SUNNYVALE, CA -- 03/03/2005 -- Finisar Corporation (NASDAQ: FNSR), a technology leader in gigabit fiber optic solutions for high-speed data networks, today reported its financial results for its third fiscal quarter ended January 31, 2005.
Finisar plans to review its third quarter results and discuss its current business outlook during a conference call for investors at 5:00 p.m. EST (2:00 p.m. PST) today, March 3, 2005. 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 third quarter of fiscal 2005 were $73.1 million, up 3% on a sequential basis from $71.0 million in the second quarter and 58% from $46.4 million in the third quarter of the prior year. For the second consecutive quarter, the Company's revenues set a new all time record. Total revenues from the sale of optical subsystems were $63.4 million in the third quarter, up 6% on a sequential basis from $59.9 million in the second quarter and 56% from $40.7 million in the third quarter of the prior year. Sales of network test and monitoring systems were $9.7 million in the third quarter, down 13% on a sequential basis from $11.1 million in the second quarter but up 70% from $5.7 million in the third quarter of the prior year.
"While the third quarter marks another revenue record for the Company, even more important was realizing our stated objective of exceeding our EBITDA breakeven point," said Jerry Rawls, Finisar's President and CEO. "Obviously, that's only an interim objective as we strive to return to profitability. We believe the recent acquisition of Infineon's transceiver product lines and their transfer to our manufacturing operations in Malaysia will be an important step in making that happen."
"Our cash burn for the quarter was another positive aspect of this quarter's performance," added Rawls. "Our cash balance at the end of January totaled $101.6 million, down only $2.6 million from $104.2 million at the end of October. This is before adding another $12 million to our cash reserves just after the end of the quarter from the sale-leaseback of one of our facilities in Sunnyvale, California."
OPERATING RESULTS
The Company reported a net loss of $33.0 million, or $0.15 per share, for the third quarter of fiscal 2005, compared to a net loss of $21.2 million, or $0.09 per share, in the second quarter and a net loss of $15.5 million, or $0.07 per share, in the third quarter of fiscal 2004. The current quarter results included a write-down of $18.8 million associated with the impairment in value of our Sunnyvale facility that was sold and leased back subsequent to the end of the quarter. The sale-leaseback transaction will be treated as a financing in accordance with Financial Accounting Standards Board Statement No. 98, "Accounting for Leases." The Company's gross profit for the third quarter was $16.7 million, or 22.8% of total revenues, compared to 16.6% in the second quarter and 19.4% in the third 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, restructurings and financing transactions. A table is included which summarizes these items. Excluding these items, the Company's net loss for the third quarter of fiscal 2005 would have been $7.9 million, or $.04 per share, compared to $9.2 million, or $.04 per share, in the second quarter and $13.1 million, or $.06 per share, in the third quarter of the prior year, and the Company's gross margins would have been $21.9 million, or 29.8% of revenues in the third quarter, compared to 30.7% in the second quarter and 22.1% in the third quarter of the prior year.
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 and assets related to the transceiver product lines of the Fiber Optics Business Unit of Infineon A.G. acquired in January 2005. 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 Nine Months Ended
January 31, January 31,
2005 2004 2005 2004
--------- --------- --------- ---------
Revenues
Optical subsystems and
components $ 63,417 $ 40,741 $ 177,079 $ 111,361
Network test and
monitoring systems 9,665 5,675 28,885 17,262
--------- --------- --------- ---------
Total revenues 73,082 46,416 205,964 128,623
Cost of revenues 51,018 32,778 146,221 101,281
Impairment of acquired
developed technology - - 3,656 -
Amortization of acquired
developed technology 5,376 4,656 17,027 13,968
--------- --------- --------- ---------
Gross profit (loss) 16,688 8,982 39,060 13,374
22.8% 19.4% 19.0% 10.4%
Operating expenses:
Research and development 14,535 12,849 47,653 47,459
Sales and marketing 7,179 4,905 21,900 13,762
General and administrative 5,476 4,517 15,153 12,826
Amortization of deferred
compensation 21 115 142 (238)
Acquired in-process
research and development - - 318 -
Amortization of purchased
intangibles 170 143 483 429
Restructuring costs - (1,199) - 1,173
Impairment of assets 18,798 18,798
Other acquisition costs - 45 - 239
--------- --------- --------- ---------
Total operating expenses 46,179 21,375 104,447 75,650
Loss from operations (29,491) (12,393) (65,387) (62,276)
Interest income (expense),
net (3,311) (2,535) (9,074) (23,069)
