SOURCE: Finisar

Finisar

June 29, 2012 17:17 ET

Finisar Corporation Files Form 10-K Report With Final Fiscal 2012 Financial Statements

SUNNYVALE, CA--(Marketwire - Jun 29, 2012) - Finisar Corporation (NASDAQ: FNSR), a global technology leader for subsystems and components for fiber optic communications, today announced it has filed its annual report on Form 10-K for its fiscal year ended April 30, 2012 with the Securities and Exchange Commission. The Form 10-K includes the Company's final audited financial statements for the fiscal year ended April 30, 2012.

The final audited financial statements include a gain of $4.9 million related to the remeasurement of the carrying value of a cash liability under a contingent consideration arrangement associated with the Company's acquisition of Ignis ASA in May 2011. This gain was not included in the Company's preliminary unaudited financial results for the fourth quarter and fiscal year ended April 30, 2012, which the Company announced in a press release dated June 11, 2012.

The contingent consideration arrangement requires the release of up to approximately $14.3 million from a previously established escrow account to the former shareholders of one of Ignis' subsidiaries if during calendar years 2011 and 2012 the subsidiary achieves specified levels of revenues, revenue growth, EBITDA and cash flow and successfully launches a new product. The acquisition-date fair value of the contingent consideration arrangement was $13.6 million. The Company estimated the fair value of the contingent consideration using a probability-weighted discounted cash flow model, based on an assumption of 100% probability of achieving these milestones. In the fourth quarter of fiscal 2012, $9.0 million was released from the escrow to such former shareholders based upon achievement of the calendar year 2011 milestones. The Company now believes that the probability of achieving the calendar year 2012 milestones is zero. Accordingly, the Company has remeasured the fair value of the remaining contingent consideration liability as of April 30, 2012 and recorded a gain of $4.9 million as other income in the consolidated statement of operations for the year ended April 30, 2012. The net after tax effect of this gain was to increase the Company's net income from $13.2 million, or $.14 per share, as previously reported, to $18.0 million, or $.20 per share, for the fourth quarter ended April 30, 2012, and from $38.1 million, or $.42 per share, as previously reported, to $43.0 million, or $.47 per share, for the fiscal year ended April 30, 2012. There still remains $5.0 million of cash in the escrow account, which is classified as prepaid expenses in the consolidated balance sheet as of April 30, 2012.

In addition to reporting financial results in accordance with U.S. generally accepted accounting principles, or GAAP, the June 11, 2012 press release reported 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 the Company's core operating results. The Company considers the $4.9 million gain on reversal of contingent consideration liability described above to be an infrequent item outside the Company's core operating results. Accordingly, the Company's non-GAAP measures for the fourth quarter and fiscal year were unaffected by this gain. A revised reconciliation of these non-GAAP measures to the comparable GAAP results contained in the Form 10-K is provided under the heading "Finisar Non-GAAP Financial Measures" below.

ABOUT FINISAR
Finisar Corporation (NASDAQ: FNSR) is a global technology leader for fiber optic subsystems and components that enable high-speed voice, video and data communications for telecommunications, 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 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 certain 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 in this release, 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);
  • Stock-based compensation expense (non-cash charges);
  • The cost of covering employee and employer tax liabilities arising from the special investigation into our historical stock option granting practices (non-recurring cash charges);
  • Acquisition method accounting adjustment for sale of acquired inventory (non-cash charges);
  • Expense related to recent flooding in Thailand (non-recurring charges); and
  • Reduction in force costs (non-recurring cash charges).

In calculating non-GAAP operating income in this release, 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:

  • Gain or loss on litigation settlements and resolutions and related costs (non-recurring cash charges or benefits);
  • Shareholder class action and derivative litigation costs (non-recurring cash expenses associated with the derivative litigation related to our historical stock option granting practices and related to the class action and derivative litigation related to our March 8, 2011 earnings announcement);
  • Acquisition related costs (non-recurring cash charges);
  • Amortization of purchased intangibles (non-cash charges); and
  • Restructuring costs and recoveries (non-recurring cash charges).

