement for Executive
Officers.
|
10.9(16)*
|
|
Form of Notice of Grant of Restricted Stock Units under 2000
Equity Incentive Plan and Terms and Conditions of Grant.
|
10.10*
|
|
Form of Notice of Grant of Stock Option under 2009 Equity
Incentive Plan and Terms and Conditions of Grant.
|
10.11*
|
|
Form of Notice of Grant of Restricted Stock Units under 2009
Equity Incentive Plan and Terms and Conditions of Grant.
|
21.1
|
|
Subsidiaries of the Registrant.
|
23.1
|
|
Consent of Burr Pilger Mayer, Inc.
|
24.1
|
|
Power of Attorney is contained on the Signatures page.
|
31.1
|
|
Certification of Chief Executive Officer Required under
Rule 13a-14(a)
or
Rule 15d-14(a)
of the Securities Exchange Act of 1934, as amended.
|
31.2
|
|
Certification of Chief Financial Officer Required under
Rule 13a-14(a)
or
Rule 15d-14(a)
of the Securities Exchange Act of 1934, as amended.
|
32.1**
|
|
Certification of Chief Executive Officer Required under
Rule 13a-14(b)
or
Rule 15d-14(b)
of the Securities Exchange Act of 1934, as amended, and
18 U.S.C. Section 1350.
|
32.2**
|
|
Certification of Financial Officer Required under
Rule 13a-14(b)
or
Rule 15d-14(b)
of the Securities Exchange Act of 1934, as amended, and
Section 1350 of Chapter 63 of Title 18 of the
United States Code (18 U.S.C. Section 1350).
|
62
|
|
|
(1) |
|
Previously filed as Exhibit 3.2 to the Registrants
Registration Statement on
Form S-1/A
filed on August 29, 2000 and incorporated herein by
reference. |
|
(2) |
|
Previously filed as Exhibit 3.3 to the Registrants
Registration Statement on
Form S-1/A
filed on August 1, 2000 and incorporated herein by
reference. |
|
(3) |
|
Previously filed as Exhibit 4.1 to the Registrants
Report on
Form 8-K
filed on March 22, 2002 and incorporated herein by
reference. |
|
(4) |
|
Previously filed as Exhibit 3.4 to the Registrants
Quarterly Report on
Form 10-Q
filed on November 14, 2005 and incorporated herein by
reference. |
|
(5) |
|
Previously filed as Exhibit 3.5 to the Registrants
Quarterly Report on
Form 10-Q
filed on February 9, 2007 and incorporated herein by
reference. |
|
(6) |
|
Previously filed as Exhibit 3.1 to the Registrants
Report on
Form 8-K
filed on December 20, 2007 and incorporated herein by
reference. |
|
(7) |
|
Previously filed as Exhibit 4.2 to the Registrants
Report on
Form 8-K
filed on March 22, 2002 and incorporated herein by
reference. |
|
(8) |
|
Previously filed as Exhibit 10.12 to the Registrants
Registration Statement on
Form S-1/A
filed on August 1, 2000 and incorporated herein by
reference. |
|
(9) |
|
Previously filed as Exhibit 10.26 to the Registrants
Registration Statement on
Form S-1/A
filed on August 1, 2000 and incorporated herein by
reference. |
|
(10) |
|
Previously filed as Exhibit 4.9 to the Registrants
Registration Statement on
Form S-8
filed on February 2, 2010 and incorporated herein by
reference. |
|
(11) |
|
Previously filed as Exhibit 4.7 to the Registrants
Registration Statement on
Form S-8
filed on February 2, 2010 and incorporated herein by
reference. |
|
(12) |
|
Previously filed as Exhibit 10.31 to the Registrants
Registration Statement on
Form S-1/A
filed on September 9, 2000 and incorporated herein by
reference. |
|
(13) |
|
Previously filed as Exhibit 10.29 to the Registrants
Annual Report on
Form 10-K
filed on September 30, 2002 and incorporated herein by
reference. |
|
(14) |
|
Previously filed as Exhibit 10.4 to the Registrants
Quarterly Report on
Form 10-Q
filed on May 13, 2003 and incorporated herein by reference. |
|
(15) |
|
Previously filed as Exhibit 10.1 to the Registrants
Report on
Form 8-K
filed on September 4, 2008 and incorporated herein by
reference. |
|
(16) |
|
Previously filed as Exhibit 10.1 to the Registrants
Report on
Form 8-K
filed on August 18, 2009 and incorporated herein by
reference. |
|
* |
|
Management contract or compensatory plan or arrangement. |
|
** |
|
The certifications attached as Exhibits 32.1 and 32.2
accompany this Annual Report on Form
10-K
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
and shall not be deemed filed by Oplink for purposes
of Section 18 of the Securities Exchange Act of 1934, as
amended. |
63
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 10th day of September,
2010.
OPLINK COMMUNICATIONS, INC.
Shirley Yin
Chief Financial Officer
KNOW ALL PERSONS BY THESE PRESENTS that each person whose
signature appears below constitutes and appoints Joseph Y. Liu
and Shirley Yin, and each of them, his true and lawful
attorneys-in-fact, each with the power of substitution, for him
in any and all capacities, to sign any amendments to this report
on
Form 10-K,
and to file the same, with Exhibits thereto and other documents
in connection there with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said
attorneys-in-fact, or substitute or substitutes, may do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Joseph
Y. Liu
Joseph
Y. Liu
|
|
Chairman and Chief Executive Officer
(Principal Executive Officer)
|
|
September 10, 2010
|
|
|
|
|
|
/s/ Shirley
Yin
Shirley
Yin
|
|
Chief Financial Officer
(Principal Financial and
Accounting Officer)
|
|
September 10, 2010
|
|
|
|
|
|
/s/ Chieh
Chang
Chieh
Chang
|
|
Director
|
|
September 10, 2010
|
|
|
|
|
|
/s/ Tim
Christoffersen
Tim
Christoffersen
|
|
Director
|
|
September 10, 2010
|
|
|
|
|
|
/s/ Jesse
W. Jack
Jesse
W. Jack
|
|
Director
|
|
September 10, 2010
|
|
|
|
|
|
/s/ Hua
Lee
Hua
Lee
|
|
Director
|
|
September 10, 2010
|
64
Oplink
Communications, Inc.
Index to Financial Statements
|
|
|
|
|
|
|
Page
|
|
|
|
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|
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|
F-2
|
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|
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|
|
|
|
|
|
F-3
|
|
|
|
|
|
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|
F-4
|
|
|
|
|
|
|
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|
F-5
|
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|
|
|
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|
F-6
|
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|
|
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|
|
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|
F-8
|
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|
|
|
|
F-38
|
|
F-1
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Oplink Communications, Inc.
We have audited the accompanying consolidated balance sheets of
Oplink Communications, Inc. and its subsidiaries (the
Company) as of June 30, 2010 and 2009, and the
related consolidated statements of operations,
stockholders equity, and cash flows for each of the three
years in the period ended June 30, 2010. Our audits also
included the financial statement schedule listed in
Item 15(a)(2). These consolidated financial statements and
financial statement schedule are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Oplink Communications, Inc. and its subsidiaries as
of June 30, 2010 and 2009, and the results of their
operations and their cash flows for each of the three years in
the period ended June 30, 2010, in conformity with
accounting principles generally accepted in the United States of
America. Also, in our opinion, the related financial statement
schedule, when considered in relation to the consolidated
financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of the Companys internal control over
financial reporting as of June 30, 2010, based on criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated
September 9, 2010 expressed an unqualified opinion thereon.
/s/ Burr
Pilger Mayer, Inc.
San Jose, California
September 9, 2010
F-2
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands, except share
|
|
|
|
and per share data)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
40,711
|
|
|
$
|
49,702
|
|
Short-term investments
|
|
|
109,632
|
|
|
|
115,774
|
|
Accounts receivable, net
|
|
|
29,728
|
|
|
|
29,023
|
|
Inventories
|
|
|
20,902
|
|
|
|
10,031
|
|
Prepaid expenses and other current assets
|
|
|
7,659
|
|
|
|
2,648
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
208,632
|
|
|
|
207,178
|
|
Long-term investments
|
|
|
10,000
|
|
|
|
3,180
|
|
Property, plant and equipment, net
|
|
|
33,363
|
|
|
|
30,318
|
|
Goodwill and intangible assets, net
|
|
|
6,952
|
|
|
|
8,848
|
|
Other assets
|
|
|
651
|
|
|
|
423
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
259,598
|
|
|
$
|
249,947
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
14,369
|
|
|
$
|
7,580
|
|
Accrued liabilities
|
|
|
11,536
|
|
|
|
10,044
|
|
Income tax payable
|
|
|
121
|
|
|
|
644
|
|
Accrued transitional costs for contract manufacturing
|
|
|
|
|
|
|
160
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
26,026
|
|
|
|
18,428
|
|
Income tax payable, non-current
|
|
|
3,415
|
|
|
|
2,816
|
|
Other non-current liabilities
|
|
|
1,508
|
|
|
|
676
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
30,949
|
|
|
|
21,920
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 14)
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 34,000,000 shares
authorized;
19,582,471 and 20,497,592 shares issued and outstanding as
of June 30, 2010 and 2009, respectively
|
|
|
20
|
|
|
|
20
|
|
Additional paid-in capital
|
|
|
443,825
|
|
|
|
453,083
|
|
Treasury stock, at cost (82,514 shares as of June 30,
2010)
|
|
|
(1,196
|
)
|
|
|
|
|
Accumulated other comprehensive income
|
|
|
8,243
|
|
|
|
8,246
|
|
Accumulated deficit
|
|
|
(222,243
|
)
|
|
|
(233,322
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
228,649
|
|
|
|
228,027
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
259,598
|
|
|
$
|
249,947
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an
integral part of these consolidated financial statements.
F-3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues
|
|
$
|
138,809
|
|
|
$
|
143,732
|
|
|
$
|
176,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
94,265
|
|
|
|
110,611
|
|
|
|
140,539
|
|
Stock compensation expense
|
|
|
373
|
|
|
|
459
|
|
|
|
456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
94,638
|
|
|
|
111,070
|
|
|
|
140,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
44,171
|
|
|
|
32,662
|
|
|
|
35,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
10,097
|
|
|
|
10,819
|
|
|
|
14,393
|
|
Stock compensation expense
|
|
|
1,061
|
|
|
|
980
|
|
|
|
1,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total research and development
|
|
|
11,158
|
|
|
|
11,799
|
|
|
|
15,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
8,238
|
|
|
|
8,076
|
|
|
|
10,501
|
|
Stock compensation expense
|
|
|
1,368
|
|
|
|
1,105
|
|
|
|
1,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales and marketing
|
|
|
9,606
|
|
|
|
9,181
|
|
|
|
11,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative:
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
7,623
|
|
|
|
9,639
|
|
|
|
14,268
|
|
Stock compensation expense
|
|
|
3,218
|
|
|
|
2,848
|
|
|
|
5,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total general and administrative
|
|
|
10,841
|
|
|
|
12,487
|
|
|
|
19,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charge and other costs
|
|
|
|
|
|
|
10,829
|
|
|
|
626
|
|
Transitional costs for contract manufacturing and other costs
|
|
|
|
|
|
|
|
|
|
|
2,285
|
|
Merger fees
|
|
|
|
|
|
|
|
|
|
|
5,618
|
|
Amortization of intangible and other assets
|
|
|
1,651
|
|
|
|
1,648
|
|
|
|
1,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
33,256
|
|
|
|
45,944
|
|
|
|
56,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
10,915
|
|
|
|
(13,282
|
)
|
|
|
(21,427
|
)
|
Interest and other income, net
|
|
|
867
|
|
|
|
3,066
|
|
|
|
7,518
|
|
Gain (loss) on sale or disposal of assets
|
|
|
942
|
|
|
|
(1,533
|
)
|
|
|
2,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for income taxes
|
|
|
12,724
|
|
|
|
(11,749
|
)
|
|
|
(11,604
|
)
|
Provision for income taxes
|
|
|
(1,645
|
)
|
|
|
(2,074
|
)
|
|
|
(1,045
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
11,079
|
|
|
|
(13,823
|
)
|
|
|
(12,649
|
)
|
Net loss attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
5,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Oplink Communications,
Inc.
|
|
$
|
11,079
|
|
|
$
|
(13,823
|
)
|
|
$
|
(6,758
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
Oplink Communications, Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.54
|
|
|
$
|
(0.67
|
)
|
|
$
|
(0.31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.51
|
|
|
$
|
(0.67
|
)
|
|
$
|
(0.31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in per share calculation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
20,699
|
|
|
|
20,589
|
|
|
|
21,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
21,631
|
|
|
|
20,589
|
|
|
|
21,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an
integral part of these consolidated financial statements.
