Finisar Corporation
Mar 7, 2013
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Finisar Announces Third Fiscal Quarter Financial Results

SUNNYVALE, CA -- (Marketwire) -- 03/07/13 -- Finisar Corporation (NASDAQ: FNSR), a global technology leader for subsystems and components for fiber optic communications, today announced financial results for its third fiscal quarter ended January 27, 2013.

COMMENTARY

"I am pleased to report fiscal third quarter revenues of $238.4 million, which is $6.3 million, or 2.7%, greater than the prior quarter. Our growth in revenues came primarily from sales of 10G and 100G transceivers and transponders for datacom applications," said Jerry Rawls, Finisar's executive Chairman of the Board.

"During the quarter, we continued to invest significantly in technology and product development and made substantial progress on a number of new products for our datacom and telecom products lines. We are planning several compelling product announcements at the OFC show during the week of March 18th in Anaheim, California," said Eitan Gertel, Finisar's Chief Executive Officer.




         FINANCIAL HIGHLIGHTS -THIRD QUARTER ENDED January 27, 2013



Summary GAAP Results                                Third         Second

                                                   Quarter        Quarter

                                                    Ended          Ended

                                                 January 27,    October 28,

                                                    2013           2012

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

                                                 (in thousands, except per

                                                       share amounts)



Revenues                                        $    238,351   $    232,041

Gross margin                                            28.5%          27.5%

Operating expenses                              $     68,841   $     63,820

Operating income (loss)                         $       (797)  $         54

Operating margin                                        (0.3)%          0.0%

Income (loss)                                   $     (3,407)  $        271

Income (loss) per share-basic                   $      (0.04)  $       0.00

Income (loss) per share-diluted                 $      (0.04)  $       0.00



Basic shares                                          93,097         92,780

Diluted shares                                        93,097         94,735





Summary Non-GAAP Results (a)                        Third         Second

                                                   Quarter        Quarter

                                                    Ended          Ended

                                                 January 27,    October 28,

                                                    2013           2012

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

                                                 (in thousands, except per

                                                       share amounts)



Revenues                                        $    238,351   $    232,041

Gross margin                                            30.7%          30.5%

Operating expenses                              $     55,816   $     54,846

Operating income                                $     17,377   $     15,838

Operating margin                                         7.3%           6.8%

Income                                          $     16,390   $     14,205

Income per share-basic                          $       0.18   $       0.15

Income per share-diluted                        $       0.17   $       0.15



Basic shares                                          93,097         92,780

Diluted shares                                        99,094         98,483





(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 2013:

Balance Sheet Highlights for the third quarter of fiscal 2013:

OUTLOOK

The Company currently expects revenues for the fourth quarter of fiscal 2013 to be in the range of $235 to $250 million; GAAP operating margin to be approximately 2%; non-GAAP operating margin to be approximately 7%; and non-GAAP earnings per diluted share to be in the range of approximately $0.15 to $0.19.

CONFERENCE CALL

Finisar will discuss its financial results for the third quarter and current business outlook during its regular quarterly conference call scheduled for Thursday, March 7, 2013, 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 1-888-417-8533 (domestic) or (719) 457-2697 (international) and enter conference ID 4484284.

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 4484284 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 Balance Sheets

                               (in thousands)



                      January 27,   October 28,    July 29,      April 30,

                         2013          2012          2012          2012

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

                      (Unaudited)   (Unaudited)   (Unaudited)

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

       ASSETS

Current assets:

  Cash and cash

   equivalents       $    265,454  $    262,432  $    220,409  $    234,544

  Accounts

   receivable, net        155,502       155,949       179,441       167,760

  Accounts

   receivable, other       10,843        15,240        14,972        21,004

  Inventories             202,123       203,554       208,168       218,432

  Prepaid expenses         22,875        25,183        24,430        25,482

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

    Total current

     assets               656,797       662,358       647,420       667,222

Property, equipment

 and improvements,

 net                      192,381       173,284       165,837       163,817

Purchased intangible

 assets, net               45,823        53,300        43,049        45,177

Goodwill                   91,551        91,098        97,994        81,431

Minority investments          884           884           884           884

Other assets                7,321         7,263         7,393        10,896

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

    Total assets     $    994,757  $    988,187  $    962,577  $    969,427

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



   LIABILITIES AND

    STOCKHOLDERS'

        EQUITY

Current liabilities:

  Accounts payable   $     67,264  $     72,844  $     71,295  $     72,339

  Accrued

   compensation            28,436        27,901        22,210        27,090

  Other accrued

   liabilities             31,901        22,774        21,456        20,871

  Deferred revenue          9,760         7,868         9,775         8,970

  Current portion of

   long-term debt               -             -             -         3,150

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

    Total current

     liabilities          137,361       131,387       124,736       132,420

Long-term

 liabilities:

  Convertible notes,

   net of current

   portion                 40,015        40,015        40,015        40,015

  Other non-current

   liabilities             14,078        21,171        16,274        15,175

  Deferred tax

   liabilities              2,512         2,459         2,433         1,972

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

    Total

     liabilities          193,966       195,032       183,458       189,582

Stockholders'

 equity:

  Common stock                 93            93            93            91

  Additional paid-in

   capital              2,341,448     2,330,683     2,321,064     2,309,219

  Accumulated other

   comprehensive

   income                  26,904        26,346        22,356        28,720

  Accumulated

   deficit             (1,575,839)   (1,572,432)   (1,572,703)   (1,566,506)

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

    Finisar

     Corporation

     stockholders'

     equity               792,606       784,690       770,810       771,524

  Non-controlling

   interest                 8,185         8,465         8,309         8,321

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

    Total

     stockholders'

     equity               800,791       793,155       779,119       779,845

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

Total liabilities

 and stockholders'

 equity              $    994,757  $    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 Corporation

                   Consolidated Statements of Operations

              (Unaudited, in thousands, except per share data)



                                                                    Three

                                                                    Months

                       Three Months Ended     Nine Months Ended     Ended

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

                       January    January    January    January    October

                       27, 2013   29, 2012   27, 2013   29, 2012   28, 2012

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

Revenues              $ 238,351  $ 242,954  $ 690,918  $ 712,669  $ 232,041

Cost of revenues        168,377    170,215    496,001    500,009    166,167

Amortization of

 acquired developed

 technology               1,930      1,637      5,202      4,796      2,000

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

Gross profit             68,044     71,102    189,715    207,864     63,874

Gross margin               28.5%      29.3%      27.5%      29.2%      27.5%

Operating expenses:

  Research and

   development           39,725     36,470    117,514    108,573     39,620

  Sales and marketing    10,398     10,599     31,291     30,310     10,219

  General and

   administrative        12,797     11,766     39,058     39,491     12,919

  Amortization of

   purchased

   intangibles            1,035        959      2,906      2,597      1,062

  Impairment of long-

   lived assets           4,886          -      4,886          -          -

  Restructuring

   recoveries                 -          -          -       (322)         -

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

    Total operating

     expenses            68,841     59,794    195,655    180,649     63,820

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

Income (loss) from

 operations                (797)    11,308     (5,940)    27,215         54

Interest income             186        151        544        411        162

Interest expense           (648)      (862)    (2,045)    (2,911)      (750)

Loss on debt

 extinguishment               -          -          -       (419)         -

Other income

 (expenses), net           (275)      (355)      (295)     4,168       (101)

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

Income (loss) before

 income taxes and

 non-controlling

 interest                (1,534)    10,242     (7,736)    28,464       (635)

Provision (benefits)

 for income taxes         2,153        875      1,733      2,792     (1,062)

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

Income (loss) before

 non-controlling

 interest                (3,687)     9,367     (9,469)    25,672        427

Adjust for net

 (income) loss

 attributable to non-

 controlling interest       280       (458)       136       (694)      (156)

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

Net income (loss)

 attributable to

 Finisar Corporation  $  (3,407) $   8,909  $  (9,333) $  24,978  $     271

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



Net income (loss) per

 share attributable

 to Finisar

 Corporation common

 stockholders:



  Basic               $   (0.04) $    0.10  $   (0.10) $    0.28  $    0.00

  Diluted             $   (0.04) $    0.09  $   (0.10) $    0.27  $    0.00



Shares used in

 computing net income

 (loss) per share -

 basic                   93,097     91,001     92,624     90,644     92,780

Shares used in

 computing net income

 (loss) per share -

 diluted                 93,097     94,032     92,624     93,904     94,735





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

              (Unaudited, in thousands, except per share data)



                                                                    Three

                                                                    Months

                       Three Months Ended     Nine Months Ended     Ended

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

                       January    January    January    January    October

                       27, 2013   29, 2012   27, 2013   29, 2012   28, 2012

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

GAAP to non-GAAP

 reconciliation of

 gross profit:

Gross profit - GAAP   $  68,044  $  71,102  $ 189,715  $ 207,864  $  63,874

Gross margin - GAAP        28.5%      29.3%      27.5%      29.2%      27.5%

Adjustments:

Cost of revenues

  Change in excess

   and obsolete

   inventory reserve        989      1,732      7,858      5,343      2,003

  Amortization of

   acquired

   technology             1,930      1,637      5,202      4,796      2,000

  Stock compensation      2,140      1,596      5,502      5,142      1,876

  Acquisition method

   accounting

   adjustment for

   sale of acquired

   inventory                  -        952      1,363      4,035        722

  Reduction in force

   costs                     17        243        801        844        136

  Acquisition related

   retention payment         73          -        146          -         73

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

    Total cost of

     revenue

     adjustments          5,149      6,160     20,872     20,160      6,810

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

Gross profit - non-

 GAAP                    73,193     77,262    210,587    228,024     70,684

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

Gross margin - non-

 GAAP                      30.7%      31.8%      30.5%      32.0%      30.5%



GAAP to non-GAAP

 reconciliation of

 operating income:

