Finisar Corporation
Feb 29, 2012
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Finisar Announces Third Quarter Fiscal 2012 Financial Results

SUNNYVALE, CA -- (MARKET WIRE) -- 02/29/12 -- Finisar Corporation (NASDAQ: FNSR), a global technology leader for subsystems and components for fiber optic communications, today announced financial results for its third quarter of fiscal 2012 ended January 29, 2012.

COMMENTARY
"In our just completed fiscal third quarter, our revenues were $243.0 million, 0.6% greater than the preceding quarter. Sales of datacom products were strong. Gross margin was relatively unchanged from the preceding quarter, despite the impact of one month of the annual price reduction for telecom products. We held operating expenses below plan, so that operating income and operating margin increased relative to the preceding quarter," 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 new innovative products," said Eitan Gertel, Finisar's Chief Executive Officer. "Production of our 100G ethernet transceivers and tunable XFP transceiver products continued to ramp during the quarter. In addition, we have started the qualification process for our high port count wavelength selective switch(WSS) modules with multiple customers. In our parallel optics product line we continue to see significant traction with several key OEM customers for our optical engine product. "


         FINANCIAL HIGHLIGHTS -THIRD QUARTER ENDED January 29, 2012



Summary GAAP Results                               Third          Second

                                                  Quarter        Quarter

                                                   Ended          Ended

                                                Jan 29, 2012   Oct 30, 2011

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

                                                 (in thousands, except per

                                                      share amounts)

Continuing operations

Revenues                                       $     242,954  $     241,489

Gross margin                                            29.3%          29.1%

Operating expenses                             $      59,794  $      61,464

Operating income                               $      11,308  $       8,817

Operating margin                                         4.7%           3.7%

Income                                         $       8,909  $       5,927

Income per share-basic                         $        0.10  $        0.07

Income per share-diluted                       $        0.09  $        0.06



Basic shares                                          91,001         90,715

Diluted shares                                        94,032         93,599





Summary Non-GAAP Results (a)                       Third          Second

                                                  Quarter        Quarter

                                                   Ended          Ended

                                                Jan 29, 2012   Oct 30, 2011

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

                                                 (in thousands, except per

                                                      share amounts)

Continuing operations

Revenues                                       $     242,954  $     241,489

Gross margin                                            31.8%          32.1%

Operating expenses                             $      53,289  $      53,845

Operating income                               $      23,973  $      23,559

Operating margin                                         9.9%           9.8%

Income                                         $      21,878  $      21,537

Income per share-basic                         $        0.24  $        0.24

Income per share-diluted                       $        0.23  $        0.23



Basic shares                                          91,001         90,715

Diluted shares                                        97,781         97,347



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.

Operating Statement Highlights for the third quarter of fiscal 2012:

Balance Sheet Highlights for the third quarter of fiscal 2012:

OUTLOOK
The Company indicated that it currently expects fourth fiscal quarter revenues to be in the range of $235 to $250 million; GAAP operating margin to be in the range of approximately 3.0% to 4.5%; non-GAAP operating margin to be in the range of 8.0% to 9.5% and non-GAAP earnings per diluted share to be in the range of approximately $0.18 to $0.22.

CONFERENCE CALL
Finisar will discuss its financial results for the third quarter and current business outlook during its regular quarterly conference call scheduled for Wednesday, February 29, 2012, 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 1-888-282-4591 (domestic) or (719) 457-1529 (international) and enter conference ID 8545316.

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 8545316 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

                   (in thousands, except per share data)



                                                                     Three

                                                                    Months

                           Three Months Ended   Nine Months Ended    Ended

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

                            January   January   January   January   October

                           29, 2012  30, 2011  29, 2012  30, 2011  30, 2011

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

                                              (Unaudited)

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

 Revenues                  $242,954  $263,016  $712,669  $711,841  $241,489

 Cost of revenues           170,215   177,730   500,009   470,865   169,571

 Amortization of acquired

  developed technology        1,637     1,221     4,796     3,613     1,637

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

 Gross profit                71,102    84,065   207,864   237,363    70,281

 Gross margin                  29.3%     32.0%     29.2%     33.3%     29.1%

 Operating expenses:

