Alliance Fiber Optic Products, Inc. (NASDAQ:AFOP), an innovative
supplier of fiber optic components, subsystems and integrated
modules for the optical network equipment market, today reported
its financial results for the third quarter ended September 30,
2006. The Company's GAAP results reflect the adoption of SFAS 123R
regarding the expensing of stock-based compensation. Revenues for
the third quarter of 2006 totaled $7,573,000, a 44% increase
compared with $5,269,000 for the year ago quarter and 21% increase
from revenues of $6,252,000 recorded in the second quarter of 2006.
Gross margin in the quarter improved to 29% from 21% in the year
ago quarter and 26% in the second quarter of 2006. GAAP net profit
for the third quarter of 2006 was $358,000, or $0.01 per share, an
improvement over a net loss of $(558,000) in the year ago quarter,
or $(0.01) per share, and a net income of $19,000 for the second
quarter of 2006, or zero per share. Included in expenses for the
quarter ended September 30, 2006 was $83,000 of stock-based
compensation charges under SFAS 123R. Included in expenses for the
quarter ended June 30, 2006 was $32,000 of stock-based compensation
charges under SFAS 123R. There were no deferred stock-based
compensation charges for either the quarter ended September 30, or
June 30, 2005, respectively. Peter Chang, President and Chief
Executive Officer, commented, �Besides repeated double digit
revenue growth and continuous gross margin improvement, the third
quarter of 2006 marked another important milestone in AFOP�s
quarterly financial results � AFOP achieved both positive operating
margin and positive operating cash flow in Q3, 2006, after
returning to positive earnings per share in the previous quarter.�
�Our performance reflects increasing demand from key customers,
gaining business from newer customers, and continuous improvement
of our technical capability and operational efficiency.�Our balance
sheet remains strong with cash and cash equivalents increasing from
the previous quarter to about $30 million.� �Based on input from
our customers and current backlog, we expect that revenues in the
fourth quarter of 2006 will continue growing. Additionally, with
continued focus on operational efficiencies, we believe that
earnings in the coming quarter will improve over the previous
quarter, and the Company will return to profitability on annual
basis in 2006 as well,� concluded Mr. Chang. Conference Call
Management will host a conference call at 1:30 p.m. Pacific Time on
October 25,�2006 to discuss AFOP�s third�quarter 2006 financial
results. To participate in AFOP�s conference call, please call
877-407-9210 at least ten minutes prior to the call in order for
the operator to connect you. The confirmation number for the call
is�217296. AFOP will also provide a live webcast of
its�third�quarter 2006 conference call at AFOP�s website
www.afop.com. An audio replay will be available until�November 1,
2006. The dial in�number for the replay is 877-660-6853�or
201-612-7415. The replay passcodes (account # 286; conference ID#:
217296) are both required for the replay. About AFOP Founded in
1995, Alliance Fiber Optic Products, Inc. designs, manufactures and
markets a broad range of high performance fiber optic components
and integrated modules. AFOP's products are used by leading and
emerging communications equipment manufacturers to deliver optical
networking systems to the long-haul, enterprise, metropolitan and
last mile access segments of the communications network. AFOP
offers a broad product line of passive optical components including
interconnect systems, couplers and splitters, thin film�CWDM &
DWDM components and modules, optical attenuators, and�micro-optics
devices. AFOP is headquartered in Sunnyvale, California, with
manufacturing and product development capabilities in the United
States, Taiwan and China. AFOP's website is located at
http://www.afop.com. Except for the historical information
contained herein, the matters set forth in this press release,
including statements as to our ability to continue to improve gross
margins, our ability to maintain positive earnings, operating
margins or cash flow, our ability to be profitable in future
periods, our ability to improve our earnings and the level of
earnings in future periods, our ability to increase revenues and
the extent of any revenue increase, the ability to sustain
increasing customer demand for our products, and our ability to
continue to improve our operating efficiency, and technological
capabilities, are forward looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are subject to
risks and uncertainties that may cause actual results to differ
materially, including, but not limited to general economic
conditions and trends, the impact of competitive products and
pricing, timely introduction of new technologies, timely design
acceptance by our customers, the acceptance of new products and
technologies by our customers, customer demand for our products,
the timing of customer orders, loss of key customers, ability to
ramp new products into volume production, the costs associated with
running our operations, industry-wide shifts in supply and demand
for optical components and modules, industry overcapacity, failure
of cost control initiatives, financial stability in foreign
markets, and other risks detailed from time to time in our SEC
reports, including AFOP's Form 10-Q for the quarter ended June 30,
2006. These forward-looking statements speak only as of the date
hereof. AFOP disclaims any intention or obligation to update or
