Finisar Corporation Announces Results for Fourth Quarter and Fiscal Year Ended April 30, 2004SUNNYVALE, CA -- 06/03/2004 -- Finisar Corporation (NASDAQ: FNSR), a technology leader in gigabit fiber optic solutions for high-speed data networks, today reported its financial results for its fourth quarter and fiscal year ended April 30, 2004.
Finisar plans to review its fourth quarter results and discuss its current outlook for fiscal 2005 during its conference call for investors at 5:00 p.m. EDT (2:00 p.m. PDT) today, June 3, 2004. The call will be broadcast live over the Internet on the Investor Relations section of Finisar's web site, located at www.Finisar.com. To listen to the Webcast, interested investors are encouraged to log onto the broadcast at least 15 minutes prior to the call. Participating in the call will be Jerry Rawls, Finisar's President and CEO, and Steve Workman, Finisar's CFO.
Total revenues in the fourth quarter of fiscal 2004 of $57.0 million were up 23% on a sequential basis from $46.4 million in the third quarter and 43% from $39.8 million in the fourth quarter of the prior year. Total revenues from the sale of optical subsystems of $48.7 million in the fourth quarter were up 19% on a sequential basis from $40.7 million in the third quarter and 46% from $33.4 million in the fourth quarter of the prior year. Sales of network test and monitoring systems of $8.3 million in the fourth quarter were up 47% on a sequential basis from $5.7 million in the third quarter and 31% from $6.4 million in the fourth quarter of the prior year.
Revenues in the fourth quarter included approximately $6.7 million related to inclusion of two months of operations of the VCSEL Fiber Optics Business acquired from Honeywell on March 2, 2004. Excluding the impact of this acquisition, total revenues were up 8% on a sequential basis from the third quarter and 26% from the fourth quarter of the prior year.
Total revenues for fiscal 2004 of $185.6 million were up 11% from $166.5 million in the prior year. Revenues from the sale of optical subsystems of $160.0 million for fiscal 2004 were up 17% from $136.8 million in the prior year. Revenues from the sale of network test and monitoring systems of $25.6 million for fiscal 2004 were down 14% from $29.6 million in the prior year.
"Our LAN/SAN revenues were particularly strong this past quarter, up 15% sequentially excluding the additional revenues from the acquisition of Honeywell's VCSEL Business Unit. We were also pleased to see improved revenues from our Network Tools business in the past quarter thanks to an enthusiastic reception to our new XGig Analyzer for 4Gb/s Fibre Channel and our Netwisdom monitoring and analysis solution for storage area networks."
"While the higher gross margins from Network Tools were offset by higher sales of optical products for LAN/SAN applications, we believe we will see an improvement in gross margins in our upcoming first quarter," added Rawls. "This expected improvement is the result of supplying more of our own internal optical component needs as well as lower production costs resulting from a number of cost reduction efforts all of which should improve the underlying profitability of our optics product line."
OPERATING RESULTS
The Company reported a net loss of $24.5 million, or $0.11 per share, for the fourth quarter of fiscal 2004, compared to a net loss of $15.5 million, or $0.07 per share, in the third quarter and a net loss of $26.2 million, or $0.13 per share, in the fourth quarter of fiscal 2003. Included in the results for the fourth quarter was a charge of $6.2 million for acquired in-process research and development associated with the acquisition of the Honeywell VCSEL Business Unit. For the full fiscal year, the Company reported a net loss of $113.8 million, or $0.53 per share, compared to a net loss of $159.2 million, or $0.82 per share, in the prior year before the accumulative effect of an accounting change.
The Company reported gross profit of $9.4 million, or 16.5% of revenues, during the fourth quarter of fiscal 2004, compared to $9.0 million, or 19.4% of revenues, in the third quarter and $5.3 million, or 13.3% of revenues, in the fourth quarter of the prior year. For the total year, gross profit was $22.8 million, or 12.3% of revenues, compared to $14.0 million, or 8.4% of revenues, in the prior year.
Amortization of acquired developed technology, amortization of purchased intangibles, purchased research and development in-process, other acquisition costs and the cumulative effect of a change in accounting related to the adoption of SFAS 142 consist of merger-related costs associated with several acquisitions completed during fiscal 2001 through 2004.
