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AFOP Reports Third Quarter 2011 Financial Results With Sequential Increases In Sales And Profits

Alliance Fiber Optic Products, Inc. (Nasdaq CM: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, 2011.

Revenues for the third quarter of 2011 totaled $11,778,000, a 10.5% increase from revenues of $10,655,000 reported in the previous quarter, and a 11.3% decrease from revenues of $13,276,000 reported in the third quarter of 2010. Operating income for the third quarter of 2011 reached $1,334,000, compared with $1,068,000 in previous quarter and $2,210,000 in the year ago quarter. Net income for the third quarter of 2011 rose to $1,454,000, or $0.16 per share based on 8.9 million shares outstanding, compared to $1,249,000, or $0.14 per share based on 8.9 million shares outstanding, for the second quarter of 2011. This compares to net income for the third quarter of 2010 of $2,064,000, or $0.24 per share based on 8.6 million shares outstanding.

Included in expenses for the quarter ended September 30, 2011 was $259,000 of stock-based compensation. Stock-based compensation charges included in expenses for the quarter ended June 30, 2011 and the quarter ended September 30, 2010 were $171,000 and $87,000, respectively.

Peter Chang, President and Chief Executive Officer, commented, “We are pleased with the financial performance and progress AFOP has made in the quarter ended September 30, 2011. Despite the inventory correction experienced in our industry and macro-economic uncertainty, we delivered quarterly revenue higher than our guidance. With this sequential revenue growth, our operating profits and net profits continued increasing.”

“Regarding the fourth quarter of 2011, we expect that revenues will be in the similar range and that the Company will achieve another consecutive profitable quarter and full fiscal 2011,” concluded Mr. Chang.

Conference Call

Management will host a conference call at 1:30 p.m. Pacific Time on October 25, 2011 to discuss AFOP’s third quarter 2011 financial results. To participate in AFOP’s conference call, please call 877-675-3572 at least ten minutes prior to the call in order for the operator to connect you. The confirmation number for the call is 15977511. AFOP will also provide a live webcast of its third quarter 2011 conference call at AFOP’s website, www.afop.com. An audio replay will be available until November 24, 2011. The dial in number for the replay is 800-585-8367 or 855-859-2056. The replay conference ID is 15977511.

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 and 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 expectations regarding future revenue, profit and operating income levels, our beliefs regarding business conditions and our expectations regarding future sales, 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 quarterly report on Form 10-Q for the quarter ended June 30, 2011. 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)
   
Sept. 30, Dec. 31,
2011 2010
ASSETS (Unaudited)
Current assets:
Cash and short-term investments $ 37,004 $ 45,360
Accounts receivable 7,843 7,224
Inventories 7,482 7,439
Other current assets   656   733
Total current assets 52,985 60,756
 
Long-term investments 10,054 -
Property and equipment, net 7,717 7,523
Other assets   172   170
Total assets $ 70,928 $ 68,449
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,321 $ 4,931
Accrued expenses and other current liabilities   3,417   4,737
Total current liabilities 7,738 9,668
 
Long-term liabilities:
Other long-term liabilities   697   777
Total liabilities 8,435 10,445
Stockholders' equity   62,493   58,004
Total liabilities and stockholders' equity $ 70,928 $ 68,449
 
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. 30 Sep. 30 Sep. 30 Sep. 30
2011 2011 2010 2011 2010
 
Revenues $ 11,778 $ 10,655 $ 13,276 $ 31,883 $ 33,768
 
Cost of revenues   7,963   7,202     8,563   21,580     22,309
Gross profit   3,815   3,453     4,713   10,303     11,459
 
Operating expenses:
Research and development 834 804 882 2,356 2,461
Sales and marketing 595 566 643 1,711 1,840
General and administrative   1,052   1,015     978   3,095     2,882
Total operating expenses 2,481 2,385 2,503 7,162 7,183
Income from operations 1,334 1,068 2,210 3,141 4,276
Interest and other income, net   149   174     102   452     358
Net income before tax $ 1,483 $ 1,242 $ 2,312 $ 3,593 $ 4,634
Income tax   29   (7 )   248   (131 )   323
Net income $ 1,454 $ 1,249   $ 2,064 $ 3,724   $ 4,311
 
Net income per share:
Basic $ 0.16 $ 0.14 $ 0.24 $ 0.42 $ 0.50
Diluted $ 0.16 $ 0.14 $ 0.23 $ 0.41 $ 0.49
 
Weighted average shares outstanding:
Basic 8,883 8,852 8,575 8,853 8,537
Diluted 9,040 9,068 8,826 9,119 8,734
 
Included in costs and expenses above:
Stock based compensation charges
Cost of revenue $ 28 $ 23 $ 28 $ 74 $ 62
Research and development 29 11 11 48 23
Sales and marketing 63 39 13 117 23
General and administrative   139   98     35   274     63
Total $ 259 $ 171   $ 87 $ 513   $ 171




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