Finisar Corporation Announces Record Fourth Quarter and Fiscal 2010 Financial ResultsSUNNYVALE, CA -- (Marketwire - June 10, 2010) - Finisar Corporation (NASDAQ: FNSR), a global technology leader for fiber optic subsystems and components for communication applications, today announced financial results for its fourth quarter and fiscal year ended April 30, 2010. Total revenues for both the fourth quarter and fiscal year were new records for the Company.
FINANCIAL HIGHLIGHTS - FOURTH QUARTER ENDED APRIL 30, 2010
Fourth Fourth Third
Quarter Quarter Quarter
Summary Results per GAAP Ended Ended Ended
April 30, April 30, Jan. 31,
2010 2009 2010
---------- --------- ----------
(in thousands, except per share
amounts)
Continuing operations
Total revenues $ 188,490 $ 107,457 $ 166,935
Gross margin 31.2% 21.6% 31.0%
Before impairment-restructuring-
retirement:
Operating expenses $ 45,932 $ 34,094 $ 42,569
Operating income (loss) $ 12,919 $ (10,871) $ 9,126
Operating margin (deficit) 6.9% (10.1)% 5.5%
Impairment-restructuring $ -- $ (13,205) $ --
Income (loss) $ 14,111 $ (27,004) $ 5,616
Income (loss) per share-basic $ 0.20 $ (0.45) $ 0.09
Income (loss) per share-diluted $ 0.19 $ (0.45) $ 0.08
Basic shares 70,596 59,622 65,113
Diluted shares 82,351 59,622 66,719
Discontinued operations
Income (loss) $ 56 $ 1,246 $ (131)
Income (loss) per share-basic $ 0.00 $ 0.02 $ 0.00
Income (loss) per share-diluted $ 0.00 $ 0.02 $ 0.00
Basic shares 70,596 59,622 65,113
Diluted shares 82,351 59,622 66,719
Fourth Fourth Third
Quarter Quarter Quarter
Non-GAAP Results (a) Ended Ended Ended
April 30, April 30, Jan. 31,
2010 2009 2010
---------- --------- ----------
(in thousands, except per share
amounts)
Continuing operations
Total revenues $ 188,490 $ 107,457 $ 166,935
Gross margin 32.6% 27.2% 32.2%
Operating expenses $ 43,186 $ 30,837 $ 39,664
Operating income (loss) $ 18,331 $ (1,633) $ 14,172
Operating margin 9.7% (1.5)% 8.5%
Income (loss) $ 16,685 $ (3,426) $ 11,468
Income (loss) per share-basic $ 0.24 $ (0.06) $ 0.18
Income (loss) per share-diluted $ 0.22 $ (0.06) $ 0.17
Basic shares 70,596 59,622 65,113
Diluted shares 82,483 59,622 76,082
(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.
Highlights for the fourth quarter under GAAP:
- -- Total revenues increased to $188.5 million, up $21.6 million, or 12.9%,
from $166.9 million in the preceding quarter and up $81.0 million, or
75.4%, from $107.5 million in the fourth quarter of the prior year;
- -- Of the $21.6 million increase in revenues from the preceding quarter,
the sale of products for applications equal to or greater than 10 Gbps
increased $6.6 million, or 9.8%, the sale of products for applications
less than 10 Gbps increased $8.6 million, or 11.5%, and the sale of
ROADM products increased $7.7 million, or 40.3%, while the sale of
products for CATV applications decreased $1.3 million, or (23.3)%;
- -- Of the $81.0 million increase in revenues from the fourth quarter of the
prior year, the sale of products for applications equal to or greater
than 10 Gbps increased $33.4 million, or 82.2%, the sale of products for
applications less than 10 Gbps increased $26.1 million, or 45.7%, the
sale of ROADM products increased $19.7 million, or 274.4%, and the sale
of products for CATV applications increased $1.9 million, or 72.5%;
- -- Gross margin increased to 31.2% from 31.0% in the preceding quarter and
21.6% in the fourth quarter of the prior year;
- -- Operating income increased to $12.9 million, or 6.9% of revenues,
compared to $9.1 million, or 5.5% of revenues, in the preceding quarter
and an operating loss of $10.9 million, or (10.1)% of revenues, in the
fourth quarter of the prior year;
- -- Net income from continuing operations was $14.1 million, or $0.19 per
diluted share, compared to $5.6 million, or $0.08 per diluted share, in
the preceding quarter and a loss of $27.0 million, or $(0.45) per share,
in the fourth quarter of the prior year, which included a $13.2 million
charge for the impairment of goodwill;
- -- Cash and short-term investments, plus other long-term investments that
can be readily converted into cash, totaled $207.0 million at the end of
the fourth quarter compared to $79.0 million at the end of the preceding
quarter. The $128.0 million increase primarily reflects net proceeds of
$131.1 million from an the sale of common stock completed in March 2010
and the use of $10.0 million in cash to pay down borrowings under a
secured credit line with Wells Fargo Foothill, LLC. Excluding the impact
of these financing transactions, the Company's cash position increased
by approximately $6.8 million compared to the end of the preceding
quarter. Finisar has classified certain of its investments as long-term
based on their scheduled maturities, although they can be readily sold
if required; and
- -- Under Finisar's $70.0 million secured credit facility with Wells Fargo
Foothill, LLC, $66.6 million was available to borrow at the end of the
fourth quarter.
