UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2018
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 001-36083
Applied Optoelectronics, Inc.
(Exact name of registrant as specified in its charter)
|
Delaware |
76-0533927 |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
13139 Jess Pirtle Blvd.
Sugar Land, TX 77478
(Address of principal executive offices)
(281) 295-1800
(Registrant’s telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer |
☒ |
|
|
|
|
Accelerated filer |
☐ |
|
|
|
|
Non-accelerated filer |
☐ |
|
|
|
|
Smaller reporting company |
☐ |
|
|
|
|
Emerging growth company |
☐ |
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: as of November 1, 2018 there were 19,798,663 shares of the registrant’s Common Stock outstanding.
Applied Optoelectronics, Inc.
2
Item 1. Condensed Consolidated Financial Statements
Applied Optoelectronics, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except per share data)
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
2018 |
|
2017 |
|
||
|
ASSETS |
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
56,380 |
|
$ |
82,936 |
|
|
Restricted cash |
|
|
1,695 |
|
|
1,012 |
|
|
Short-term investments |
|
|
6,022 |
|
|
36 |
|
|
Accounts receivable - trade, net of allowance of $31 and $33, respectively |
|
|
32,028 |
|
|
59,850 |
|
|
Inventories |
|
|
107,905 |
|
|
75,768 |
|
|
Prepaid income tax |
|
|
763 |
|
|
1,394 |
|
|
Prepaid expenses and other current assets |
|
|
10,377 |
|
|
8,701 |
|
|
Total current assets |
|
|
215,170 |
|
|
229,697 |
|
|
Property, plant and equipment, net |
|
|
222,545 |
|
|
197,943 |
|
|
Land use rights, net |
|
|
5,832 |
|
|
804 |
|
|
Intangible assets, net |
|
|
3,971 |
|
|
4,007 |
|
|
Deferred income tax assets |
|
|
18,493 |
|
|
12,801 |
|
|
Other assets, net |
|
|
15,074 |
|
|
7,732 |
|
|
TOTAL ASSETS |
|
$ |
481,085 |
|
$ |
452,984 |
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Current portion of notes payable and long-term debt |
|
$ |
8,275 |
|
$ |
559 |
|
|
Accounts payable |
|
|
53,706 |
|
|
43,624 |
|
|
Accrued income taxes |
|
|
— |
|
|
7,422 |
|
|
Accrued liabilities |
|
|
20,723 |
|
|
19,103 |
|
|
Total current liabilities |
|
|
82,704 |
|
|
70,708 |
|
|
Notes payable and long-term debt, less current portion |
|
|
62,896 |
|
|
49,000 |
|
|
TOTAL LIABILITIES |
|
|
145,600 |
|
|
119,708 |
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
Preferred Stock; 5,000 shares authorized at $0.001 par value; no shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively |
|
|
— |
|
|
— |
|
|
Common Stock; 45,000 shares authorized at $0.001 par value; 19,758 and 19,451 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively |
|
|
20 |
|
|
19 |
|
|
Additional paid-in capital |
|
|
290,070 |
|
|
285,376 |
|
|
Accumulated other comprehensive income |
|
|
835 |
|
|
9,743 |
|
|
Retained earnings |
|
|
44,560 |
|
|
38,138 |
|
|
TOTAL STOCKHOLDERS' EQUITY |
|
|
335,485 |
|
|
333,276 |
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
|
$ |
481,085 |
|
$ |
452,984 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Applied Optoelectronics, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except share and per share data)
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
|
||||||||
|
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
||||
|
Revenue, net |
|
$ |
56,386 |
|
$ |
88,879 |
|
$ |
209,447 |
|
$ |
302,474 |
|
|
Cost of goods sold |
|
|
38,849 |
|
|
49,507 |
