Finisar Corporation
Dec 5, 2012
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Finisar Announces Second Fiscal Quarter Financial Results

SUNNYVALE, CA -- (Marketwire) -- 12/05/12 -- Finisar Corporation (NASDAQ: FNSR), a global technology leader for subsystems and components for fiber optic communications, today announced financial results for its second fiscal quarter ended October 28, 2012.

COMMENTARY

"I am pleased to report fiscal second quarter revenues of $232.0 million, which is $11.5 million, or 5.2%, greater than the prior quarter. Our growth in revenues came primarily from sales of tunable XFP transceivers and wavelength selective switches, including ROADM line cards," said Jerry Rawls, Finisar's executive Chairman of the Board. "In addition, operating income increased at a faster rate than revenues because we were able to hold operating expenses relatively flat. This was accomplished in spite of the impact of a full quarter of operating expenses from operation of our RED-C subsidiary, which we acquired during the first quarter."

"During the quarter, we continued to invest significantly in technology and product development and made substantial progress on a number of new products including tunable SFP+ transceivers, 100G coherent transponders, and next generation 100G client CFP and CFP2 transponders. We expect these new products to drive our future revenue growth and market share expansion in calendar 2013 and beyond," said Eitan Gertel, Finisar's Chief Executive Officer.




        FINANCIAL HIGHLIGHTS -SECOND QUARTER ENDED October 28, 2012



Summary GAAP Results                                 Second       First

                                                    Quarter      Quarter

                                                     Ended        Ended

                                                  October 28,    July 29,

                                                      2012         2012

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

                                                    (in thousands, except

                                                     per share amounts)



Revenues                                          $   232,041  $   220,526

Gross margin                                             27.5%        26.2%

Operating expenses                                $    63,820  $    62,994

Operating income (loss)                           $        54  $    (5,197)

Operating margin                                          0.0%        (2.4)%

Income (loss)                                     $       271  $    (6,197)

Income (loss) per share-basic                     $      0.00  $     (0.07)

Income (loss) per share-diluted                   $      0.00  $     (0.07)



Basic shares                                           92,780       91,988

Diluted shares                                         94,735       91,988





Summary Non-GAAP Results (a)                         Second       First

                                                    Quarter      Quarter

                                                     Ended        Ended

                                                  October 28,    July 29,

                                                      2012         2012

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

                                                    (in thousands, except

                                                     per share amounts)



Revenues                                          $   232,041  $   220,526

Gross margin                                             30.5%        30.3%

Operating expenses                                $    54,846  $    54,710

Operating income                                  $    15,838  $    12,000

Operating margin                                          6.8%         5.4%

Income                                            $    14,205  $    10,871

Income per share-basic                            $      0.15  $      0.12

Income per share-diluted                          $      0.15  $      0.12



Basic shares                                           92,780       91,988

Diluted shares                                         98,483       94,204



_____________

(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 second quarter of fiscal 2013:

Balance Sheet Highlights for the second quarter of fiscal 2013:

OUTLOOK

The Company currently expects revenues for the third quarter of fiscal 2013 to be in the range of $230 to $245 million; GAAP operating margin to in the range of approximately 0.0% to 1.5%; non-GAAP operating margin to be in the range of approximately 6.5% to 8.0%; and non-GAAP earnings per diluted share to be in the range of approximately $0.14 to $0.18.

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, December 5, 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 1-888-516-2377 (domestic) or (719) 457-2637 (international) and enter conference ID 7734918.

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 7734918 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 recently completed RED-C acquisition; 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 29, 2012) 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 29,

                       28, 2012   30, 2011   28, 2012   30, 2011     2012

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

                                           (Unaudited)

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

                              ( in thousands, except per share data)

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

Revenues              $ 232,041  $ 241,489  $ 452,567  $ 469,715  $ 220,526

Cost of revenues        166,167    169,571    327,624    329,794    161,457

Amortization of

 acquired developed

 technology               2,000      1,637      3,272      3,159      1,272

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

Gross profit             63,874     70,281    121,671    136,762     57,797

Gross margin               27.5%      29.1%      26.9%      29.1%      26.2%

Operating expenses:

  Research and

   development           39,620     36,707     77,789     72,103     38,169

  Sales and marketing    10,219     10,125     20,893     19,711     10,674

  General and

   administrative        12,919     13,773     26,261     27,725     13,342

  Amortization of

   purchased

   intangibles            1,062        859      1,871      1,638        809

  Restructuring

   recoveries                 -          -          -       (322)         -

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

    Total operating

     expenses            63,820     61,464    126,814    120,855     62,994

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

Income (loss) from

 operations                  54      8,817     (5,143)    15,907     (5,197)