   Research and

    development              36,470    29,607   108,573    84,372    36,707

   Sales and marketing       10,599     8,818    30,310    27,140    10,125

   General and

    administrative           11,766    14,658    39,491    34,251    13,773

   Amortization of

    purchased intangibles       959       383     2,597     1,149       859

   Restructuring

    recoveries                    -         -      (322)        -         -

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

     Total operating

      expenses               59,794    53,466   180,649   146,912    61,464

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

 Income from operations      11,308    30,599    27,215    90,451     8,817

 Interest income                151       204       411       439       100

 Interest expense              (862)   (1,465)   (2,911)   (5,697)   (1,138)

 Loss on debt

  extinguishment                  -    (5,946)     (419)   (5,946)        -

 Other income (expense),

  net                          (355)   (3,404)    4,168    (3,404)     (140)

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

 Income from continuing

  operations before income

  taxes and non-

  controlling interest       10,242    19,988    28,464    75,843     7,639

 Provision for income

  taxes                         875     1,167     2,792     3,816     1,369

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

 Consolidated net income      9,367    18,821    25,672    72,027     6,270

 Adjust for net loss

  attributable to non-

  controlling interest         (458)        -      (694)        -      (343)

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

Net income attributable to

 Finisar Corporation          8,909    18,821    24,978    72,027     5,927

Loss from discontinued

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

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

Net income                 $  8,909  $ 18,821  $ 24,978  $ 71,743  $  5,927

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



Income per share from

 continuing operations -

 basic                     $   0.10  $   0.24  $   0.28  $   0.93  $   0.07

Income per share from

 continuing operations -

 diluted                   $   0.09  $   0.22  $   0.27  $   0.84  $   0.06



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                       91,001    80,080    90,644    77,638    90,715



Shares used in computing

 net income per share from

 continuing operations -

 diluted                     94,032    93,388    93,904    90,694    93,599



Shares used in computing

 net income per share from

 discontinued operations -

 basic                       91,001    80,080    90,644    77,638    90,715



Shares used in computing

 net income per share from

 discontinued operations -

 diluted                     94,032    93,388    93,904    90,694    93,599





                            Finisar Corporation

                        Consolidated Balance Sheets

                               (In thousands)



                         January 29,  October 30,    July 31,    April 30,

                             2012         2011         2011         2011

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

                         (Unaudited)  (Unaudited)  (Unaudited)      Note

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

         ASSETS

Current assets:

  Cash and cash

   equivalents           $   218,321  $   228,040  $   238,052  $   314,765

  Accounts receivable,

   net                       178,294      176,494      166,536      168,386

  Accounts receivable,

   other                      17,839       11,558       12,788       12,733

  Inventories                225,533      214,940      208,567      187,617

  Prepaid expenses and

   other                      22,402       19,120       16,029        9,906

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

    Total current assets     662,389      650,152      641,972      693,407

Property, equipment and

 improvements, net           150,233      143,139      138,300      125,693

Purchased intangible

 assets, net                  46,351       47,306       49,979       17,439

Goodwill                      80,988       82,936       83,107            -

Minority investments          12,289       12,289       12,289       12,289

Equity method

 investments                       -            -            -       31,142

Other assets                  20,395       21,773       21,291        5,179

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

    Total assets         $   972,645  $   957,595  $   946,938  $   885,149

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



     LIABILITIES AND

   STOCKHOLDERS' EQUITY

Current liabilities:

  Accounts payable       $    86,185  $    91,034  $    87,996  $    76,288

  Accrued compensation        24,667       24,410       17,494       24,525

  Other accrued

   liabilities                31,912       32,118       33,828       25,112

  Deferred revenue             8,342        7,909        9,762        8,064

  Current portion of

   long-term debt              4,281        4,281        7,547            -

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

    Total current

     liabilities             155,387      159,752      156,627      133,989

Long-term liabilities:

