-- Fourth quarter revenues of $121.0 million, a new record for the
Company, increased 7% from $112.7 million in the third quarter and 25% from
$96.6 million in the fourth quarter of the prior year. These results were
in line with the Company's preannouncement on May 16, 2008 wherein
management indicated that fourth quarter revenues would be approximately
$120 million.
-- Optics revenues of $111.4 million increased 8% from $103.0 million in
the third quarter and 26% from $88.2 million in the prior year; while
Network Tools revenues of $9.6 million declined slightly from $9.8 million
in the prior quarter and increased 15% from $8.4 million in the fourth
quarter of the prior year.
-- Revenues of $31.2 million from products for 10/40 Gbps applications
increased 7% from $29.1 million in the prior quarter and 110% from $14.9
million in the fourth quarter of the prior year.
-- Revenues of $50.6 million from products for 1-8 Gbps LAN/SAN
applications increased 12% from $45.4 million in the prior quarter and 11%
from $45.7 million in the fourth quarter of the prior year.
-- Gross margin of 32.9% compares to 33.4% in the third quarter and 32.3%
in the fourth quarter of the prior year.
-- Net loss of $8.7 million, or $.03 per share, compares to a net loss of
$10.6 million, or $.03 per share, in the third quarter and a net loss of
$16.0 million, or $.05 per share, 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, of $116.4 million decreased $6.0
million from $122.4 million at January 27, 2008, but also reflects a
reduction in outstanding debt of $14.2 million during the quarter and $2.5
million in minority investments. Excluding these items, cash would have
increased to approximately $133 million in the fourth quarter. The Company
has classified 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
-- Excluding certain items as described below, net income in the fourth
quarter was $7.9 million, or $.03 per share, compared to $6.7 million, or
$.02 per share, in the third quarter and $2.3 million, or $.01 per share,
in the fourth quarter of the prior year.
-- Gross margin, excluding certain items, decreased sequentially to 37.4%
from 38.2% in the third quarter and from 37.6% in the fourth quarter of the
prior year. The decrease in gross margins compared to the prior quarter was
primarily related to an unfavorable product mix as revenues from Network
Tools declined as a percent of total revenues while revenues for short
distance LAN/SAN applications increased in the quarter.
-- The Company generated approximately $17 million in EBITDA during the
fourth quarter while investing approximately $9.5 million in capital
expenditures.
The Company's operating results include a number of non-cash and cash
charges and gains or losses principally related to acquisitions, the sale
of minority investments, restructuring activities, impairments and
financing transactions. For the fourth quarter of fiscal 2008, these items
resulted in net charges of $16.6 million and included, among other items,
$3.0 million in non-cash stock compensation expense; a $4.8 million
non-cash charge related to an impairment in the value of patents that have
been capitalized; a $3.1 million non-cash charge related to slow-moving and
obsolete inventory; $1.6 million in amortization charges related to
acquired developed technology and purchased intangibles arising from
previous acquisitions; a $1.4 million loss related to minority investments;
$1.2 million related to the amortization of discount on convertible notes
issued in 2001; and a $721,000 cash charge associated with employee
retention related to a previous acquisition. 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.
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 was $7.9 million,
or $.03 per share, compared to $6.7 million, or $.02 per share, in the
third quarter and $2.3 million, or $.01 per share, in the fourth quarter of
the prior year. On a non-GAAP basis, gross margins were 37.4% in the fourth
quarter of fiscal 2008 compared to 38.2% in the third quarter and 37.6% in
the fourth quarter of the prior year. The decrease in gross margins
compared to the prior quarter is primarily related to an unfavorable
product mix as revenues from Network Tools declined as a percent of total
revenues while revenues for short distance LAN/SAN applications increased
in the quarter.
Profitability in the fourth quarter reflects non-GAAP operating expenses of
$35.6 million compared to $34.6 million in the third quarter and $32.7
million in the fourth quarter of the prior year. Most of the increase from
the prior quarter was related to higher expenses for research and
development while prior year comparisons were impacted by two acquisitions
completed during the fourth quarter of the prior year.
FINANCIAL HIGHLIGHTS - FISCAL YEAR ENDED APRIL 30, 2008
-- Revenues of $440.2 million for the fiscal year, a new record for the
Company, increased 5% from $418.5 million in the prior year.
-- Revenues of $401.6 million from optical components and subsystems
increased 5% from $381.3 million in the prior year.
-- Revenues of $96.8 million from products for 10/40 Gbps applications
increased 140% from $40.3 million in the prior year partially offset by a
decrease in revenues for 1-4 Gbps LAN/SAN applications.
-- Revenues of $38.6 million from Network Tools increased 3% from $37.3
million in the prior year.
