The company achieved revenues of $228.2 million for its first fiscal quarter 2012. This was a sequential decline in revenues over the last quarter, which was primarily driven by continued decrease in demand from telecom customers, particularly Chinese OEMs.

Finisar Corporation, a global provider of subsystems and components for fibre optics communications, has announced financial results for its first quarter of fiscal 2012 ended July 31, 2011.



"In our just completed fiscal first quarter, our revenues were $228.2 million, 9.8% greater than the prior year period but 3.7% less than the preceding quarter. The sequential decline in revenues was primarily driven by continued softness in demand from our telecom customers, particularly Chinese OEMs. We achieved a non-GAAP gross margin of 32.1%, exceeding our prior guidance of 30.7% to 31.7%. This resulted from lower than expected manufacturing costs. Our non-GAAP earnings per diluted share were $0.21, exceeding our prior guidance of $0.16 to $0.20, as our operating expenses were also lower than expected," said Jerry Rawls, Finisar's executive Chairman of the Board.

"During the first quarter we continued to invest in our new product development programs, including our tunable XFP transceivers, 40Gbps and 100Gbps products, 16Gbps fibre channel transceivers and our edge or access ROADMs. We are currently qualified at multiple OEM customers for our tunable XFP transceiver and are in qualification with more than 15 additional customers,” said Eitan Gertel, Finisar's Chief Executive Officer.

“We expect production of this product to start to ramp during the second quarter of fiscal 2012. In addition, on June 29, 2011, we successfully closed our previously announced cash tender offer for the remaining outstanding shares of Ignis ASA and now hold 100% of the outstanding shares of Ignis," he

 

Highlights for the first quarter of fiscal 2012 under GAAP

Revenues increased to $228.2 million, up $20.3 million, or 9.8%, from $207.9 million in the first quarter of the prior year. First quarter revenues included approximately $7.0 million from applying consolidation accounting for Finisar's ownership interest in Ignis from May 18, 2011, the date Finisar acquired a controlling interest in Ignis, through June 30, 2011, the end of Ignis's fiscal quarter.

Compared to the first quarter of the prior year, the sale of LAN/SAN products increased by $15.6 million, or 19.7%, the sale of metro/telecom products (including WSS/ROADM line cards) increased by $5.3 million, or 4.2%, and the sale of products for analogue and cable television (CATV) applications decreased by $500,000, or (11.8)%.

Compared to the first quarter of the previous year, the sale of 10 Gbps or faster products increased by $16.7 million, or 17.8%, the sale of less than 10 Gbps products increased by $16.6 million, or 21.0%, the sale of WSS/ROADM line card products decreased by $ 12.5 million, or (40.9)%  

Gross margin decreased to 29.1% of revenues from 34.1% in the first quarter of the previous year.

Operating income decreased $16.7 million to $7.1 million, or 3.1% of revenues, compared to $23.7 million, or 11.4% of revenues, in the first quarter of the previous year.

 Income from continuing operations was $10.1 million, or $0.11 per diluted share, compared to $19.4 million, or $0.24 per diluted share, in the first quarter of the prior year.

Cash and cash equivalents totalled $238.1 million at the end of the first quarter compared to $314.8 million at the end of the preceding quarter. Excluding the impact of the uses of cash described below with respect to the Ignis acquisition, repayment of debt, and payout of previously accrued bonus amounts, cash would have increased $15.2 million.

On May 18, 2011, the voluntary tender offer launched on April 7, 2011 for the shares of Ignis, closed with Finisar acquiring approximately 38.1 million additional shares of Ignis, representing approximately 48% of outstanding Ignis shares. These shares, combined with the 25.7 million shares held by Finisar before the offer, brought Finisar's total ownership to approximately 81% of outstanding Ignis shares.

Finisar subsequently launched a mandatory tender offer for the remaining shares of Ignis not owned by Finisar at a purchase price of NOK 8 per share. Upon the settlement on June 29, 2011, Finisar acquired additional shares to bring its share ownership to 97.3% and subsequently acquired the remaining shares through the compulsory transfer provisions of Norwegian law.

The total cost for the acquisition of the Ignis shares during the quarter was $76.7 million. Finisar also repaid on behalf of Ignis debt equivalent to approximately $8.2 million during the quarter.

During the first quarter, accrued compensation expense declined approximately $7.0 million primarily as the result of the pay out of employee bonuses previously accrued during fiscal 2011. Days sales outstanding were 65 days, the same as the prior quarter. Inventory turns decreased to 3.2 compared to 3.4 in the preceding quarter.Capital expenditures were $16.3 million compared to $19.4 million in the preceding quarter.

Under Finisar's $70.0 million secured credit facility with Wells Fargo Foothill, LLC, no borrowings were outstanding and $66.6 million was available to borrow at the end of the quarter.

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

At the end of the quarter, Ignis also had debt that remains outstanding equivalent to approximately $9.9 million, which is reflected in Finisar's consolidated balance sheet.

Outlook

Finisar will apply consolidation accounting for its 100% ownership interest in Ignis for the full second quarter ending October 30, 2011, compared to the first quarter in which consolidation accounting was applied for approximately 50% of the quarter and for only 81% ownership. The expected impact of the consolidation of Ignis on the outlook for the second quarter is approximately $14 million of revenues at a gross margin of approximately 23-24%, additional operating expenses of approximately $5 million and dilution to earnings per share of approximately $0.02.

Including the impact of the consolidation of Ignis, the Company indicated that it currently expects second fiscal quarter revenues to be in the range of $235 to $250 million; GAAP operating margin to be in the range of approximately 5.5% to 7.0%.

Finisar discussed its financial results for the fourth quarter and current business outlook during its regular quarterly conference call on Thursday, 1 September 2011.

An audio replay is available for two weeks following the call by dialling

1-888-203-1112 (from the U.S.)                                    or             (719) 457-0820 (international)

and then following the prompts. The conference ID is 6630304 and you must 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.