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

(Marketwire Via Acquire Media NewsEdge) SUNNYVALE, CA -- (Marketwire) -- 06/29/12 -- 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.

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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 FINISARFinisar 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 Three Months Ended Twelve Months Ended Ended -------------------- -------------------- --------- April 30, April 30, April 30, April 30, January 2012 2011 2012 2011 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 ========= ========= ========= ========= ========= 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 Source: Finisar

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