In calculating non-GAAP income from continuing operations and non-GAAP income from continuing operations per share in this release, we have also excluded the following items in applicable periods:

  • Interest income on legal settlements and resolutions (non-recurring benefits);
  • Amortization of discount on convertible debt and imputed interest expense (non-cash charges);
  • Imputed interest expense related to restructuring (amortization of imputed interest expense associated with previously incurred restructuring costs);
  • 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);
  • Dollar denominated foreign exchange transaction losses (gains) (non-cash charges);
  • Gain on fair value remeasurement of contingent consideration liability (non-recurring benefits);
  • Other miscellaneous expenses (income) (non-recurring charges or benefits);
  • Loss related to minority and equity method investments (non-cash charges);
  • Debt extinguishment loss (non-recurring charges);
  • Fair value re-measurement of equity investment (non-cash gain from re-measurement of value of prior investment in an investee); and
  • Differences between cash payable for income taxes and the provision for income taxes in accordance with GAAP, less discrete items.

In calculating non-GAAP income (loss) per share in this release, we have included the shares issuable upon conversion of our outstanding convertible notes and excluded the interest expenses associated with such notes in such periods where such treatment is dilutive to non-GAAP income (loss) per share.

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  
(in thousands, except per share data)  
                               
    Three Months Ended     Twelve Months Ended     Three Months Ended  
    April 30, 2012     April 30, 2011     April 30, 2012     April 30, 2011     January 29, 2012  
    (Unaudited)  
GAAP to non-GAAP reconciliation of gross profit:                                        
Gross profit - GAAP   $ 65,480     $ 74,909     $ 273,344     $ 312,272     $ 71,102  
Gross margin - GAAP     27.3 %     31.6 %     28.7 %     32.9 %     29.3 %
Adjustments:                                        
Cost of revenues                                        
  Change in excess and obsolete inventory reserve     5,027       3,737       10,370       9,306       1,732  
  Amortization of acquired technology     1,515       1,071       6,311       4,685       1,637  
  Stock compensation     1,139       1,388       6,281       4,797       1,596  
  Payroll taxes related to options investigation     -       -       -       (83 )     -  
  Acquisition method accounting adjustment for sale of acquired inventory     963       -       4,998       11       952  
  Flood-related expense     1,222       -       1,222       -       -  
  Reduction in force costs     62       7       906       50       243  
    Total cost of revenue adjustments     9,928       6,203       30,088       18,766       6,160  
Gross profit - non-GAAP     75,408       81,112       303,432       331,038       77,262  
Gross margin - non-GAAP     31.4 %     34.2 %     31.9 %     34.9 %     31.8 %
                                         
GAAP to non-GAAP reconciliation of operating income:                                        
Operating income - GAAP     12,111       21,265       39,326       111,716       11,308  
Operating margin - GAAP     5.0 %     9.0 %     4.1 %     11.8 %     4.7 %
Adjustments:                                        
Total cost of revenue adjustments     9,928       6,203       30,088       18,766       6,160  
Research and development                                        
  Reduction in force costs     35       21       801       51       693  
  Stock compensation     2,288       2,162       9,123       6,509       2,200  
  Payroll taxes related to options investigation     -       -       -       (118 )     -  
Sales and marketing                                        
  Reduction in force costs     36       46       36       270       -  
  Stock compensation     727       653       3,105       2,168       747  
  Payroll taxes related to options investigation     -       -       -       (42 )     -  
General and administrative                                        
  Reduction in force costs     41       15       1,055       136       51  
  Stock compensation     1,768       1,421       7,467       5,057       1,746  
  Payroll taxes related to options investigation     -       -       -       (73 )     -  
  Acquisition related costs     -       995       1,602       995       304  
  Litigation settlements and resolutions and related costs     (7,422 )     (94 )     (7,515 )     778       (185 )
  Shareholder class action and derivative litigation costs     447       -       1,072       -       (10 )
Amortization of purchased intangibles     897       382       3,494       1,531       959  
Restructuring recoveries     -       -       (322 )     -       -  
    Total cost of revenue and operating expense adjustments     8,745       11,804       50,006       36,028       12,665  
Operating income - non-GAAP     20,856       33,069       89,332       147,744       23,973  
Operating margin - non-GAAP     8.7 %     14.0 %     9.4 %     15.6 %     9.9 %
                                         
