Science & Technology
Science and Technology
Science and Technology
Fri, June 11, 2010
Thu, June 10, 2010
Finisar Corporation Announces Record Fourth Quarter and Fiscal 2010 Financial Results
SUNNYVALE, CA--(Marketwire - June 10, 2010) - Finisar Corporation (
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 (
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 ======= ======== ======== ========= =======