Operating income

 (loss) - GAAP             (797)    11,308     (5,940)    27,215         54

Operating margin -

 GAAP                      -0.3%       4.7%      -0.9%       3.8%       0.0%

Adjustments:

Total cost of revenue

 adjustments              5,149      6,160     20,872     20,160      6,810

Research and

 development

  Reduction in force

   costs                     11        693        188        766          -

  Acquisition related

   retention payment        213          -        435          -        222

  Stock compensation      2,601      2,200      8,940      6,835      3,353

Sales and marketing

  Acquisition related

   retention payment         17          -         37          -         20

  Stock compensation        885        747      2,964      2,378      1,002

General and

 administrative

  Reduction in force

   costs                     25         51         94      1,014         54

  Acquisition related

   retention payment        223          -        476          -        253

  Stock compensation      2,218      1,746      8,003      5,699      2,956

  Acquisition related

   costs                    731        304      1,152      1,602         96

  Litigation

   settlements and

   resolutions and

   related costs              -       (185)        13        (93)       (10)

  Shareholder class

   action and

   derivative

   litigation costs         180        (10)       189        625        (34)

Amortization of

 purchased

 intangibles              1,035        959      2,906      2,597      1,062

Impairment of long-

 lived assets             4,886          -      4,886          -          -

Restructuring

 recoveries                   -          -          -       (322)         -

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

    Total cost of

     revenue and

     operating

     expense

     adjustments         18,174     12,665     51,155     41,261     15,784

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

Operating income -

 non-GAAP                17,377     23,973     45,215     68,476     15,838

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

Operating margin -

 non-GAAP                   7.3%       9.9%       6.5%       9.6%       6.8%



GAAP to non-GAAP

 reconciliation of

 income attributable

 to Finisar

 Corporation:

Income (loss)

 attributable to

 Finisar Corporation

 - GAAP                  (3,407)     8,909     (9,333)    24,978        271

Adjustments:

Total cost of revenue

 and operating

 expense adjustments     18,174     12,665     51,155     41,261     15,784

Imputed interest

 related to

 restructuring              148        206        374        672        164

Other (income)

 expense, net

  Loss (gain) on sale

   of assets                 38       (229)      (151)        (7)      (170)

  Loss related to

   minority and

   equity method

   investments                -          -          -        619          -

  Other miscellaneous

   income                  (101)       351       (261)       601          -

  Foreign exchange

   transaction loss

   (gain)                   431        362       (180)      (280)      (607)

  Debt extinguishment

   loss                       -          -        573        419        573

  Fair value

   remeasurement of

   equity investment          -          -          -     (5,429)         -

Provision for income

 taxes

  Income tax

   provision

   adjustments            1,107       (386)      (711)       109     (1,810)

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

Total adjustments        19,797     12,969     50,799     37,965     13,934

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

Net income

 attributable to

 Finisar Corporation

 - non-GAAP              16,390     21,878     41,466     62,943     14,205

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



Non-GAAP income

 attributable to

 Finisar Corporation  $  16,390  $  21,878  $  41,466  $  62,943  $  14,205

Add: interest expense

 for dilutive

 convertible notes          539        539      1,618      1,617        539

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

Adjusted non-GAAP

 income attributable

 to Finisar

 Corporation          $  16,929  $  22,417  $  43,084  $  64,560  $  14,744

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



Non-GAAP income per

 share attributable

 to Finisar

 Corporation common

 stockholders

  Basic               $    0.18  $    0.24  $    0.45  $    0.69  $    0.15

  Diluted             $    0.17  $    0.23  $    0.44  $    0.66  $    0.15

Shares used in

 computing non-GAAP

 income per share

 attributable to

 Finisar Corporation

 common stockholders

  Basic                  93,097     91,001     92,624     90,644     92,780

  Diluted                99,094     97,781     98,891     97,652     98,483



Non-GAAP EBITDA

Non-GAAP income

 attributable to

 Finisar Corporation  $  16,390  $  21,878  $  41,466  $  62,943  $  14,205

Depreciation expense     13,306     11,388     39,123     32,978     13,106

Amortization                 86        208        559        624        237

Interest expense            314        505      1,127      1,828        424

Income tax expense        1,046      1,261      2,444      2,683        748

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

Non-GAAP EBITDA       $  31,142  $  35,240  $  84,719  $ 101,056  $  28,720

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





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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