F-4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
Non-
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid in
|
|
|
Treasury
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Controlling
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stock
|
|
|
Income (Loss)
|
|
|
Deficit
|
|
|
Interest
|
|
|
Equity
|
|
|
|
(In thousands, except share data)
|
|
|
Balance at June 30, 2007
|
|
|
23,167,521
|
|
|
$
|
23
|
|
|
$
|
478,615
|
|
|
$
|
|
|
|
$
|
3,112
|
|
|
$
|
(211,975
|
)
|
|
$
|
68,749
|
|
|
$
|
338,524
|
|
Exercise of stock options
|
|
|
175,992
|
|
|
|
1
|
|
|
|
2,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,044
|
|
Issuance of common stock from ESPP
|
|
|
115,494
|
|
|
|
|
|
|
|
1,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,083
|
|
Issuance of common stock in connection with acquisition
|
|
|
|
|
|
|
|
|
|
|
910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
910
|
|
Repurchase of common stock
|
|
|
(2,748,565
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
(39,997
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(40,000
|
)
|
Forfeiture of restricted stock
|
|
|
(291
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement of treasury stock
|
|
|
|
|
|
|
|
|
|
|
(39,997
|
)
|
|
|
39,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
19,784
|
|
|
|
|
|
|
|
6,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,769
|
|
Tax benefit arising from disqualifying dispositions of stock
options
|
|
|
|
|
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69
|
|
Cumulative effect of adoption of guidance for uncertain tax
positions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(766
|
)
|
|
|
|
|
|
|
(766
|
)
|
Purchase of subsidiary shares from noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(62,858
|
)
|
|
|
(62,858
|
)
|
Components of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,758
|
)
|
|
|
(5,891
|
)
|
|
|
(12,649
|
)
|
Change in cumulative translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,121
|
|
|
|
|
|
|
|
|
|
|
|
5,121
|
|
Change in unrealized gain on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,505
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008
|
|
|
20,729,935
|
|
|
|
21
|
|
|
|
449,492
|
|
|
|
|
|
|
|
8,256
|
|
|
|
(219,499
|
)
|
|
|
|
|
|
|
238,270
|
|
Exercise of stock options
|
|
|
68,478
|
|
|
|
|
|
|
|
535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
535
|
|
Issuance of common stock from ESPP
|
|
|
171,442
|
|
|
|
|
|
|
|
1,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,135
|
|
Repurchase of common stock
|
|
|
(488,263
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(3,471
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,472
|
)
|
Retirement of treasury stock
|
|
|
|
|
|
|
|
|
|
|
(3,471
|
)
|
|
|
3,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
16,000
|
|
|
|
|
|
|
|
5,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,392
|
|
Components of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,823
|
)
|
|
|
|
|
|
|
(13,823
|
)
|
Change in cumulative translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
|
85
|
|
Change in unrealized loss on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(95
|
)
|
|
|
|
|
|
|
|
|
|
|
(95
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,833
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2009
|
|
|
20,497,592
|
|
|
|
20
|
|
|
|
453,083
|
|
|
|
|
|
|
|
8,246
|
|
|
|
(233,322
|
)
|
|
|
|
|
|
|
228,027
|
|
Exercise of stock options
|
|
|
390,400
|
|
|
|
|
|
|
|
4,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,129
|
|
Issuance of common stock from ESPP
|
|
|
201,400
|
|
|
|
|
|
|
|
1,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,361
|
|
Repurchase of common stock
|
|
|
(1,522,905
|
)
|
|
|
|
|
|
|
|
|
|
|
(21,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,989
|
)
|
Forfeiture of restricted stock
|
|
|
(3,096
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement of treasury stock
|
|
|
|
|
|
|
|
|
|
|
(20,793
|
)
|
|
|
20,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
19,080
|
|
|
|
|
|
|
|
6,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,020
|
|
Tax benefit arising from disqualifying dispositions of stock
options
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
Components of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,079
|
|
|
|
|
|
|
|
11,079
|
|
Change in cumulative translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(88
|
)
|
|
|
|
|
|
|
|
|
|
|
(88
|
)
|
Change in unrealized gain on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2010
|
|
|
19,582,471
|
|
|
$
|
20
|
|
|
$
|
443,825
|
|
|
$
|
(1,196
|
)
|
|
$
|
8,243
|
|
|
$
|
(222,243
|
)
|
|
$
|
|
|
|
$
|
228,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an
integral part of these consolidated financial statements.
F-5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
11,079
|
|
|
$
|
(13,823
|
)
|
|
$
|
(12,649
|
)
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization of property, plant and equipment
|
|
|
6,487
|
|
|
|
7,070
|
|
|
|
7,107
|
|
Amortization of intangible assets
|
|
|
3,848
|
|
|
|
3,810
|
|
|
|
3,342
|
|
Stock compensation expense
|
|
|
6,020
|
|
|
|
5,392
|
|
|
|
7,931
|
|
(Recovery) provision for doubtful accounts
|
|
|
(28
|
)
|
|
|
438
|
|
|
|
113
|
|
Inventory charges
|
|
|
|
|
|
|
4,065
|
|
|
|
7,274
|
|
Amortization of premium (discount) on investments
|
|
|
546
|
|
|
|
(419
|
)
|
|
|
(687
|
)
|
(Gain) loss on sale or disposal of assets
|
|
|
(942
|
)
|
|
|
1,533
|
|
|
|
(2,305
|
)
|
Impairment charge and other costs
|
|
|
|
|
|
|
10,829
|
|
|
|
626
|
|
Tax benefit arising from disqualifying dispositions of stock
options
|
|
|
25
|
|
|
|
|
|
|
|
69
|
|
Other
|
|
|
(62
|
)
|
|
|
(556
|
)
|
|
|
556
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
415
|
|
|
|
4,774
|
|
|
|
1,623
|
|
Inventories
|
|
|
(10,193
|
)
|
|
|
14,457
|
|
|
|
(3,090
|
)
|
Prepaid expenses and other current assets
|
|
|
(5,138
|
)
|
|
|
2,933
|
|
|
|
2,041
|
|
Other assets
|
|
|
395
|
|
|
|
130
|
|
|
|
109
|
|
Accounts payable
|
|
|
4,756
|
|
|
|
(8,505
|
)
|
|
|
1,001
|
|
Accrued liabilities and other liabilities
|
|
|
(328
|
)
|
|
|
(45
|
)
|
|
|
(5,342
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
16,880
|
|
|
|
32,083
|
|
|
|
7,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of
available-for-sale
investments
|
|
|
(205,953
|
)
|
|
|
(150,907
|
)
|
|
|
(148,547
|
)
|
Sales and maturities of
available-for-sale
investments
|
|
|
211,085
|
|
|
|
82,911
|
|
|
|
130,540
|
|
Purchases of
held-to-maturity
investments
|
|
|
(25,000
|
)
|
|
|
(3,198
|
)
|
|
|
(29,623
|
)
|
Maturities of
held-to-maturity
investments
|
|
|
20,000
|
|
|
|
22,646
|
|
|
|
94,700
|
|
Proceeds from sales of property and equipment
|
|
|
566
|
|
|
|
608
|
|
|
|
27,338
|
|
Purchases of property, plant and equipment
|
|
|
(5,517
|
)
|
|
|
(4,135
|
)
|
|
|
(8,014
|
)
|
Sales of cost investments
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
Purchases of cost investments
|
|
|
|
|
|
|
|
|
|
|
(400
|
)
|
Acquisition of businesses, net of cash acquired
|
|
|
(5,761
|
)
|
|
|
|
|
|
|
(81,445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(10,580
|
)
|
|
|
(52,075
|
)
|
|
|
(10,451
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
5,490
|
|
|
|
1,670
|
|
|
|
3,127
|
|
Repurchases of common stock
|
|
|
(20,793
|
)
|
|
|
(3,472
|
)
|
|
|
(40,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(15,303
|
)
|
|
|
(1,802
|
)
|
|
|
(36,873
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
12
|
|
|
|
(505
|
)
|
|
|
6
|
|
Net decrease in cash and cash equivalents
|
|
|
(8,991
|
)
|
|
|
(22,299
|
)
|
|
|
(39,599
|
)
|
Cash and cash equivalents, beginning of year
|
|
|
49,702
|
|
|
|
72,001
|
|
|
|
111,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
40,711
|
|
|
$
|
49,702
|
|
|
$
|
72,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for income taxes
|
|
$
|
1,302
|
|
|
$
|
580
|
|
|
$
|
531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid repurchases of common stock
|
|
$
|
1,196
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock and options in connection with
acquisitions
|
|
$
|
|
|
|
$
|
|
|
|
$
|
910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gain (loss) on investments
|
|
$
|
85
|
|
|
$
|
(95
|
)
|
|
$
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax liabilities arising from adoption of guidance for uncertain
tax positions
|
|
$
|
|
|
|
$
|
|
|
|
$
|
766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an
integral part of these consolidated financial statements.
F-6
NOTE 1
THE COMPANY:
The
Company
Oplink Communications, Inc. (Oplink or the
Company) was incorporated in California in September
1995 and was later reincorporated in Delaware in September 2000.
The Company is headquartered in Fremont, California and has
manufacturing, design and research and development facilities in
Zhuhai, Shanghai and Wuhan, China, in Taiwan and in Woodland
Hills, California.
Oplink designs, manufactures and sells optical networking
components and subsystems. Its products expand optical
bandwidth, amplify optical signals, monitor and protect
wavelength performance, redirect light signals, ensure signal
connectivity and provide signal transmission and reception
within an optical network. Its products enable greater and
higher quality bandwidth over longer distances, which reduces
network congestion and transmission cost per bit. Its products
also enable optical system manufacturers to provide flexible and
scalable bandwidth to support the increase of data traffic on
the Internet and other public and private networks.
Oplink offers its customers design, integration and optical
manufacturing solutions (OMS) for the production and
packaging of highly-integrated optical subsystems and turnkey
solutions, based upon a customers specific product design
and specifications. Oplink also offers solutions with lower
levels of component integration for customers that place more
value on flexibility than would be provided with turnkey
solutions.
Oplinks product portfolio also includes optical
transmission products that broaden the addressable markets as
well as the range of solutions that Oplink can now offer its
customers. Oplinks transmission products consist of a
comprehensive line of high-performance fiber optic modules,
including fiber optic transmitters, receivers, transceivers, and
transponders, primarily for use in metropolitan area network
(MAN), local area network (LAN), and
fiber-to-the-home
(FTTH) applications. Fiber optic modules are
pre-assembled components that are used to build network
equipment. Oplinks transmission products convert
electronic signals into optical signals and back into electronic
signals, thereby facilitating the transmission of information
over fiber optic communication networks.
The acquisition of Emit Technology Co., Ltd. (Emit)
in early 2010 enabled Oplink to offer communications system
equipment makers a broadened suite of precision-made,
cost-effective, and reliable optical connectivity products to
establish multiple-use, quick pluggable fiber links among
network devices for bandwidth deployment, as well as in a test
and measurement environment for a wide range of system design
and service applications.
Fiscal
year
The Company operates and reports using a fiscal year, which ends
on the Sunday closest to June 30. Interim fiscal quarters
end on the Sundays closest to each calendar quarter end. For
presentation purposes, the Company presents each fiscal year as
if it ended on June 30. June 27, 2010, June 28,
2009 and June 29, 2008 represent the Sunday closest to the
period ended June 30, 2010, 2009 and 2008, respectively.
Fiscal 2010, 2009 and 2008 are 52-week fiscal years. Fiscal 2011
will consist of 53 weeks, one week more than a typical
fiscal year.
F-7
Reclassifications
Certain items previously reported in prior years
consolidated financial statements have been reclassified to
conform with the current year presentation. Such
reclassifications had no effect on previously reported total
assets, stockholders equity, or net income (loss).
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis
of presentation
The consolidated financial statements include the accounts of
the Company and its wholly- and majority- owned subsidiaries.
The ownership interests of minority investors are recorded as
noncontrolling interests and as of and for the years ended
June 30, 2010 and 2009 such amounts were immaterial. All
significant intercompany accounts and transactions have been
eliminated in consolidation. With the exception of the
Companys OCP subsidiaries, the Company presents the
financial information of its consolidated foreign operating
subsidiaries in its consolidated financial statements utilizing
accounts as of a date one month earlier than the accounts of its
parent company, U.S. subsidiary and its non-operating
non-U.S. subsidiaries
to ensure timely reporting of consolidated results.
The Company conducts its business within one business segment
and has no organizational structure dictated by product, service
lines, geography or customer type.
In January 2010, the Company acquired approximately 91.2% of the
outstanding shares of Emit Technology Co., Ltd.
(Emit) and acquired additional 2.9% of Emits
outstanding shares subsequent to the acquisition date. As a
result, fiscal year 2010 included financial results from Emit
since the acquisition date.
Risks
and uncertainties
There are a number of risks and uncertainties facing the Company
that could have a material adverse effect on the Companys
financial condition, operating results or cash flows. These
risks and uncertainties include, but are not limited to, a
further and sustained downturn in the telecommunications
industry or the overall economy in the United States and other
parts of the world, possible further reductions in customer
orders, intense competition in the Companys target markets
and potential pricing pressure that may arise from changing
supply or demand conditions in the industry. In addition, the
Company obtains most of its critical materials from a single or
limited number of suppliers and generally does not have
long-term supply contracts with them. The Company could
experience discontinuation of key components, price increases
and late deliveries from its suppliers. Also, substantially all
of the Companys manufacturing operations are located in
China and are subject to laws and regulations of China. These
and other risks and uncertainties facing the Company are
described in more detail in the Risk Factors
sections of the Companys Annual Report on
Form 10-K
and Quarterly Reports on
Form 10-Q
filed with the Securities and Exchange Commission
(SEC).
Use of
estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
F-8
Cash
and cash equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents. The Companys cash equivalents consist
primarily of money market funds, unrestricted deposits, debt
instruments of the U.S. Treasury and commercial paper. Cash
includes amounts restricted for letters of credit for purchases
and deposits for equipment maintenance of $322,000 and $528,000
at June 30, 2010 and 2009, respectively.
Investments
Management determines the appropriate classification of its
investments in marketable securities at the time of purchase and
reevaluates such designation as of each balance sheet date. The
Companys marketable securities are classified as either
held-to-maturity
or
available-for-sale.
Held-to-maturity
securities represent those securities that the Company has both
the intent and ability to hold to maturity and are carried at
amortized cost. Interest on these securities, as well as
amortization of discounts and premiums, is included in interest
income.
Available-for-sale
securities represent those securities that do not meet the
classification of
held-to-maturity
or trading securities and are carried at fair value. Unrealized
gains and losses on these securities are reported as a separate
component of accumulated other comprehensive income (loss) until
realized. When
available-for-sale
or
held-to-maturity
securities are sold, the cost of the securities is specifically
identified and is used to determine the realized gain or loss. A
security is considered impaired when its fair value is less than
its amortized cost basis.
Other-than-temporary
impairment is triggered when (1) an entity has the intent
to sell the impaired security, (2) it is more likely than
not that the entity will be required to sell the impaired
security before recovery of its amortized cost basis, or
(3) the entity does not expect to recover the entire
amortized cost basis of the impaired security. Should a decline
in the fair value of an individual security or securities be
judged to be other than temporary, the cost basis of the
security would be written down to fair value.
Securities classified as short-term have maturity dates of less
than one year from the balance sheet date. Securities classified
as long-term have maturity dates greater than one year from the
balance sheet date.
Revenue
recognition
The Company derives its revenues from the sale of fiber optic
components and subsystems. Revenues from product sales are
generally recognized upon delivery of the product or customer
acceptance, whichever is later, provided that persuasive
evidence of an arrangement exists, delivery has occurred and no
significant obligations remain, the fee is fixed or determinable
and collectibility is reasonably assured. Revenues associated
with contract-related cancellation payments from customers are
recognized when a formal agreement is signed or a purchase order
is issued by the customer covering such payments and the
collectibility of the cancellation payments is determined to be
reasonably assured.