NON-GAAP FINANCIAL RESULTS
The Company provides non-GAAP financial measures to complement its consolidated financial statements presented in accordance with GAAP. These non-GAAP financial measures are intended to supplement the user's overall understanding of the Company's current financial performance and its prospects for the future. Specifically, the Company believes the non-GAAP results provide useful information to both management and investors by identifying certain expenses, gains and losses that, when excluded from the GAAP results, may provide additional understanding of the Company's core operating results or business performance. However, these non-GAAP financial measures are not intended to supercede or replace the Company's GAAP results. A detailed reconciliation of the non-GAAP results to the GAAP results is provided in the "Non-GAAP Condensed Consolidated Statements of Operations" schedules below.
Operating results reported on a non-GAAP basis exclude a number of non-cash and cash charges related to deferred compensation, acquisitions, minority investments, inventory obsolescence, a discount associated with the Company's convertible debt offering in October 2001 and inducements associated with the conversion of a portion of the notes, the loss realized upon the closure of the Company's Demeter Technologies subsidiary and its German facility and the accelerated depreciation on certain assets abandoned in connection with those closures, along with other restructuring charges, and a non-cash charge representing research and development in-process related to the acquisition of Honeywell's VCSEL Business Unit.
The Company reported a non-GAAP gross margin of 21.9% in the fourth quarter of fiscal 2004, compared to 22.1% in the prior quarter and 27.1% in the fourth quarter of the prior year. Non-GAAP gross margin was negatively impacted by a shift in product mix toward a lower percentage of revenues from the sale of our network test and monitoring systems which have a higher gross margin than revenues from optical subsystems and a higher percentage of revenues from lower margin LAN/SAN products as compared to the prior periods.
The Company reported a non-GAAP pretax loss of $14.2 million in the fourth quarter compared to $13.0 million in the prior quarter and $12.4 million in the fourth quarter of the prior year. Because the Company does not intend to recognize any further tax benefits until it returns to profitability, the non-GAAP net loss for the fourth quarter totaled $14.2 million, or $0.06 per share, compared to $13.1 million, or $0.06 per share, in the third quarter and $12.5 million, or $0.06 per share, in the fourth quarter of fiscal 2003.
SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACTS 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, including statements regarding Finisar's expectations, beliefs, intentions, or strategies regarding the future. 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. These risks include those associated with 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 customers in any period; ongoing new product development and introduction of new and enhanced products; the challenges of rapid growth followed by periods of contraction; intensive competition; and potential problems related to the assimilation and integration of the operations, technologies and products of several recently acquired companies and product lines, including the Honeywell VCSEL Business Unit acquired in March 2004 as well as our pending acquisition of the Fiber Optics Business Unit of Infineon A.G., that we expect to complete in the third calendar quarter of 2004. Other risks relating to Finisar's business are set forth in Finisar's Annual Report on Form 10-K and other interim reports as filed with the Securities and Exchange Commission.
ABOUT FINISAR
Finisar Corporation (NASDAQ: FNSR) is a technology leader for fiber optic subsystems and network test and monitoring systems. These products enable high-speed data communications for networking and storage applications over Gigabit Ethernet local area networks (LANs), Fibre Channel storage area networks (SANs), and metropolitan area networks (MANs) using both IP and SONET/SDH-based protocols. The Company's headquarters is in Sunnyvale, California, USA. www.Finisar.com.