|
|
132,211 |
|
|
168,348 |
|
|
Gross profit |
|
|
17,537 |
|
|
39,372 |
|
|
77,236 |
|
|
134,126 |
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
14,180 |
|
|
9,190 |
|
|
38,561 |
|
|
24,695 |
|
|
Sales and marketing |
|
|
2,370 |
|
|
2,551 |
|
|
7,221 |
|
|
6,612 |
|
|
General and administrative |
|
|
10,591 |
|
|
9,580 |
|
|
29,945 |
|
|
26,188 |
|
|
Total operating expenses |
|
|
27,141 |
|
|
21,321 |
|
|
75,727 |
|
|
57,495 |
|
|
Income (loss) from operations |
|
|
(9,604) |
|
|
18,051 |
|
|
1,509 |
|
|
76,631 |
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
86 |
|
|
61 |
|
|
223 |
|
|
166 |
|
|
Interest expense |
|
|
(274) |
|
|
(248) |
|
|
(624) |
|
|
(792) |
|
|
Other income (expense), net |
|
|
766 |
|
|
(354) |
|
|
1,320 |
|
|
(898) |
|
|
Total other income (expense), net |
|
|
578 |
|
|
(541) |
|
|
919 |
|
|
(1,524) |
|
|
Income (loss) before income taxes |
|
|
(9,026) |
|
|
17,510 |
|
|
2,428 |
|
|
75,107 |
|
|
Income tax (expense) benefit |
|
|
5,294 |
|
|
1,865 |
|
|
3,994 |
|
|
(6,872) |
|
|
Net income (loss) |
|
$ |
(3,732) |
|
$ |
19,375 |
|
$ |
6,422 |
|
$ |
68,235 |
|
|
Net income (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.19) |
|
$ |
1.00 |
|
$ |
0.33 |
|
$ |
3.59 |
|
|
Diluted |
|
$ |
(0.19) |
|
$ |
0.95 |
|
$ |
0.32 |
|
$ |
3.39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used to compute net income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
19,707,036 |
|
|
19,294,022 |
|
|
19,597,181 |
|
|
18,993,068 |
|
|
Diluted |
|
|
19,707,036 |
|
|
20,422,609 |
|
|
20,038,657 |
|
|
20,133,644 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Applied Optoelectronics, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, in thousands)
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
|
||||||||
|
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
||||
|
Net income (loss) |
|
$ |
(3,732) |
|
$ |
19,375 |
|
$ |
6,422 |
|
$ |
68,235 |
|
|
Gain (loss) on foreign currency translation adjustment |
|
|
(4,798) |
|
|
2,032 |
|
|
(8,908) |
|
|
7,285 |
|
|
Comprehensive income (loss) |
|
$ |
(8,530) |
|
$ |
21,407 |
|
$ |
(2,486) |
|
$ |
75,520 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Applied Optoelectronics, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Three and Nine months ended September 30, 2018 and 2017
(Unaudited, in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
||
|
|
|
Preferred Stock |
|
Common Stock |
|
Additional |
|
other |
|
|
|
|
|
|
|||||||||
|
|
|
Number |
|
|
|
|
Number |
|
|
|
|
paid-in |
|
comprehensive |
|
Retained |
|
Stockholders' |
|
||||
|
|
|
of shares |
|
Amount |
|
of shares |
|
Amount |
|
capital |
|
gain (loss) |
|
earnings |
|
equity |
|
||||||
|
July 1, 2018 |
|
— |
|
$ |
— |
|
19,634 |
|
$ |
20 |
|
$ |
288,686 |
|
$ |
5,633 |
|
$ |
48,292 |
|
$ |
342,631 |
|
|
Stock options exercised, net of shares withheld for employee tax |
|
— |
|
|
— |
|
43 |
|
|
— |
|
|
(845) |
|
|
— |
|
|
— |
|
|
(845) |
|
|
Issuance of restricted stock, net of shares withheld for employee tax |
|
— |
|
|
— |
|
81 |
|
|
— |
|
|
(665) |
|
|
— |
|
|
— |
|
|
(665) |
|
|
Share-based compensation |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
2,894 |
|
|
— |
|
|
— |
|
|
2,894 |
|
|
Foreign currency translation adjustment |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(4,798) |
|
|
— |
|
|
(4,798) |
|
|
Net income (loss) |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(3,732) |
|
|