In addition to reporting financial results in accordance with U.S. generally accepted accounting principles, or GAAP, Finisar provides supplemental information regarding its operating performance on a non-GAAP basis. Finisar believes this supplemental information provides investors and management with additional insight into its underlying core operating performance by excluding a number of non-cash and cash charges, as well as infrequently occurring gains or losses principally related to acquisitions, the sale of minority investments, restructuring or other transition activities, impairments and financing transactions. For the fourth quarter of fiscal 2010, these excluded items related to continuing operations totaled a net amount of $2.6 million. Excluded charges included $3.3 million in non-cash stock-based compensation expenses; $1.6 million in non-cash amortization charges related to acquired developed technology and purchased intangibles arising from previous acquisitions; $491,000 in non-cash charges related to slow-moving and excess inventory; and $359,000 in non-cash charges for imputed interest expense on the Company's debt obligations. These charges were partially offset by a $2.0 million non-cash tax benefit and a $1.2 million non-cash gain on foreign currency translation. Other items are as described in Finisar Non-GAAP Financial Measures below.
Highlights for the fourth quarter on a non-GAAP basis:
- -- Non-GAAP gross margin was 32.6% compared to 32.2% in the preceding
quarter and 27.2% in the fourth quarter of the prior year. The favorable
gross margin impact associated with additional revenues in the fourth
quarter was partially offset by the unfavorable impact of annual price
reductions for certain telecom customers which took effect on
January 1, 2010;
- -- Non-GAAP operating expenses were $43.2 million, an increase of
$3.5 million from $39.7 million in the preceding quarter and
$12.4 million from $30.8 million in the fourth quarter of the prior
year. The increase from the preceding quarter reflects a $2.6 million
increase in research and development expenses due in part to costs
associated with the Company's product development efforts for 100
Gigabit Ethernet applications and a $769,000 increase in sales and
marketing expense primarily related to the increase in revenues;
- -- Non-GAAP operating income was $18.3 million, or 9.7% of revenues,
in the fourth quarter, up $4.2 million from $14.1 million, or 8.5% of
revenues, in the preceding quarter, and up $19.9 million from a loss of
$1.6 million, or 1.5% of revenues, in the fourth quarter of the prior
year;
- -- Non-GAAP net income from continuing operations was $16.7 million, or
$0.22 per diluted share, compared to net income of $11.5 million, or
$0.17 per diluted share, in the preceding quarter and a net loss of
$3.4 million, or $(0.06) per share, in the fourth quarter of the prior
year;
- -- Non-GAAP EBITDA rose to $26.0 million compared to $21.6 million in the
preceding quarter and $6.1 million in the fourth quarter of the prior
year; and
- -- Capital expenditures were $10.0 million compared to $10.7 million in
the preceding quarter and $3.3 million in the fourth quarter of the
prior year.