Finisar Corporation
Consolidated Statement of Operations
(In thousands, except per share amounts)
Three Months Ended Twelve Months Ended
April 30 April 30
2004 2003 2004 2003
---- ---- ---- ----
Revenues
Optical subsystems
and components $ 48,664 $ 33,427 $ 160,025 $ 136,846
Network test and
monitoring systems 8,331 6,358 25,593 29,636
-------- -------- --------- ---------
Total revenues 56,995 39,785 185,618 166,482
Cost of revenues 42,304 29,948 143,585 130,501
Amortization of acquired
developed technology 5,271 4,549 19,239 21,983
-------- -------- --------- ---------
Gross profit 9,420 5,288 22,794 13,998
16.5% 13.3% 12.3% 8.4%
Operating expenses:
Research and
development 14,734 16,948 62,193 60,295
Sales and marketing 6,301 4,540 20,063 20,232
General and
administrative 3,912 3,501 16,738 15,201
Acquired in-process
research and development 6,180 - 6,180 -
Amortization of (benefit
from) deferred stock
compensation 133 (1,252) (105) (1,719)
Amortization of
purchased intangibles 143 143 572 758
Impairment of goodwill
and intangible assets - - - 10,586
Restructuring costs (791) 5,148 382 9,378
Other acquisition costs (17) (9) 222 198
-------- -------- --------- ---------
Total operating
expenses 30,595 29,019 106,245 114,929
Loss from operations (21,175) (23,731) (83,451) (100,931)
Interest income
(expense), net (2,632) (1,910) (25,701) (6,699)
Other income
(expense), net (640) (449) (4,347) (51,314)
-------- -------- --------- ---------
Loss before income taxes
and cumulative effect
of an accounting change (24,447) (26,090) (113,499) (158,944)
Provision for income taxes 45 107 334 229
-------- -------- --------- ---------
Loss before cumulative
effect of an accounting
change (24,492) (26,197) (113,833) (159,173)
Cumulative effect of an
accounting change to
adopt SFAS 142 - - - (460,580)
-------- -------- --------- ---------
Net loss $(24,492) $(26,197) $(113,833) $(619,753)
======== ======== ========= =========
Loss per share before
cumulative effect of
an accounting change $ (0.11) $ (0.13) $ (0.53) $ (0.82)
======== ======== ========= =========
Cumulative per share
effect of an
accounting change to
adopt SFAS 142 $ - $ - $ - $ (2.35)
======== ======== ========= =========
Net loss per share -
basic and diluted $ (0.11) $ (0.13) $ (0.53) $ (3.17)
======== ======== ========= =========
Shares used in
per-share calculation
- basic and diluted 221,052 200,615 216,117 195,666
Finisar Corporation
Consolidated Balance Sheet
(In thousands)
April 30, January 31, April 30,
2004 2004 2003
---- ---- ----
ASSETS
Cash and cash
equivalents $ 69,872 $ 151,194 $ 40,918
Short-term
investments 73,526 75,458 78,520
Restricted investments 6,329 9,009 6,737
Accounts receivable,
trade (net) 28,481 29,431 23,390
Accounts receivable,
other 11,314 6,719 5,362
Inventories 34,717 26,729 36,470
Prepaid expenses 4,736 2,652 2,341
Deferred income taxes 2,045 2,559 3,324
---------- ---------- ----------
Total current assets 231,020 303,751 197,062
Property, plant,
equipment and
improvements, net 107,736 95,255 112,125
Restricted investments,
long-term 8,921 10,669 3,307
Purchased intangibles,
net 47,961 38,513 52,910
Goodwill, net 60,620 19,985 19,838
Minority investment 24,227 24,601 28,844
Other assets 14,220 14,119 9,520
---------- ---------- ----------
Total assets $ 494,705 $ 506,893 $ 423,606
========== ========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Accounts payable $ 29,460 $ 21,417 $ 22,872
Accrued compensation 4,376 3,498 4,449
Other accrued liabilities 14,464 12,728 8,474
Income tax payable 790 602 536
Current portion of other
long-term liabilities 2,000 2,000 1,384
Non-cancelable purchase
obligations 7,038 7,591 9,380
---------- ---------- ----------
Total current
liabilities 58,128 47,836 47,095
Deferred income taxes 2,045 2,559 3,324
Convertible notes 229,493 228,399 94,023
Other long-term
liabilities 2,194 2,206 4,184
Common stock 222 222 207
Additional paid-in
capital 1,259,759 1,258,140 1,219,424
Notes receivable from
stockholders (481) (574) (1,077)
Deferred stock
compensation (162) (296) (1,045)
Accumulated other
comprehensive income 710 1,112 841
Accumulated deficit (1,057,203) (1,032,711) (943,370)
---------- ---------- ----------
Total stockholders'
equity 202,845 225,893 274,980
---------- ---------- ----------
Total liabilities
and stockholders'
equity $ 494,705 $ 506,893 $ 423,606
========== ========== ==========
The following non-GAAP financial results for the three and twelve month periods ended April 30, 2004 and 2003, have been adjusted to exclude non-cash and cash charges related to acquisitions and the writedown in goodwill as a result of adoption of FASB 142, deferred stock compensation, the amortization of acquired developed technology and other intangible assets associated with a number of acquisitions, the sale of assets of the Company's Sensors Unlimited subsidiary, inventory obsolescence, other non-recurring gains and losses, the impairment of certain assets and restructuring costs at the Company's Demeter Technologies subsidiary, the write-off of minority investments, amortization of the discount on the issuance of convertible debt and the non-cash charge associated with the conversion of a portion of convertible securities into equity. A reconciliation of these results to what is reported under GAAP is also included.
