Finisar Corporation Reports Fourth Quarter and Fiscal Year ResultsRevenues Surpass $100 Million in the Quarter
SUNNYVALE, CA -- 06/07/2006 -- Finisar Corporation (NASDAQ: FNSR), a technology leader in gigabit fiber optic solutions for high-speed data networks, today reported financial results for its fourth quarter and fiscal year ended April 30, 2006.
FINANCIAL HIGHLIGHTS - FOURTH FISCAL QUARTER ENDED APRIL 30, 2006
GAAP
- -- Revenues of $102.4 million were up 9.5% sequentially and up 36.8% from
the fourth quarter of the prior year. These results were in the upper range
of management's revenue guidance of $97-$104 million for the quarter. The
Company has now recorded eleven consecutive quarters of revenue growth, the
last seven of which have set new records.
- -- Net income of $.01 per diluted share compares to net income of $.03
per share in the third quarter (which included a large non-recurring gain
on the sale of an investment), and a net loss of $.15 per share in the
fourth quarter of the prior year.
- -- Gross margins of 33.7% were up from 30.2% in the third quarter and
13.6% in the fourth quarter of the prior year.
- -- Cash and short-term investments, plus other long-term investments
which can be readily converted into cash, totaled $118.8 million at April
30, 2006, up from $116.3 million at the end of last quarter. The Company
has reclassified certain of its investments as long-term based on its
intent to hold these securities until maturity, although they can be
readily sold if required.
Non-GAAP Financial Measures
- -- Net income of $.03 per share compares to $.03 per share in the third
quarter and a net loss of $.05 per share in the fourth quarter of the prior
year.
- -- Gross margins of 39.2% were up from 38.8% in the third quarter and
25.5% in the fourth quarter of the prior year.
- -- The Company generated approximately $18 million in EBITDA during the
quarter and $9 million in free cash flow (EBITDA less capex).
FINANCIAL HIGHLIGHTS - FISCAL YEAR ENDED APRIL 30, 2006
GAAP
- -- Revenues of $364.3 million grew 29.7% from $280.8 million in the prior
year. This marks the fourth consecutive year of revenue growth, the last
two of which set new records for the Company.
- -- A net loss of $.09 per share compares to a net loss of $.49 per share
in the prior year.
- -- Gross margins of 27.1% were up from 17.5% in the prior year.
- -- Cash and short-term investments, plus other long-term investments
which can be readily converted into cash, totaled $118.8 million at April
30, 2006, up from $102.4 million at April 30, 2005.
Non-GAAP Financial Measures
- -- Net income of $9.1 million, or $.03 per diluted share, compares to a
net loss of $43.8 million, or $.19 per share, in the prior year.
- -- Gross margins of 34.9% were up from 28.1% in the prior year.
- -- The Company generated approximately $46 million in EBITDA compared to
a loss of $7 million in the prior year.
FOURTH QUARTER OPERATING RESULTS
Total revenues in the fourth quarter of fiscal 2006 were $102.4 million, up 9.5% on a sequential basis from $93.5 million in the third quarter and 36.8% from $74.9 million in the fourth quarter of the prior year. The Company's revenues have grown sequentially for eleven consecutive quarters, the last seven of which set new records. Total revenues from the sale of optical subsystems were $91.9 million in the fourth quarter, up 9.2% on a sequential basis from $84.2 million in the third quarter and 42.5% from $64.5 million in the fourth quarter of the prior year. Sales of network test and monitoring systems of $10.5 million were up 12.1% from $9.3 million in the third quarter and were up 1.1% from $10.4 million in the fourth quarter of the prior year.
The Company reported net income of $1.7 million, or $.01 per diluted share, for the fourth quarter of fiscal 2006, compared to net income of $8.3 million, or $.03 per diluted share, in the third quarter and a net loss of $37.8 million, or $.15 per share, in the fourth quarter of fiscal 2005. The Company's gross profit for the fourth quarter was $34.5 million, or 33.7% of total revenues, compared to 30.2% in the third quarter and 13.6% in the fourth quarter of 2005.
