Finisar Corporation
Nov 30, 2011
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Finisar Announces Second Quarter Fiscal 2012 Financial Results

Revenues of $241.5 Million, 5.8% Quarter-Over-Quarter Growth
Non-GAAP Operating Income of $23.6 Million, 12.5% Quarter-Over-Quarter Growth
Non-GAAP Earnings per Diluted Share of $0.23

SUNNYVALE, CA -- (MARKET WIRE) -- 11/30/11 -- Finisar Corporation (NASDAQ: FNSR), a global technology leader for subsystems and components for fiber optic communications, today announced financial results for its second quarter of fiscal 2012 ended October 30, 2011.

COMMENTARY

"In our just completed fiscal second quarter, our revenues were $241.5 million, 5.8% greater than the preceding first quarter, primarily driven by growth in sales of our WSS and ROADM line card products, tunable XFP transceivers, and the consolidation of a full quarter of the financial results of our Ignis subsidiary. We achieved a non-GAAP gross margin of 32.1%. Non-GAAP operating income increased 12.5% from the preceding quarter, and non-GAAP operating margin increased to 9.8% from 9.2% in the preceding quarter. Our non-GAAP earnings per diluted share were $0.23," said Jerry Rawls, Finisar's executive Chairman of the Board.

"We continued to execute well on our product development plan and have delivered to customers a number of innovative products in the WSS and pluggable product lines during the second quarter," said Eitan Gertel, Finisar's Chief Executive Officer. "Production of our tunable XFP transceiver products began to ramp during the second quarter of fiscal 2012. Tunable XFPs were qualified at several additional customers during the second quarter and we expect more qualifications in the third quarter. In addition, we have qualified our next generation edge or access WSS modules with multiple customers and expect revenue from these products to continue to ramp in the first half of calendar 2012."


         FINANCIAL HIGHLIGHTS -SECOND QUARTER ENDED October 30, 2011



                                   Second         Second          First

                                  Quarter         Quarter        Quarter

Summary GAAP Results               Ended          Ended           Ended

                                Oct 30, 2011   Oct 31, 2010   July 31, 2011

                               -------------  -------------  --------------

                                 (in thousands, except per share amounts)

Continuing operations

------------------------------

Revenues                       $     241,489  $     240,943  $      228,226

Gross margin                            29.1%          34.2%           29.1%

Operating expenses             $      61,464  $      46,295  $       59,391

Operating income               $       8,817  $      36,105  $        7,090

Operating margin                         3.7%          15.0%            3.1%

Income                         $       5,927  $      33,796  $       10,142

Income per share-basic         $        0.07  $        0.44  $         0.11

Income per share-diluted       $        0.06  $        0.39  $         0.11



Basic shares                          90,715         76,766          90,221

Diluted shares                        93,599         89,521          93,527



                                   Second         Second          First

                                   Quarter        Quarter         Quarter

 Summary Non-GAAP Results (a)       Ended          Ended          Ended

                                Oct 30, 2011   Oct 31, 2010   July 31, 2011

                               -------------  -------------  --------------

                                  (in thousands, except per share amounts)

Continuing operations

------------------------------

Revenues                       $     241,489  $     240,943  $      228,226

Gross margin                            32.1%          35.5%           32.1%

Operating expenses             $      53,845  $      44,594  $       52,414

Operating income               $      23,559  $      40,897  $       20,944

Operating margin                         9.8%          17.0%            9.2%

Income                         $      21,537  $      38,302  $       19,528

Income per share-basic         $        0.24  $        0.50  $         0.22

Income per share-diluted       $        0.23  $        0.44  $         0.21



Basic shares                          90,715         76,766          90,221

Diluted shares                        97,347         89,521          97,275



_____________

(a) In evaluating the operating performance of Finisar's business, Finisar management utilizes financial measures that exclude certain charges and credits required by U.S. generally accepted accounting principles, or GAAP, that are considered by management to be outside Finisar's core operating results. A reconciliation of Finisar's non-GAAP financial measures to the most directly comparable GAAP measures, as well as additional related information, can be found under the heading "Finisar Non-GAAP Financial Measures" below.

Highlights for the second quarter of fiscal 2012 under GAAP:

In addition to reporting financial results in accordance with U.S. generally accepted accounting principles, or GAAP, Finisar provides supplemental information regarding its operating performance on a non-GAAP basis. For the second quarter of fiscal 2011, items related to continuing operations representing a net charge of approximately $15.6 million were excluded. The excluded items are described in Finisar Non-GAAP Financial Measures below.