Finisar Corporation
Non GAAP Consolidated Statement of Operations
(In thousands, except per share amounts)
Three Months Ended Twelve Months Ended
April 30 April 30
2004 2003 2004 2003
---- ---- ---- ----
Revenues
Optical subsystems and
components $ 48,664 $ 33,427 $ 160,025 $ 136,846
Network test and
monitoring systems 8,331 6,358 25,593 29,636
--------- --------- --------- ---------
Total revenues 56,995 39,785 185,618 166,482
Cost of revenues 44,515 28,996 142,184 124,005
--------- --------- --------- ---------
Gross profit 12,480 10,789 43,434 42,477
21.9% 27.1% 23.4% 25.5%
Operating expenses:
Research and development 14,734 14,207 55,310 57,554
Sales and marketing 6,301 4,540 20,063 20,232
General and
administrative 3,912 3,501 15,139 15,201
--------- --------- --------- ---------
Total operating
expenses 24,947 22,248 90,512 92,987
Loss from operations (12,467) (11,459) (47,078) (50,510)
Interest income
(expense), net (1,535) (649) (4,665) (1,916)
Other income
(expense), net (173) (256) (1,158) (1,178)
--------- --------- --------- ---------
Loss before income taxes (14,175) (12,364) (52,901) (53,604)
Provision for
income taxes 45 107 334 229
--------- --------- --------- ---------
Net loss $ (14,220) $ (12,471) $ (53,235) $ (53,833)
========= ========= ========= =========
Net loss per share
- basic and diluted $ (0.06) $ (0.06) $ (0.25) $ (0.28)
========= ========= ========= =========
Shares used in
per-share
calculation
- basic and diluted 221,052 200,615 216,117 195,666
The above pro forma
results exclude the
following items which
are included in the
company's operating
results when presented
in accordance with
generally accepted
accounting principles
(GAAP):
Inventory write off net
of sales of inventory
previously written off $ (2,210) $ 952 $ 214 $ 6,496
Acquired in-process R7D 6,180 - 6,180 -
Charge for rework
material - - 2,906 -
Final settlement of
vendor materials
liability - - (1,718) -
Amortization of acquired
developed technology 5,271 4,549 19,239 21,983
Amortization of
deferred compensation 134 (1,252) (104) (1,719)
Amortization of
purchased intangibles 143 143 572 758
Impairment of goodwill
and intangible assets - - - 10,586
Costs for reduction
in force - - 281 4,230
Other acquisition costs (17) (9) 222 198
Non-employee option
expense - - 891 -
Other than temporary
decline in value of
investment in Ciena
stock - - 250 -
Minority investment
write off 374 193 2,932 12,764
Amortization of discount
on convertible notes 1,094 1,261 10,220 4,783
Cost from sale of Sensors - - - 36,839
Closure of Demeter (791) 7,889 5,817 8,422
Closure of German facility - - 1,125 -
Debt extinguishment costs - - (86) -
Debt conversion costs 3 - 10,816 -
Settlement of claim - - 750 -
Asset disposal 91 - 91 -
Cumulative effect of an
accounting change to
adopt SFAS 142 - - - 460,580
--------- --------- --------- ---------
GAAP net loss $ (24,492) $ (26,197) $(113,833) $(619,753)
========= ========= ========= =========
Contact:
Steve Workman
VP Finance, Chief Financial Officer
408-548-1000
Shelby Palmer
Investor Relations
408-542-5050
investor.relations@Finisar.com