The Company's operating results include a number of non-cash and cash charges and gains principally related to acquisitions, the sale of minority investments, restructuring activities and financing transactions. For the fourth quarter of fiscal 2006, these items resulted in a net charge of $7.3 million and included, among other items, $3.0 million in amortization charges related to acquired developed technology and purchased intangibles arising from previous acquisitions, $2.4 million related to charges for slow-moving and obsolete inventory, $1.1 million related to the amortization of discount on convertible notes issued in 2001 and $.6 million for the cost of a redundant facility, partially offset by a $1.1 million gain from the sale of equipment. The charge for slow-moving and obsolete inventory was largely based on an estimate of the amount of inventory that will be unused after twelve months although a portion of that inventory may in fact be used beyond this period. Also included in the current quarter is a non-cash tax provision of $.6 million resulting from timing differences associated with the amortization of goodwill for tax reporting purposes which is not amortized for financial reporting purposes.
The Company excludes these and certain other items for the purpose of tracking its performance on a non-GAAP basis. Non-GAAP gross profit and non-GAAP net income (loss), as reported by the Company, give an indication of the Company's baseline performance before gains, losses or other charges that are considered by management to be outside of our core operating results.
The Company's non-GAAP net income for the fourth quarter of fiscal 2006 was $9.0 million, or $.03 per share, compared to net income of $7.7 million, or $.03 per share, in the third quarter and a net loss of $12.6 million, or $.05 per share, in the fourth quarter of the prior year. On a non-GAAP basis, gross margins were 39.2% in the fourth quarter of fiscal 2006 compared to 38.8% in the third quarter and 25.5% in the fourth quarter of the prior year.
"Fiscal 2006 marked an important turning point for our Company," said Jerry Rawls, Finisar's Chairman of the Board, President and CEO. "We worked our way back from one of the most difficult market downturns in history and succeeded in achieving our plan for returning to profitability. Our growth in optics revenues during the past year was driven by a 41% increase in our LAN/SAN business, while our sales to the Metro Access market increased 27%. This revenue growth combined with our vertically integrated business model produced gross margins that exceeded the expectations of many in our industry. We also continued to invest in R&D, producing a number of new products that will help us maintain technological leadership and fuel future revenue growth. We remain very optimistic about our future."
CONFERENCE CALL
Finisar plans to review its fourth 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, June 7, 2006. 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.
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; 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 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 components and 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 Fibre Channel, IP, SAS, SATA and SONET/SDH protocols. The Company's headquarters is in Sunnyvale, California, USA. www.finisar.com.
FINANCIAL STATEMENTS
The following financial tables are presented in accordance with GAAP.
Finisar Corporation
Consolidated Balance Sheet
(In thousands)
April 30, January 31, April 30,
2006 2006 2005
------------ ------------ ------------
(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 63,361 $ 54,228 $ 29,431
Short-term investments 33,507 36,125 44,458
Restricted investments,
short-term 1,864 3,728 3,717
Accounts receivable, net 57,388 48,244 42,443
Accounts receivable, other 8,963 6,842 11,371
Inventories 52,974 48,039 33,933
Prepaid expenses 4,112 4,850 3,470
------------ ------------ ------------
Total current assets 222,169 202,056 168,823
Investments 21,918 25,965 28,473
Property, plant and improvements,
net 82,225 79,582 87,264
Restricted investments, long-term 3,656 3,634 5,393
Purchased technology, net 14,972 17,558 33,046
Other purchased intangible
assets, net 4,184 4,556 4,424
Goodwill 124,532 132,484 119,690
Minority investments 15,093 15,696 21,366
Other assets 17,125 16,990 18,109
------------ ------------ ------------
Total assets $ 505,874 $ 498,521 $ 486,588
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 34,221 $ 37,618 $ 30,430
Accrued compensation 9,376 7,252 4,500