Highlights for the second quarter of fiscal 2012 on a non-GAAP basis:

Balance Sheet Highlights for the second quarter of fiscal 2012:

OUTLOOK

The Company indicated that it currently expects third fiscal quarter revenues to be in the range of $235 to $250 million; GAAP operating margin to be in the range of approximately 3.5% to 5.0%; non-GAAP operating margin to be in the range of 8.5% to 10.0% and non-GAAP earnings per diluted share to be in the range of approximately $0.20 to $0.24.

CONFERENCE CALL

Finisar will discuss its financial results for the second quarter and current business outlook during its regular quarterly conference call scheduled for Wednesday, November 30, 2011, at 2:00 pm PST (5:00 pm EST). To listen to the call you may connect through the Finisar investor relations page at http://investor.finisar.com/ or dial 1-888-542-1102 (domestic) or (719) 325-2373 (international) and enter conference ID 4696405.

An audio replay will be available for two weeks following the call by dialing 1-888-203-1112 (domestic) or (719) 457-0820 and then following the prompts: enter conference ID 4696405 and provide your name, affiliation, and contact number. A replay of the webcast will be available shortly after the conclusion of the call on the Company's website until the next regularly scheduled earnings conference call.

SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

The statements contained in this press release that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All forward-looking statements included in this press release are based upon information available to Finisar as of the date hereof, and Finisar assumes no obligation to update any such forward-looking statements. Forward-looking statements involve risks and uncertainties which could cause actual results to differ materially from those projected. Examples of such risks include those associated with: the uncertainty of customer demand for Finisar's products; the rapidly evolving markets for Finisar's products and uncertainty regarding the development of these markets; Finisar's historical dependence on sales to a limited number of customers and fluctuations in the mix of products and customers in any period; ongoing new product development and introduction of new and enhanced products; challenges related to the integration of the Ignis acquisition and realizing anticipated benefits of improved access to a supply of tunable lasers; the challenges of rapid growth followed by periods of contraction; and intensive competition. Further information regarding these and other risks relating to Finisar's business is set forth in Finisar's annual report on Form 10-K (filed June 28, 2011) and quarterly SEC filings.

ABOUT FINISAR

Finisar Corporation (NASDAQ: FNSR) is a global technology leader for fiber optic subsystems and components that enable high-speed voice, video and data communications for telecommunications, networking, storage, wireless, and cable TV applications. For more than 20 years, Finisar has provided critical optics technologies to system manufacturers to meet the increasing demands for network bandwidth and storage. Finisar is headquartered in Sunnyvale, California, USA with R&D, manufacturing sites, and sales offices worldwide. For additional information, visit www.finisar.com.

FINISAR FINANCIAL STATEMENTS

The following financial tables are presented in accordance with GAAP.


                            Finisar Corporation

                   Consolidated Statements of Operations



                                                                     Three

                                                                    Months

                           Three Months Ended   Six Months Ended     Ended

                           ------------------  ------------------  --------

                            October   October   October   October  July 31,

                           30, 2011  31, 2010  30, 2011  31, 2010    2011

                           --------  --------  --------  --------  --------

                                              (Unaudited)

                           ------------------------------------------------

                                 (in thousands, except per share data)

                           ------------------------------------------------

 Revenues                  $241,489  $240,943  $469,715  $448,825  $228,226

 Cost of revenues           169,571   157,343   329,794   293,135   160,223

 Amortization of acquired

  developed technology        1,637     1,200     3,159     2,392     1,522

                           --------  --------  --------  --------  --------

 Gross profit                70,281    82,400   136,762   153,298    66,481

 Gross margin                  29.1%     34.2%     29.1%     34.2%     29.1%

 Operating expenses:

   Research and

    development              36,707    28,148    72,103    54,765    35,396

   Sales and marketing       10,125     9,247    19,711    18,322     9,586

   General and

    administrative           13,773     8,517    27,725    19,593    13,952

   Amortization of

    purchased intangibles       859       383     1,638       766       779

   Restructuring

    recoveries                    -         -      (322)        -      (322)

                           --------  --------  --------  --------  --------

     Total operating

      expenses               61,464    46,295   120,855    93,446    59,391

                           --------  --------  --------  --------  --------

 Income from operations       8,817    36,105    15,907    59,852     7,090

 Interest income                100       143       260       235       160

 Interest expense            (1,138)   (2,077)   (2,049)   (4,232)     (911)

 Loss on debt

  extinguishment                  -         -      (419)        -      (419)