FINANCIAL HIGHLIGHTS - FISCAL YEARS ENDED APRIL 30, 2010 and 2009
FY2010
Fiscal Year Fiscal Higher
Summary Results per GAAP Ended Year Ended (Lower)
April 30, April 30, Than
2010 2009 FY2009
----------- ---------- ----------
(in thousands, except per share
Continuing operations amounts)
Total revenues $ 629,880 $ 497,058 $ 132,822
Gross margin 28.5% 27.9% 0.6%
Before impairment-restructuring-
retirement:
Operating expenses $ 164,272 $ 156,329 $ 7,943
Operating income (loss) $ 15,469 $ (17,522) $ 32,991
Operating margin (deficit) 2.5% (3.5)% 6.0%
Impairment-restructuring costs $ (4,173) $ (238,507) $ 234,334
Gain (loss) on retirement of notes $ (25,039) $ 3,064 $ (28,103)
Loss $ (22,806) $ (262,492) $ 239,686
Loss per share-basic $ (0.35) $ (4.99) $ 4.64
Loss per share-diluted $ (0.35) $ (4.99) $ 4.64
Basic shares 64,952 52,557 12,395
Diluted shares 64,952 52,557 12,395
Discontinued operations
Income $ 36,937 $ 2,149 $ 34,788
Income per share-basic $ 0.57 $ 0.04 $ 0.53
Income per share-diluted $ 0.57 $ 0.04 $ 0.53
Basic shares 64,952 52,557 12,395
Diluted shares 64,952 52,557 12,395
FY2010
Fiscal Year Fiscal Higher
Non-GAAP Results (a) Ended Year Ended (Lower)
April 30, April 30, Than
2010 2009 FY2009
----------- ---------- ----------
(in thousands, except per share
Continuing operations amounts)
Revenue $ 629,880 $ 497,058 $ 132,822
Gross margin 31.0% 31.4% (0.4)%
Operating expenses $ 150,811 $ 132,986 $ 17,825
Operating income $ 44,675 $ 23,192 $ 21,483
Operating margin 7.1% 4.7% 2.4%
Income $ 37,462 $ 15,716 $ 21,746
Income per share-basic $ 0.58 $ 0.30 $ 0.28
Income per share-diluted $ 0.56 $ 0.30 $ 0.26
Basic shares 64,952 52,557 12,395
Diluted shares 66,704 53,272 13,432
Highlights for fiscal year 2010 under GAAP:
- -- Total revenues increased to $629.9 million, up $132.8 million, or 26.7%,
from $497.1 million in the prior year;
- -- Of the $132.8 million increase in revenues, the sale of products for
applications equal to or greater than 10 Gbps increased $72.6 million,
or 41.3%, the sale of products for applications less than 10 Gbps
increased $273,000, approximately unchanged, the sale of ROADM products
increased $50.2 million, or 226.1%, and the sale of products for CATV
applications increased $9.7 million, or 103.4%;
- -- Gross margin increased to 28.5% from 27.9% in the prior year;
- -- Operating expenses totaled $164.3 million, up 5.1%, from $156.3 million
in the prior year;
- -- Operating income (before charges of $4.2 million for impairment and
restructuring) increased by $33.0 million to $15.5 million, or 2.5% of
revenues, compared to a loss of $(17.5) million in the prior year;
- -- Loss from continuing operations totaled $(22.8) million, or $(0.35) per
share, compared to a loss of $(262.5) million, or $(4.99) per share, in
the prior year, which included a charge of $238.5 million for the
impairment of goodwill; and
- -- Income from discontinued operations totaled $36.9 million, or $0.57 per
diluted share, reflecting the sale of the Company's Network Tools
business in the first quarter of the fiscal year.
For fiscal 2010, items excluded under non-GAAP results totaled a net amount of $24.1 million. Excluded charges included $25.0 million in non-cash charges for the early retirement of debt; $14.9 million in non-cash stock-based compensation expenses; $6.8 million in non-cash amortization charges related to acquired developed technology and purchased intangibles arising from previous acquisitions; $6.5 million in non-cash charges related to slow-moving and excess inventory; and $3.0 million in non-cash charges for imputed interest expense on the Company's debt obligations. These charges were partially offset by a $35.9 million gain from the sale of the Company's Network Tools business and a $1.3 million gain from the sale of a product line, a $2.0 million non-cash tax benefit and $1.1 million in non-cash gains on foreign currency translation. Other items are as described in Finisar Non-GAAP Financial Measures below.
