Finisar Announces Results For Fourth Quarter

Finisar Corporation a technology leader in gigabit fiber optic solutions for high-speed data networks, reported its financial results for its fourth quarter and fiscal year ended April 30, 2004.

Finisar Corporation a technology leader in gigabit fiber optic solutions for high-speed data networks, reported its financial results for its fourth quarter and fiscal year ended April 30, 2004.

Total revenues in the fourth quarter of fiscal 2004 of $57.0 million were up 23% on a sequential basis from $46.4 million in the third quarter and 43% from $39.8 million in the fourth quarter of the prior year.

Total revenues from the sale of optical subsystems of $48.7 million in the fourth quarter were up 19% on a sequential basis from $40.7 million in the third quarter and 46% from $33.4 million in the fourth quarter of the prior year.

Sales of network test and monitoring systems of $8.3 million in the fourth quarter were up 47% on a sequential basis from $5.7 million in the third quarter and 31% from $6.4 million in the fourth quarter of the prior year.

Revenues in the fourth quarter included approximately $6.7 million related to inclusion of two months of operations of the VCSEL Fiber Optics Business acquired from Honeywell on March 2, 2004.

Excluding the impact of this acquisition, total revenues were up 8% on a sequential basis from the third quarter and 26% from the fourth quarter of the prior year.

Total revenues for fiscal 2004 of $185.6 million were up 11% from $166.5 million in the prior year.

Revenues from the sale of optical subsystems of $160.0 million for fiscal 2004 were up 17% from $136.8 million in the prior year.

Revenues from the sale of network test and monitoring systems of $25.6 million for fiscal 2004 were down 14% from $29.6 million in the prior year.

"Our LAN/SAN revenues were particularly strong this past quarter, up 15% sequentially excluding the additional revenues from the acquisition of Honeywell's VCSEL Business Unit," said Finisar President and CEO, Jerry Rawls.

"We were also pleased to see improved revenues from our Network Tools business in the past quarter thanks to an enthusiastic reception to our new XGig Analyzer for 4Gb/s Fibre Channel and our Netwisdom monitoring and analysis solution for storage area networks." "While the higher gross margins from Network Tools were offset by higher sales of optical products for LAN/SAN applications, we believe we will see an improvement in gross margins in our upcoming first quarter," added Rawls.

"This expected improvement is the result of supplying more of our own internal optical component needs as well as lower production costs resulting from a number of cost reduction efforts all of which should improve the underlying profitability of our optics product line." Operating Results The Company reported a net loss of $24.5 million, or $0.11 per share, for the fourth quarter of fiscal 2004, compared to a net loss of $15.5 million, or $0.07 per share, in the third quarter and a net loss of $26.2 million, or $0.13 per share, in the fourth quarter of fiscal 2003.

Included in the results for the fourth quarter was a charge of $6.2 million for acquired in-process research and development associated with the acquisition of the Honeywell VCSEL Business Unit.

For the full fiscal year, the Company reported a net loss of $113.8 million, or $0.53 per share, compared to a net loss of $159.2 million, or $0.82 per share, in the prior year before the accumulative effect of an accounting change.

The Company reported gross profit of $9.4 million, or 16.5% of revenues, during the fourth quarter of fiscal 2004, compared to $9.0 million, or 19.4% of revenues, in the third quarter and $5.3 million, or 13.3% of revenues, in the fourth quarter of the prior year.

For the total year, gross profit was $22.8 million, or 12.3% of revenues, compared to $14.0 million, or 8.4% of revenues, in the prior year.

Amortization of acquired developed technology, amortization of purchased intangibles, purchased research and development in-process, other acquisition costs and the cumulative effect of a change in accounting related to the adoption of SFAS 142 consist of merger-related costs associated with several acquisitions completed during fiscal 2001 through 2004.

Non-Gaap Financial Results The Company provides non-GAAP financial measures to complement its consolidated financial statements presented in accordance with GAAP.

These non-GAAP financial measures are intended to supplement the user's overall understanding of the Company's current financial performance and its prospects for the future.

Specifically, the Company believes the non-GAAP results provide useful information to both management and investors by identifying certain expenses, gains and losses that, when excluded from the GAAP results, may provide additional understanding of the Company's core operating results or business performance.

However, these non-GAAP financial measures are not intended to supersede or replace the Company's GAAP results.

A detailed reconciliation of the non-GAAP results to the GAAP results is provided in the "Non-GAAP Condensed Consolidated Statements of Operations" schedules below.

Operating results reported on a non-GAAP basis exclude a number of non-cash and cash charges related to deferred compensation, acquisitions, minority investments, inventory obsolescence, a discount associated with the Company's convertible debt offering in October 2001 and inducements associated with the conversion of a portion of the notes, the loss realized upon the closure of the Company's Demeter Technologies subsidiary and its German facility and the accelerated depreciation on certain assets abandoned in connection with those closures, along with other restructuring charges, and a non-cash charge representing research and development in-process related to the acquisition of Honeywell's VCSEL Business Unit.

The Company reported a non-GAAP gross margin of 21.9% in the fourth quarter of fiscal 2004, compared to 22.1% in the prior quarter and 27.1% in the fourth quarter of the prior year.

Non-GAAP gross margin was negatively impacted by a shift in product mix toward a lower percentage of revenues from the sale of our network test and monitoring systems which have a higher gross margin than revenues from optical subsystems and a higher percentage of revenues from lower margin LAN/SAN products as compared to the prior periods.

The Company reported a non-GAAP pretax loss of $14.2 million in the fourth quarter compared to $13.0 million in the prior quarter and $12.4 million in the fourth quarter of the prior year.

Because the Company does not intend to recognize any further tax benefits until it returns to profitability, the non-GAAP net loss for the fourth quarter totaled $14.2 million, or $0.06 per share, compared to $13.1 million, or $0.06 per share, in the third quarter and $12.5 million, or $0.06 per share, in the fourth quarter of fiscal 2003.

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