Sales to distributors do not include the right to return or
exchange products or price protection. Provisions for returns
and allowances are recorded at the time revenues are recognized
based on the Companys historical experience.
All amounts billed to customers for shipping and handling costs
are offset against the direct cost of shipping and handling and
included in cost of revenues. The amount of shipping and
handling costs incurred are not material for the years ended
June 30, 2010, 2009 and 2008.
The Company records sales taxes accrued and collected on sales
of its products in accrued liabilities on its consolidated
balance sheets.
F-9
Foreign
currency translations
The functional currency of the Companys foreign
subsidiaries is the local currency. In consolidation, assets and
liabilities are translated at year-end currency exchange rates
and revenues and expense items are translated at average
currency exchange rates prevailing during the period. Gains and
losses from foreign currency translation and foreign currency
transaction gains and losses from intercompany transactions and
balances for which settlement is not planned or anticipated in
the foreseeable future are accumulated as a separate component
of stockholders equity. Realized gains and losses
resulting from foreign currency transactions are included as a
component of interest and other income, net in the consolidated
statements of operations and are immaterial for all the periods
presented.
Fair
value of financial instruments
The Company has determined that the amounts reported for cash
and cash equivalents, accounts receivable, accounts payable and
accrued liabilities approximate fair value because of their
short maturities
and/or
variable interest rates.
Available-for-sale
investments are reported at their fair value.
Held-to-maturity
investments are reported at amortized cost.
Concentration
of credit risk
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash equivalents,
short-term and long-term investments and trade accounts
receivable. Substantially all of the Companys cash
equivalents and short-term and long-term investments primarily
composed of investments in money market funds, commercial paper
and government and non-government debt securities are maintained
with three high quality financial institutions and principally
held in the United States. The composition and maturities
are regularly monitored by management. Such deposits are in
excess of the amount of the insurance provided by the federal
government on such deposits. To date, the Company has not
experienced any losses on such deposits.
The Companys accounts receivable are derived from revenues
earned from customers located in the United States, Canada,
Europe, China, Japan and other Asia-Pacific countries. There are
a limited number of customers accounting for the majority of
purchases in the industry worldwide. The Company performs
ongoing credit evaluations of its customers financial
condition and currently requires no collateral from its
customers. The Company maintains an allowance for doubtful
accounts based upon the expected collection of its outstanding
receivable balance.
The following table summarizes the revenues from customers in
excess of 10% of total revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Customer A
|
|
|
21
|
%
|
|
|
20
|
%
|
|
|
25
|
%
|
Customer B
|
|
|
14
|
%
|
|
|
17
|
%
|
|
|
14
|
%
|
At June 30, 2010, three customers accounted for 20%, 19%
and 10% of total accounts receivable. At June 30, 2009,
three customers accounted for 34%, 15%, and 13% of total
accounts receivable.
Inventories
Inventories are stated at the lower of cost or market value.
Inventory cost is determined using standard cost, which
approximates actual cost on a
first-in,
first-out basis. Inventory is subject to rapid technological
changes as a result of substitute products or specification
changes or because the Company holds an excessive amount of
inventory relative to customer forecasts which could have an
adverse affect on its realization in future periods. The Company
regularly assesses the valuation of inventories and writes down
those inventories which are obsolete or in excess of forecasted
usage to their estimated
F-10
realizable value and subsequent changes in facts and
circumstances do not result in the restoration or increase in
that newly established cost basis. Estimates of realizable value
are based upon the Companys analyses and assumptions
including, but not limited to, forecasted sales levels by
product, expected product lifecycle, product development plans
and future demand requirements. If market conditions are less
favorable than the Companys forecast or actual demand from
customers is lower than the Companys estimates, the
Company may be required to record additional inventory
write-downs. If demand is higher than expected, the Company may
sell inventories that had previously been written down.
Accounts
receivable and allowance for doubtful accounts
The Companys accounts receivable are derived from revenues
earned from customers located in the United States, Canada,
Europe, China, Japan, and other Asia-Pacific countries. The
Company performs ongoing credit evaluations of its
customers financial condition and currently requires no
collateral from its customers. The Company maintains an
allowance for doubtful accounts for estimated losses in
anticipation of the inability or unwillingness of customers to
make required payments. When the Company becomes aware that a
specific customer is unable to meet its financial obligations,
such as the result of bankruptcy or deterioration in the
customers operating results or financial position, the
Company records a specific allowance equal to the amount due to
reflect the level of credit risk in the customers
outstanding receivable balance. If the condition or
circumstances of the Companys customers deteriorates,
estimates of the recoverability of trade receivables could be
materially affected and the Company may be required to record
additional allowances. Alternatively, if the Companys
estimates are determined to be greater than the actual amounts
necessary, the Company may reverse a portion of such allowance
in future periods based on actual collection experience.
Property,
plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is
computed using the straight-line method based upon the useful
lives of the assets. Estimated useful lives of 20 to
30 years are used for buildings and 3 to 10 years are
used for manufacturing and engineering equipment. Estimated
useful lives of 2 to 5 years are used for computer hardware
and software. Leasehold improvements are amortized using the
straight-line method based upon the shorter of the estimated
useful lives or the lease term of the respective assets. Land
and construction in progress are not depreciated. Improvements
and betterments are capitalized if they extend the useful life
of the asset. Repair and maintenance costs are charged to
expense as incurred. Gain (loss) related to retirement or
disposition of fixed assets is recognized in the period which
the gain (loss) occurs.
Impairment
of long-lived assets
The Company evaluates the recoverability of the net carrying
value of its property, plant and equipment and identifiable
intangible assets with definite lives, whenever certain events
or changes in circumstances indicate that the carrying amount of
these assets may not be recoverable, by comparing the carrying
values to the estimated future undiscounted cash flows. A
deficiency in cash flows relative to the carrying amounts is an
indication of the need for a write-down due to impairment. The
impairment write-down would be the difference between the
carrying amounts and the fair value of these assets. A loss on
impairment would be recognized as a charge to earnings.
During fiscal 2008, the Company noted that the carrying value of
intangible assets purchased in connection with the acquisition
of F3 Inc. (F3) in fiscal 2006, a majority-owned
subsidiary of Oplink, may not be recoverable and performed an
impairment review. As a result, an impairment charge of $517,000
was recorded in the consolidated statement of operations for the
year ended June 30, 2008 based on the amounts by which the
carrying amounts of these assets exceeded their fair value.
There was no impairment charge during fiscal years 2010 or 2009.
F-11
Impairment
of goodwill and other intangible assets
Goodwill represents the excess of the purchase price over the
fair value of the net tangible and identifiable intangible
assets acquired in a business combination. Goodwill and
intangible assets with indefinite useful lives should not be
amortized but rather be tested for impairment at least annually
or sooner whenever events or changes in circumstances indicate
that they may be impaired. These events or circumstances could
include a significant change in the business climate, legal
factors, operating performance indicators, competition, or sale
or disposition of a significant portion of a reporting unit. In
fiscal 2009, the Company recorded an impairment charge of
$10.8 million related to goodwill acquired as part of
Oplinks acquisition of OCP in fiscal 2008 and 2007 and F3
and Fibercom Optics Communication Corp. (Fibercom)
in fiscal 2006. There was no goodwill impairment charge in
fiscal 2010 or 2008.
Accrued
transitional costs for contract manufacturing
On November 1, 2006, OCP, a wholly-owned subsidiary of
Oplink as of October 31, 2007, reached an agreement with
SAE Magnetics (H.K.) Limited (SAE), a wholly-owned
subsidiary of TDK Corporation, which enabled OCP to
manufacture certain of its product lines in China beginning July
2007. In connection with the outsourcing, a restructuring
liability of $1.2 million was accrued on Oplinks
consolidated balance sheet at June 30, 2007 primarily for
estimated severance and retention payments, along with expenses
incurred to relocate certain fixed assets associated with the
manufacturing of certain of OCPs product lines. The
Company recorded an expense for accrued transitional costs for
contract manufacturing of $2.3 million in fiscal 2008. The
Company did not incur any transitional costs for contract
manufacturing in fiscal 2010 or 2009 as the manufacturing
transfer was substantially completed as of June 30, 2008
(see Note 5).
Income
taxes
The Company accounts for income taxes under the liability
method, which recognizes deferred tax assets and liabilities for
the expected future tax consequences of temporary differences
between the tax bases of assets and liabilities and their
financial statement reported amounts, and for net operating loss
and tax credit carryforwards. Deferred income tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred taxes of a change in tax rates is recognized in
income in the period that includes the enactment date. The
Company records a valuation allowance against deferred tax
assets when it is more likely than not that such assets will not
be realized.
The Company recognizes liabilities for uncertain tax positions
based on the provisions of ASC Topic 740, Income
Taxes (ASC 740). If the Company ultimately
determines that the payment of such a liability is not
necessary, then the Company reverses the liability and
recognizes a tax benefit during the period in which the
determination is made that the liability is no longer necessary.
The Company recognizes accrued interest and penalties related to
unrecognized tax benefits as a component of provision for income
taxes in the consolidated statements of operations.
Research
and development costs
Research and development expenses consist primarily of salaries
including stock compensation expense and related personnel
costs, depreciation, non-recurring engineering charges and
prototype costs, patent filing costs and fees paid to
consultants and outside service providers, all of which relate
to the design, development, testing, pre-manufacturing and
significant improvement of the Companys products. Research
and development costs are charged to operations as incurred.
F-12
Advertising
costs
Advertising costs, included in sales and marketing expenses, are
expensed as incurred. Advertising costs for the years ended
June 30, 2010, 2009 and 2008 were immaterial.
Stock
compensation
The Company accounts for share-based compensation in accordance
with ASC Topic 718, Compensation-Stock Compensation
(ASC 718), which establishes accounting for
stock-based awards exchanged for employee services. Accordingly,
stock-based compensation cost is measured at grant date, based
on the fair value of the award, and is recognized as expense on
a straight-line basis over the employee requisite service
period, which is generally four years. The Companys stock
compensation is generally accounted for as an equity instrument.
The effect of recording stock compensation for the three years
ended June 30, 2010, 2009 and 2008 was as follows (in
thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Stock-based compensation expense by type of award:
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock options
|
|
$
|
3,875
|
|
|
$
|
4,212
|
|
|
$
|
7,011
|
|
Restricted stock awards
|
|
|
1,521
|
|
|
|
223
|
|
|
|
266
|
|
Employee stock purchase plan
|
|
|
624
|
|
|
|
957
|
|
|
|
654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation
|
|
|
6,020
|
|
|
|
5,392
|
|
|
|
7,931
|
|
Tax effect on stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect on net income (loss)
|
|
$
|
6,020
|
|
|
$
|
5,392
|
|
|
$
|
7,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.29
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(0.28
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASC 718 requires forfeitures to be estimated at the time of
grant and revised if necessary in subsequent periods if actual
forfeitures differ from those estimates. Changes in estimated
forfeitures will be recognized through a cumulative
catch-up
adjustment in the period of change and will also impact the
amount of compensation expense to be recognized in future
periods.
During the years ended June 30, 2010, 2009 and 2008, the
Company granted 175,000, 359,040 and 1,465,632 stock options,
respectively, with an estimated total grant-date fair value of
$1.1 million, $2.0 million and $7.4 million,
respectively. The Company estimated that the stock compensation
expense for the stock options granted in the years ended
June 30, 2010, 2009 and 2008 not expected to vest was
$132,000, $280,000 and $1.2 million, respectively.
During the years ended June 30, 2010, 2009 and 2008 the
Company granted 501,813, 16,000 and 19,734 restricted stock
awards (RSAs) and restricted stock units
(RSUs), with a total grant-date fair value of
$7.0 million, $223,000, and $266,000, respectively. The
Company estimated that the stock compensation expense for the
RSUs granted in the year ended June 30, 2010 not expected
to vest was $1.0 million.
As of June 30, 2010, the unrecorded deferred stock
compensation balance related to stock options to purchase Oplink
common stock was $4.2 million which will be recognized over
an estimated weighted average amortization period of
2.1 years. The unrecorded deferred stock compensation
balance related to
F-13
RSUs was $4.4 million which will be recognized over an
estimated period of 3.2 years. Approximately $8,000 of
stock compensation was capitalized as inventory at June 30,
2010 and 2009.
Valuation
Assumptions
The Company estimates the fair value of stock options and
purchase rights under the Companys employee stock purchase
plan using a Black-Scholes valuation model. The fair value of
each option grant is estimated on the date of grant using the
Black-Scholes valuation model and the straight-line attribution
approach with the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Risk-free interest rate
|
|
|
2.22
|
%
|
|
|
2.78
|
%
|
|
|
3.35
|
%
|
Expected term
|
|
|
4.6 years
|
|
|
|
4.6 years
|
|
|
|
4.5 years
|
|
Expected dividends
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Volatility
|
|
|
48
|
%
|
|
|
52
|
%
|
|
|
46
|
%
|
The estimated fair value of purchase rights under the
Companys employee stock purchase plan is determined using
the Black-Scholes valuation model with the following
weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Risk-free interest rate
|
|
|
0.58
|
%
|
|
|
1.23
|
%
|
|
|
2.87
|
%
|
Expected term
|
|
|
1.3 years
|
|
|
|
1.3 years
|
|
|
|
1.3 years
|
|
Expected dividends
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Volatility
|
|
|
49
|
%
|
|
|
64
|
%
|
|
|
48
|
%
|
The dividend yield of zero is based on the fact that the Company
has never paid cash dividends and has no present intention to
pay cash dividends. Expected volatility is based on the
historical volatility of the Companys common stock. The
risk-free interest rates are taken from the Daily Federal Yield
Curve Rates as of the grant dates as published by the Federal
Reserve and represent the yields on actively traded Treasury
securities for terms equal to the expected term of the options
or purchase rights. The expected term calculation for stock
options is based on the observed historical option exercise
behavior and post-vesting forfeitures of options by the
Companys employees. The expected term assumption for
purchase rights is based on the average exercise date for the
four purchase periods in each
24-month
offering period.
The weighted-average grant date fair value for options to
purchase Oplink common stock granted under the stock option plan
was $6.40, $5.70 and $5.05 per share for the years ended
June 30, 2010, 2009 and 2008, respectively. The
weighted-average fair value of the purchase rights under
Oplinks employee stock purchase plan was $5.64, $1.65 and
$2.66 per share for the years ended June 30, 2010, 2009 and
2008, respectively.