Other accrued liabilities 13,129 17,292 14,073
Deferred revenue 5,070 5,433 3,519
Current portion of other
long-term liabilities 2,333 2,229 2,242
Convertible notes - 843 15,811
Non-cancelable purchase
obligations 1,209 1,390 6,449
------------ ------------ ------------
Total current liabilities 65,338 72,057 77,024
Long-term liabilities:
Convertible notes 238,275 237,127 250,019
Other long-term liabilities 21,253 23,220 13,623
Deferred income taxes 4,053 3,483 1,632
------------ ------------ ------------
Total long-term
liabilities 263,581 263,830 265,274
Stockholders' equity:
Common stock 306 299 259
Additional paid-in capital 1,371,180 1,359,953 1,314,960
Accumulated other
comprehensive income 1,698 297 381
Accumulated deficit (1,196,229) (1,197,915) (1,171,310)
------------ ------------ ------------
Total stockholders'
equity 176,955 162,634 144,290
------------ ------------ ------------
Total liabilities and
stockholders' equity $ 505,874 $ 498,521 $ 486,588
============ ============ ============
Finisar Corporation
Consolidated Statement of Operations
(In thousands, except per share data)
Three
Months
Three Months Ended Twelve Months Ended Ended
April 30, April 30, January 31,
------------------ -------------------- --------
2006 2005 2006 2005 2006
-------- -------- -------- ---------- --------
(Unaudited) (Unaudited) (Unaudited)
Revenues
Optical subsystems
and components $ 91,938 $ 64,503 $325,956 $ 241,582 $ 84,199
Network test and
monitoring systems 10,466 10,356 38,337 39,241 9,336
-------- -------- -------- ---------- --------
Total revenues 102,404 74,859 364,293 280,823 93,535
Cost of revenues 65,306 59,410 247,126 205,631 61,331
Amortization of
acquired developed
technology 2,593 5,240 17,671 22,268 4,003
Impairment of acquired
developed technology - - 853 3,656 -
-------- -------- -------- ---------- --------
Gross profit 34,505 10,209 98,643 49,268 28,201
Gross margin 33.7% 13.6% 27.1% 17.5% 30.2%
Operating expenses:
Research and
development 13,216 15,146 51,903 62,799 11,525
Sales and marketing 7,934 7,883 31,925 29,783 8,119
General and
administrative 7,987 8,221 29,408 23,374 6,644
Amortization of
deferred stock
compensation - 20 - 162 -
Acquired in-process
research and
development - 1,240 - 1,558 -
Amortization of
purchased
intangibles 365 621 1,747 1,104 453
Impairment of assets - - - 18,798 -
Restructuring costs - 287 3,064 287 -
-------- -------- -------- ---------- --------
Total operating
expenses 29,502 33,418 118,047 137,865 26,741
-------- -------- -------- ---------- --------
Income (loss) from
operations 5,003 (23,209) (19,404) (88,597) 1,460
Interest income 1,076 683 3,482 2,396 858
Interest expense (4,087) (3,681) (15,842) (14,468) (3,838)
Other income (expense),
net 269 (10,828) 9,346 (12,582) 10,498
-------- -------- -------- ---------- --------
Income (loss) before
income taxes 2,261 (37,035) (22,418) (113,251) 8,978
Provision for income
taxes 575 800 2,501 856 675
-------- -------- -------- ---------- --------
Net income (loss) $ 1,686 $(37,835) $(24,919) $ (114,107) $ 8,303
======== ======== ======== ========== ========
Net income (loss) per
share - basic $ 0.01 $ (0.15) $ (0.09) $ (0.49) $ 0.03
======== ======== ======== ========== ========
Net income (loss) per
share - diluted $ 0.01 $ (0.15) $ (0.09) $ (0.49) $ 0.03
======== ======== ======== ========== ========
Shares used in
computing net income
(loss) per share -
basic 302,316 258,850 290,518 232,210 297,265
Shares used in
computing net income
(loss) per share -
diluted 326,781 258,850 290,518 232,210 307,681
NON-GAAP FINANCIAL MEASURES
The Company provides supplemental information regarding the Company's operational performance on a non-GAAP basis which excludes various non-cash and cash charges, principally related to acquisitions, restructuring activities and financing transactions. Non-GAAP gross profit and non-GAAP net income (loss), as reported by the Company, give an indication of the Company's baseline performance before gains, losses or other charges that are considered by management to be outside of our core operating results. While non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States, the Company's management uses this information for the purpose of evaluating the Company's historical and prospective financial performance in the ordinary course of business. The Company believes that providing this information to its investors, in addition to the GAAP presentation, allows investors to better evaluate the Company's progress over time and its financial results in comparison to other companies with whom it competes.