Other income (expense), net (158) (572) (1,754) (3,707)
--------- --------- --------- ---------
Loss before income taxes (32,960) (15,500) (76,215) (89,052)
Provision (benefit) for
income taxes - 43 57 289
Net loss $ (32,960) $ (15,543) $ (76,272) $ (89,341)
========= ========= ========= =========
Loss per share -
basic and diluted $ (0.15) $ (0.07) $ (0.34) $ (0.42)
========= ========= ========= =========
Shares used in per-share
calculation-basic and
diluted 224,170 219,900 223,491 214,235
Finisar Corporation
Consolidated Balance Sheet
(In thousands)
January 31, October 31, April 30,
2005 2004 2004
ASSETS
----------- ----------- -----------
Cash and cash equivalents $ 25,753 $ 29,377 $ 69,872
Short-term investments 75,815 74,870 73,526
Restricted investments 3,734 3,722 6,329
Accounts receivable,
trade (net) 33,466 38,087 28,481
Accounts receivable, other 9,517 12,044 11,314
Inventories 36,296 38,306 34,717
Prepaid expenses 7,464 6,072 4,736
Deferred income taxes 28 285 2,045
----------- ----------- -----------
Total current assets 192,073 202,763 231,020
Property, plant, equipment
and improvements, net 82,848 104,000 107,736
Restricted investments,
long-term 7,204 7,165 8,921
Purchased intangibles, net 36,066 41,612 47,961
Goodwill, net 67,232 67,069 60,620
Minority investment 24,004 24,434 24,227
Other assets 15,403 15,618 14,220
----------- ----------- -----------
Total assets $ 424,830 $ 462,661 $ 494,705
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 19,557 $ 28,360 $ 29,460
Accrued compensation 4,935 4,823 4,376
Other accrued liabilities 14,614 10,820 14,464
Income tax payable 52 577 790
Current portion of other
long-term liabilities 2,000 2,000 2,000
Non-cancelable purchase
obligations 6,223 6,091 7,038
----------- ----------- -----------
Total current liabilities 47,381 52,671 58,128
Deferred income taxes 28 285 2,045
Convertible notes 247,962 247,892 229,493
Other long-term liabilities 125 149 2,194
----------- ----------- -----------
Total long-term 248,115 248,326 233,732
Common stock 224 224 222
Additional paid-in capital 1,262,324 1,261,319 1,259,759
Notes receivable from
stockholders - - (481)
Deferred stock compensation (20) (41) (162)
Accumulated other comprehensive
income 281 677 710
Accumulated deficit (1,133,475) (1,100,515) (1,057,203)
----------- ----------- -----------
Total stockholders' equity 129,334 161,664 202,845
----------- ----------- -----------
Total liabilities and
stockholders' equity $ 424,830 $ 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 Nine Months Ended
January 31, January 31,
2005 2004 2005 2004
-------- -------- -------- --------
Cost of revenues items
Inventory write off net
of sales of inventory
previously written off $ (300) $ (3,391) $ (428) $ 2,424
Profit on sales of Data
Transit Finished Goods
inventory acquired - - 445 -
Charge for rework material - - - 2,906
Final settlement of vendor
materials liability - - - (1,718)
Amortization of acquired
developed technology 5,376 4,656 20,683 13,968
-------- -------- -------- --------
Total 5,076 1,265 20,700 17,580
Research and development
expense items
Non-employee option expense - - - 135
Closure of Demeter - - (318) 6,748
Costs for reduction in force 38 38
Loss on sale of equipment - - 909 -
-------- -------- -------- --------
Total 38 - 629 6,883
Sales and marketing
Costs for reduction in force 67 - 67 -
-------- -------- -------- --------
Total 67 - 67 -
General and administrative
expense items
Closure of Demeter - 93 (96) -
Non-employee option expense - - - 756
Settlement of claim - 750 - 750
-------- -------- -------- --------
Total - 843 (96) 1,506
Amortization of deferred
compensation 21 115 142 (238)
Amortization of purchased
intangibles 170 143 483 429
Acquired in-process R&D for
Data Transit acquisition - - 318 -
Impairment of assets 18,798 - 18,798 -
Other acquisition costs - 45 - 239
Restructuring costs items
Restructuring costs - costs
for reduction in force - 93 - 281
Closure of Demeter - (1,292) - 892
Closure of German facility - - - -
-------- -------- -------- --------
Total - (1,199) - 1,173
Interest (income) expense items
Debt conversion costs - 50 - 10,813
Amortization of discount
on convertible notes 1,069 1,038 3,198 9,126
-------- -------- -------- --------
Total 1,069 1,088 3,198 19,939
Other (income) expense items
Write down in value of
investment in Ciena stock - (278) - 250
Minority investment write-off 430 454 1,223 2,558
Closure of Demeter - - - (1,032)
Closure of German facility - - - 1,125
Debt extinguishment costs - - - (86)
Gain on sale of equipment (583) - (502) -
-------- -------- -------- --------
Total (153) 176 721 2,815
-------- -------- -------- --------
Net effect on GAAP net loss $ 25,086 $ 2,476 $ 44,960 $ 50,326
======== ======== ======== ========
Net effect on loss per share
- basic and diluted $ 0.11 $ 0.01 $ 0.20 $ 0.23
======== ======== ======== ========
Contact: Steve Workman VP Finance, Chief Financial Officer 408-548-1000 Ed Lamb Investor Relations 408-542-5050 investor.relations@Finisar.com