Equity
Incentive Program
Oplink adopted the 2000 Equity Incentive Plan (the 2000
Plan) in July 2000. The 2000 Plan was terminated in
November 2009 immediately upon the effectiveness of the
Companys new 2009 Equity Incentive Plan (the 2009
Plan). No further awards will be granted under the 2000
Plan. However, the 2000 Plan will continue to govern awards
previously granted under that plan.
The 2009 Plan was adopted by the Company in September 2009 and
became effective upon approval by the Companys
stockholders at the annual meeting held in November 2009. The
2009 Plan provides for the grant of stock awards to employees,
directors and consultants. These stock awards include stock
F-14
options, RSAs, RSUs, stock appreciation rights, performance
units, and performance shares. The maximum aggregate number of
shares of common stock that may be issued under the 2009 Plan is
2,500,000 shares, plus any shares subject to stock awards
granted under 2000 Plan that expire or otherwise terminate
without having been exercised in full, or that are forfeited to
or repurchased by the Company. Shares subject to full
value awards (RSUs, RSAs, performance shares and
performance units) will count against the 2009 Plans share
reserve as 1.3 shares for every one share subject to such
awards. Accordingly, if such awards are forfeited or repurchased
by the Company, 1.3 times the number of shares forfeited or
repurchased will return to the 2009 Plan. The maximum term of
stock options and stock appreciation rights under the 2009 Plan
is 7 years.
The following table summarizes activity under the equity
incentive plans for the indicated periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
Awards
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Restricted
|
|
|
Weighted
|
|
|
|
Shares
|
|
|
Number of
|
|
|
Average
|
|
|
Stock
|
|
|
Average
|
|
|
|
Available
|
|
|
Options
|
|
|
Exercise
|
|
|
Awards/Units
|
|
|
Grant Date
|
|
|
|
for Grant
|
|
|
Outstanding
|
|
|
Price
|
|
|
Outstanding
|
|
|
Fair Value
|
|
|
Balance, June 30, 2007
|
|
|
4,211,451
|
|
|
|
3,449,236
|
|
|
$
|
16.31
|
|
|
|
|
|
|
$
|
|
|
Additional authorized
|
|
|
598,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
(1,485,366
|
)
|
|
|
1,465,632
|
|
|
|
11.81
|
|
|
|
19,734
|
|
|
|
13.93
|
|
Converted from OCP options(1)
|
|
|
(594,679
|
)
|
|
|
594,679
|
|
|
|
28.35
|
|
|
|
|
|
|
|
|
|
Exercised or vested
|
|
|
|
|
|
|
(175,992
|
)
|
|
|
11.62
|
|
|
|
(19,734
|
)
|
|
|
13.93
|
|
Canceled
|
|
|
1,244,988
|
|
|
|
(1,244,988
|
)
|
|
|
23.04
|
|
|
|
|
|
|
|
|
|
Expired(2)
|
|
|
(413,747
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2008
|
|
|
3,561,060
|
|
|
|
4,088,567
|
|
|
|
14.60
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
(375,040
|
)
|
|
|
359,040
|
|
|
|
12.71
|
|
|
|
16,000
|
|
|
|
13.92
|
|
Exercised or vested
|
|
|
|
|
|
|
(68,478
|
)
|
|
|
7.80
|
|
|
|
(16,000
|
)
|
|
|
13.92
|
|
Canceled
|
|
|
583,999
|
|
|
|
(583,999
|
)
|
|
|
17.73
|
|
|
|
|
|
|
|
|
|
Expired(2)
|
|
|
(89,095
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired(3)
|
|
|
(1,804,006
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2009
|
|
|
1,876,918
|
|
|
|
3,795,130
|
|
|
|
14.06
|
|
|
|
|
|
|
|
|
|
Additional shares authorized
|
|
|
2,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
(682,513
|
)
|
|
|
175,000
|
|
|
|
15.06
|
|
|
|
501,813
|
|
|
|
13.96
|
|
Exercised or vested
|
|
|
|
|
|
|
(390,400
|
)
|
|
|
10.58
|
|
|
|
(19,080
|
)
|
|
|
14.19
|
|
Canceled
|
|
|
125,128
|
|
|
|
(121,128
|
)
|
|
|
27.87
|
|
|
|
(4,000
|
)
|
|
|
13.90
|
|
Expired(4)
|
|
|
(1,406,099
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2010
|
|
|
2,413,434
|
|
|
|
3,458,602
|
|
|
$
|
14.02
|
|
|
|
478,733
|
|
|
$
|
13.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
In connection with the acquisition
of OCP, Oplink assumed 5,420,687 outstanding stock options
issued pursuant to OCPs stock option plans and converted
them into 594,679 options to purchase shares of Oplink common
stock pursuant to conversion terms stated in the merger
agreement.
|
|
(2)
|
|
In accordance with previous OCP
stock option plans that have now terminated, OCP stock options
that were granted and subsequently cancelled are not available
for future grant.
|
|
(3)
|
|
The Companys 1998 Stock
Option Plan terminated ten years after its adoption by the
Companys board of directors and the shares not granted at
the time of termination have expired.
|
|
(4)
|
|
The Companys 2000 Stock Plan
terminated upon the adoption of the 2009 Plan and shares not
granted at the time of termination have expired.
|
F-15
The options outstanding and exercisable at June 30, 2010
were in the following exercise price ranges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Vested and Exercisable
|
|
|
|
at June 30, 2010
|
|
|
at June 30, 2010
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
Aggregate
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
Aggregate
|
|
|
|
Number
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Intrinsic
|
|
|
Number
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Intrinsic
|
|
Range of Exercise Price
|
|
Outstanding
|
|
|
Life
|
|
|
Price
|
|
|
Value
|
|
|
Outstanding
|
|
|
Life
|
|
|
Price
|
|
|
Value
|
|
|
|
|
|
|
(In years)
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
(In years)
|
|
|
|
|
|
(In thousands)
|
|
|
$ 1.00 - $ 5.00
|
|
|
406,904
|
|
|
|
2.3
|
|
|
$
|
4.62
|
|
|
$
|
4,187
|
|
|
|
406,904
|
|
|
|
2.3
|
|
|
$
|
4.62
|
|
|
$
|
4,187
|
|
$ 5.01 - $ 8.00
|
|
|
383,463
|
|
|
|
3.0
|
|
|
|
5.73
|
|
|
|
3,520
|
|
|
|
351,567
|
|
|
|
2.6
|
|
|
|
5.56
|
|
|
|
3,287
|
|
$ 8.01 - $ 10.00
|
|
|
27,367
|
|
|
|
1.4
|
|
|
|
8.76
|
|
|
|
168
|
|
|
|
27,367
|
|
|
|
1.4
|
|
|
|
8.76
|
|
|
|
168
|
|
$10.01 - $ 11.00
|
|
|
427,983
|
|
|
|
7.4
|
|
|
|
10.09
|
|
|
|
2,062
|
|
|
|
230,212
|
|
|
|
7.1
|
|
|
|
10.09
|
|
|
|
1,109
|
|
$11.01 - $ 13.00
|
|
|
221,154
|
|
|
|
6.9
|
|
|
|
12.16
|
|
|
|
608
|
|
|
|
131,848
|
|
|
|
6.2
|
|
|
|
12.31
|
|
|
|
342
|
|
$13.01 - $ 15.00
|
|
|
665,475
|
|
|
|
6.8
|
|
|
|
13.81
|
|
|
|
734
|
|
|
|
394,611
|
|
|
|
6.3
|
|
|
|
13.68
|
|
|
|
484
|
|
$15.01 - $ 18.00
|
|
|
310,553
|
|
|
|
6.7
|
|
|
|
16.91
|
|
|
|
|
|
|
|
192,381
|
|
|
|
5.7
|
|
|
|
17.42
|
|
|
|
|
|
$18.01 - $ 20.00
|
|
|
190,626
|
|
|
|
3.5
|
|
|
|
18.87
|
|
|
|
|
|
|
|
184,921
|
|
|
|
3.5
|
|
|
|
18.86
|
|
|
|
|
|
$20.01 - $ 27.00
|
|
|
751,083
|
|
|
|
5.9
|
|
|
|
20.24
|
|
|
|
|
|
|
|
748,731
|
|
|
|
5.9
|
|
|
|
20.24
|
|
|
|
|
|
$28.00 - $ 35.00
|
|
|
38,137
|
|
|
|
0.3
|
|
|
|
34.25
|
|
|
|
|
|
|
|
38,137
|
|
|
|
0.3
|
|
|
|
34.25
|
|
|
|
|
|
$42.00 - $158.00
|
|
|
35,857
|
|
|
|
0.3
|
|
|
|
73.44
|
|
|
|
|
|
|
|
35,857
|
|
|
|
0.3
|
|
|
|
73.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,458,602
|
|
|
|
5.4
|
|
|
$
|
14.02
|
|
|
$
|
11,280
|
|
|
|
2,742,536
|
|
|
|
4.8
|
|
|
$
|
14.35
|
|
|
$
|
9,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest
|
|
|
3,413,790
|
|
|
|
5.4
|
|
|
$
|
14.04
|
|
|
$
|
11,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2009 and 2008, options to purchase 2,579,605
and 2,132,161 shares at weighted average exercise prices of
$14.21 and $14.97 per share, respectively, were vested and
exercisable.
The aggregate intrinsic value in the table above represents the
total pretax intrinsic value, based on the Companys
closing stock price of $14.91 as of June 25, 2010, which
would have been received by the option holders had all option
holders exercised their options as of that date. The total
number of
in-the-money
options exercisable as of June 30, 2010 was 1,542,509. The
total intrinsic value of options exercised during the years
ended June 30, 2010, 2009 and 2008 was $2.1 million,
$281,000 and $517,000, respectively. The total cash received by
the Company from employees as a result of employee stock option
exercises during the years ended June 30, 2010, 2009 and
2008 was approximately $4.1 million, $535,000 and
$2.0 million, respectively.
The Company settles employee stock option exercises with newly
issued common shares.
Employee
Stock Purchase Plan
The Companys employee stock purchase plan authorizes the
granting of stock purchase rights to eligible employees during
an offering period not more than 27 months with exercise
dates approximately every six months. Shares are purchased
through employee payroll deductions at purchase prices equal to
85% of the lesser of the fair market value of the Companys
common stock at either the first day of each offering period or
the date of purchase. The compensation cost in connection with
the purchase plan for the years ended June 30, 2010, 2009
and 2008 was $624,000, $957,000 and $654,000, respectively.
201,400, 171,442 and 115,494 shares were purchased under
the employee stock purchase plan during the years ended
June 30, 2010, 2009 and 2008. The total cash received by
the Company from employees as a result of purchases under the
ESPP during the years ended June 30, 2010, 2009 and 2008
were $1.4 million, $1.1 million and $1.1 million,
respectively.
F-16
Derivative
financial instruments and hedging activities
ASC Topic 815, Derivatives and Hedging requires
companies to value derivative financial instruments, including
those used for hedging foreign currency exposures, at current
market value, with the impact of any change in market value
charged against earnings in the corresponding period or as a
component of comprehensive income (loss), depending on the type
of hedging relationship that exists. The Company has not entered
into any derivative financial instrument contracts.
Comprehensive
income (loss)
Comprehensive income (loss) is defined as the change in equity
of a business enterprise during a period from transactions and
other events and circumstances from non-owner sources. The
components of comprehensive income (loss) consist of foreign
currency translation adjustments, foreign currency transaction
gains and losses from intercompany transactions and balances for
which settlement is not planned or anticipated in the
foreseeable future and changes in unrealized gains and losses on
investments, net of taxes. Comprehensive income (loss) and the
components of accumulated other comprehensive income (loss) are
presented in the accompanying consolidated statements of
stockholders equity. The balance of accumulated other
comprehensive income is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
Accumulated other comprehensive income:
|
|
|
|
|
|
|
|
|
Cumulative translation adjustment
|
|
$
|
8,241
|
|
|
$
|
8,329
|
|
Unrealized gain (loss) on investments, net
|
|
|
2
|
|
|
|
(83
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,243
|
|
|
$
|
8,246
|
|
|
|
|
|
|
|
|
|
|
The reconciliation of net income (loss) to comprehensive income
(loss) for the years ended June 30, 2010, 2009 and 2008 is
as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Net income (loss)
|
|
$
|
11,079
|
|
|
$
|
(13,823
|
)
|
|
$
|
(6,758
|
)
|
Change in cumulative translation adjustment
|
|
|
(88
|
)
|
|
|
85
|
|
|
|
5,121
|
|
Change in unrealized gain (loss) on investments, net
|
|
|
85
|
|
|
|
(95
|
)
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
$
|
11,076
|
|
|
$
|
(13,833
|
)
|
|
$
|
(1,614
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per share
Basic net income (loss) per share is computed by dividing the
net income (loss) by the weighted average number of shares of
common stock outstanding during the period. Diluted net income
(loss) per share is computed by dividing the net income (loss)
for the period by the weighted average number of common and
common equivalent shares outstanding during the period, if
dilutive. Potentially dilutive common equivalent shares are
composed of the incremental common shares issuable upon the
exercise of stock options, the vesting of RSUs and purchases
under the employee stock purchase plan. The following is a
reconciliation of the numerators and denominators of the basic
and diluted net income (loss) per share
F-17
computations and the antidilutive common stock equivalents
excluded from the computations for the periods presented (in
thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
11,079
|
|
|
$
|
(13,823
|
)
|
|
$
|
(6,758
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic
|
|
|
20,699
|
|
|
|
20,589
|
|
|
|
21,533
|
|
Effect of dilutive potential shares
|
|
|
932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding diluted
|
|
|
21,631
|
|
|
|
20,589
|
|
|
|
21,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share basic
|
|
$
|
0.54
|
|
|
$
|
(0.67
|
)
|
|
$
|
(0.31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share diluted
|
|
$
|
0.51
|
|
|
$
|
(0.67
|
)
|
|
$
|
(0.31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Antidilutive stock options not included
in net income (loss) per share calculation
|
|
|
1,688
|
|
|
|
3,795
|
|
|
|
4,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recently
issued accounting standards
In December 2007, the FASB issued a revision of business
combinations guidance, which was later codified under ASC Topic
805, Business Combinations (ASC 805).