-- Net loss of $36.4 million was improved from $45.4 million in the prior
year.
-- Net income of $20.8 million on a non-GAAP basis was down $14.1 million
from $34.9 million in the prior year primarily due to an increase in
operating expenses of $13.1 million, or 11%, from the prior year,
approximately half of which was related to two acquisitions completed in
the fourth quarter of the prior fiscal year.
"While fiscal 2008 was a challenging year for us at the top line, it was
extremely gratifying to see us recover and set new revenue records for the
company in the last half of the year," said Jerry Rawls, Finisar's Chairman
and CEO. "Demand for our products for both 10-40 Gbps and shorter distance
LAN/SAN applications continues to be healthy during these uncertain
economic times. And with the announcement of our proposed merger with
Optium, we are extremely excited about the future potential for growth and
profitability."
CONFERENCE CALL
Finisar will discuss these financial statements and its current business
outlook during its regular quarterly conference call scheduled for today,
June 12, 2008 at 2:00 p.m. Pacific Time. To listen to the call you may
connect to the investor page of Finisar at www.finisar.com or dial
877-407-0890 (domestic) or 201-689-7827 (international) and enter passcode
284578.
A replay will be available approximately two days after the call for two
weeks. To access the replay, dial 877-660-6853 (domestic) or 201-612-7415
(international) and then, following the prompts, enter account number 2791
followed by conference ID number 284578. A Web archive will also be made
available approximately two days following call at www.finisar.com until
the next conference call to be held approximately 90 days from today.
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. 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 completion of Finisar's pending combination
with Optium Corporation ("Optium") and, if it is consummated, the operation
of the combined company; 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. Additional risks include the
potential impact of regulatory review or civil litigation arising from the
investigation of our historical option granting practices or the recent
filing of restated financial information. 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 reports as filed with the
Securities and Exchange Commission.
ABOUT FINISAR
Finisar Corporation (
Finisar Corporation
Consolidated Statements of Operations
Three
Months
Three Months Ended Twelve Months Ended Ended
-------------------- -------------------- ---------
April April April April January
30, 2008 30, 2007 30, 2008 30, 2007 27, 2008
--------- --------- --------- --------- ---------
(Unaudited, in thousands, except per share data)
Revenues
Optical subsystems
and components $ 111,378 $ 88,204 $ 401,625 $ 381,263 $ 102,957
Network test and
monitoring
systems 9,627 8,393 38,555 37,285 9,784
--------- --------- --------- --------- ---------
Total revenues 121,005 96,597 440,180 418,548 112,741
Cost of revenues 79,882 63,922 292,161 270,272 73,396
Amortization of
acquired developed
technology 1,314 1,466 6,501 6,002 1,729
--------- --------- --------- --------- ---------
Gross profit 39,809 31,209 141,518 142,274 37,616
Gross margin 32.9% 32.3% 32.2% 34.0% 33.4%
Operating expenses:
Research and
development 20,194 17,571 76,544 64,559 21,218
Sales and
marketing 10,280 8,781 40,006 36,122 10,492
General and
administrative 8,629 12,164 40,259 35,641 12,768
Acquired
in-process
research and
development - 5,770 - 5,770 -
Amortization of
purchased
intangibles 280 277 1,748 1,814 488
Impairment of
intangible
assets 4,784 - 4,784 - -
--------- --------- --------- --------- ---------
Total operating
expenses 44,167 44,563 163,341 143,906 44,966
--------- --------- --------- --------- ---------
Loss from operations (4,358) (13,354) (21,823) (1,632) (7,350)
Interest income 1,352 1,882 5,805 6,204 1,501
Interest expense (4,341) (4,152) (17,236) (16,044) (4,291)
Loss on debt
extinguishment - - - (31,606) -
Other income
(expense), net (560) 431 (298) (724) 310
--------- --------- --------- --------- ---------
Loss before income
taxes (7,907) (15,193) (33,552) (43,802) (9,830)
Provision for income
taxes 765 780 2,848 2,810 807
--------- --------- --------- --------- ---------
Loss before
cumulative effect (8,672) (15,973) (36,400) (46,612) (10,637)
Cumulative effect - - - (1,213) -
--------- --------- --------- --------- ---------
Net loss $ (8,672) $ (15,973) $ (36,400) $ (45,399) $ (10,637)
========= ========= ========= ========= =========
Net loss per share -
basic and diluted $ (0.03) $ (0.05) $ (0.12) $ (0.15) $ (0.03)
Shares used in
computing net loss
per share - basic
and diluted 308,786 308,623 308,680 307,804 308,663
Finisar Corporation