Highlights for fiscal 2010 on a non-GAAP basis:
- -- Non-GAAP gross margin was 31.0% compared to 31.4% in the prior year;
- -- Non-GAAP operating expenses totaled $150.8 million, an increase of
$17.8 million, or 13.4%, from $133.0 million in the prior year, due
primarily to an increase in spending for research and development;
- -- Non-GAAP operating income totaled $44.7 million, or 7.1% of revenues,
compared to $23.2 million, or 4.7% of revenues, in the prior year;
- -- Non-GAAP net income from continuing operations totaled $37.5 million, or
$0.56 per diluted share, compared to net income of $15.7 million, or
$0.30 per diluted share, in the prior year;
- -- Non-GAAP EBITDA increased to $74.0 million compared to $52.2 million in
the prior year; and
- -- Capital expenditures totaled $31.4 million compared to $23.6 million in
the prior year.
COMMENTARY
"I am extraordinarily proud of the results we achieved this past year and our employees who worked so hard to make it happen," said Jerry Rawls, Finisar's executive Chairman of the Board. "The continued strong demand for Finisar products has been driven by growth in IP traffic, demand for mobile bandwidth and the need to upgrade existing networks and build out new wireless backhaul networks. Those demands have powered Finisar to record revenue levels. We believe the underlying trends driving our business will continue and that fiscal 2011 will be another record year for us."
"While most of our product transfer activities to low cost off-shore locations were largely complete at the end of the fourth quarter, there are additional merger synergies related to the integration of Finisar components into legacy Optium products to be realized over the next few quarters," said Eitan Gertel, Finisar's Chief Executive Officer. "As a result, we believe gross margins on a non-GAAP basis can continue to improve as these new engineering designs become qualified by our customers and we realize the expected benefits of anticipated additional revenue growth along with a favorable trend in product mix."
OUTLOOK
The Company indicated that it currently expects that revenues for its first fiscal quarter ending August 1, 2010 will likely range from $190 to $205 million. On a GAAP basis, operating margin is expected to range from 7% to 8.5%. Additional non-cash and infrequently occurring charges excluded in calculating non-GAAP operating income are expected to total approximately $5 to $7 million. As a result, on a non-GAAP basis, operating margin is expected to be in the range of 10% to 11.5%.
CONFERENCE CALL
Finisar will discuss its financial results for the fourth quarter and its current business outlook during its regular quarterly conference call scheduled for today, June 10, 2010, at 2:00 p.m. PDT/5:00 EDT. To listen to the call you may connect through the Finisar investor relations page at investor.finisar.com or dial 866-393-6455 (domestic) or 706-643-4465 (international) and enter conference ID 75501246.
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; 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 July 9, 2009) and quarterly SEC filings.