 Other income (expense),

  net                          (140)      192     4,523         -     4,663

                           --------  --------  --------  --------  --------

 Income from continuing

  operations before income

  taxes and non-

  controlling interest        7,639    34,363    18,222    55,855    10,583

 Provision for income

  taxes                       1,369       567     1,917     2,649       548

                           --------  --------  --------  --------  --------

 Consolidated net income      6,270    33,796    16,305    53,206    10,035

 Adjust for net loss

  attributable to non-

  controlling interest         (343)        -      (236)        -       107

                           --------  --------  --------  --------  --------

Net income attributable to

 Finisar Corporation          5,927    33,796    16,069    53,206    10,142

Loss from discontinued

 operations, net of taxes         -         -         -      (284)        -

                           --------  --------  --------  --------  --------

Net income                 $  5,927  $ 33,796  $ 16,069  $ 52,922  $ 10,142

                           ========  ========  ========  ========  ========



Income per share from

 continuing operations -

 basic                     $   0.07  $   0.44  $   0.18  $   0.70  $   0.11

Income per share from

 continuing operations -

 diluted                   $   0.06  $   0.39  $   0.17  $   0.63  $   0.11



Income per share from

 discontinued operations -

 basic                     $      -  $      -  $      -  $  (0.00) $      -

Income per share from

 discontinued operations -

 diluted                   $      -  $      -  $      -  $  (0.00) $      -



Shares used in computing

 net income per share from

 continuing operations -

 basic                       90,715    76,766    90,470    76,433    90,221



Shares used in computing

 net income per share from

 continuing operations -

 diluted                     93,599    89,521    93,712    89,013    93,527



Shares used in computing

 net income per share from

 discontinued operations -

 basic                       90,715    76,766    90,470    76,433    90,221



Shares used in computing

 net income per share from

 discontinued operations -

 diluted                     93,599    89,521    93,712    89,013    93,527








                            Finisar Corporation

                        Consolidated Balance Sheets

                               (In thousands)



                                    October 30,    July 31,      April 30,

                                       2011          2011          2011

                                   ------------  ------------  ------------

                                    (Unaudited)   (Unaudited)

                                   ------------  ------------  ------------

              ASSETS

Current assets:

  Cash and cash equivalents        $    228,040  $    238,052  $    314,765

  Accounts receivable, net              176,494       166,536       168,386

  Accounts receivable, other             11,558        12,788        12,733

  Inventories                           214,940       208,567       187,617

  Prepaid expenses and other             19,120        16,029         9,906

                                   ------------  ------------  ------------

    Total current assets                650,152       641,972       693,407

Property, equipment and

 improvements, net                      143,139       138,300       125,693

Purchased intangible assets, net         47,306        49,979        17,439

Goodwill                                 82,936        83,107             -

Minority investments                     12,289        12,289        12,289

Equity method investments                     -             -        31,142

Other assets                             21,773        21,291         5,179

                                   ------------  ------------  ------------

    Total assets                   $    957,595  $    946,938  $    885,149

                                   ============  ============  ============



   LIABILITIES AND STOCKHOLDERS'

               EQUITY

Current liabilities:

  Accounts payable                 $     91,034  $     87,996  $     76,288

  Accrued compensation                   24,410        17,494        24,525

  Other accrued liabilities              32,118        33,828        25,112

  Deferred revenue                        7,909         9,762         8,064

  Current portion of long-term

   debt                                   4,281         7,547             -

                                   ------------  ------------  ------------

    Total current liabilities           159,752       156,627       133,989

Long-term liabilities:

  Convertible notes, net of

   current portion                       40,015        40,015        40,015

  Long-term debt, net of current

   portion                                    -         2,329             -

  Other non-current liabilities          15,771        16,314        11,988

  Deferred tax liabilities                4,052         3,553             -

                                   ------------  ------------  ------------

    Total liabilities                   219,590       218,838       185,992

Stockholders' equity:

  Common stock                               91            91            90

  Additional paid-in capital          2,293,485     2,285,769     2,275,600

  Accumulated other comprehensive

   income                                29,323        33,404        32,966

  Accumulated deficit                (1,593,430)   (1,599,357)   (1,609,499)