This guidance replaces the previous FASB guidance on business
combinations and establishes principles and requirements for how
an acquirer recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed, and
any noncontrolling interest in the acquiree in a business
combination. It also establishes principles around how goodwill
acquired in a business combination or a gain from a bargain
purchase should be recognized and measured, as well as provides
guidelines on the disclosure requirements on the nature and
financial impact of the business combination. In addition, the
guidance establishes a model to account for certain
pre-acquisition contingencies. This guidance was effective on a
prospective basis for all business combinations for which the
acquisition date is on or after the beginning of the first
annual period subsequent to December 15, 2008. The Company
accounted for the acquisitions of Emit and Oridus in accordance
with this new accounting guidance in fiscal 2010.
In August 2009, the FASB issued Accounting Standards Update
2009-05,
Fair Value Measurements and Disclosures
Measuring Liabilities at Fair Value. This update provides
amendments to ASC Topic
820-10,
Fair Value Measurements and Disclosures-Overall, for
the fair value measurement of liabilities. This update is
effective for the first reporting period (including interim
periods) beginning after issuance. The implementation did not
have a material impact on the Companys consolidated
financial position, results of operations or cash flows.
In January 2010, the FASB issued Accounting Standards Update
2009-16 to
amend the disclosure requirements related to recurring and
nonrecurring fair value measurements. The guidance requires new
disclosures on the transfers of assets and liabilities between
Level 1 and Level 2 of the fair value measurement
hierarchy, including the reasons and the timing of the
transfers. Additionally, the guidance requires a roll forward of
activities on purchases, sales, issuance, and settlements of the
assets and liabilities measured using significant unobservable
inputs (Level 3 fair value measurements). The guidance will
be applied prospectively to new transfers of financial assets
occurring in fiscal years beginning after November 15,
2009. The Company does not believe that the implementation will
have a material impact on its consolidated financial position,
results of operations or cash flows.
In various areas, including revenue recognition, stock option
and purchase accounting, accounting standards and practices
continue to evolve. The Company believes that it is in
compliance with all of the rules and related guidance as they
currently exist. However, any changes to accounting principles
F-18
generally accepted in the United States of America in these
areas could impact the future accounting of its operations.
NOTE 3
SHORT-TERM AND LONG-TERM INVESTMENTS
The Company generally invests its excess cash in debt
instruments of the U.S. Treasury, government agencies and
corporations with strong credit ratings. Such investments are
made in accordance with the Companys investment policy,
which establishes guidelines relative to diversification and
maturities designed to maintain safety and liquidity. These
guidelines are periodically reviewed and modified to take
advantage of trends in yields and interest rates.
Short-term and long-term investments at June 30, 2010 and
2009 consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Carrying
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
|
Value
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
$
|
6,823
|
|
|
$
|
6,823
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
6,823
|
|
United States government agencies
|
|
|
14,994
|
|
|
|
14,993
|
|
|
|
4
|
|
|
|
|
|
|
|
14,997
|
|
United States Treasury
|
|
|
41,946
|
|
|
|
41,912
|
|
|
|
34
|
|
|
|
|
|
|
|
41,946
|
|
Corporate securities
|
|
|
45,869
|
|
|
|
45,902
|
|
|
|
|
|
|
|
(33
|
)
|
|
|
45,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term investments
|
|
|
109,632
|
|
|
|
109,630
|
|
|
|
38
|
|
|
|
(33
|
)
|
|
|
109,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States government agencies
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
2
|
|
|
|
|
|
|
|
10,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term investments
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
2
|
|
|
|
|
|
|
|
10,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
119,632
|
|
|
$
|
119,630
|
|
|
$
|
40
|
|
|
$
|
(33
|
)
|
|
$
|
119,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Carrying
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
|
Value
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
$
|
3,140
|
|
|
$
|
3,140
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
3,140
|
|
United States government agencies
|
|
|
10,004
|
|
|
|
10,001
|
|
|
|
3
|
|
|
|
(2
|
)
|
|
|
10,002
|
|
United States Treasury
|
|
|
48,971
|
|
|
|
48,944
|
|
|
|
27
|
|
|
|
|
|
|
|
48,971
|
|
Corporate securities
|
|
|
53,659
|
|
|
|
53,772
|
|
|
|
13
|
|
|
|
(126
|
)
|
|
|
53,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term investments
|
|
|
115,774
|
|
|
|
115,857
|
|
|
|
43
|
|
|
|
(128
|
)
|
|
|
115,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate securities
|
|
|
3,180
|
|
|
|
3,180
|
|
|
|
|
|
|
|
|
|
|
|
3,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term investments
|
|
|
3,180
|
|
|
|
3,180
|
|
|
|
|
|
|
|
|
|
|
|
3,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
118,954
|
|
|
$
|
119,037
|
|
|
$
|
43
|
|
|
$
|
(128
|
)
|
|
$
|
118,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-19
The amortized cost and fair value of
available-for-sale
and
held-to-maturity
investments at June 30, 2010 and June 30, 2009 are
presented in the following tables (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Available-for-sale
investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
$
|
6,823
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
6,823
|
|
United States government agencies
|
|
|
9,993
|
|
|
|
1
|
|
|
|
|
|
|
|
9,994
|
|
United States Treasury
|
|
|
41,912
|
|
|
|
34
|
|
|
|
|
|
|
|
41,946
|
|
Corporate securities
|
|
|
42,801
|
|
|
|
|
|
|
|
(33
|
)
|
|
|
42,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
investments
|
|
|
101,529
|
|
|
|
35
|
|
|
|
(33
|
)
|
|
|
101,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate securities
|
|
|
3,101
|
|
|
|
|
|
|
|
|
|
|
|
3,101
|
|
United States government agencies
|
|
|
15,000
|
|
|
|
5
|
|
|
|
|
|
|
|
15,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
held-to-maturity
investments
|
|
|
18,101
|
|
|
|
5
|
|
|
|
|
|
|
|
18,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
119,630
|
|
|
$
|
40
|
|
|
$
|
(33
|
)
|
|
$
|
119,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Available-for-sale
investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
$
|
3,140
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
3,140
|
|
United States government agencies
|
|
|
5,000
|
|
|
|
3
|
|
|
|
|
|
|
|
5,003
|
|
United States Treasury
|
|
|
48,944
|
|
|
|
27
|
|
|
|
|
|
|
|
48,971
|
|
Corporate securities
|
|
|
53,772
|
|
|
|
13
|
|
|
|
(126
|
)
|
|
|
53,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
investments
|
|
|
110,856
|
|
|
|
43
|
|
|
|
(126
|
)
|
|
|
110,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate securities
|
|
|
3,180
|
|
|
|
|
|
|
|
|
|
|
|
3,180
|
|
United States government agencies
|
|
|
5,001
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
4,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
held-to-maturity
investments
|
|
|
8,181
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
8,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
119,037
|
|
|
$
|
43
|
|
|
$
|
(128
|
)
|
|
$
|
118,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The gross realized gain (loss) on sales of
available-for-sale
securities in fiscal 2010 and 2008 were immaterial. There was no
gross realized gain (loss) on sales of
available-for-sale
securities in fiscal 2009. The unrealized losses on
available-for-sale
and
held-to-maturity
securities are primarily due to decreases in the fair value of
debt securities as a result of changes in market interest rates.
The Company has the intent and the ability to hold these
securities for a reasonable period of time sufficient for a
forecasted recovery of fair value up to (or beyond) the initial
cost of the investment. The Company expects to realize the full
value of these investments upon maturity. In addition, the
Company does not believe that it will be required to sell these
securities to meet its cash or working capital requirements or
contractual or regulatory obligations. Therefore, the Company
has determined that the gross unrealized losses on its
securities at June 30, 2010 are temporary in nature. The
following tables provide a breakdown of the
F-20
Companys
available-for-sale
and
held-to-maturity
securities with unrealized losses as of June 30, 2010 and
2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
|
In Loss Position
|
|
|
|
< 12 months
|
|
|
|
|
|
|
Gross
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Available-for-sale
investments:
|
|
|
|
|
|
|
|
|
Corporate securities
|
|
$
|
37,772
|
|
|
$
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
investments
|
|
|
37,772
|
|
|
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
Total investments in loss position
|
|
$
|
37,772
|
|
|
$
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
|
In Loss Position
|
|
|
|
< 12 months
|
|
|
|
|
|
|
Gross
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Available-for-sale
investments:
|
|
|
|
|
|
|
|
|
Corporate securities
|
|
$
|
20,380
|
|
|
$
|
(126
|
)
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
investments
|
|
|
20,380
|
|
|
|
(126
|
)
|
Held-to-maturity
investments:
|
|
|
|
|
|
|
|
|
United States government agencies
|
|
|
4,999
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Total
held-to-maturity
investments
|
|
|
4,999
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Total investments in loss position
|
|
$
|
25,379
|
|
|
$
|
(128
|
)
|
|
|
|
|
|
|
|
|
|
As of June 30, 2010 and 2009, the Company did not have any
securities that have been in a continuous unrealized loss
position for more than twelve months.
The amortized cost and estimated fair value of debt securities
at June 30, 2010 and 2009 by contractual maturities are
shown below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
|
|
Amortized
|
|
|
Estimated
|
|
|
Amortized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Available-for-sale
investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year or less
|
|
$
|
101,529
|
|
|
$
|
101,531
|
|
|
$
|
110,856
|
|
|
$
|
110,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
investments
|
|
|
101,529
|
|
|
|
101,531
|
|
|
|
110,856
|
|
|
|
110,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year or less
|
|
|
8,101
|
|
|
|
8,101
|
|
|
|
5,001
|
|
|
|
4,999
|
|
Due in one year to five years
|
|
|
10,000
|
|
|
|
10,005
|
|
|
|
3,180
|
|
|
|
3,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
held-to-maturity
investments
|
|
|
18,101
|
|
|
|
18,106
|
|
|
|
8,181
|
|
|
|
8,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
119,630
|
|
|
$
|
119,637
|
|
|
$
|
119,037
|
|
|
$
|
118,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 4
FAIR VALUE ACCOUNTING
Fair value is defined as the price that would be received from
selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
When
F-21
determining the fair value measurements for assets and
liabilities, which are required to be recorded at fair value,
the Company considers the principal or most advantageous market
in which the Company would transact and the market-based risk
measurements or assumptions that market participants would use
in pricing the asset or liability, such as inherent risk,
transfer restrictions and credit risk. The Company applies the
fair value hierarchy which has the following three levels of
inputs to measure fair value:
|
|
|
|
|
Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the reporting
entity has the ability to access at the measurement date;
|
|
|
|
Level 2 inputs are inputs other than quoted prices included
within Level 1 that are observable for the asset or
liability, either directly or indirectly; and
|
|
|
|
Level 3 inputs are unobservable inputs for the asset or
liability.
|
The Companys Level 1 financial assets generally
include money market funds. The Companys Level 2
financial assets generally include United States Treasury
securities, United States government agency debt securities,
certificates of deposit, commercial paper, and corporate bonds.
The Company bases the fair value of its financial assets on
pricing from third party sources of market information obtained
through the Companys investment brokers. The Company does
not adjust for or apply any additional assumptions or estimates
to the pricing information it receives from brokers. The
Companys investment brokers obtain pricing data from a
variety of industry standard data providers (e.g., Bloomberg),
and rely on comparable pricing of other securities because the
Level 2 securities that the Company holds are not actively
traded and have fewer observable transactions. The Company
considers this the most reliable information available for the
valuation of the securities. There are no changes in valuation
techniques or related inputs during fiscal 2010.
The Company adopted the authoritative guidance on fair value
measurement for financial assets and financial liabilities
effective June 30, 2008 and for nonfinancial assets and
liabilities, except for items that are recognized or disclosed
at fair value in the financial statements on a recurring basis
(at least annually) effective July 1, 2009.
Items Measured
at Fair Value on a Recurring Basis
The following table presents the Companys financial
assets, excluding accrued interest components, which are
measured at fair value on a recurring basis at June 30,
2010 and 2009, consistent with the fair value hierarchy (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
10,182
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,182
|
|
Certificates of deposit
|
|
|
|
|
|
|
6,823
|
|
|
|
|
|
|
|
6,823
|
|
United States government agencies
|
|
|
|
|
|
|
9,994
|
|
|
|
|
|
|
|
9,994
|
|
United States Treasury
|
|
|
|
|
|
|
41,946
|
|
|
|
|
|
|
|
41,946
|
|
Corporate securities
|
|
|
|
|
|
|
50,768
|
|
|
|
|
|
|
|
50,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets
|
|
$
|
10,182
|
|
|
$
|
109,531
|
|
|
$
|
|
|
|
$
|
119,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
24,813
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
24,813
|
|
Certificates of deposit
|
|
|
|
|
|
|
3,140
|
|
|
|
|
|
|
|
3,140
|
|
United States government agencies
|
|
|
|
|
|
|
5,003
|
|
|
|
|
|
|
|
5,003
|
|
United States Treasury
|
|
|
|
|
|
|
48,971
|
|
|
|
|
|
|
|
48,971
|
|
Corporate securities
|
|
|
|
|
|
|
58,658
|
|
|
|
|
|
|
|
58,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets
|
|
$
|
24,813
|
|
|
$
|
115,772
|
|
|
$
|
|
|
|
$
|
140,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2010 and 2009, the Company did not have any
assets or liabilities measured at fair value on a recurring
basis using significant unobservable inputs (Level 3).
Items Measured
at Fair Value on a Nonrecurring Basis
Certain assets that are subject to nonrecurring fair value
measurement are not included in the table above. These assets
include cost method investments in private companies. The
Company did not record any
other-than-temporary
impairment charges for these investments during the fiscal year
ended June 30, 2010.