Interest income             162        100        358        260        196

Interest expense           (750)    (1,138)    (1,397)    (2,049)      (647)

Loss on debt

 extinguishment               -          -          -       (419)         -

Other income

 (expenses), net           (101)      (140)       (20)     4,523         81

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

Income (loss) before

 income taxes and

 non-controlling

 interest                  (635)     7,639     (6,202)    18,222     (5,567)

Provision (benefits)

 for income taxes        (1,062)     1,369       (420)     1,917        642

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

Income (loss) before

 non-controlling

 interest                   427      6,270     (5,782)    16,305     (6,209)

Adjust for net income

 (loss) attributable

 to non-controlling

 interest                  (156)      (343)      (144)      (236)        12

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

Net income (loss)

 attributable to

 Finisar Corporation  $     271  $   5,927  $  (5,926) $  16,069  $  (6,197)

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



Net income (loss) per

 share attributable

 to Finisar

 Corporation common

 stockholders:



  Basic               $    0.00  $    0.07  $   (0.06) $    0.18  $   (0.07)

  Diluted             $    0.00  $    0.06  $   (0.06) $    0.17  $   (0.07)



Shares used in

 computing net income

 (loss) per share -

 basic                   92,780     90,715     92,386     90,470     91,988

Shares used in

 computing net income

 (loss) per share -

 diluted                 94,735     93,599     92,386     93,712     91,988





                            Finisar Corporation

                        Consolidated Balance Sheets

                               (in thousands)



                                    October 28,    July 29,      April 30,

                                       2011          2012          2012

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

                                    (Unaudited)   (Unaudited)

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

              ASSETS

Current assets:

  Cash and cash equivalents        $    262,432  $    220,409  $    234,544

  Accounts receivable, net              155,949       179,441       167,760

  Accounts receivable, other             15,240        14,972        21,004

  Inventories                           203,554       208,168       218,432

  Prepaid expenses                       25,183        24,430        25,482

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

    Total current assets                662,358       647,420       667,222

Property, equipment and

 improvements, net                      173,284       165,837       163,817

Purchased intangible assets, net         53,300        43,049        45,177

Goodwill                                 91,098        97,994        81,431

Minority investments                        884           884           884

Other assets                              7,263         7,393        10,896

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

    Total assets                   $    988,187  $    962,577  $    969,427

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



   LIABILITIES AND STOCKHOLDERS'

               EQUITY

Current liabilities:

  Accounts payable                 $     72,844  $     71,295  $     72,339

  Accrued compensation                   27,901        22,210        27,090

  Other accrued liabilities              22,774        21,456        20,871

  Deferred revenue                        7,868         9,775         8,970

  Current portion of long-term

   debt                                       -             -         3,150

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

    Total current liabilities           131,387       124,736       132,420

Long-term liabilities:

  Convertible notes, net of

   current portion                       40,015        40,015        40,015

  Other non-current liabilities          21,171        16,274        15,175

  Deferred tax liabilities                2,459         2,433         1,972

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

    Total liabilities                   195,032       183,458       189,582

Stockholders' equity:

  Common stock                               93            93            91

  Additional paid-in capital          2,330,683     2,321,064     2,309,219

  Accumulated other comprehensive

   income                                26,346        22,356        28,720

  Accumulated deficit                (1,572,432)   (1,572,703)   (1,566,506)

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

    Finisar Corporation

     stockholders' equity               784,690       770,810       771,524

  Non-controlling interest                8,465         8,309         8,321

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

    Total stockholders' equity          793,155       779,119       779,845

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

Total liabilities and

 stockholders' equity              $    988,187  $    962,577  $    969,427

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



Note - Balance sheet amounts as of April 30, 2012 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 certain 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 and non-GAAP income per share in this release, we have also excluded the following items in applicable periods:

In calculating non-GAAP income 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 29,

                       28, 2012   30, 2011   28, 2012   30, 2011     2012

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

                                           (Unaudited)

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

                              ( in thousands, except per share data)

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

GAAP to non-GAAP

 reconciliation of

 gross profit:

Gross profit - GAAP   $  63,874  $  70,281  $ 121,671  $ 136,762  $  57,797

Gross margin - GAAP        27.5%      29.1%      26.9%      29.1%      26.2%

Adjustments:

Cost of revenues

  Change in excess

   and obsolete

   inventory reserve      2,003      2,521      6,869      3,611      4,866

  Amortization of

   acquired

   technology             2,000      1,637      3,272      3,159      1,272

  Stock compensation      1,876      1,687      3,362      3,546      1,486

  Acquisition method

   accounting

   adjustment for

   sale of acquired

   inventory                722      1,229      1,363          -        641

  Flood-related

   expense                    -          -          -      3,083          -

  Reduction in force

   costs                    136         49        784        601        648

  Acquisition related

   retention payment         73          -         73          -          -

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

    Total cost of

     revenue

     adjustments          6,810      7,123     15,723     14,000      8,913

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

Gross profit - non-

 GAAP                    70,684     77,404    137,394    150,762     66,710

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

Gross margin - non-

 GAAP                      30.5%      32.1%      30.4%      32.1%      30.3%



GAAP to non-GAAP

 reconciliation of

 operating income:

Operating income

 (loss) - GAAP               54      8,817     (5,143)    15,907     (5,197)

Operating margin -

 GAAP                       0.0%       3.7%      -1.1%       3.4%      -2.4%

Adjustments:

Total cost of revenue

 adjustments              6,810      7,123     15,723     14,000      8,913

Research and

 development

  Reduction in force

   costs                      -         73        177         73        177

  Acquisition related

   retention payment        222          -        222          -          -

  Stock compensation      3,353      2,274      6,339      4,635      2,986

Sales and marketing

  Acquisition related

   retention payment         20          -         20          -          -

  Stock compensation      1,002        767      2,079      1,631      1,077

General and

 administrative

  Reduction in force

   costs                     54        865         69        963         15

  Acquisition related

   retention payment        253          -        253          -          -

  Stock compensation      2,956      1,945      5,785      3,953      2,829

  Acquisition related

   costs                     96        209        421      1,298        325

  Litigation

   settlements and

   resolutions and

   related costs            (10)        (8)        13         92         23

  Shareholder class

   action and

   derivative

   litigation costs         (34)       635          9        635         43

Amortization of

 purchased

 intangibles              1,062        859      1,871      1,638        809

Restructuring

 recoveries                   -          -          -       (322)         -

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

    Total cost of

     revenue and

     operating

     expense

     adjustments         15,784     14,742     32,981     28,596     17,197

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

Operating income -

 non-GAAP                15,838     23,559     27,838     44,503     12,000

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

Operating margin -

 non-GAAP                   6.8%       9.8%       6.2%       9.5%       5.4%



GAAP to non-GAAP

 reconciliation of

 income attributable

 to Finisar

 Corporation:

Income (loss)

 attributable to

 Finisar Corporation

 - GAAP                     271      5,927     (5,926)    16,069     (6,197)

Adjustments:

Total cost of revenue

 and operating

 expense adjustments     15,784     14,742     32,981     28,596     17,197

Imputed interest

 related to

 restructuring              164        396        226        466         62

Other (income)

 expense, net

  Loss (gain) on sale

   of assets               (170)       221       (189)       222        (19)

  Loss related to

   minority and

   equity method

   investments                -          -          -        619          -

  Other miscellaneous

   income                     -        250       (160)       250       (160)

  Foreign exchange

   transaction loss

   (gain)                  (607)      (494)      (611)      (642)        (4)

  Debt extinguishment

   loss                     573          -        573        419          -

  Fair value

   remeasurement of

   equity investment          -          -          -     (5,429)         -

Provision for income

 taxes

  Income tax

   provision

   adjustments           (1,810)       495     (1,818)       495         (8)

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

Total adjustments        13,934     15,610     31,002     24,996     17,068

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

Net income

 attributable to

 Finisar Corporation

 - non-GAAP              14,205     21,537     25,076     41,065     10,871

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



Non-GAAP income

 attributable to

 Finisar Corporation  $  14,205  $  21,537  $  25,076  $  41,065  $  10,871

Add: interest expense

 for dilutive

 convertible notes          539        539          -      1,078          -

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

Adjusted non-GAAP

 income attributable

 to Finisar

 Corporation          $  14,744  $  22,076  $  25,076  $  42,143  $  10,871

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



Non-GAAP income per

 share attributable

 to Finisar

 Corporation common

 stockholders

  Basic               $    0.15  $    0.24  $    0.27  $    0.45  $    0.12

  Diluted             $    0.15  $    0.23  $    0.26  $    0.43  $    0.12

Shares used in

 computing non-GAAP

 income per share

 attributable to

 Finisar Corporation

 common stockholders

  Basic                  92,780     90,715     92,386     90,470     91,988

  Diluted                98,483     97,347     94,780     97,460     94,204



Non-GAAP EBITDA

Non-GAAP income

 attributable to

 Finisar Corporation  $  14,205  $  21,537  $  25,076  $  41,065  $  10,871

Depreciation expense     13,106     10,995     25,817     21,590     12,711

Amortization                237        208        473        416        236

Interest expense            424        642        813      1,323        389

Income tax expense          748        874      1,398      1,422        650

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

Non-GAAP EBITDA       $  28,720  $  34,256  $  53,577  $  65,816  $  24,857

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



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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