                                   ------------  ------------  ------------

    Finisar Corporation

     stockholders' equity               729,469       719,907       699,157

  Non-controlling interest                8,536         8,193             -

                                   ------------  ------------  ------------

    Total stockholders' equity          738,005       728,100       699,157

                                   ------------  ------------  ------------

Total liabilities and

 stockholders' equity              $    957,595  $    946,938  $    885,149

                                   ============  ============  ============

FINISAR NON-GAAP FINANCIAL MEASURES

In addition to reporting financial results in accordance with U.S. generally accepted accounting principles, or GAAP, Finisar provides supplemental information regarding the Company's operating performance on a non-GAAP basis that excludes certain gains, losses and charges of a non-cash nature or which occur relatively infrequently and which management considers to be outside our core operating results. Some of these non-GAAP measures also exclude the ongoing impact of historical business decisions made in different business and economic environments. Management believes that tracking non-GAAP gross profit, non-GAAP income from operations, non-GAAP net income and non-GAAP net income per share provides management and the investment community with valuable insight into our current operations, our ability to generate cash and the underlying business trends which are affecting our performance. These non-GAAP measures are used by both management and our Board of Directors, along with the comparable GAAP information, in evaluating our current performance and planning our future business activities. In particular, management finds it useful to exclude non-cash charges in order to better correlate our operating activities with our ability to generate cash from operations and to exclude non-recurring and infrequently incurred cash charges as a means of more accurately predicting our liquidity requirements. We believe that these non-GAAP measures, when used in conjunction with our GAAP financial information, also allow investors to better evaluate our financial performance in comparison to other periods and to other companies in our industry.

In calculating non-GAAP gross profit in this release, we have excluded the following items from cost of revenues in applicable periods:

In calculating non-GAAP operating income in this release, we have excluded the same items to the extent they are classified as operating expenses, and have also excluded the following items in applicable periods:

In calculating non-GAAP income from continuing operations and non-GAAP income from continuing operations per share in this release, we have also excluded the following items in applicable periods:

In calculating non-GAAP income (loss) per share in this release, we have included the shares issuable upon conversion of our outstanding convertible notes and excluded the interest expenses associated with such notes in such periods where such treatment is dilutive to non-GAAP income (loss) per share.

A reconciliation of this non-GAAP financial information to the corresponding GAAP information is set forth below:






                            Finisar Corporation

      Reconciliation of Results of Operations under GAAP and non-GAAP



                                                                     Three

                                                                    Months

                           Three Months Ended   Six Months Ended     Ended

                           ------------------  ------------------  --------

                            October   October   October   October  July 31,

                           30, 2011  31, 2010  30, 2011  31, 2010    2011

                           --------  --------  --------  --------  --------

                                              (Unaudited)

                           ------------------------------------------------

                                 (in thousands, except per share data)

Reconciliation of GAAP

 income to non-GAAP income

 from continuing

 operations

Reconciliation of GAAP

 Gross Profit to non-GAAP

 Gross Profit:

Gross profit per GAAP      $ 70,281  $ 82,400  $136,762  $153,298  $ 66,481

Gross margin, GAAP             29.1%     34.2%     29.1%     34.2%     29.1%

Adjustments:

Cost of revenues

  Change in excess and

   obsolete inventory

   reserve                    2,521       575     3,611       980     1,090

  Amortization of acquired

   technology                 1,637     1,200     3,159     2,392     1,522

  Stock compensation          1,687     1,310     3,546     2,056     1,859

  Acquisition method

   accounting adjustment

   for sale of acquired

   inventory                  1,229         -     3,083         -     1,854

  Reduction in force costs       49         6       601        42       552

                           --------  --------  --------  --------  --------

    Total cost of revenue

     adjustments              7,123     3,091    14,000     5,470     6,877

Gross profit, non-GAAP       77,404    85,491   150,762   158,768    73,358

Gross margin, non-GAAP         32.1%     35.5%     32.1%     35.4%     32.1%



Reconciliation of GAAP

 operating income to non-

 GAAP operating income:

Operating income per GAAP     8,817    36,105    15,907    59,852     7,090

Operating margin, GAAP          3.7%     15.0%      3.4%     13.3%      3.1%

Adjustments:

Total cost of revenue

 adjustments                  7,123     3,091    14,000     5,470     6,877

Research and development

  Reduction in force costs       73         -        73         5         -

  Stock compensation          2,274     1,702     4,635     2,739     2,361

Sales and marketing

  Reduction in force costs        -        81         -       155         -

  Stock compensation            767       528     1,631       979       864

General and administrative

  Reduction in force costs      865        50       963        92        98

  Stock compensation          1,945     1,422     3,953     2,447     2,008

  Acquisition related

   costs                        209         -     1,298         -     1,089

  Litigation settlements

   and resolutions and

   related costs                627    (2,465)      727    (2,565)      100

Amortization of purchased

 intangibles                    859       383     1,638       766       779

Restructuring recoveries          -         -      (322)        -      (322)