revise any forward-looking statements. ALLIANCE FIBER OPTIC
PRODUCTS, INC. Condensed Consolidated Balance Sheets (in thousands)
� Sep. 30, Dec. 31, 2006� 2005� (unaudited) ASSETS Current assets:
Cash and short-term investments $ 29,826� $ 29,407� Accounts
receivable 3,872� 3,570� Inventories 4,812� 3,670� Other current
assets � 799� � 634� Total current assets 39,309� 37,281� �
Property and equipment, net 4,057� 4,564� Other assets 152� 105� �
� Total assets $ 43,518� $ 41,950� � � � LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,159�
$ 2,342� Accrued expenses and other liabilities � 2,605� � 2,428�
Total current liabilities 5,764� 4,770� � Long-term liabilities �
803� � 859� Total liabilities 6,567� 5,629� � Stockholders' equity
36,951� 36,321� � � Total liabilities and stockholders' equity $
43,518� $ 41,950� ALLIANCE FIBER OPTIC PRODUCTS, INC. Condensed
Consolidated Statements of Operations (In thousands, except per
share amounts) (Unaudited) � Three Months Ended Nine Months Ended
Sep. 30, Jun. 31, Sep. 30, Sep. 30, Sep. 30, 2006� 2006� 2005�
2006� 2005� � Revenues $ 7,573� $ 6,252� $ 5,269� $ 19,046� $
15,453� � Cost of revenues � 5,402� � 4,621� � 4,141� � 13,907� �
12,293� Gross profit � 2,171� � 1,631� � 1,128� � 5,139� � 3,160� �
Operating expenses: Research and development 815� 708� 784� 2,282�
2,618� Sales and marketing 543� 555� 519� 1,684� 1,653� General and
administrative � 789� � 720� � 756� � 2,272� � 2,219� Total
operating expenses 2,147� 1,983� 2,059� 6,238� 6,490� � Income
(loss) from operations 24� (352) (931) (1,099) (3,330) Interest and
other income, net 334� 371� 373� 1,103� 1,240� � � � � � Net income
(loss) $ 358� $ 19� $ (558) $ 4� $ (2,090) � Net income (loss) per
share - basic and diluted Basic $ 0.01� $ 0.00� $ (0.01) $ 0.00� $
(0.05) Diluted $ 0.01� $ 0.00� $ (0.01) $ 0.00� $ (0.05) � Weighted
average shares outstanding Basic 40,205� 40,086� 39,405� 40,023�
39,228� Diluted 43,728� 43,713� 39,405� 43,545� 39,228� � Included
in costs and expenses above: Stock based compensation charges Cost
of revenue $ 33� $ 9� $ -� $ 65� $ -� Research and development 17�
6� -� 38� -� Sales and marketing 6� 4� -� 22� -� General and
administrative � 27� � 13� � -� � 67� � -� Total $ 83� $ 32� $ -� $
192� $ -� Alliance Fiber Optic Products, Inc. (NASDAQ:AFOP), an
innovative supplier of fiber optic components, subsystems and
integrated modules for the optical network equipment market, today
reported its financial results for the third quarter ended
September 30, 2006. The Company's GAAP results reflect the adoption
of SFAS 123R regarding the expensing of stock-based compensation.
Revenues for the third quarter of 2006 totaled $7,573,000, a 44%
increase compared with $5,269,000 for the year ago quarter and 21%
increase from revenues of $6,252,000 recorded in the second quarter
of 2006. Gross margin in the quarter improved to 29% from 21% in
the year ago quarter and 26% in the second quarter of 2006. GAAP
net profit for the third quarter of 2006 was $358,000, or $0.01 per
share, an improvement over a net loss of $(558,000) in the year ago
quarter, or $(0.01) per share, and a net income of $19,000 for the
second quarter of 2006, or zero per share. Included in expenses for
the quarter ended September 30, 2006 was $83,000 of stock-based
compensation charges under SFAS 123R. Included in expenses for the
quarter ended June 30, 2006 was $32,000 of stock-based compensation
charges under SFAS 123R. There were no deferred stock-based
compensation charges for either the quarter ended September 30, or
June 30, 2005, respectively. Peter Chang, President and Chief
Executive Officer, commented, "Besides repeated double digit
revenue growth and continuous gross margin improvement, the third
quarter of 2006 marked another important milestone in AFOP's
quarterly financial results -- AFOP achieved both positive
operating margin and positive operating cash flow in Q3, 2006,
after returning to positive earnings per share in the previous
quarter." "Our performance reflects increasing demand from key
customers, gaining business from newer customers, and continuous
improvement of our technical capability and operational efficiency.
Our balance sheet remains strong with cash and cash equivalents
increasing from the previous quarter to about $30 million." "Based
on input from our customers and current backlog, we expect that
revenues in the fourth quarter of 2006 will continue growing.
Additionally, with continued focus on operational efficiencies, we
believe that earnings in the coming quarter will improve over the
previous quarter, and the Company will return to profitability on
annual basis in 2006 as well," concluded Mr. Chang. Conference Call
Management will host a conference call at 1:30 p.m. Pacific Time on
October 25, 2006 to discuss AFOP's third quarter 2006 financial
results. To participate in AFOP's conference call, please call
877-407-9210 at least ten minutes prior to the call in order for
the operator to connect you. The confirmation number for the call
is 217296. AFOP will also provide a live webcast of its third
quarter 2006 conference call at AFOP's website www.afop.com. An
audio replay will be available until November 1, 2006. The dial in
number for the replay is 877-660-6853 or 201-612-7415. The replay
passcodes (account # 286; conference ID#: 217296) are both required
for the replay. About AFOP Founded in 1995, Alliance Fiber Optic
Products, Inc. designs, manufactures and markets a broad range of
high performance fiber optic components and integrated modules.
