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Finisar Announces Fourth Quarter and Fiscal 2013 Financial Results

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Finisar Corporation (NASDAQ: FNSR), a global technology leader for subsystems and components for fiber optic communications, today announced financial results for its fourth quarter and fiscal year ended April 28, 2013.

COMMENTARY

"I am pleased to report fiscal fourth quarter revenues of $243.4 million, which is $5.1 million, or 2.1%, greater than the prior quarter. Our growth in revenues came primarily from sales of 10G and 100G Ethernet transceivers and transponders for datacom applications. Our favorable product mix in the quarter enabled us to achieve gross margin and earnings per diluted share that exceeded our guidance range," said Jerry Rawls, Finisar's executive Chairman of the Board.

"During the quarter, we continued to invest significantly in technology and product development and made substantial progress on a number of new products for our datacom and telecom products lines, including our next generation 100G CFP2 transceiver, 12x25G optical engine and new generation dual wavelength selective switch product family," said Eitan Gertel, Finisar's Chief Executive Officer.

FINANCIAL HIGHLIGHTS - FOURTH QUARTER ENDED April 28, 2013

Summary GAAP Results Fourth Third Quarter Quarter Ended Ended April 28, 2013 Jan 27, 2013 ----------------- ----------------- (in thousands, except per share amounts)

Revenues $ 243,417 $ 238,351 Gross margin 27.7% 28.5% Operating expenses $ 66,941 $ 68,841 Operating income (loss) $ 385 $ (797) Operating margin 0.2% (0.3)% Net income (loss) $ 3,879 $ (3,407) Income(loss) per share-basic $ 0.04 $ (0.04) Income(loss) per share-diluted $ 0.04 $ (0.04)

Basic shares 93,567 93,097 Diluted shares 96,192 93,097

Summary Non-GAAP Results (a) Fourth Third Quarter Quarter Ended Ended April 28, 2013 Jan 27, 2013 ----------------- ----------------- (in thousands, except per share amounts)

Revenues $ 243,417 $ 238,351 Gross margin 32.2% 30.7% Operating expenses $ 58,295 $ 55,816 Operating income $ 20,032 $ 17,377 Operating margin 8.2% 7.3% Net income 19,789 $ 16,390 Income per share-basic $ 0.21 $ 0.18 Income per share-diluted $ 0.20 $ 0.17

Basic shares 93,567 93,097 Diluted shares 99,941 99,094

(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.

Financial Statement Highlights for the fourth quarter of fiscal 2013:

Revenues increased to $243.4 million, up $5.1 million, or 2.1%, from $238.4 million in the preceding quarter as continued strength in sales of datacom products was partially offset by lower telecom product revenue primarily as the result of sluggish carrier capital expenditure levels and a full three month impact of annual price reductions for telecom products most of which, as in prior years, went into effect in January.

Compared to the preceding quarter, the sale of products for datacom applications increased by $16.3 million, or 11.0%, and the sale of products for telecom applications decreased by $11.2 million, or (12.3)%.

Gross margin decreased to 27.7% on a GAAP basis from 28.5% in the preceding quarter, primarily as the result of a charge for impairment of certain purchased intangibles related to acquired developed technology and other long-lived assets.

Non-GAAP gross margin increased to 32.2% from 30.7% in the preceding quarter, primarily as the result of favorable product mix.

GAAP operating income increased $1.2 million to $0.4 million, or 0.2% of revenues, compared to $(0.8) million, or (0.3)% of revenues in the preceding quarter, primarily as the result of a gain on the fair value remeasurement of contingent consideration liability.

Non-GAAP operating income increased $2.7 million to $20.0 million, or 8.2% of revenues, compared to $17.4 million, or 7.3% of revenues, in the preceding quarter, primarily as the result of higher non-GAAP gross margins.

Cash and cash equivalents totaled $289.1 million at the end of the fourth quarter, compared to $265.5 million at the end of the preceding quarter.