(3,732) |
|
|
September 30, 2018 |
|
— |
|
$ |
— |
|
19,758 |
|
$ |
20 |
|
$ |
290,070 |
|
$ |
835 |
|
$ |
44,560 |
|
$ |
335,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
||
|
|
|
Preferred Stock |
|
Common Stock |
|
Additional |
|
other |
|
|
|
|
|
|
|||||||||
|
|
|
Number |
|
|
|
|
Number |
|
|
|
|
paid-in |
|
comprehensive |
|
Retained |
|
Stockholders' |
|
||||
|
|
|
of shares |
|
Amount |
|
of shares |
|
Amount |
|
capital |
|
gain (loss) |
|
earnings |
|
equity |
|
||||||
|
July 1, 2017 |
|
— |
|
$ |
— |
|
19,192 |
|
$ |
19 |
|
$ |
290,067 |
|
$ |
4,369 |
|
$ |
13,047 |
|
$ |
307,502 |
|
|
Stock options exercised, net of shares withheld for employee tax |
|
— |
|
|
— |
|
93 |
|
|
— |
|
|
(4,753) |
|
|
— |
|
|
— |
|
|
(4,753) |
|
|
Issuance of restricted stock, net of shares withheld for employee tax |
|
— |
|
|
— |
|
74 |
|
|
— |
|
|
(1,795) |
|
|
— |
|
|
— |
|
|
(1,795) |
|
|
Share-based compensation |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
2,081 |
|
|
— |
|
|
— |
|
|
2,081 |
|
|
Foreign currency translation adjustment |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
2,032 |
|
|
— |
|
|
2,032 |
|
|
Other |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(1) |
|
|
1 |
|
|
— |
|
|
Net income |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
19,375 |
|
|
19,375 |
|
|
September 30, 2017 |
|
— |
|
$ |
— |
|
19,359 |
|
$ |
19 |
|
$ |
285,600 |
|
$ |
6,400 |
|
$ |
32,423 |
|
$ |
324,442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
||
|
|
|
Preferred Stock |
|
Common Stock |
|
Additional |
|
other |
|
|
|
|
|
|
|||||||||
|
|
|
Number |
|
|
|
|
Number |
|
|
|
|
paid-in |
|
comprehensive |
|
Retained |
|
Stockholders' |
|
||||
|
|
|
of shares |
|
Amount |
|
of shares |
|
Amount |
|
capital |
|
gain (loss) |
|
earnings |
|
equity |
|
||||||
|
January 1, 2018 |
|
— |
|
$ |
— |
|
19,451 |
|
$ |
19 |
|
$ |
285,376 |
|
$ |
9,743 |
|
$ |
38,138 |
|
$ |
333,276 |
|
|
Stock options exercised, net of shares withheld for employee tax |
|
— |
|
|
— |
|
121 |
|
|
— |
|
|
(2,073) |
|
|
— |
|
|
— |
|
|
(2,073) |
|
|
Issuance of restricted stock, net of shares withheld for employee tax |
|
— |
|
|
— |
|
186 |
|
|
1 |
|
|
(1,595) |
|
|
— |
|
|
— |
|
|
(1,594) |
|
|
Share-based compensation |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
8,362 |
|
|
— |
|
|
— |
|
|
8,362 |
|
|
Foreign currency translation adjustment |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(8,908) |
|
|
— |
|
|
(8,908) |
|
|
Net income |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
6,422 |
|
|
6,422 |
|
|
September 30, 2018 |
|
— |
|
$ |
— |
|
19,758 |
|
$ |
20 |
|
$ |
290,070 |
|
$ |
835 |
|
$ |
44,560 |
|
$ |
335,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
||
|
|
|
Preferred Stock |
|
Common Stock |
|
Additional |
|
other |
|
|
|
|
|
|
|||||||||
|
|
|
Number |
|
|
|
|
Number |
|
|
|
|
paid-in |
|
comprehensive |
|
Retained |
|
Stockholders' |
|
||||
|
|
|
of shares |
|
Amount |
|
of shares |
|
Amount |
|
capital |
|
gain (loss) |
|
earnings |
|
equity |
|
||||||
|
January 1, 2017 |
|
— |
|
$ |
— |
|
18,400 |
|
$ |
18 |
|
$ |
265,264 |
|
$ |
(885) |
|
$ |
(37,013) |
|
$ |
227,384 |
|
|
Public offering of common stock, net |
|
— |
|
|
— |
|
459 |
|
|
1 |
|
|
21,571 |
|
|
— |
|
|
— |
|
|
21,572 |
|
|
Stock options exercised, net of shares withheld for employee tax |
|
— |
|
|
— |
|
356 |
|
|
— |
|
|
(4,930) |
|
|
— |
|
|
— |
|
|
(4,930) |
|
|