Consolidated Balance Sheets
(In thousands)
April 30, January October July 29, April 30,
2008 27, 2008 28, 2007 2007 2007
---------- ---------- ---------- ---------- ----------
(Unaudited) (Unaudited) (Unaudited)
Current assets:
Cash and cash
equivalents $ 79,442 $ 75,437 $ 46,249 $ 52,090 $ 56,106
Short-term
available-
for-sale
investments 29,125 38,096 59,768 59,910 56,511
Short-term
available-
for-sale
investments
- equity 2,801 - - - -
Restricted
investments,
short-term - - - 625 625
Accounts
receivable,
net 47,061 55,035 54,463 58,434 55,969
Accounts
receivable,
other 12,408 9,645 8,958 6,694 9,270
Inventories 82,554 83,220 78,557 77,351 77,670
Prepaid
expenses
and other 7,656 5,586 4,751 4,352 4,553
---------- ---------- ---------- ---------- ----------
Total
current
assets 261,047 267,019 252,746 259,456 260,704
Long-term
available-
for-sale
investments
- debt 7,887 8,872 8,932 9,074 11,079
Long-term
available-
for-sale
investments
- equity - 3,730 4,540 8,211 8,776
Property, plant
and improvements,
net 89,847 85,710 84,246 84,325 84,071
Purchased
technology, net 11,850 13,163 14,893 16,622 18,351
Other
intangible
assets, net 17,726 22,061 21,697 21,145 20,807
Goodwill 128,348 128,852 128,949 128,949 128,949
Minority
investments 13,250 11,250 11,250 11,250 11,250
Other assets 3,241 3,004 2,988 3,844 4,203
---------- ---------- ---------- ---------- ----------
Total
assets $ 533,196 $ 543,661 $ 530,241 $ 542,876 $ 548,190
========== ========== ========== ========== ==========
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Current
liabilities:
Accounts
payable $ 43,040 $ 38,044 $ 32,491 $ 34,795 $ 41,705
Accrued
compensation 14,397 14,970 10,475 12,977 10,550
Other
accrued
liabilities 23,054 23,593 15,932 15,287 12,590
Deferred
revenue 5,312 5,135 5,543 5,864 5,473
Current
portion of
other
long-term
liabilities 2,436 2,390 2,344 2,299 2,255
Convertible
notes 101,918 113,722 112,469 66,950 66,950
Non-cancelable
purchase
obligations 3,206 2,787 2,426 2,676 2,798
---------- ---------- ---------- ---------- ----------
Total
current
liabilities 193,363 200,641 181,680 140,848 142,321
Long-term
liabilities:
Convertible
notes 150,000 150,000 150,000 194,262 193,066
Other
long-term
liabilities 18,310 18,861 19,633 20,346 21,042
Deferred
income taxes 9,522 7,872 7,178 6,634 6,090
---------- ---------- ---------- ---------- ----------
Total long-
term
liabilities 177,832 176,733 176,811 221,242 220,198
Stockholders'
equity:
Common stock 309 309 309 309 309
Additional
paid-in
capital 1,540,241 1,538,048 1,534,718 1,532,068 1,529,322
Accumulated
other
comprehensive
income 12,973 10,780 8,936 10,852 11,162
Accumulated
deficit (1,391,522) (1,382,850) (1,372,213) (1,362,443) (1,355,122)
---------- ---------- ---------- ---------- ----------
Total
stockholders'
equity 162,001 166,287 171,750 180,786 185,671
---------- ---------- ---------- ---------- ----------
Total
liabilities
and
stockholders'
equity $ 533,196 $ 543,661 $ 530,241 $ 542,876 $ 548,190
========== ========== ========== ========== ==========
NON-GAAP FINANCIAL MEASURES
In addition to reporting financial results in accordance with 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. Management believes that tracking
non-GAAP gross profit and non-GAAP net income provides both 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 exclude the ongoing
impact of historical business decisions made in different business and
economic environments and 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 profits, 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);
-- Duplicative facility costs during facility move (non-recurring
charges);
-- Stock compensation expense (non-cash charges);
-- Acquisition related compensation costs (non-recurring cash charges
related to employee retention);
-- 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 net income, 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 G&A expense (non-recurring
cash charges related to the special investigation into our historical stock
option granting practices) and the cost of covering employee and employer
tax liabilities (non-recurring cash charges) arising from that
investigation recorded in each line of the income statement;
-- Amortization of purchased intangibles (non-cash charges related to
prior acquisitions);
-- Impairment charges associated with intangible assets (non-cash and non-
recurring);
-- Amortization of discount on convertible debt (non-cash charges);
-- Loss on debt extinguishment (non-recurring and non-cash charge);
-- 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);
-- Tax charges arising from timing difference related to asset purchases
(non-cash provision); and
-- Cumulative effect of change in accounting principle (non-recurring and
non-cash charges or income).