NOTE 5
ACCRUED TRANSITIONAL COSTS FOR CONTRACT MANUFACTURING
A summary of accrued transitional costs for contract
manufacturing in fiscal 2010, 2009 and 2008 is as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidation of
|
|
|
|
|
|
|
Workforce
|
|
|
Excess Facilities
|
|
|
|
|
|
|
Reduction
|
|
|
and Other Charges
|
|
|
Total
|
|
|
Balance at June 30, 2007
|
|
$
|
1,234
|
|
|
$
|
|
|
|
$
|
1,234
|
|
Additional charge
|
|
|
553
|
|
|
|
1,732
|
|
|
|
2,285
|
|
Other adjustment
|
|
|
(100
|
)
|
|
|
|
|
|
|
(100
|
)
|
Cash payments
|
|
|
(1,346
|
)
|
|
|
(1,732
|
)
|
|
|
(3,078
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008
|
|
|
341
|
|
|
|
|
|
|
|
341
|
|
Reclassification
|
|
|
(199
|
)
|
|
|
160
|
|
|
|
(39
|
)
|
Cash payments
|
|
|
(142
|
)
|
|
|
|
|
|
|
(142
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2009
|
|
|
|
|
|
|
160
|
|
|
|
160
|
|
Other adjustment
|
|
|
|
|
|
|
(160
|
)
|
|
|
(160
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2010
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On November 1, 2006, OCP reached an agreement with SAE
Magnetics (H.K.) Limited (SAE), a wholly-owned
subsidiary of TDK Corporation, which enabled OCP to begin
manufacture of certain of its product lines in China in July
2007. As a result of the decision to transfer the manufacturing
of certain of its product lines from its Woodland Hills,
California and OCPA facilities to SAE, the Company incurred
$2.3 million transitional costs for contract manufacturing
for the year ended June 30, 2008. These transitional
charges are primarily related to estimated severance and
retention payments, along with expenses incurred to relocate
certain fixed assets and product qualification associated with
the manufacturing of certain of our product lines in China. The
Company did not incur any transitional costs for
F-23
contract manufacturing for the years ended June 30, 2010 or
2009 as the manufacturing transfer was substantially completed
by June 30, 2008.
NOTE 6
ACQUISITIONS
Acquisition
in fiscal 2010
On January 29, 2010, the Company acquired approximately
91.2% of the outstanding shares of Emit Technology Co., Ltd
(Emit), a fiber optic components manufacturer based
in Taiwan. The Company anticipates through this acquisition to
be able to extend its product offering and expand its market
opportunity and geographic exposure. The purchase price is
comprised of approximately $6.2 million in cash, 80% of
which was paid at closing, and the balance was released
subsequently after the closing. Transaction costs were accounted
for as expenses in the periods in which the costs were incurred.
Emits financial results have been included in the
Companys consolidated financial position, results of
operations and cash flow since the acquisition date.
The Company will continue to conduct its business within one
business segment as its organizational structure is not dictated
by product, service lines, geography or customer type.
The acquisition of approximately 91.2% of Emits
outstanding shares of common stock was accounted for in
accordance with ASC Topic 805, Business Combinations
(ASC 805). The fair value of the noncontrolling
interest was determined based on the number of shares held by
minority shareholders multiplied by the offer price.
The purchase price was allocated to tangible and intangible
assets acquired and liabilities assumed based on their estimated
fair values on the acquisition date, with the remaining
unallocated purchase price recorded as goodwill.
Managements estimates of fair value are based upon
assumptions believed to be reasonable, but which are inherently
uncertain and unpredictable. Such valuations require management
to make significant estimates and assumptions, especially with
respect to intangible assets. Based on assumptions determined by
management and valuation performed by third parties, the
purchase price was allocated to various asset classes. The
following table summarizes the consideration paid for Emit and
the amounts of the assets acquired and liabilities assumed
recognized at the acquisition date, as well as the fair value at
the acquisition date of the noncontrolling interest in Emit (in
thousands):
|
|
|
|
|
Cash
|
|
$
|
6,215
|
|
|
|
|
|
|
Fair value of total consideration
|
|
$
|
6,215
|
|
|
|
|
|
|
|
|
|
|
|
Net working capital
|
|
$
|
2,657
|
|
Property, plant, and equipment
|
|
|
4,162
|
|
Other non-current assets
|
|
|
188
|
|
Developed technology
|
|
|
410
|
|
Customer relationships
|
|
|
190
|
|
Trade name
|
|
|
180
|
|
Other non-current liabilities
|
|
|
(1,397
|
)
|
|
|
|
|
|
Total identifiable net assets
|
|
|
6,390
|
|
Fair value of noncontrolling interest
|
|
|
(597
|
)
|
Goodwill
|
|
|
422
|
|
|
|
|
|
|
Total
|
|
$
|
6,215
|
|
|
|
|
|
|
Purchased identifiable intangible assets are primarily comprised
of developed technology, customer relationships, and trade names
and are amortized using the straight-line method over their
respective
F-24
useful lives of between 3 years to 7 years. The
goodwill recognized is not deductible for income tax purposes.
Emits financial results for the periods prior to the
acquisition were not material to the Companys results of
operation, and accordingly, pro forma results of operations have
not been presented.
The noncontrolling interest in Emit is included in other
non-current liabilities in the Companys consolidated
balance sheet as it is not significant. Losses attributable to
noncontrolling interest for the year ended June 30, 2010
were not material to the respective periods and were included as
a component of interest and other income, net in the
Companys consolidated statements of operations for the
period.
Subsequent to the acquisition date, the Company acquired
additional 2.9% of Emits outstanding shares for
approximately $195,000. As a result, the remaining shares that
the Company did not own, constituting approximately 5.9% of
Emits outstanding shares, will remain outstanding and will
continued to be held by the Emit shareholders.
As part of the acquisition of Emit, Company assumed a liability
for a defined benefits plan. As of June 30, 2010, there is
a liability of $589,000 and is included in other non-current
liabilities on the consolidated balance sheet.
On June 8, 2010, the Company acquired substantially all of
the assets of Oridus, Inc. (Oridus), a private
company located in California, to expand its product offerings.
Under the terms of the purchase agreement, Oplink acquired all
of Oridus right, title and interest in assets, properties
and rights, except cash and cash equivalent, and did not assume
any liabilities other than any performance obligations relating
to assumed customer contracts. The consideration for the
purchased assets consisted of $750,000 in cash. As the result of
the acquisition, the Company recorded $600,000 of identifiable
intangible assets and $150,000 of goodwill. The goodwill
recognized is deductible for income tax purposes.
Acquisitions
in fiscal 2008
In November 2007, the preliminary accounting for the acquisition
of approximately 58% of OCPs outstanding shares of common
stock was updated, which resulted in an increase to the purchase
price to $102.9 million from $99.7 million to include
assumed liabilities of $3.2 million. The assumed
liabilities are for costs incurred to close down OCP facilities
that are no longer needed, costs incurred to reduce the number
of employees, costs incurred as a result of
change-in-control
provisions for OCP executives and costs incurred to cancel
pre-existing contracts. The liabilities incurred are included in
the purchase price. The allocation of the revised purchase price
of $102.9 million was updated to reflect updated valuations
for inventory and fixed assets and assumed liabilities as
follows:
|
|
|
|
|
Net working capital
|
|
$
|
87,235
|
|
Net fixed assets
|
|
|
3,696
|
|
Other net assets
|
|
|
2,951
|
|
Identifiable intangible assets
|
|
|
9,012
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
102,894
|
|
|
|
|
|
|
On October 31, 2007, Oplink completed the acquisition of
the remaining 42% of outstanding shares in common stock of OCP
that it did not already own, by means of a merger between OCP
and a wholly-owned subsidiary of Oplink. The merger was approved
on October 31, 2007 by OCP shareholders holding more than
two thirds of OCP common stock not held by Oplink. The merger
became effective immediately after the close of trading on
October 31, 2007. As a result of the merger, OCP became a
wholly-owned subsidiary of Oplink. Pursuant to the merger
agreement, Oplink paid $1.65 per share in cash, or approximately
$79.4 million in the aggregate, to former holders of the
42% of OCP common stock not held by Oplink. In connection with
the merger, Oplink assumed 5,420,687 outstanding stock
F-25
options issued pursuant to OCPs stock option plans and
converted them into 594,679 options to purchase shares of Oplink
common stock pursuant to conversion terms stated in the merger
agreement.
The acquisition of 48,107,148 shares of OCP common stock,
which represents the remaining 42% of OCPs outstanding
shares of common stock that Oplink did not already own has been
accounted for as a business combination using the purchase
method of accounting. Assets acquired and liabilities assumed
were recorded at their fair values as of October 31, 2007,
which was the acquisition completion date.
The purchase price for the remaining 42% of OCPs
outstanding shares of common stock on October 31, 2007 that
Oplink did not already own was comprised of (in thousands):
|
|
|
|
|
Cash
|
|
$
|
79,379
|
|
Fair value of assumed vested stock options
|
|
|
910
|
|
Transaction costs
|
|
|
1,406
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
81,695
|
|
|
|
|
|
|
The purchase price for the remaining 42% stake in OCP was
allocated to OCPs net tangible and identifiable intangible
assets based on their estimated fair values. Goodwill is
recorded as a result of the excess of purchase price for the 42%
of OCPs outstanding common stock over the fair values of
net tangible and identifiable intangible assets. The allocation
of purchase price for the remaining 42% stake in OCP is shown
below (in thousands):
|
|
|
|
|
Net working capital
|
|
$
|
47,503
|
|
Net fixed assets
|
|
|
5,946
|
|
Other net assets
|
|
|
11,299
|
|
Identifiable intangible assets
|
|
|
6,692
|
|
Goodwill
|
|
|
10,255
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
81,695
|
|
|
|
|
|
|
The following unaudited pro forma information presents a summary
of the Companys consolidated results of operations as if
the OCP acquisition had taken place at the beginning of each
period presented (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
Net revenues
|
|
$
|
176,253
|
|
|
$
|
170,598
|
|
Net (loss) income
|
|
$
|
(12,104
|
)
|
|
$
|
(18,755
|
)
|
Net (loss) income per share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.56
|
)
|
|
$
|
(0.82
|
)
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(0.56
|
)
|
|
$
|
(0.82
|
)
|
|
|
|
|
|
|
|
|
|
Shares used in per share calculations
|
|
|
|
|
Basic
|
|
|
21,533
|
|
|
|
22,864
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
21,533
|
|
|
|
22,864
|
|
|
|
|
|
|
|
|
|
|
Depreciation of fixed assets and amortization of intangible
assets were adjusted to reflect the fair values of the assets.
Noncontrolling interest was adjusted to reflect OCP becoming a
wholly-owned subsidiary of Oplink at the beginning of each
period presented. These results are presented for illustrative
purposes only and are not necessarily indicative of the actual
operating results that would have occurred if Oplink and OCP had
been a consolidated entity during the periods presented.
F-26
NOTE 7
GOODWILL AND INTANGIBLE ASSETS, NET
The following table presents details of the intangible assets
acquired as a result of acquisitions as of June 30, 2010
and 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
Gross
|
|
|
Accumulated
|
|
|
|
|
June 30, 2010
|
|
Useful Life
|
|
|
Amount
|
|
|
Amortization
|
|
|
Net
|
|
|
|
(In years)
|
|
|
|
|
|
|
|
|
|
|
|
Technology
|
|
|
4-6
|
|
|
$
|
9,592
|
|
|
$
|
6,099
|
|
|
$
|
3,493
|
|
Customer relationships
|
|
|
3-7
|
|
|
|
5,671
|
|
|
|
3,882
|
|
|
|
1,789
|
|
Trade name
|
|
|
3-6
|
|
|
|
1,775
|
|
|
|
760
|
|
|
|
1,015
|
|
Backlog
|
|
|
1
|
|
|
|
188
|
|
|
|
105
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
17,226
|
|
|
$
|
10,846
|
|
|
$
|
6,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
Gross
|
|
|
Accumulated
|
|
|
|
|
June 30, 2009
|
|
Useful Life
|
|
|
Amount
|
|
|
Amortization
|
|
|
Net
|
|
|
|
(In years)
|
|
|
|
|
|
|
|
|
|
|
|
Technology
|
|
|
4
|
|
|
$
|
8,673
|
|
|
$
|
3,903
|
|
|
$
|
4,770
|
|
Trade name
|
|
|
6
|
|
|
|
1,595
|
|
|
|
474
|
|
|
|
1,121
|
|
Customer relationships
|
|
|
3-4
|
|
|
|
5,481
|
|
|
|
2,524
|
|
|
|
2,957
|
|
Backlog
|
|
|
1
|
|
|
|
97
|
|
|
|
97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
15,846
|
|
|
$
|
6,998
|
|
|
$
|
8,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents details of the amortization expense
of intangible assets as reported in the consolidated statements
of operations (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30,
|
|
Reported as:
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Cost of revenues
|
|
$
|
2,197
|
|
|
$
|
2,162
|
|
|
$
|
1,823
|
|
Operating expenses
|
|
|
1,651
|
|
|
|
1,648
|
|
|
|
1,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,848
|
|
|
$
|
3,810
|
|
|
$
|
3,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The future amortization of intangible assets is as follows (in
thousands):
|
|
|
|
|
Fiscal Years Ending June 30,
|
|
Amount
|
|
|
2011
|
|
$
|
4,003
|
|
2012
|
|
|
1,309
|
|
2013
|
|
|
484
|
|
2014
|
|
|
247
|
|
2015
|
|
|
177
|
|
After 2015
|
|
|
160
|
|
|
|
|
|
|
|
|
$
|
6,380
|
|
|
|
|
|
|
Goodwill and intangible assets with indefinite useful lives are
required to be tested for impairment at least annually or sooner
whenever events or changes in circumstances indicate that they
may be impaired. Intangible assets with definite lives are
required to be amortized over their estimated useful lives and
reviewed for impairment whenever events or changes in
circumstances indicate an assets carrying value may not be
recoverable.
F-27
The Company had goodwill of $572,000 on its consolidated balance
sheets at June 30, 2010, which was acquired as part of
Oplinks acquisitions of Emit and Oridus in fiscal 2010.
There was no goodwill recorded on the Companys
consolidated balance sheets at June 30, 2009.
NOTE 8
OTHER INVESTMENTS
The Company had cost method investments of $400,000 included in
other assets on its consolidated balance sheet at June 30,
2010 and 2009, representing an investment in a
start-up
company.