ABOUT FINISAR
Finisar Corporation (NASDAQ: FNSR) is a global technology leader for fiber optic subsystems and network test systems that enable high-speed voice, video and data communications for 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 Statements of Operations
Three
Months
Three Months Ended Twelve Months Ended Ended
---------------------- ---------------------- ----------
April 30, April 30, April 30, April 30, January 31,
2010 2009 2010 2009 2010
---------- ---------- ---------- ---------- ----------
(Unaudited)
(in thousands, except per share data)
Revenues $ 188,490 $ 107,457 $ 629,880 $ 497,058 $ 166,935
Cost of
revenues 128,447 81,636 445,370 352,096 114,048
Impairment of
acquired
developed
technology - 1,248 - 1,248 -
Amortization
of acquired
developed
technology 1,192 1,350 4,769 4,907 1,192
---------- ---------- ---------- ---------- ----------
Gross profit 58,851 23,223 179,741 138,807 51,695
Gross margin 31.2% 21.6% 28.5% 27.9% 31.0%
Operating
expenses:
Research and
development 27,256 19,767 94,770 80,136 24,892
Sales and
marketing 8,648 5,908 30,702 27,730 7,922
General and
administrative 9,645 7,719 36,772 35,818 9,329
Acquired
in-process
research and
development - - - 10,500 -
Amortization of
purchased
intangibles 383 700 2,028 2,145 426
Impairment of
goodwill and
intangible
assets - 13,205 - 238,507 -
Restructuring
costs - - 4,173 - -
---------- ---------- ---------- ---------- ----------
Total
operating
expenses 45,932 47,299 168,445 394,836 42,569
---------- ---------- ---------- ---------- ----------
Income (loss)
from operations 12,919 (24,076) 11,296 (256,029) 9,126
Interest income 40 18 144 1,762 85
Interest expense (2,115) (2,517) (8,957) (14,597) (2,241)
Gain (loss) on
repayment/purchase
of convertible
notes - - (25,039) 3,064 28
Other income
(expense), net 1,009 38 (1,890) (3,654) (961)
---------- ---------- ---------- ---------- ----------
Income (loss)
from continuing
operations
before income
taxes 11,853 (26,537) (24,446) (269,454) 6,037
Provision for
(benefit from)
income taxes (2,258) 467 (1,640) (6,962) 421
---------- ---------- ---------- ---------- ----------
Income (loss)
from continuing
operations 14,111 (27,004) (22,806) (262,492) 5,616
Income (loss)
from discontinued
operations,
net of taxes 56 1,246 36,937 2,149 (131)
---------- ---------- ---------- ---------- ----------
Net income
(loss) $ 14,167 $ (25,758) $ 14,131 $ (260,343) $ 5,485
========== ========== ========== ========== ==========
Income (loss)
per share from
continuing
operations -
basic $ 0.20 $ (0.45) $ (0.35) $ (4.99) $ 0.09
Income (loss)
per share from
continuing
operations -
diluted $ 0.19 $ (0.45) $ (0.35) $ (4.99) $ 0.08
Income (loss)
per share from
discontinued
operations -
basic $ 0.00 $ 0.02 $ 0.57 $ 0.04 $ (0.00)
Income (loss)
per share from
discontinued
operations -
diluted $ 0.00 $ 0.02 $ 0.57 $ 0.04 $ (0.00)
Shares used in
computing net
loss per share
from continuing
operations -
basic 70,596 59,622 64,952 52,557 65,113
Shares used in
computing net
loss per share
from continuing
operations -
diluted 82,351 59,622 64,952 52,557 66,719
Shares used in
computing net
income (loss)
per share from
discontinued
operations -
basic 70,596 59,622 64,952 52,557 65,113
Shares used in
computing net
income (loss)
per share from
discontinued
operations -
diluted 82,351 59,622 64,952 52,557 66,719
Finisar Corporation
Consolidated Balance Sheets
(In thousands)
April 30, January 31, November 1, August 2, April 30,
2010 2010 2009 2009 2009
---------- ---------- ---------- ---------- ----------
(unaudited) (unaudited) (unaudited)
ASSETS
Current assets:
Cash and cash
equivalents $ 207,024 $ 78,914 $ 80,595 $ 60,327 $ 37,129
Short-term
available-
for-sale
investments - 67 79 92 92
Accounts
receivable, net 127,617 116,399 95,924 99,466 81,820
Accounts
receivable,
other 12,855 8,456 9,747 8,512 10,033
Inventories 139,525 122,680 113,133 108,686 107,764
Prepaid
expenses 9,194 7,024 6,738 5,568 6,795
Current assets
associated with
discontinued
operations - - - - 4,863
---------- ---------- ---------- ---------- ----------
Total current
assets 496,215 333,540 306,216 282,651 248,496
Property, plant
and improvements,
net 89,214 83,926 81,077 79,492 81,606
Purchased
technology, net 11,689 12,882 14,074 15,267 16,459
Other intangible
assets, net 11,713 12,115 12,559 13,102 13,427
Minority
investments 12,289 12,289 12,289 14,289 14,289
Other assets 5,610 5,961 6,183 2,427 2,584
Non-current assets
associated with
discontinued
operations - - - - 3,527
---------- ---------- ---------- ---------- ----------
Total
assets $ 626,730 $ 460,713 $ 432,398 $ 407,228 $ 380,388
