Finisar Corporation Sets Revenue Record for Second Quarter Ended October 31, 2004SUNNYVALE, CA -- 12/09/2004 -- Finisar Corporation (NASDAQ: FNSR), a technology leader in gigabit fiber optic solutions for high-speed data networks, today reported financial results for its second quarter ended October 31, 2004.
Finisar plans to review second quarter results and discuss the current outlook for the remainder of fiscal 2005 during its conference call for investors at 5:00 p.m. EST (2:00 p.m. PST) today, December 9, 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 second quarter of fiscal 2005 of $71.0 million were up 15% on a sequential basis from $61.9 million in the first quarter and 66% from $42.8 million in the second quarter of the prior year and represented an all time record for the Company. Total revenues from the sale of optical subsystems of $59.9 million in the second quarter were up 11% on a sequential basis from $53.8 million in the first quarter and 65% from $36.4 million in the second quarter of the prior year. Sales of network test and monitoring systems of $11.1 million in the first quarter were up 37% on a sequential basis from $8.1 million in the first quarter and up 76% from $6.3 million in the second quarter of the prior year. Network test and monitoring revenues in the second quarter of fiscal 2005 included approximately $3.0 million in sales of products from a product line acquired from Data Transit Corporation during the quarter.
"I think our employees should take great pride in our progress at the top line," said Jerry Rawls, Finisar's President and CEO. "It speaks to our dedication to making our customers successful with leading edge products and customer service that exceeds expectations. And, while it is gratifying to set records, even more important is the progress we are making at the bottom line. Gross margins are up sequentially, our losses have been reduced, and we are close to reaching our interim goal of EBITDA breakeven."
OPERATING RESULTS
The Company reported a net loss of $23.0 million, or $0.10 per share, for the second quarter of fiscal 2005, compared to a net loss of $22.1 million, or $0.10 per share, in the first quarter and a net loss of $32.6 million, or $0.15 per share, in the second quarter of fiscal 2004. Note that the Company does not intend to recognize any further tax benefits until it returns to profitability.
The Company's operating results include a number of non-cash and cash charges, principally related to acquisitions, financing transactions and the effect of the adoption of new accounting pronouncements. A table is included which summarizes these items. Excluding these items, the Company's net loss for the second quarter of fiscal 2005 would have been $10.9 million, or $.05 per share, compared to $14.3 million, or $.06 per share, in the first quarter and $13.4 million, or $.06 per share, in the second quarter of the prior year. Excluding these items, the Company's gross margins would have been $20.0 million, or 28.2% of revenues in the second quarter, compared to 26.1% in the first quarter and 22.7% in the second quarter of the prior year.
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.
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, 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 Technologies A.G., that we expect to complete in the fourth 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.
Finisar Corporation
Consolidated Statement of Operations
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
October 31 October 31
2004 2003 2004 2003
--------- --------- --------- ---------
Revenues
Optical subsystems
and components $ 59,912 $ 36,432 $ 113,662 $ 70,620
Network test and
monitoring systems 11,093 6,344 19,220 11,587
--------- --------- --------- ---------
Total revenues 71,005 42,776 132,882 82,207
Cost of revenues 51,285 32,041 96,989 68,503
Impairment of acquired
developed technology 3,656 - 3,656 -
Amortization of acquired
developed technology 6,086 4,656 11,652 9,312
--------- --------- --------- ---------
Gross profit (loss) 9,978 6,079 20,585 4,392
14.1% 14.2% 15.5% 5.3%
Operating expenses:
Research and development 17,043 13,695 33,118 34,610
Sales and marketing 7,570 4,557 14,721 8,857
General and
administrative 4,995 4,356 9,677 8,309
Amortization of
deferred compensation 24 (49) 121 (353)
Aquired in-process
research and
development 318 - 318 -
Amortization of
purchased intangibles 170 143 313 286
Restructuring costs - 187 - 2,372
Other acquisition costs - 149 - 194
--------- --------- --------- ---------
Total operating
expenses 30,120 23,038 58,268 54,275
Loss from operations (20,142) (16,959) (37,683) (49,883)
