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Finisar Announces Second Fiscal Quarter Financial Results




SUNNYVALE, CA — (Marketwire) — 12/05/12 — Finisar Corporation (NASDAQ: FNSR), a global technology leader for subsystems and components for fiber optic communications, today announced financial results for its second fiscal quarter ended October 28, 2012.

“I am pleased to report fiscal second quarter revenues of $232.0 million, which is $11.5 million, or 5.2%, greater than the prior quarter. Our growth in revenues came primarily from sales of tunable XFP transceivers and wavelength selective switches, including ROADM line cards,” said Jerry Rawls, Finisar-s executive Chairman of the Board. “In addition, operating income increased at a faster rate than revenues because we were able to hold operating expenses relatively flat. This was accomplished in spite of the impact of a full quarter of operating expenses from operation of our RED-C subsidiary, which we acquired during the first quarter.”

“During the quarter, we continued to invest significantly in technology and product development and made substantial progress on a number of new products including tunable SFP+ transceivers, 100G coherent transponders, and next generation 100G client CFP and CFP2 transponders. We expect these new products to drive our future revenue growth and market share expansion in calendar 2013 and beyond,” said Eitan Gertel, Finisar-s Chief Executive Officer.

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(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.

Revenues increased to $232.0 million, an increase of $11.5 million, or 5.2%, from $220.5 million in the preceding quarter, primarily driven by growth in revenues from tunable XFP transceivers and wavelength selective switches, including ROADM line cards.

Compared to the preceding quarter, the sale of products for telecom applications increased by $11.1 million, or 13.7%, and the sale of products for datacom applications increased by $0.4 million, or 0.3%.

Gross margin increased to 27.5% on a GAAP basis and 30.5% on a non-GAAP basis, from 26.2% and 30.3%, respectively, in the preceding quarter, primarily as the result of higher revenue levels.

GAAP operating income (loss) increased $5.3 million to $54,000, or 0.0 % of revenues, compared to an operating loss of $(5.2) million, or (2.4)% of revenues, in the preceding quarter.

Non-GAAP operating income increased $3.8 million to $15.8 million, or 6.8% of revenues, compared to $12.0 million, or 5.4% of revenues, in the preceding quarter as the Company was able to hold operating expenses relatively flat, in spite of the impact of a full quarter of operating expenses from the operation of the Company-s RED-C subsidiary which we acquired during the first quarter.

Non-GAAP EBITDA increased $3.9 million to $28.7 million, or 12.4% of revenues, compared to $24.9 million, or 11.3% of revenues, in the preceding quarter.

Cash and cash equivalents totaled $262.4 million at the end of the second quarter, compared to $220.5 million at the end of the preceding quarter.

At the end of the second quarter, Finisar had approximately $40.0 million in principal amount of convertible notes outstanding with a conversion price of $10.675 per share.

The Company currently expects revenues for the third quarter of fiscal 2013 to be in the range of $230 to $245 million; GAAP operating margin to in the range of approximately 0.0% to 1.5%; non-GAAP operating margin to be in the range of approximately 6.5% to 8.0%; and non-GAAP earnings per diluted share to be in the range of approximately $0.14 to $0.18.

Finisar will discuss its financial results for the second quarter and current business outlook during its regular quarterly conference call scheduled for Wednesday, December 5, 2012, at 2:00 pm PST (5:00 pm EST). To listen to the call you may connect through the Finisar investor relations page at or dial 1-888-516-2377 (domestic) or (719) 457-2637 (international) and enter conference ID 7734918.

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 7734918 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.

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; challenges related to the integration of the recently completed RED-C acquisition; 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 June 29, 2012) and quarterly SEC filings.

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 .

The following financial tables are presented in accordance with GAAP.

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);

Acquisition method accounting adjustment for sale of acquired inventory (non-cash charges);

Expense related to recent flooding in Thailand (non-recurring charges);

Reduction in force costs (non-recurring cash charges); and

Acquisition related retention payments (non-recurring 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 charges and benefits).

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

Imputed interest related to restructuring (non-cash charges);

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);

Loss related to minority and equity method investments (non-cash charges);

Dollar denominated foreign exchange transaction losses (gains) (non-cash charges or benefits);

Other miscellaneous expenses (income) (non-recurring charges or benefits);

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 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:

Kurt Adzema
Chief Financial Officer
408-542-5050
or

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





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