NOTE 9
BALANCE SHEET COMPONENTS (IN THOUSANDS)
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
Accounts receivable, net:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
30,192
|
|
|
$
|
29,659
|
|
Less: Allowance for doubtful accounts
|
|
|
(464
|
)
|
|
|
(636
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29,728
|
|
|
$
|
29,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories, net:
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
13,744
|
|
|
$
|
7,809
|
|
Work-in-process
|
|
|
7,158
|
|
|
|
2,222
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,902
|
|
|
$
|
10,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net:
|
|
|
|
|
|
|
|
|
Production and engineering equipment
|
|
$
|
42,780
|
|
|
$
|
49,920
|
|
Computer hardware and software
|
|
|
7,654
|
|
|
|
7,352
|
|
Building and leasehold improvements
|
|
|
26,296
|
|
|
|
21,819
|
|
Land
|
|
|
4,168
|
|
|
|
1,949
|
|
Construction in progress
|
|
|
|
|
|
|
1,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,898
|
|
|
|
82,517
|
|
Less: Accumulated depreciation and amortization
|
|
|
(47,535
|
)
|
|
|
(52,199
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
33,363
|
|
|
$
|
30,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities:
|
|
|
|
|
|
|
|
|
Payroll and related expenses
|
|
$
|
3,792
|
|
|
$
|
3,120
|
|
Employee withholdings and related expenses
|
|
|
531
|
|
|
|
586
|
|
Accrued professional fees
|
|
|
1,168
|
|
|
|
1,561
|
|
Accrued sales commission
|
|
|
486
|
|
|
|
535
|
|
Accrued sales return
|
|
|
541
|
|
|
|
595
|
|
Accrued warranty
|
|
|
421
|
|
|
|
371
|
|
Advance deposits from customers
|
|
|
480
|
|
|
|
123
|
|
Other
|
|
|
4,117
|
|
|
|
3,153
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,536
|
|
|
$
|
10,044
|
|
|
|
|
|
|
|
|
|
|
NOTE 10
ACCRUED WARRANTY
The Company provides reserves for the estimated cost of product
warranties at the time revenues are recognized based on
historical experience of known product failure rates and
expected material and labor
F-28
costs to provide warranty services. The Company generally
provides a one-year warranty on its products. Additionally, from
time to time, specific warranty accruals may be made if
unforeseen technical problems arise. Alternatively, if estimates
are determined to be greater than the actual amounts necessary,
the Company may reverse a portion of such provisions in future
periods.
Changes in the warranty liability, which is included as a
component of Accrued liabilities on the consolidated
balance sheet as disclosed in Note 9, is as follows (in
thousands):
|
|
|
|
|
Balance at June 30, 2007
|
|
$
|
445
|
|
Accruals for warranties issued during the year
|
|
|
160
|
|
Adjustments related to pre-existing warranties including
expirations and changes in estimates
|
|
|
(2
|
)
|
Cost of warranty repair
|
|
|
(317
|
)
|
|
|
|
|
|
Balance at June 30, 2008
|
|
|
286
|
|
Accruals for warranties issued during the year
|
|
|
287
|
|
Adjustments related to pre-existing warranties including
expirations and changes in estimates
|
|
|
129
|
|
Cost of warranty repair
|
|
|
(331
|
)
|
|
|
|
|
|
Balance at June 30, 2009
|
|
|
371
|
|
Accruals for warranties issued during the year
|
|
|
230
|
|
Adjustments related to pre-existing warranties including
expirations and changes in estimates
|
|
|
116
|
|
Cost of warranty repair
|
|
|
(296
|
)
|
|
|
|
|
|
Balance at June 30, 2010
|
|
$
|
421
|
|
|
|
|
|
|
NOTE 11
INCOME TAXES
Consolidated income (loss) before provision for income taxes
includes
non-U.S. income
of approximately $3,878,000 and $7,033,000 for the years ended
June 30, 2010 and 2009, respectively, and
non-U.S. loss
of approximately $1,582,000 for the year ended June 30,
2008. The Company recorded tax provisions of $1,645,000,
$2,074,000 and $1,045,000 for the years ended June 30,
2010, 2009 and 2008, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Current income tax expense (benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(181
|
)
|
|
$
|
228
|
|
|
$
|
525
|
|
State
|
|
|
386
|
|
|
|
442
|
|
|
|
134
|
|
Foreign
|
|
|
697
|
|
|
|
1,404
|
|
|
|
386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
902
|
|
|
|
2,074
|
|
|
|
1,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
432
|
|
|
|
|
|
|
|
|
|
State
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provision for income taxes
|
|
$
|
1,645
|
|
|
$
|
2,074
|
|
|
$
|
1,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-29
Deferred tax assets (liabilities) consist of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
31,504
|
|
|
$
|
37,082
|
|
Accruals and reserves
|
|
|
16,849
|
|
|
|
17,179
|
|
Credit carryforwards
|
|
|
7,869
|
|
|
|
7,152
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax assets
|
|
|
56,222
|
|
|
|
61,413
|
|
Valuation allowance
|
|
|
(53,665
|
)
|
|
|
(57,257
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
2,557
|
|
|
|
4,156
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
(2,691
|
)
|
|
|
(3,724
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net deferred tax (liabilities) assets
|
|
$
|
(134
|
)
|
|
$
|
432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded as:
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
$
|
118
|
|
|
$
|
901
|
|
Other assets
|
|
|
119
|
|
|
|
|
|
Other non-current liabilities
|
|
|
(371
|
)
|
|
|
(469
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net deferred tax (liabilities) assets
|
|
$
|
(134
|
)
|
|
$
|
432
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of the statutory federal income tax rate to the
Companys effective tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Tax at federal statutory rate
|
|
|
35
|
%
|
|
|
35
|
%
|
|
|
35
|
%
|
State, net of federal benefit
|
|
|
2
|
%
|
|
|
(2
|
)%
|
|
|
(1
|
)%
|
Research credit carryforward
|
|
|
(0
|
)%
|
|
|
1
|
%
|
|
|
|
|
Stock compensation
|
|
|
4
|
%
|
|
|
(9
|
)%
|
|
|
(9
|
)%
|
Foreign rate differences
|
|
|
0
|
%
|
|
|
6
|
%
|
|
|
7
|
%
|
Change in valuation allowance
|
|
|
(27
|
)%
|
|
|
(22
|
)%
|
|
|
53
|
%
|
Intangible impairment
|
|
|
|
|
|
|
(35
|
)%
|
|
|
|
|
Purchase accounting adjustments
|
|
|
|
|
|
|
|
|
|
|
(16
|
)%
|
Permanent differences and true ups
|
|
|
|
|
|
|
|
|
|
|
(2
|
)%
|
Unbenefitted pre-acquisition losses
|
|
|
|
|
|
|
|
|
|
|
(58
|
)%
|
Minority Interest
|
|
|
|
|
|
|
|
|
|
|
(18
|
)%
|
Other
|
|
|
(1
|
)%
|
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
13
|
%
|
|
|
(18
|
)%
|
|
|
(9
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on the available objective evidence at June 30, 2010,
management believes that sufficient uncertainty exists regarding
the realizability of the deferred tax assets such that a
valuation allowance has been recorded. However, the valuation
allowance against deferred tax assets at June 30, 2010 and
2009 was less than 100% as management believes that a portion of
the deferred tax assets will be realized. The majority of
realizable deferred tax assets at June 30, 2010 are as a
result of the acquisition of Emit.
Included in the June 30, 2010 valuation allowance is
approximately $3.6 million related to stock options, which
will be credited to stockholders equity when realized for
tax purposes. The change in
F-30
valuation allowance for the years ended June 30, 2010, 2009
and 2008 was a decrease of $3.6 million, $2.1 million
and $3.2 million, respectively.
At June 30, 2010, the Company has approximately
$66.4 million of federal and $61.3 million of state
net operating loss carryforwards. Because of certain changes in
ownership of the Company in 1999 and 1998, there is an annual
limitation of approximately $600,000 on the use of the net
operating loss carryforwards generated prior to 1999 pursuant to
section 382 of the Internal Revenue Code.
The federal net operating loss carryforwards will expire through
2027 and the California net operating loss carryforwards will
expire through 2017.
As of June 30, 2010, the Company also had research and
development tax credit carryforwards for federal and California
income tax return purposes of approximately $4.4 million
and $2.2 million, respectively, available to reduce future
income subject to income taxes. The minimum tax credit
carryforwards for federal and California is $1.1 million
and $82,000, respectively. The Company also has California
Manufacturing Credit carryforwards of $1.1 million which
will expire through 2013. The federal research and development
tax credit carryforwards will expire through 2029. The
California research and development credit carries forward
indefinitely.
The Companys China subsidiaries have been granted tax
holidays beginning in 1999. Under the tax holiday, a subsidiary
will have full tax exemption for two years and a reduced tax
rate for the next three years. Zhuhai FTZ Oplinks tax
holiday will expire on January 1, 2012. Shanghai Oplink is
under tax holiday now and the tax holiday will expire on
January 1, 2013.
A reconciliation of the beginning and ending amount of
unrecognized tax benefits is as follows (in thousands):
|
|
|
|
|
Balance at July 1, 2007
|
|
$
|
766
|
|
Increases related to tax positions taken during prior years
|
|
|
|
|
Increases related to tax positions taken during current year
|
|
|
|
|
Settlements
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008
|
|
|
766
|
|
Increases related to tax positions taken during prior years
|
|
|
2,942
|
|
Increases related to tax positions taken during current year
|
|
|
1,118
|
|
Settlements
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2009
|
|
|
4,826
|
|
Increases related to tax positions taken during prior years
|
|
|
46
|
|
Increases related to tax positions taken during current year
|
|
|
360
|
|
Settlements
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2010
|
|
$
|
5,232
|
|
|
|
|
|
|
If the ending balance of $5,232,000 of unrecognized tax benefits
at June 30, 2010 were recognized, approximately $2,832,000
would affect the effective income tax rate.
The Companys accounting policy is to include interest and
penalties related to unrecognized tax benefits within
Oplinks provision for income taxes. The Company had
accrued interest and penalties of approximately $583,000 and
$280,000 at June 30, 2010 and 2009, respectively.
Although the Company files U.S. federal, various state, and
foreign tax returns, the Companys only major tax
jurisdictions are the United States, California, and China. The
tax years 2004 to 2009 remain open in several jurisdictions.
F-31
The Company has made no provision for U.S. income taxes on
undistributed earnings of certain foreign subsidiaries because
it is the Companys intention to permanently reinvest such
earnings in its foreign subsidiaries. If such earnings were
distributed, the Company would be subject to additional
U.S. income tax expense. Determination of the amount of
unrecognized deferred income tax liability related to these
earnings is not practicable.
NOTE 12
STOCKHOLDERS EQUITY
Authorized
Shares
On November 7, 2005, the Company announced a
one-for-seven
reverse split of the Companys common stock. The effective
date of the reverse stock split was November 9, 2005. All
share, share equivalent and per share amounts have been adjusted
to reflect the reverse stock split. On November 8, 2006,
the Companys stockholders approved the amendment to the
Companys certificate of incorporation reducing the number
of shares of capital stock the Company is authorized to issue
from 420,000,000 shares to 39,000,000 shares. The
Companys amended and restated certificate of incorporation
was amended on January 11, 2007 to reflect the reduction in
authorized shares.
The Company is authorized to issue 5,000,000 shares of
undesignated preferred stock, $0.001 par value per share,
of which 4,000,000 shares have been designated as
Series A Junior Participating Preferred Stock and no shares
were issued and outstanding as of June 30, 2010 and 2009.
Preferred stock may be issued from time to time in one or more
series. The Board of Directors is authorized to determine the
rights, preferences, privileges and restrictions granted to and
imposed upon any wholly unissued series of preferred stock and
to fix the number of shares of any series of preferred stock and
the designation of any such series without any vote or action by
the Companys stockholders.
Purchase
Rights Plan
On March 18, 2002, the Board of Directors of Oplink
approved the adoption of a Share Purchase Rights Plan (the
Plan). Terms of the Plan provide for a dividend
distribution of one preferred share purchase right (a
Right) for each outstanding share of common stock,
par value $0.001 per share of Oplink. The dividend was paid on
April 3, 2002 (the Record Date) to the
stockholders of record on that date. Each Right entitles the
registered holder to purchase from Oplink one one-hundredth of a
share of Series A Junior Participating Preferred Stock, par
value $0.001 per share (the Preferred Shares), at a
price of $112.00 per one one-hundredth of a Preferred Share (the
Purchase Price), subject to adjustment. The Rights
will be exercisable only after public announcement that a person
or group has become the beneficial owner of 15% or more of
Oplinks common stock (a 15% holder) or
10 business days after a person or group commences a tender
or exchange offer which would result in the offeror becoming a
15% holder. If a person or group becomes a 15% holder, then each
Right (other than Rights held by a 15% holder and certain
related parties, which will be voided) will be adjusted so that
upon exercise the holder will have the right to receive that
number of shares of Oplinks common stock having a value of
twice the exercise price of the Right. In addition, if following
the public announcement of the existence of a 15% holder Oplink
is involved in certain business combination transactions, each
Right (other than Rights which have previously been voided) will
represent the right to purchase, at the exercise price, common
stock of the acquiring entity having a value of twice the
exercise price at the time. The Board of Directors will also
have the right, after a person or group becomes a 15% holder, to
cause each Right (other than Rights held by the 15% holder,
which will be voided) to be exchanged for one share of
Oplinks common stock. The Board of Directors is entitled
to redeem the Rights at $0.01 per Right at any time prior to the
public announcement of the existence of a 15% holder. The Rights
are scheduled to expire at the close of business on
March 18, 2012.
F-32
Repurchase
of Common Stock
On August 14, 2008, Oplinks Board of Directors
authorized a program to repurchase up to $20 million of the
Companys common stock. $3.5 million of common stock
was repurchased under this repurchase plan during the year ended
June 30, 2009. The remaining balance was completed during
the fiscal year ended June 30, 2010.
On May 25, 2010, Oplinks Board of Directors
authorized a program to repurchase up to $40 million of the
Companys common stock. Repurchases under the program will
be made in open market or privately negotiated transactions in
compliance with Securities and Exchange Commission
Rule 10b-18,
subject to market conditions, applicable legal requirements and
other factors. $5.5 million of its common stock was
repurchased under this repurchase plan during the fiscal year
ended June 30, 2010.
NOTE 13
RELATED PARTY TRANSACTIONS
Loans
to Officers
In August 2000, an executive officer borrowed from Oplink,
pursuant to a full recourse promissory note, the principal
amount of $400,000 at an annual interest rate of 6.5%.