AFOP's products are used by leading and emerging communications
equipment manufacturers to deliver optical networking systems to
the long-haul, enterprise, metropolitan and last mile access
segments of the communications network. AFOP offers a broad product
line of passive optical components including interconnect systems,
couplers and splitters, thin film CWDM & DWDM components and
modules, optical attenuators, and micro-optics devices. AFOP is
headquartered in Sunnyvale, California, with manufacturing and
product development capabilities in the United States, Taiwan and
China. AFOP's website is located at http://www.afop.com. Except for
the historical information contained herein, the matters set forth
in this press release, including statements as to our ability to
continue to improve gross margins, our ability to maintain positive
earnings, operating margins or cash flow, our ability to be
profitable in future periods, our ability to improve our earnings
and the level of earnings in future periods, our ability to
increase revenues and the extent of any revenue increase, the
ability to sustain increasing customer demand for our products, and
our ability to continue to improve our operating efficiency, and
technological capabilities, are forward looking statements within
the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to risks and uncertainties that may cause
actual results to differ materially, including, but not limited to
general economic conditions and trends, the impact of competitive
products and pricing, timely introduction of new technologies,
timely design acceptance by our customers, the acceptance of new
products and technologies by our customers, customer demand for our
products, the timing of customer orders, loss of key customers,
ability to ramp new products into volume production, the costs
associated with running our operations, industry-wide shifts in
supply and demand for optical components and modules, industry
overcapacity, failure of cost control initiatives, financial
stability in foreign markets, and other risks detailed from time to
time in our SEC reports, including AFOP's Form 10-Q for the quarter
ended June 30, 2006. These forward-looking statements speak only as
of the date hereof. AFOP disclaims any intention or obligation to
update or revise any forward-looking statements. -0- *T ALLIANCE
FIBER OPTIC PRODUCTS, INC. Condensed Consolidated Balance Sheets
(in thousands) Sep. 30, Dec. 31, 2006 2005 -------------
------------ (unaudited) ASSETS Current assets: Cash and short-term
investments $ 29,826 $ 29,407 Accounts receivable 3,872 3,570
Inventories 4,812 3,670 Other current assets 799 634 -------------
------------ Total current assets 39,309 37,281 Property and
equipment, net 4,057 4,564 Other assets 152 105 -------------
------------ Total assets $ 43,518 $ 41,950 =============
============ LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable $ 3,159 $ 2,342 Accrued expenses and
other liabilities 2,605 2,428 ------------- ------------ Total
current liabilities 5,764 4,770 Long-term liabilities 803 859
------------- ------------ Total liabilities 6,567 5,629
Stockholders' equity 36,951 36,321 ------------- ------------ Total
liabilities and stockholders' equity $ 43,518 $ 41,950
============= ============ *T -0- *T ALLIANCE FIBER OPTIC PRODUCTS,
INC. Condensed Consolidated Statements of Operations (In thousands,
except per share amounts) (Unaudited) Three Months Ended Nine
Months Ended -------------------------- ----------------- Sep. 30,
Jun. 31, Sep. 30, Sep. 30, Sep. 30, 2006 2006 2005 2006 2005
-------- -------- -------- -------- -------- Revenues $ 7,573 $
6,252 $ 5,269 $19,046 $15,453 Cost of revenues 5,402 4,621 4,141
13,907 12,293 -------- -------- -------- -------- -------- Gross
profit 2,171 1,631 1,128 5,139 3,160 -------- -------- --------
-------- -------- Operating expenses: Research and development 815
708 784 2,282 2,618 Sales and marketing 543 555 519 1,684 1,653
General and administrative 789 720 756 2,272 2,219 --------
-------- -------- -------- -------- Total operating expenses 2,147
1,983 2,059 6,238 6,490 Income (loss) from operations 24 (352)
(931) (1,099) (3,330) Interest and other income, net 334 371 373
1,103 1,240 -------- -------- -------- -------- -------- Net income
(loss) $ 358 $ 19 $ (558) $ 4 $(2,090) ======== ======== ========
======== ======== Net income (loss) per share - basic and diluted
Basic $ 0.01 $ 0.00 $ (0.01) $ 0.00 $ (0.05) Diluted $ 0.01 $ 0.00
$ (0.01) $ 0.00 $ (0.05) Weighted average shares outstanding Basic
40,205 40,086 39,405 40,023 39,228 Diluted 43,728 43,713 39,405
43,545 39,228 Included in costs and expenses above: Stock based
compensation charges Cost of revenue $ 33 $ 9 $ - $ 65 $ - Research
and development 17 6 - 38 - Sales and marketing 6 4 - 22 - General
and administrative 27 13 - 67 - -------- -------- -------- --------
-------- Total $ 83 $ 32 $ - $ 192 $ - ======== ======== ========
======== ======== *T
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