                           --------  --------  --------  --------  --------

    Total cost of revenue

     and operating expense

     adjustments             14,742     4,792    28,596    10,088    13,854

Operating income, non-GAAP   23,559    40,897    44,503    69,940    20,944

Operating margin, non-GAAP      9.8%     17.0%      9.5%     15.6%      9.2%



Reconciliation of GAAP

 income to non-GAAP income

 from continuing

 operations:

Income per GAAP from

 continuing operations        5,927    33,796    16,069    53,206    10,142

Total cost of revenue and

 operating expense

 adjustments                 14,742     4,792    28,596    10,088    13,854

Non-cash imputed interest

 expenses on convertible

 debt                             -       367         -       742         -

Imputed interest related

 to restructuring               396         -       466         -        70

Other income (expense),

 net

  Loss (gain) on sale of

   assets                       221        (9)      222         7         1

  Loss related to minority

   and equity method

   investments                    -         -       619         -       619

  Other misc. expenses or

   (income)                     250       (58)      250       (58)        -

  Foreign exchange

   transaction gain            (494)     (471)     (642)     (538)     (148)

  Debt extinguishment loss        -         -       419         -       419

  Fair value remeasurement

   of equity investment           -         -    (5,429)        -    (5,429)

Provision for income tax

  Timing differences            495      (115)      495       667         -

                           --------  --------  --------  --------  --------

Total adjustments            15,610     4,506    24,996    10,908     9,386

                           --------  --------  --------  --------  --------

Income, non-GAAP, from

 continuing operations       21,537    38,302    41,065    64,114    19,528

                           --------  --------  --------  --------  --------



Reconciliation of GAAP

 loss to non-GAAP loss

 from discontinued

 operations:

Loss per GAAP from

 discontinued operations          -         -         -      (284)        -

Loss from discontinued

 operations, non-GAAP             -         -         -      (284)        -

                           --------  --------  --------  --------  --------



Reconciliation of GAAP net

 income (loss) to non-GAAP

 net income (loss):

Net income (loss) per GAAP    5,927    33,796    16,069    52,922    10,142

Total adjustments from

 continuing operations       15,610     4,506    24,996    10,908     9,386

Total adjustments from

 discontinuing operations         -         -         -         -         -

                           --------  --------  --------  --------  --------

Total adjustments            15,610     4,506    24,996    10,908     9,386

                           --------  --------  --------  --------  --------

Net income, non-GAAP       $ 21,537  $ 38,302  $ 41,065  $ 63,830  $ 19,528

                           ========  ========  ========  ========  ========



Income from continuing

 operations                $ 21,537  $ 38,302  $ 41,065  $ 64,114  $ 19,528

Add: interest expense for

 dilutive convertible

 notes                          539     1,374     1,078     2,752       539

                           --------  --------  --------  --------  --------

Adjusted income from

 continuing operations     $ 22,076  $ 39,676  $ 42,143  $ 66,866  $ 20,067

                           ========  ========  ========  ========  ========



Income per share from

 continuing operations -

 basic                     $   0.24  $   0.50  $   0.45  $   0.84  $   0.22

Income per share from

 continuing operations -

 diluted                   $   0.23  $   0.44  $   0.43  $   0.75  $   0.21



Shares used in computing

 net income per share from

 continuing operations -

 basic                       90,715    76,766    90,470    76,433    90,221

Shares used in computing

 net income per share from

 continuing operations -

 diluted                     97,347    89,521    97,460    89,013    97,275



Continuing operations

Net income, non-GAAP       $ 21,537  $ 38,302  $ 41,065  $ 64,114  $ 19,528



Depreciation expense         10,995     8,684    21,590    16,850    10,595

Amortization                    208       289       416       578       208

Interest expense                642     1,567     1,323     3,255       681

Income tax expense              874       682     1,422     1,983       548

                           --------  --------  --------  --------  --------

Non-GAAP EBITDA            $ 34,256  $ 49,524  $ 65,816  $ 86,780  $ 31,560

                           --------  --------  --------  --------  --------



Discontinued operations

Net loss, non-GAAP                -         -         -      (284)        -

Depreciation expense              -         -         -         -         -

                           --------  --------  --------  --------  --------

Non-GAAP EBITDA            $      -  $      -  $      -  $   (284) $      -

                           --------  --------  --------  --------  --------



                           --------  --------  --------  --------  --------

Total Non-GAAP EBITDA      $ 34,256  $ 49,524  $ 65,816  $ 86,496  $ 31,560

                           ========  ========  ========  ========  ========

Investor Contact:

Kurt Adzema

Chief Financial Officer

408-542-5050

or

Investor.relations@finisar.com



Press contact:

Victoria McDonald

Sr. Manager, Corporate Communications

408-542-4261



Source: Finisar

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