Issuance of restricted stock, net of shares withheld for employee tax |
|
— |
|
|
— |
|
144 |
|
|
— |
|
|
(2,161) |
|
|
— |
|
|
— |
|
|
(2,161) |
|
|
Share-based compensation |
|
— |
|
|
— |
|
|
|
|
— |
|
|
5,849 |
|
|
— |
|
|
— |
|
|
5,849 |
|
|
Cumulative effect of previously unrecognized tax benefits |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,207 |
|
|
1,207 |
|
|
Foreign currency translation adjustment |
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
7,285 |
|
|
— |
|
|
7,285 |
|
|
Other |
|
— |
|
|
— |
|
|
|
|
— |
|
|
7 |
|
|
— |
|
|
(6) |
|
|
1 |
|
|
Net income |
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
68,235 |
|
|
68,235 |
|
|
September 30, 2017 |
|
— |
|
$ |
— |
|
19,359 |
|
$ |
19 |
|
$ |
285,600 |
|
$ |
6,400 |
|
$ |
32,423 |
|
$ |
324,442 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Applied Optoelectronics, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
|
|
|
Nine months ended September 30, |
|
||||
|
|
|
2018 |
|
2017 |
|
||
|
Operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
6,422 |
|
$ |
68,235 |
|
|
Adjustments to reconcile net income to net cash provided by |
|
|
|
|
|
|
|
|
operating activities: |
|
|
|
|
|
|
|
|
Lower of cost or market reserve adjustment to inventory |
|
|
5,546 |
|
|
1,365 |
|
|
Depreciation and amortization |
|
|
21,807 |
|
|
14,332 |
|
|
Deferred income taxes, net |
|
|
(5,734) |
|
|
(2,495) |
|
|
Loss (gain) on disposal of assets |
|
|
(5) |
|
|
51 |
|
|
Share-based compensation |
|
|
8,362 |
|
|
5,849 |
|
|
Unrealized foreign exchange gain |
|
|
(580) |
|
|
(308) |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable, trade |
|
|
27,822 |
|
|
(23,261) |
|
|
Prepaid income tax |
|
|
653 |
|
|
— |
|
|
Inventories |
|
|
(41,288) |
|
|
(21,113) |
|
|
Other current assets |
|
|
(2,013) |
|
|
(6,062) |
|
|
Accounts payable |
|
|
10,082 |
|
|
14,618 |
|
|
Accrued income taxes |
|
|
(7,390) |
|
|
4,360 |
|
|
Accrued liabilities |
|
|
1,941 |
|
|
1,927 |
|
|
Net cash provided by operating activities |
|
|
25,625 |
|
|
57,498 |
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Purchase of short-term investments |
|
|
(15,023) |
|
|
— |
|
|
Maturities of short-term investments |
|
|
9,036 |
|
|
8 |
|
|
Purchase of property, plant and equipment |
|
|
(52,268) |
|
|
(46,529) |
|
|
Purchase of land use rights |
|
|
(5,591) |
|
|
— |
|
|
Proceeds from disposal of equipment |
|
|
697 |
|
|
171 |
|
|
Deposits and prepaid for equipment |
|
|
(7,533) |
|
|
(2,369) |
|
|
Purchase of intangible assets |
|
|
(343) |
|
|
(407) |
|
|
Net cash used in investing activities |
|
|
(71,025) |
|
|
(49,126) |
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of notes payable and long-term debt |
|
|
35,899 |
|
|
— |
|
|
Principal payments of long-term debt and notes payable |
|
|
(1,883) |
|
|
(38,300) |
|
|
Proceeds from line of credit borrowings |
|
|
113,266 |
|
|
36,000 |
|
|
Repayments of line of credit borrowings |
|
|
(125,678) |
|
|
— |
|
|
Repayments of bank acceptance payable |
|
|
— |
|
|
(307) |
|
|
Exercise of stock options |
|
|
120 |
|
|
1,399 |
|
|
Payments of tax withholding on behalf of employees related to share-based compensation |
|
|
(3,788) |
|
|
(8,490) |
|
|
Proceeds from common stock offering, net |
|
|
— |
|
|
21,572 |
|
|
Net cash provided by financing activities |
|
|
17,936 |
|
|
11,874 |
|
|
Effect of exchange rate changes on cash |
|
|
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