A reconciliation of each of these non-GAAP financial measures to GAAP information is set forth below (in thousands, except per share amounts):
Finisar Corporation
Reconciliation of Results of Operations under GAAP and non-GAAP
(In thousands, except per share data)
Three
Months
Three Months Ended Twelve Months Ended Ended
April 30, April 30, January 31,
------------------ -------------------- --------
2006 2005 2006 2005 2006
-------- -------- -------- ---------- --------
(Unaudited) (Unaudited) (Unaudited)
Reconciliation of GAAP
Gross Profit to
non-GAAP Gross Profit:
Gross profit per GAAP 34,505 10,209 98,643 49,268 28,201
Gross margin, GAAP 33.7% 13.6% 27.1% 17.5% 30.2%
Adjustments:
Cost of revenues
Change in excess and
obsolete inventory
reserve 2,385 417 5,289 (11) 4,504
Amortization of
acquired technology 2,593 5,241 17,671 25,924 4,003
Duplicate facility
costs during
facility move 640 422 2,832 422 878
Change in warranty
reserve - 1,638 (1,327) 1,638 (1,327)
Purchase accounting
adjustment for sale
of acquired
inventory - 56 231 501 -
Reduction in force
and employee
retention costs
related to
acquisitions - 216 1,342 216 -
Abandonment of fixed
assets - - 1,666 - -
Asset retirement
obligations - - 88 - -
Impairment of
acquired developed
technology - - 853 - -
Write-off of old A/P
debits through COGS - 705 - 705 -
Sales tax audit - 153 - 153 -
-------- -------- -------- ---------- --------
Total cost of
revenue
adjustments 5,618 8,848 28,645 29,548 8,058
Gross profit, non-GAAP 40,123 19,057 127,288 78,816 36,259
Gross margin, non-GAAP 39.2% 25.5% 34.9% 28.1% 38.8%
Reconciliation of GAAP
net income (loss) to
non-GAAP net income
(loss):
Net income (loss) per
GAAP 1,686 (37,835) (24,919) (114,107) 8,303
Total cost of revenue
adjustments 5,618 8,848 28,645 29,548 8,058
Research and
development
Reduction in force
costs 9 9 347 47 -
Asset retirement
obligations - - 361 - -
Abandonment of fixed
assets - - 1,588 - -
Sales tax audit - 827 - 827 -
Loss on sale of
assets - - - 909 -
Closure of
operations - - - (318) -
Sales and marketing
Reduction in force
costs - - 224 67 -
Asset retirement
obligations - - 26 - -
Abandonment of fixed
assets - - 153 - -
Sales tax audit - 21 - 21 -
General and
administrative
Reduction in force
costs 89 52 237 52 31
Abandonment of fixed
assets - - 130 - -
Patent amortization - 130 500 130 -
Lease set-up costs - 748 - 748 -
Sales tax audit - 22 - 22 -
Closure of operations - - - (96) -
Amortization of
deferred compensation - 21 - 163 -
Amortization of
purchased intangibles 365 621 1,747 1,104 453
Acquired in-process R&D - 1,240 - 1,558 -
Impairment of assets - - - 18,798 -
Amortization of
discount on
convertible debt 1,148 1,058 4,525 4,256 1,148
Restructuring costs - 287 3,064 287 -
Other expense, net
Loss (gain) on sale
of assets (1,080) 41 (12,090) (461) (11,337)
Loss on minority
investments 602 10,542 2,116 11,765 476
Provision for income
tax
Timing difference
related to asset
purchases 565 859 2,416 859 617
-------- -------- -------- ---------- --------
Total adjustments 7,316 25,326 33,989 70,286 (554)
-------- -------- -------- ---------- --------
Net income (loss),
non-GAAP $ 9,002 $(12,509) $ 9,070 $ (43,821) $ 7,749
======== ======== ======== ========== ========
Net income (loss),
non-GAAP per share
- basic $ 0.03 $ (0.05) $ 0.03 $ (0.19) $ 0.03
======== ======== ======== ========== ========
Net income (loss),
non-GAAP per share
- diluted $ 0.03 $ 0.03
======== ======== ======== ========== ========
Shares used in
computing proforma net
income (loss) per
share - basic 302,316 258,850 290,518 232,210 297,265
Shares used in
computing proforma net
income (loss) per
share - diluted 326,781 307,681
Contact:
Steve Workman
Chief Financial Officer
408-548-1000
Investor Relations
408-542-5050
investor.relations@Finisar.com