========== ========== ========== ========== ==========
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts
payable $ 76,838 $ 65,124 $ 54,915 $ 52,264 $ 48,421
Accrued
compensation 18,289 12,698 10,885 9,048 11,428
Other accrued
liabilities 21,076 21,059 25,403 25,102 30,513
Deferred revenue 6,571 5,516 2,079 2,073 1,703
Current portion of
Convertible notes 28,839 28,480 33,334 - -
Current portion of
long-term debt 4,000 4,000 6,241 6,173 6,107
Short term debt - 14,500 - - -
Non-cancelable
purchase
obligations 722 521 596 657 2,965
Current liabilities
associated with
discontinued
operations - - - - 3,160
---------- ---------- ---------- ---------- ----------
Total current
liabilities 156,335 151,898 133,453 95,317 104,297
Long-term liabilities:
Convertible
notes 100,000 100,000 100,000 135,490 134,255
Long-term debt 15,250 10,750 12,151 13,737 15,305
Other long-term
liabilities 5,893 6,008 5,832 2,352 2,511
Deferred income
taxes 606 1,136 1,136 973 1,149
Non-current
liabilities
associated with
discontinued
operations - - - - 650
---------- ---------- ---------- ---------- ----------
Total
long-term
liabilities 121,749 117,894 119,119 152,552 153,870
Stockholders'
equity:
Common stock 76 65 65 61 60
Additional
paid-in
capital 2,030,373 1,892,186 1,887,167 1,838,508 1,831,224
Accumulated
other
comprehensive
income 15,791 10,431 9,840 6,552 2,662
Accumulated
deficit (1,697,594) (1,711,761) (1,717,246) (1,685,762) (1,711,725)
---------- ---------- ---------- ---------- ----------
Total
stockholders'
equity 348,646 190,921 179,826 159,359 122,221
---------- ---------- ---------- ---------- ----------
Total liabilities
and stockholders'
equity $ 626,730 $ 460,713 $ 432,398 $ 407,228 $ 380,388
========== ========== ========== ========== ==========
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 non-recurring and infrequently incurred 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, we have excluded the following items from cost of revenues in applicable periods:
- -- Changes in excess and obsolete inventory reserve (predominantly non-cash
charges or non-cash benefits);
- -- Amortization of acquired technology (non-cash charges related to
technology obtained in acquisitions);
- -- Duplicate facility costs during facility move (non-recurring charges);
- -- Stock-based compensation expense (non-cash charges);
- -- The cost of covering employee and employer tax liabilities
(non-recurring cash charges) arising from the investigation special
investigation into our historical stock option granting practices
recorded in each line of the income statement;
- -- Impairment of acquired developed technology (non-cash and non-recurring
charges);
- -- Purchase accounting adjustment for sale of acquired inventory (non-cash
and non-recurring charges); and
- -- Reduction in force costs (non-recurring charges).
In calculating non-GAAP operating income (loss), 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:
- -- Options investigation costs included in general and administrative
expense (non-recurring cash charges related to the special investigation
into our historical stock option granting practices)
- -- Gain or loss on settlement of lawsuits (non-recurring charges);
- -- Acquired in-process research and development expense (non-recurring and
non-cash charges);
- -- Amortization of purchased intangibles (non-cash charges related to prior
acquisitions);
- -- Restructuring charges associated with the abandonment of certain
facilities (non-recurring charges); and
- -- Impairment charges associated with intangible assets (non-cash and
non-recurring charges).
In calculating non-GAAP income (loss) from continuing operations and non- GAAP income (loss) from continuing operations per share, we have also excluded the following items in applicable periods:
- -- Amortization of discount on convertible debt and imputed interest
expense (non-cash charges);
- -- Gains and losses on debt extinguishment (non-recurring and non-cash
charges or income);
- -- Gains and losses on sales of assets (non-recurring or non-cash losses
and cash gains related to the periodic disposal of assets no longer
required for current activities);
- -- Gains and losses on minority investments (infrequently occurring and
principally non-cash gains and losses related to the disposal of
investments in other companies and non-cash income or loss from these
investments accounted for under the equity method);
- -- Other miscellaneous income (non-recurring);
- -- Foreign exchange transaction losses (gains) (non-recurring and non-cash
charges); and
- -- Tax charges arising from timing difference related to asset purchases
(non-cash provision).