FINANCIAL HIGHLIGHTS - FISCAL YEAR ENDED APRIL 28, 2013

Summary GAAP Results Fiscal Year Fiscal Year Ended Ended April 28, 2013 April 30, 2012 ----------------- ----------------- (in thousands, except per share amounts)

Revenues $ 934,335 $ 952,579 Gross margin 27.5% 28.7% Operating expenses $ 262,596 $ 229,165 Operating income (loss) $ (5,555) $ 44,179 Operating margin (0.6)% 4.6% Net income (loss) $ (5,454) $ 42,993 Income (loss) per share-basic $ (0.06) $ 0.47 Income (loss) per share-diluted $ (0.06) $ 0.46

Basic shares 92,860 90,823 Diluted shares 92,860 94,186

Summary Non-GAAP Results (a) Fiscal Year Fiscal Year Ended Ended April 28, 2013 April 30, 2012 ----------------- ----------------- (in thousands, except per share amounts)

Revenues $ 934,335 $ 952,579 Gross margin 30.9% 31.9% Operating expenses $ 223,667 $ 214,100 Operating income $ 65,247 $ 89,332 Operating margin 7.0% 9.4% Net income $ 61,255 $ 83,177 Income per share-basic $ 0.66 $ 0.92 Income per share-diluted $ 0.64 $ 0.87

Basic shares 92,860 90,823 Diluted shares 99,284 97,935

Financial Statement Highlights for fiscal year 2013:

Revenues decreased to $934.3 million, down $18.2 million, or (1.9)%, from $952.6 million in the preceding year.

Compared to the preceding year, the sale of products for datacom applications increased by $53.6 million, or 10.0%, primarily from sales of 10G and 100G transceivers and transponders and the sale of products for telecom applications decreased by $71.8 million, or (17.3)%, primarily as the result of sluggish carrier capital expenditure levels.

Gross margin decreased to 27.5% on a GAAP basis and 30.9% on a non-GAAP basis from 28.7% and 31.9%, respectively, in the preceding year, primarily as the result of a decline in average selling prices.

Non-GAAP operating income decreased $24.1 million to $65.2 million, or 7.0% of revenues, from $89.3 million, or 9.4% of revenues, primarily as the result of lower gross margin and an increase in operating expenses, due to increases in employee related expenses, costs of materials associated with new product development, and the consolidation of financial results of Red-C Optical Networks, which was acquired in fiscal 2013.

GAAP operating income (loss) decreased $49.7 million to $(5.6) million, or (0.6)% of revenues, from $44.2 million or 4.6% of revenues primarily as the result of the factors affecting Non-GAAP operating income and in addition the impairment of acquired developed technology and other long-lived assets.

OUTLOOK

The Company indicated that it currently expects revenues for the first quarter of fiscal 2014 to be in the range of $245 to $260 million; GAAP operating margin to in the range of approximately 5.0% to 6.5%; non-GAAP operating margin to be in the range of approximately 9.0% to 10.5% and non-GAAP earnings per diluted share to be in the range of approximately $0.22 to $0.26. The Company also noted that during the fourth fiscal quarter of 2013 and during the first week of the first quarter of fiscal 2014, the Company completed the divestment of two non-strategic subsidiaries of Ignis AS, which was acquired by Finisar in May 2012. These divested businesses accounted for approximately $5 million in revenues during the fourth quarter of fiscal 2013.

CONFERENCE CALL

Finisar will discuss its financial results for the fourth quarter and current business outlook during its regular quarterly conference call scheduled for Wednesday, June 19, 2013, at 2:00 pm PDT (5:00 pm EDT). To listen to the call you may connect through the Finisar investor relations page at http://investor.finisar.com/ or dial 1-888- 438-5491 (domestic) or (719) 325-2458 (international) and enter conference ID 8003705.

An audio replay will be available for two weeks following the call by dialing 1-888-203-1112 (domestic) or (719) 457-0820 and then following the prompts: enter conference ID 8003705 and provide your name, affiliation, and contact number. 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.

 

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