  Convertible notes, net

   of current portion         40,015       40,015       40,015       40,015

  Long-term debt, net of

   current portion                 -            -        2,329            -

  Other non-current

   liabilities                17,246       15,771       16,314       11,988

  Deferred tax

   liabilities                 4,047        4,052        3,553            -

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

    Total liabilities        216,695      219,590      218,838      185,992

Stockholders' equity:

  Common stock                    91           91           91           90

  Additional paid-in

   capital                 2,301,850    2,293,485    2,285,769    2,275,600

  Accumulated other

   comprehensive income       29,536       29,323       33,404       32,966

  Accumulated deficit     (1,584,521)  (1,593,430)  (1,599,357)  (1,609,499)

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

    Finisar Corporation

     stockholders'

     equity                  746,956      729,469      719,907      699,157

  Non-controlling

   interest                    8,994        8,536        8,193            -

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

    Total stockholders'

     equity                  755,950      738,005      728,100      699,157

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

Total liabilities and

 stockholders' equity    $   972,645  $   957,595  $   946,938  $   885,149

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



Note - Balance sheet amounts as of April 30, 2011 are derived

 from the audited consolidated financial statements as of the

 date.

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

                   (in thousands, except per share data)



                                                                     Three

                                                                    Months

                           Three Months Ended   Nine Months Ended    Ended

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

                            January   January   January   January   October

                           29, 2012  30, 2011  29, 2012  30, 2011  30, 2011

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

                                              (Unaudited)

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

GAAP to non-GAAP

 reconciliation of gross

 profit:

Gross profit - GAAP        $ 71,102  $ 84,065  $207,864  $237,363  $ 70,281

Gross margin - GAAP            29.3%     32.0%     29.2%     33.3%     29.1%

Adjustments:

Cost of revenues

  Change in excess and

   obsolete inventory

   reserve                    1,732     4,589     5,343     5,569     2,521

  Amortization of acquired

   technology                 1,637     1,222     4,796     3,614     1,637

  Stock compensation          1,596     1,353     5,142     3,409     1,687

  Payroll taxes related to

   options investigation          -       (83)        -       (83)        -

  Acquisition method

   accounting adjustment

   for sale of acquired

   inventory                    952        11     4,035        11     1,229

  Reduction in force costs      243         1       844        43        49

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

    Total cost of revenue

     adjustments              6,160     7,093    20,160    12,563     7,123

Gross profit - non-GAAP      77,262    91,158   228,024   249,926    77,404

Gross margin - non-GAAP        31.8%     34.7%     32.0%     35.1%     32.1%



GAAP to non-GAAP

 reconciliation of

 operating income:

Operating income - GAAP      11,308    30,599    27,215    90,451     8,817

Operating margin - GAAP         4.7%     11.6%      3.8%     12.7%      3.7%

Adjustments:

Total cost of revenue

 adjustments                  6,160     7,093    20,160    12,563     7,123

Research and development

  Reduction in force costs      693        25       766        30        73

  Stock compensation          2,200     1,608     6,835     4,347     2,274

  Payroll taxes related to

   options investigation          -      (118)        -      (118)        -

Sales and marketing

  Reduction in force costs        -        69         -       224         -

  Stock compensation            747       536     2,378     1,515       767

  Payroll taxes related to

   options investigation          -       (42)        -       (42)        -

General and administrative

  Reduction in force costs       51        29     1,014       121       865

  Stock compensation          1,746     1,189     5,699     3,636     1,945

  Payroll taxes related to

   options investigation          -       (73)        -       (73)        -

  Acquisition related

   costs                        304         -     1,602         -       209

  Litigation settlements

   and resolutions and

   related costs               (185)    3,437       (93)      872        (8)

  Shareholder class action

   and derivative

   litigation costs             (10)        -       625         -       635

Amortization of purchased

 intangibles                    959       383     2,597     1,149       859

Restructuring recoveries          -         -      (322)        -         -

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

    Total cost of revenue

     and operating expense

     adjustments             12,665    14,136    41,261    24,224    14,742

Operating income - non-

 GAAP                        23,973    44,735    68,476   114,675    23,559

Operating margin - non-

 GAAP                           9.9%     17.0%      9.6%     16.1%      9.8%



GAAP to non-GAAP

 reconciliation of income

 from continuing

 operations:

Income from continuing

 operations - GAAP            8,909    18,821    24,978    72,027     5,927

Total cost of revenue and

 operating expense

 adjustments                 12,665    14,136    41,261    24,224    14,742

Non-cash imputed interest

 expenses on convertible

 debt                             -         -         -       742         -

Imputed interest related

 to restructuring               206        74       672        74       396

Other income (expense),

 net

  Loss (gain) on sale of

   assets                      (229)      154        (7)      161       221

  Loss related to minority

   and equity method

   investments                    -         -       619         -         -

  Other miscellaneous

   expenses (income)            351        (3)      601       (61)      250

  Foreign exchange

   transaction loss (gain)      362     2,357      (280)    1,819      (494)

  Debt extinguishment loss        -     6,566       419     6,566         -

  Fair value remeasurement

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

Provision for income taxes

  Income tax provision

   adjustments                 (386)      416       109     1,083       495

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

Total adjustments            12,969    23,700    37,965    34,608    15,610

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

Income from continuing

 operations - non-GAAP       21,878    42,521    62,943   106,635    21,537

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



GAAP to non-GAAP

 reconciliation of loss

 from discontinued

 operations:

Loss from discontinued

 operations - GAAP                -         -         -      (284)        -

Loss from discontinued

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

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



GAAP to non-GAAP

 reconciliation of net

 income:

Net income - GAAP             8,909    18,821    24,978    71,743     5,927

  Total adjustments from

   continuing operations     12,969    23,700    37,965    34,608    15,610

  Total adjustments from

   discontinued operations        -         -         -         -         -

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

Total adjustments            12,969    23,700    37,965    34,608    15,610

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

Net income, non-GAAP       $ 21,878  $ 42,521  $ 62,943  $106,351  $ 21,537

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



Non-GAAP income from

 continuing operations     $ 21,878  $ 42,521  $ 62,943  $106,635  $ 21,537

Add: interest expense for

 dilutive convertible

 notes                          539     1,283     1,617     4,035       539

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

Non-GAAP adjusted income

 from continuing

 operations                $ 22,417  $ 43,804  $ 64,560  $110,670  $ 22,076

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



Non-GAAP income per share

 from continuing

 operations - basic        $   0.24  $   0.53  $   0.69  $   1.37  $   0.24

Non-GAAP income per share

 from continuing

 operations - diluted      $   0.23  $   0.47  $   0.66  $   1.22  $   0.23



Shares used in computing

 non-GAAP net income per

 share from continuing

 operations - basic          91,001    80,080    90,644    77,638    90,715

Shares used in computing

 non-GAAP net income per

 share from continuing

 operations - diluted        97,781    93,388    97,652    90,694    97,347



Non-GAAP EBITDA -

 Continuing operations

Non-GAAP income from

 continuing operations     $ 21,878  $ 42,521  $ 62,943  $106,635  $ 21,537

Depreciation expense         11,388     8,922    32,978    25,772    10,995

Amortization                    208       264       624       842       208

Interest expense                505     1,187     1,828     4,442       642

Income tax expense            1,261       751     2,683     2,734       874

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

Non-GAAP EBITDA -

 continuing operations     $ 35,240  $ 53,645  $101,056  $140,425  $ 34,256

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



Non-GAAP EBITDA -

 Discontinued operations

Non-GAAP income from

 discontinuing operations         -         -         -      (284)        -

Depreciation expense              -         -         -         -         -

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

Non-GAAP EBITDA -

 Discontinued operations   $      -  $      -  $      -  $   (284) $      -

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



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

Total Non-GAAP EBITDA      $ 35,240  $ 53,645  $101,056  $140,141  $ 34,256

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

Investor Contact:

Kurt Adzema

Chief Financial Officer

408-542-5050

Investor.relations@finisar.com



Press contact:

Victoria McDonald

Sr. Manager, Corporate Communications

408-542-4261



Source: Finisar

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