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
Twelve Months Months
Three Months Ended Ended Ended
------------------ ------------------ --------
April April April April January
30, 2008 30, 2007 30, 2008 30, 2007 27, 2008
-------- -------- -------- -------- --------
(Unaudited, in thousands, except per share data)
Reconciliation of GAAP
Gross Profit to non-GAAP
Gross Profit:
Gross profit per GAAP 39,809 31,209 141,518 142,274 37,616
Gross margin, GAAP 32.9% 32.3% 32.2% 34.0% 33.4%
Adjustments:
Cost of revenues
Change in excess and
obsolete inventory
reserve 3,021 2,570 9,375 8,841 1,587
Amortization of
acquired technology 1,314 1,466 6,501 6,002 1,729
Duplicate facility costs
during facility move 296 226 296 1,033 -
Stock compensation 771 640 3,091 3,517 895
Acquisition related
compensation 27 - 67 - 40
Costs related to options
investigation - (6) 1,084 143 1,084
Purchase accounting
adjustment for sale of
acquired inventory - 262 1,306 262 -
Reduction in force costs 9 - 346 - 145
-------- -------- -------- -------- --------
Total cost of revenue
adjustments 5,438 5,158 22,066 19,798 5,480
Gross profit, non-GAAP 45,247 36,367 163,584 162,072 43,096
Gross margin, non-GAAP 37.4% 37.6% 37.2% 38.7% 38.2%
Reconciliation of GAAP
net income (loss) to
non-GAAP net income
(loss):
Net loss per GAAP (8,672) (15,973) (36,400) (45,399) (10,637)
Total cost of revenue
adjustments 5,438 5,158 22,066 19,798 5,480
Research and development
Reduction in force costs 12 - 40 - -
Stock compensation 1,139 784 4,377 4,014 1,247
Acquisition related
compensation 499 - 1,247 - 748
Costs related to options
investigation - (6) 1,648 132 1,648
Sales and marketing
Reduction in force costs 87 - 170 90 49
Stock compensation 482 414 2,048 1,911 673
Acquisition related
compensation 85 - 213 - 128
Costs related to options
investigation - (6) 742 31 742
General and administrative
Reduction in force costs - - 6 12 -
Stock compensation 586 559 2,048 2,379 481
Acquistion related
compensation 110 - 274 164
Costs related to options
investigation 507 4,089 8,769 5,608 3,961
Amortization of purchased
intangibles 280 277 1,748 1,814 488
Acquired in-process R&D - 5,770 - 5,770 -
Impairment of intangible
assets 4,784 - 4,784 - -
Amortization of discount
on convertible debt 1,236 1,223 4,942 4,791 1,253
Loss on debt
extinguishment 74 - 74 31,606 -
Other expense, net
Gain on sale of assets (61) (580) (519) (309) (99)
Loss (gain) on minority
investments 1,355 - 1,149 237 (22)
Other misc income (650) - (977) - (327)
Provision for income tax
Timing difference
related to asset
purchases 588 544 2,370 3,640 694
Cumulative Effect
Cumulative effect of
change in accounting
principle - - - (1,213) -
-------- -------- -------- -------- --------
Total adjustments 16,551 18,226 57,219 80,311 17,308
-------- -------- -------- -------- --------
Net income, non-GAAP $ 7,879 $ 2,253 $ 20,819 $ 34,912 $ 6,671
======== ======== ======== ======== ========
Net income, non-GAAP per
share - basic $ 0.03 $ 0.01 $ 0.07 $ 0.11 $ 0.02
Net income, non-GAAP per
share - diluted $ 0.03 $ 0.01 $ 0.07 $ 0.11 $ 0.02
Shares used in computing
non-GAAP net income per
share - basic 308,786 308,623 308,680 307,804 308,663
Shares used in computing
non-GAAP net income per
share - diluted 310,129 327,108 318,949 327,300 312,097
Non-GAAP EBITDA
Net income, non-GAAP $ 7,879 $ 2,253 $ 20,819 $ 34,912 $ 6,671
Depreciation expense 6,257 5,760 24,121 23,816 6,180
Amortization expense 640 544 2,350 1,846 610
Interest expense 1,752 1,047 6,488 5,048 1,537
Income tax expense 177 236 478 (830) 113
-------- -------- -------- -------- --------
Non-GAAP EBITDA $ 16,705 $ 9,840 $ 54,256 $ 64,792 $ 15,111
======== ======== ======== ======== ========
Contact Information: Contact: Steve Workman Chief Financial Officer 408-548-1000 Investor Relations 408-542-5050 investor.relations@Finisar.com