Originally, this promissory note provided that the outstanding
principal amount and any accrued and unpaid interest would be
due and payable in two equal installments on August 16,
2002 and August 16, 2005. The executive officer and Oplink
subsequently amended the promissory note on March 18, 2002
to provide for the outstanding principal amount and any accrued
and unpaid interest to become due and payable in full on
June 30, 2007. As of June 30, 2009, the outstanding
principal balance was $45,000. As of June 30, 2010, the
outstanding principal balance was $15,000. Oplink believes that
the balance of the note will be paid. The note is recorded as a
component of other assets on the consolidated balance sheets.
In March 2001, an executive officer borrowed from Oplink,
pursuant to a full recourse promissory note, the principal
amount of $160,000 at an annual interest rate of 8.5%. The
promissory note, which had a balance of $100,000 as of
March 31, 2002, was amended and was due and payable in four
equal installments every six months from the date of new
employment by the former executive officer. As of June 30,
2010 and 2009, the outstanding principal balance of the note
receivable from this former executive officer was approximately
$20,000 and was recorded as a component of other assets on the
consolidated balance sheets. Oplink believes that the balance of
the note will be paid.
Acquisition
of Oridus, Inc.
On June 8, 2010, Oplink acquired substantially all of the
assets of Oridus, a private company located in California, for a
purchase price of $750,000 in cash. Oplink did not assume any of
Oridus liabilities other than any performance obligations
relating to assumed customer contracts. Chieh Chang, a member of
Oplinks board of directors, is also a member of the board
of directors of Oridus. In addition, Mr. Chang was a
creditor of Oridus, having extended loans to Oridus totaling
approximately $395,000. Oridus is using the proceeds from the
sale of assets to partially repay Mr. Chang and its other
creditors. The proceeds are insufficient to pay all of
Oridus creditors in full. The total amount to be received
by Mr. Chang in repayment of his loans to Oridus will be
approximately $20,000.
NOTE 14
COMMITMENTS AND CONTINGENCIES
Indemnification
Agreements
The Company has entered into certain indemnification
arrangements in the ordinary course of business. Pursuant to
these arrangements, the Company indemnifies, holds harmless, and
agrees to reimburse the indemnified parties, generally their
business partners or customers, for losses suffered or
F-33
incurred by the indemnified party in connection with any patent,
or any copyright or other intellectual property infringement
claim by any third party with respect to the Companys
products. Based on negotiation and special circumstances of each
case, the terms of the agreements may vary. The maximum
potential amount of future payments the Company could be
required to make under these agreements is unlimited. The
Company has never incurred costs to defend lawsuits or settle
claims related to these indemnification agreements. As a result,
the Company believes the estimated fair value of these
agreements is minimal.
The Company has entered into indemnification agreements with its
directors and officers that may require the Company to indemnify
its directors and officers against liabilities that may arise by
reason of their status or service as directors or officers,
other than liabilities arising from willful misconduct of a
culpable nature; to advance their expenses incurred as a result
of any proceeding against them as to which they could be
indemnified; and to obtain directors and officers
insurance if available on reasonable terms, which the Company
currently has in place.
Purchase
Obligations
Through the normal course of business, the Company purchases or
places orders for the necessary materials of its products from
various suppliers and the Company commits to purchase products
where it would incur a penalty if the agreement was canceled.
The Company estimates that its contractual obligations at
June 30, 2010 were $23.9 million, of which all are due
within the following twelve months. This amount does not include
contractual obligations recorded on the consolidated balance
sheets as current liabilities.
Operating
Leases
The Company leases some facilities under non-cancelable
operating leases. The leases require the Company to pay taxes,
maintenance and repair costs. Future minimum lease payments
under the Companys non-cancelable operating leases are as
follows (in thousands):
|
|
|
|
|
Year Ending June 30,
|
|
|
|
|
2011
|
|
$
|
236
|
|
2012
|
|
|
57
|
|
2013
|
|
|
15
|
|
|
|
|
|
|
|
|
$
|
308
|
|
|
|
|
|
|
Rent expense for all operating leases was approximately
$522,000, $726,000 and $1.6 million in fiscal 2010, 2009
and 2008, respectively.
Capital
Expenditure
In July 2008, the Company entered into a capital expenditure
commitment of approximately $2.1 million which would be
funded from available working capital. As of June 30, 2010,
the remaining unpaid balance was approximately $108,000. The
future payments are as follows (in thousands):
|
|
|
|
|
Year Ending June 30,
|
|
|
|
|
2011
|
|
$
|
86
|
|
2012
|
|
|
|
|
2013
|
|
|
22
|
|
|
|
|
|
|
|
|
$
|
108
|
|
|
|
|
|
|
F-34
Litigation
Finisar
Corporation v. Source Photonics, Inc., et al.
On January 5, 2010, Finisar Corporation, or Finisar, filed
a complaint in the United States District Court for the Northern
District of California against Source Photonics, Inc., MRV
Communications, Inc., NeoPhotonics Corporation and the Company,
or collectively, the co-defendants. In the complaint, Finisar
alleged infringement of certain of its U.S. patents arising
from the co-defendants respective manufacture,
importation, use, sale of or offer to sell certain optical
transceiver products in the United States. Finisar sought
to recover unspecified damages, up to treble the amount of
actual damages, together with attorneys fees, interest and
costs. Finisar alleged that at least some of the patents
asserted are a part of certain digital diagnostic standards for
optoelectronics transceivers and, therefore, are being utilized
in such digital diagnostic standards. On March 23, 2010,
the Company filed an answer to the complaint and counterclaims
against Finisar. On May 5, 2010, the court dismissed
without prejudice all co-defendants (including the Company)
except Source Photonics, Inc., on grounds that such claims
should have been asserted in four separate lawsuits, one against
each co-defendant. This dismissal without prejudice does not
prevent Finisar from bringing a new similar lawsuit against the
Company. The Company and Finisar have agreed to toll its
respective claims and not to refile any claims against each
other until one or more specified events occur resulting in the
partial or complete resolution of the litigation between Source
Photonics and Finisar.
If Finisar brings a new similar lawsuit against the Company, and
if the Company is unsuccessful in its defense of the Finisar
patent infringement claims, a license to use the allegedly
infringing technology may not be available to the Company on
commercially reasonable terms and therefore may limit or
preclude the Company from competing in the market for optical
transceivers in the United States, which could materially harm
its business.
Although the Company believes that it would have meritorious
defenses to the infringement allegations and intend to defend
any new similar lawsuit vigorously, there can be no assurance
that it will be successful in its defense. Even if the Company
is successful, it may incur substantial legal fees and other
costs in defending the lawsuit. Further, a new lawsuit, if
brought, would be likely to divert the efforts and attention of
the Companys management and technical personnel, which
could harm its business.
IPO
Securities Litigation
In November 2001, Oplink and certain of its officers and
directors were named as defendants in a class action shareholder
complaint filed in the United States District Court for the
Southern District of New York. In the amended complaint, the
plaintiffs alleged that Oplink, certain of Oplinks
officers and directors and the underwriters of Oplinks
initial public offering (IPO) violated
Section 11 of the Securities Act of 1933 based on
allegations that Oplinks registration statement and
prospectus failed to disclose material facts regarding the
compensation to be received by, and the stock allocation
practices of, the IPO underwriters. Similar complaints were
filed by plaintiffs against hundreds of other public companies
that went public in the late 1990s and early 2000s and their IPO
underwriters (collectively, the IPO Lawsuits).
During the summer of 2008, the parties engaged in a formal
mediation process to discuss a global resolution of the IPO
Lawsuits. Ultimately, the parties reached an agreement to settle
all 309 cases against all defendants, and entered into a
settlement agreement in April 2009. The settlement provides for
a $586 million recovery in total, divided among the 309
cases. The court issued a final order approving the settlement
in October 2009. Oplinks share of the settlement was
$327,458. A number of appeals have been filed with the Second
Circuit Court of Appeals, challenging the fairness of the
settlement. A number of shareholder plaintiffs have also filed
petitions for leave to appeal the class certification portion of
Judge Scheindlins ruling. These appeals and petitions are
pending, and the deadline for appellants to file opening briefs
is October 6, 2010.
F-35
IPO 16(b)
Claim
In October 2007, Vanessa Simmonds filed in the United States
District Court for the Western District of Washington a
Complaint for Recovery of Short Swing Profits Under
Section 16(b) of the Securities Exchange Act of 1934
against Bank of America and JP Morgan Chase & Company
as defendants, and against Oplink as a nominal defendant. The
complaint did not seek recovery of damages or other relief
against Oplink. The Complaint alleged that in the years 2000 and
2001 the underwriters and unnamed officers, directors and
principal shareholders of Oplink acted as a group by
coordinating their efforts to undervalue the IPO price of Oplink
and to thereafter inflate the aftermarket price throughout the
six month
lock-up
period. The Complaint further alleges that the underwriters
profited by (a) sharing in profits of customers to whom
they had made IPO allocations; (b) allocating shares of
Oplink to insiders at other companies from whom the underwriters
expected to receive additional work in return; and (c) by
creating the opportunity (through the alleged laddering
practices) for Oplinks directors, officers and other
insiders to profit through their sale of stock after the
lock-up
period in return for future business for the underwriter.
The complaint against Oplink and its underwriters was one of a
total of 54 nearly identical lawsuits filed by Ms. Simmonds
in October 2007 against companies and underwriters that had
completed IPOs in the early 2000s. All of these cases were
transferred to one judge at the U.S. District Court. In
March 2009, the judge dismissed the complaints, ruling that the
plaintiff made an insufficient demand on the issuers and that
the cases did not merit tolling the statute of limitations. The
plaintiff filed notices of appeal in each of the 54 cases in
April 2009, and the appeals were consolidated in June 2009 in
the Ninth Circuit Court of Appeals. Each of Ms. Simmonds
and the issuer and underwriter defendants has submitted their
appeal briefs to the court. Oral arguments on the appeals have
been scheduled for October 5, 2010.
Other
Matters
The Company is subject to legal proceedings and claims, either
asserted or unasserted, that arise in the ordinary course of
business. While the outcome of these proceedings and claims
cannot be predicted with certainty, management does not believe
that the outcome of any of these legal matters will have a
material adverse effect on Oplinks consolidated financial
position, results of operations or cash flows.
NOTE 15
SEGMENT REPORTING
The Company has determined that it has one reportable segment:
fiber optic component and subsystem product sales. This segment
consists of organizations located in the United States and
China, which develop, manufacture,
and/or
market fiber optic networking components.
The geographic breakdown of revenues by customers bill-to
location is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
46,963
|
|
|
$
|
48,154
|
|
|
$
|
72,098
|
|
China
|
|
|
34,698
|
|
|
|
34,529
|
|
|
|
31,713
|
|
Europe
|
|
|
24,012
|
|
|
|
24,001
|
|
|
|
23,664
|
|
Japan
|
|
|
16,624
|
|
|
|
17,462
|
|
|
|
17,783
|
|
Canada
|
|
|
4,163
|
|
|
|
6,949
|
|
|
|
17,912
|
|
Asia-Pacific (excluding China and Japan)
|
|
|
12,349
|
|
|
|
12,637
|
|
|
|
13,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
138,809
|
|
|
$
|
143,732
|
|
|
$
|
176,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-36
The breakdown of property, plant and equipment, net by
geographical location is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
United States
|
|
$
|
5,959
|
|
|
$
|
7,492
|
|
Asia
|
|
|
27,404
|
|
|
|
22,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
33,363
|
|
|
$
|
30,318
|
|
|
|
|
|
|
|
|
|
|
NOTE 16
401(K) PLAN
In 1997, the Company adopted the Oplink 401(k) Plan. This plan
covers substantially all employees who meet minimum age and
service requirements and allows participants to defer a portion
of their annual compensation on a pretax basis, pursuant to
Section 401(k) of the Internal Revenue Code. All employees
are eligible to participate beginning one month after
commencement of employment. There are no employer matching
contributions under the plan.
OCP adopted the Optical Communications, Inc. 401(k) Profit
Sharing Plan in 1992 (the OCP 401(k) Plan).
Since January 1, 2009, no employee contributions have been
made to the OCP 401(k) Plan, and all former OCP employees
currently employed with Oplink are eligible to participate in
the Oplink 401(k) Plan.
NOTE 17
SUBSEQUENT EVENTS
The Company has reviewed and evaluated events subsequent to
June 30, 2010 through the date that the consolidated
financial statements were issued.
In August 2010, the Compensation Committee of Oplinks
Board of Directors approved the grant under the 2009 Equity
Incentive Plan of a total of 201,800 restricted stock units
(RSUs) and 35,000 stock options to Oplink
employees and a total of 20,000 shares of stock to the
non-employee members of the Board of Directors and consultants.
F-37
Schedule II
Oplink Communications, Inc.
Valuation and Qualifying Accounts
For the Years ended June 30, 2010, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
Charged
|
|
|
|
|
|
|
Balance at
|
|
Through
|
|
(Credited) to
|
|
|
|
|
|
|
Beginning
|
|
Business
|
|
Costs and
|
|
|
|
Balance at
|
|
|
of Year
|
|
Combination
|
|
Expenses
|
|
Deductions(1)
|
|
End of Year
|
|
|
(In thousands)
|
|
Allowance for doubtful accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended June 30, 2010
|
|
$
|
636
|
|
|
$
|
27
|
|
|
$
|
(28
|
)
|
|
$
|
171
|
|
|
$
|
464
|
|
Year Ended June 30, 2009
|
|
$
|
443
|
|
|
$
|
|
|
|
$
|
438
|
|
|
$
|
245
|
|
|
$
|
636
|
|
Year Ended June 30, 2008
|
|
$
|
330
|
|
|
$
|
|
|
|
$
|
113
|
|
|
$
|
|
|
|
$
|
443
|
|
Product returns
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended June 30, 2010
|
|
$
|
595
|
|
|
$
|
|
|
|
$
|
(54
|
)
|
|
$
|
|
|
|
$
|
541
|
|
Year Ended June 30, 2009
|
|
$
|
594
|
|
|
$
|
|
|
|
$
|
50
|
|
|
$
|
49
|
|
|
$
|
595
|
|
Year Ended June 30, 2008
|
|
$
|
562
|
|
|
$
|
|
|
|
$
|
32
|
|
|
$
|
|
|
|
$
|
594
|
|
|
|
|
(1)
|
|
Deductions represent costs charged
or amounts written off against the reserve or allowance.
|
F-38