I think Glenn McDougall's going.
A few comments from H&Q's OCLI report:
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Excluding earnings from the MMG division sold earlier this year, revenues increased even more dramatically, growing 53%. Sales growth was driven by a 128% YOY, 22% sequential, increase in Telecommunications components to $47.8 million (46% of sales); a 25% YOY, 8% sequential increase in the Flex division to $17.6 million; a 34% YOY increase in Display products, based on a 93% increase in projection displays products; and a 35% increase in Office Automation. Applied Photonics, which includes the former Aerospace and Instrumentation division, declined 14% to $10.6 million during the fiscal fourth quarter.
The fourth quarter gross margin of 32.2% exceeded our estimate by 170 bps and increased from 29.7% in F3Q99, reflecting a higher level of business, improvements in productivity and better leveraging of the overhead cost structure. Operating expense of $19.9 million exceeded our estimate of $16.6 million and the $16.2 million posted last year, primarily due to higher than expected R&D expense of $8.7 million (versus our estiamted $7 million) and $5 million in 1998, and higher SG&A expense of $11.2 million, (compared to our forecast of $9.6 million), and $11.1 million in the year ago period. While R&D expense as a percentage of sales increased to 8.5%, from 7.2% last year, SG&A expense as a percentage of sales, decreased to 10.8% from 15.8% in the year ago period, primarily due to the sale of MMG, rationalization of the European infrastructure and lower legal expenses. As a percentage of sales, operating expense increased to 19.2%, above our 18% estimate, but was significantly lower than the 23% recorded in 1998. The tax rate for the quarter was 36.7%, slightly above our estimates of 36%. Finally, fourth quarter operating income more than doubled to $8.5 million, from $3.7 million in the prior year, while operating EPS rose 80%, to $0.54/sh, from $0.30/sh, last year, reflecting a higher share count due to the company's 1.3 million common share offering in the third quarter.
Revenues for FY99 equaled $347 million, representing a growth of 36% from the previous year's $256 million. The operating margin rose from 9.7% ($24.9 million) last year to 11.44% ($39.7 million) this year. Overall, the tax rate for the year decreased to 36.3%, versus 40.7% last year. Finally, net income for the year of $24.2 million (7% net margin) grew significantly versus a $2.3 million net income last year (1% net margin).
Bookings and Backlog Reflect Strength in The Telecommunications Business
The Telecommunications division continues to be strong as bookings and backlog increased during the quarter, reflected in the book-to-bill ratio which rose to 1.08. During the quarter, the backlog grew 20% to $94 million, from $87.1 million at the end of July and $78 million in the year ago period. The company's bookings metric continues to be subject to orders from the JV's two largest customers, who have moved from issuing regular purchase orders to sometimes issuing open or "blanket" orders, which they then use to take product on little or no notice. Since products shipped under this consignment-like model never appear in bookings, OCLI's bookings may sometimes appear to decline.
Outlook Remains Bright
Telecommunications - Based upon the rapid growth experienced by OCLI and other WDM component providers, and robust industry forecasts, we believe the Company's telecommunications products division will be able to meet or exceed our revenue assumption of $200 million in FY00. Since the build out of WDM optical networks is in the early stage of point-to-point backbone construction, with significant additional growth potential represented bymetro fiber-ring extensions, we anticipate WDM component demand will remain very strong with the real possibility of unexpected surges.
OCLI also remains on track with the Telecordia qualification process associated with its MicroNode Wavelength-Selective Optical Switch which can be used in a number of applications as a 100GHz ITU channel switch, an integrated switched optical add/drop multiplexer, or a single or multiple channel optical cross-connect. The MicroNode switch offers the further functionality of switching individual WDM optical channels without adversely affecting through-channel traffic. OCLI has received production orders for the MicroNode switch and expects it will commence shipments in early CY00. Looking further out, we believe OCLI is currently developing four to six other new DWDM products.
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Expects merger with JDSU to close around January 26.
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