Interest income
(expense), net (2,992) (15,026) (5,763) (20,534)
Other income
(expense), net 192 (555) (1,596) (3,135)
--------- --------- --------- ---------
Loss before income taxes (22,942) (32,540) (45,042) (73,552)
Provision (benefit)
for income taxes 37 33 56 246
Net loss $ (22,979) $ (32,573) $ (45,098) $ (73,798)
========= ========= ========= =========
Loss per share -
basic and diluted $ (0.10) $ (0.15) $ (0.20) $ (0.35)
========= ========= ========= =========
Shares used in per-share
calculation-basic and
diluted 223,380 215,826 223,155 211,357
Finisar Corporation
Consolidated Balance Sheet
(In thousands)
October 31, 2004 April 30, 2004
----------- -----------
ASSETS
Cash and cash equivalents $ 29,377 $ 69,872
Short-term investments 74,870 73,526
Restricted investments 3,722 6,329
Accounts receivable, trade (net) 38,087 28,481
Accounts receivable, other 12,044 11,314
Inventories 38,306 34,717
Prepaid expenses 6,072 4,736
Deferred income taxes 285 2,045
----------- -----------
Total current assets 202,763 231,020
Property, plant, equipment
and improvements, net 104,000 107,736
Restricted investments, long-term 7,165 8,921
Purchased intangibles, net 41,612 47,961
Goodwill, net 67,069 60,620
Minority investment 24,434 24,227
Other assets 15,618 14,220
----------- -----------
Total assets $ 462,661 $ 494,705
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 30,146 $ 29,460
Accrued compensation 4,823 4,376
Other accrued liabilities 10,820 14,464
Income tax payable 577 790
Current portion of other
long-term liabilities 2,000 2,000
Non-cancelable purchase
obligations 6,091 7,038
----------- -----------
Total current liabilities 54,457 58,128
Deferred income taxes 285 2,045
Convertible notes 247,892 229,493
Other long-term liabilities 149 2,194
----------- -----------
Total long-term 248,326 233,732
Common stock 224 222
Additional paid-in capital 1,261,319 1,259,759
Notes receivable from stockholders - (481)
Deferred stock compensation (41) (162)
Accumulated other
comprehensive income 677 710
Accumulated deficit (1,102,301) (1,057,203)
----------- -----------
Total stockholders' equity 159,878 202,845
----------- -----------
Total liabilities and
stockholders' equity $ 462,661 $ 494,705
=========== ===========
Finisar Corporation
Certain non-cash and Cash Items Included in financial statements
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
October 31 October 31
2004 2003 2004 2003
--------- --------- --------- ---------
Cost of revenues items
Inventory write off net
of sales of inventory
previously written off $ (128) $ 683 $ (128) $ 5,815
Profit on sales of Data
Transit Finished Goods
inventory acquired 445 - 445 -
Charge for rework
material - - - 2,906
Final settlement of
vendor materials
liability - (1,718) - (1,718)
Amortization of
acquired developed
technology 9,742 4,656 15,308 9,312
--------- --------- --------- ---------
Total 10,059 3,621 15,625 16,315
Research and development
expense items
Non-employee option
expense - 135 - 135
Closure of Demeter - - (318) 6,748
Loss on sale of
equipment 909 - 909 -
--------- --------- --------- ---------
Total 909 135 591 6,883
General and administrative
expense items
Closure of Demeter - - (96) -
Non-employee option
expense - 756 - 756
Amortization of
deferred compensation 24 (49) 121 (353)
Amortization of
purchased intangibles 170 143 313 286
Acquired in-process R&D
for Data Transit
acquisition 318 - 318 -
Other acquisition costs - 149 - 194
--------- --------- --------- ---------
Total 512 999 656 883
Restructuring costs items
Restructuring costs -
costs for reduction
in force - 188 - 188
Closure of Demeter - - - 1,059
Closure of German
facility - - - 1,125
Total - 188 - 2,372
Interest (income)
expense items
Debt conversion costs - 8,352 - 10,763
Amortization of discount
on convertible notes 1,069 5,715 2,129 8,088
--------- --------- --------- ---------
Total 1,069 14,067 2,129 18,851
Other (income) expense
items
Write down in value
of investment in
Ciena stock - - - 528
Minority investment
write-off 432 269 793 2,104
Closure of Demeter - (274) - -
Closure of German
facility - 273 - -
Debt extinguishment
costs - (86) - (86)
Loss on sale of
equipment (938) - 81 -
--------- --------- --------- ---------
Total (506) 182 874 2,546
--------- --------- --------- ---------
Net effect on GAAP
net loss $ 12,043 $ 19,192 $ 19,875 $ 47,850
========= ========= ========= =========
Net effect on loss
per share - basic
and diluted $ 0.05 $ 0.09 $ 0.09 $ 0.23
========= ========= ========= =========
Contact:
Steve Workman
VP Finance, Chief Financial Officer
408-548-1000
Ed Lamb
Investor Relations
408-542-5050
investor.relations@Finisar.com