In calculating non-GAAP income (loss) from discontinued operations and non-GAAP income (loss) from discontinued operations per share, we have also excluded gains on disposal of a product line and disposal of discontinued operations.
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
Three
Three Months Twelve Months Months
Ended Ended Ended
----------------- ------------------- -------
January
April 30, April 30, April 30, April 30, 31,
2010 2009 2010 2009 2010
------- -------- -------- --------- -------
(Unaudited)
(in thousands, except per share data)
Reconciliation of GAAP
income (loss) to non-GAAP
income (loss) from
continuing operations
Reconciliation of GAAP
Gross Profit to non-GAAP
Gross Profit:
Gross profit per GAAP $58,851 $ 23,223 $179,741 $ 138,806 $51,695
Gross margin, GAAP 31.2% 21.6% 28.5% 27.9% 31.0%
Adjustments:
Cost of revenues
Change in excess and
obsolete inventory
reserve 491 2,495 6,526 6,038 (24)
Amortization of
acquired technology 1,192 1,349 4,768 4,907 1,192
Duplicate facility
costs during facility
move - - - 287 -
Stock compensation 983 830 4,211 3,267 909
Payroll taxes related
to options
investigation - (247) - (247) -
Impairment of acquired
developed technology - 1,248 - 1,248 -
Purchase accounting
adjustment for sale
of acquired inventory - - - 1,402 -
Reduction in force
costs - 306 240 470 64
------- -------- -------- --------- -------
Total cost of
revenue
adjustments 2,666 5,981 15,745 17,372 2,141
Gross profit, non-GAAP 61,517 29,204 195,486 156,178 53,836
Gross margin, non-GAAP 32.6% 27.2% 31.0% 31.4% 32.2%
Reconciliation of GAAP
operating income (loss)
to non-GAAP operating
income (loss):
Operating income (loss)
per GAAP 12,919 (24,076) 11,296 (256,029) 9,126
Operating margin, GAAP 6.9% -22.4% 1.8% -51.5% 5.5%
Adjustments:
Total cost of revenue
adjustments 2,666 5,981 15,745 17,372 2,141
Research and development
Reduction in force
costs - 267 49 454 20
Stock compensation 1,143 1,546 5,521 5,576 1,363
Payroll taxes related
to options
investigation - (273) - (273) -
Sales and marketing
Reduction in force
costs 35 99 35 217 -
Stock compensation 385 460 1,857 1,682 463
Payroll taxes related
to options
investigation - (48) - (48) -
General and administrative
Reduction in force
costs 90 111 393 328 54
Stock compensation 816 824 3,357 2,916 779
Payroll taxes related
to options
investigation - (132) 200 (132) -
Costs related to
options investigation - (297) - (22) -
Litigation settlement (106) - 21 - (200)
Amortization of purchased
intangibles 383 702 2,028 2,146 426
Acquired in-process R&D - - - 10,500 -
Restructuring costs - - 4,173 - -
Impairment of intangible
assets - 13,205 - 238,507 -
------- -------- -------- --------- -------
Total cost of
revenue and
operating expense
adjustments 5,412 22,445 33,379 279,223 5,046
Operating income (loss),
non-GAAP 18,331 (1,631) 44,675 23,194 14,172
Operating margin, non-GAAP 9.7% -1.5% 7.1% 4.7% 8.5%
Reconciliation of GAAP
income (loss) to non-GAAP
income (loss) from
continuing operations:
Income (loss) per GAAP
from continuing
operations before
cumulative effect of
change in accounting
principle 14,111 (27,004) (22,806) (262,492) 5,616
Total cost of revenue and
operating expense
adjustments 5,412 22,445 33,379 279,223 5,046
Amortization of discount
on convertible debt - - - 1,817 -
No cash imputed interest
expenses on convertible
debt 359 1,185 3,033 4,910 383
Loss/(gain) on
repayment/purchase of
convertible notes - - 25,039 (3,064) (28)
Other income (expense), net
Loss on sale of assets 4 497 289 994 10