GAAP to non-GAAP reconciliation of income from continuing operations:                                        
Income from continuing operations - GAAP     18,015       16,352       42,993       88,379       8,909  
Total cost of revenue and operating expense adjustments     8,745       11,804       50,006       36,028       12,665  
Interest income from legal settlement     (434 )     -       (434 )     -       -  
Non-cash imputed interest expenses on convertible debt     -       -       -       742       -  
Imputed interest related to restructuring     133       73       805       147       206  
Other income (expense), net                                        
  Loss (gain) on sale of assets     3       (144 )     (4 )     17       (229 )
  Loss related to minority and equity method investments     -       413       619       413       -  
  Gain on fair value remeasurement of contingent consideration liability     (4,853 )     -       (4,853 )     -       -  
  Other miscellaneous expenses (income)     (424 )     -       177       (61 )     351  
  Foreign exchange transaction loss (gain)     506       574       226       2,393       362  
  Debt extinguishment loss     -       2,652       419       9,218       -  
  Gain of fair value measurement of minority equity-method investment     (3 )     -       (5,432 )     -       -  
Provision for income taxes                                        
  Income tax provision adjustments     (1,454 )     389       (1,345 )     1,472       (386 )
Total adjustments     2,219       15,761       40,184       50,369       12,969  
Income from continuing operations - non-GAAP     20,234       32,113       83,177       138,748       21,878  
                                         
GAAP to non-GAAP reconciliation of loss from discontinued operations:                                        
Loss from discontinued operations - GAAP     -       -       -       (284 )     -  
Loss from discontinued operations - non-GAAP     -       -       -       (284 )     -  
                                         
GAAP to non-GAAP reconciliation of net income:                                        
Net income - GAAP     18,015       16,352       42,993       88,095       8,909  
  Total adjustments from continuing operations     2,219       15,761       40,184       50,369       12,969  
  Total adjustments from discontinued operations     -       -       -       -       -  
Total adjustments     2,219       15,761       40,184       50,369       12,969  
Net income, non-GAAP   $ 20,234     $ 32,113     $ 83,177     $ 138,464     $ 21,878  
                                         
Non-GAAP income from continuing operations   $ 20,234     $ 32,113     $ 83,177     $ 138,748     $ 21,878  
Add: interest expense for dilutive convertible notes     539       560       2,156       4,595       539  
Non-GAAP adjusted income from continuing operations   $ 20,773     $ 32,673     $ 85,333     $ 143,343     $ 22,417  
                                         
Non-GAAP income per share from continuing operations - basic   $ 0.22     $ 0.36     $ 0.92     $ 1.72     $ 0.24  
Non-GAAP income per share from continuing operations - diluted   $ 0.21     $ 0.33     $ 0.87     $ 1.55     $ 0.23  
                                         
Shares used in computing non-GAAP net income per share from continuing operations - basic     91,349       89,584       90,823       80,582       91,001  
Shares used in computing non-GAAP net income per share from continuing operations - diluted     98,528       97,837       97,935       92,715       97,781  
                                         
Non-GAAP EBITDA - Continuing operations                                        
Non-GAAP income from continuing operations   $ 20,234     $ 32,113     $ 83,177     $ 138,748     $ 21,878  
Depreciation expense     12,583       9,922       45,561       35,694       11,388  
Amortization     227       208       851       1,050       208  
Interest expense     444       504       2,272       4,946       505  
Income tax expense     667       242       3,350       2,976       1,261  
Non-GAAP EBITDA - continuing operations   $ 34,155     $ 42,989     $ 135,211     $ 183,414     $ 35,240  
                                         
Non-GAAP EBITDA - Discontinued operations                                        
Non-GAAP income from discontinuing operations     -       -       -       (284 )     -  
Depreciation expense     -       -       -       -       -  
Non-GAAP EBITDA - Discontinued operations   $ -     $ -     $ -     $ (284 )   $ -  
                                         
Total Non-GAAP EBITDA   $ 34,155     $ 42,989     $ 135,211     $ 183,130     $ 35,240  

Contact Information

  • Investor Contact:
    Kurt Adzema
    Chief Financial Officer
    408-542-5050
    or
    Investor.relations@finisar.com

    Press contact:
    Victoria McDonald
    Sr. Manager, Corporate Communications
    408-542-4261