Loss on minority
investments - - 1,625 797 -
Other misc income - (17) (2) (575) -
Foreign exchange
transaction
loss/(gain) (1,202) (532) (1,096) 1,953 441
Provision for income tax - -
Timing differences (1,999) - (1,999) (7,847) -
------- -------- -------- --------- -------
Total adjustments 2,574 23,578 60,268 278,208 5,852
------- -------- -------- --------- -------
Income (loss), non-GAAP,
from continuing
operations 16,685 (3,426) 37,462 15,716 11,468
------- -------- -------- --------- -------
Reconciliation of GAAP
income (loss) to non-GAAP
income (loss) from
discontinued operations:
Income (loss) per GAAP
from discontinued
operations 56 1,246 36,937 2,149 (131)
Adjustments:
Reduction in force
costs - 131 6 258 -
Stock compensation - 359 704 1,539 -
Payroll taxes related
to options
investigation - (184) - (184) -
Amortization of
acquired technology - 235 170 1,131 -
Amortization of
purchased intangibles - 124 77 541 -
Gain (loss) on
disposal of a product
line - - (1,250) 919 -
Gain on disposal of
discontinued
operations - - (35,888) - 165
------- -------- -------- --------- -------
Total adjustments - 665 (36,181) 4,204 165
------- -------- -------- --------- -------
Income (loss) from
discontinued operations,
non-GAAP 56 1,911 756 6,353 34
------- -------- -------- --------- -------
Reconciliation of GAAP net
income (loss) to non-GAAP
net income (loss):
Net income (loss) per GAAP 14,167 (25,758) 14,131 (260,343) 5,485
Total adjustments from
continuing operations 2,574 23,578 60,268 278,208 5,852
Total adjustments from
discontinuing operations - 665 (36,181) 4,204 165
Cumulative Effect
Cumulative effect of
change in accounting
principle - - - - -
------- -------- -------- --------- -------
Total adjustments 2,574 24,243 24,087 282,412 6,017
------- -------- -------- --------- -------
Net income (loss),
non-GAAP $16,741 $ (1,515) $ 38,218 $ 22,069 $11,502
======= ======== ======== ========= =======
Income per share from
continuing operations -
basic $ 0.24 $ (0.06) $ 0.58 $ 0.30 $ 0.18
Income per share from
continuing operations -
diluted $ 0.22 $ (0.06) $ 0.56 $ 0.30 $ 0.17
Income (loss) per share
from discontinued
operations - basic $ 0.00 $ 0.03 $ 0.01 $ 0.12 $ 0.00
Income (loss) per share
from discontinued
operations - diluted $ 0.00 $ 0.03 $ 0.01 $ 0.12 $ 0.00
Shares used in computing
net income per share -
basic 70,596 59,622 64,952 52,557 65,113
Shares used in computing
net income per share -
diluted 82,483 59,622 66,704 53,272 76,082
Continuing operations
Net income (loss),
non-GAAP $16,685 $ (3,426) $ 37,462 $ 15,716 $11,468
Depreciation expense 7,531 7,626 29,523 28,747 7,638
Amortization 289 127 888 768 291
Interest expense 1,716 1,314 5,780 6,108 1,773
Income tax expense (259) 468 359 886 421
------- -------- -------- --------- -------
Non-GAAP EBITDA $25,962 $ 6,109 $ 74,012 $ 52,225 $21,591
------- -------- -------- --------- -------
Discontinued operations
Net income (loss),
non-GAAP 56 1,911 756 6,353 34
Depreciation expense - 207 119 826 -
------- -------- -------- --------- -------
Non-GAAP EBITDA $ 56 $ 2,118 $ 875 $ 7,179 $ 34
------- -------- -------- --------- -------
------- -------- -------- --------- -------
Total Non-GAAP EBITDA $26,018 $ 8,227 $ 74,887 $ 59,404 $21,625
======= ======== ======== ========= =======
Contact:
Steve Workman
Senior Vice President, Corporate Development and Investor Relations
408-548-1000
Victoria McDonald
Senior Manager, Corporate Communications
408-542-4261
investor.relations@Finisar.com
