11/21...FNSR Agreements to Acquire: Demeter Technologies, Transwave Fiber and Shomiti Systems
Shares of Finisar (FNSR:Nasdaq - news) surged after the fiber-optics systems company beat analysts' expectations for the second quarter and disclosed a series of acquisitions.
Shares of Finisar were recently up 22%, or $5.63, to $31.94 in Nasdaq trading.
Wit Soundview today raised its earnings estimates for the full year to 18 cents a share from 13 cents and reiterated the shares as a strong buy, with a 12-month price target of $57.
On Tuesday, the Sunnyvale, Calif., company said it earned $7.5 million, or 4 cents a share, for the second quarter, compared with $1.3 million, or a penny a share, in the same period last year, beating the First Call/Thomson Financial seven-analyst estimate of 3 cents a share
SUNNYVALE, Calif.--(BUSINESS WIRE)--Nov. 21, 2000--Finisar Corporation (NASDAQ:FNSR - news), a leading provider of gigabit fiber optic solutions for high-speed data networks, today reported financial results for its second fiscal quarter ended October 31, 2000. At the same time, the Company announced that it had entered into definitive agreements to acquire Demeter Technologies, Transwave Fiber and Shomiti Systems. In the case of Demeter Technologies, the Company announced that it had also completed the acquisition.
Management will host an earnings conference call on its web site at www.finisar.com at 5:00 p.m. EDT (2:00pm PDT) to discuss the results for the quarter, the outlook for the Company going forward, and the announcement to acquire three companies.
CURRENT QUARTER RESULTS
The financial results for the Company's current quarter include the results of Sensors Unlimited for one month. The acquisition of Sensors was recorded as a purchase with an initial value of approximately $356 million based on the initial issuance of approximately 9.5 million shares of Finisar common stock, the assumption of outstanding stock options, and cash used in completing the transaction. An additional 9.5 million shares of Finisar common stock may be issued to former Sensors shareholders over the next three years pursuant to the merger agreement. Any such additional consideration will be recorded at the time of issuance. With the initial shares issued to acquire Sensors Unlimited, the Company had approximately 170 million shares outstanding at the end of the quarter.
Total revenues for the second quarter of fiscal 2001 were a record $44.5 million, up 177% from the second quarter of fiscal 2000 and up 64% sequentially from the immediately preceding quarter. Total revenues include sales of optical subsystems of $37.3 million and sales of network performance test systems of $7.2 million. Sales of optical subsystems were up 245% from the second quarter of fiscal 2000 and up 69% sequentially. Sales of network test systems were up 37% from the second quarter of fiscal 2000 and up 39% sequentially.
Pro forma gross margin excluding non-cash charges for the amortization of acquisition-related costs rose sequentially to 41.5% in the second quarter compared to 39.5% in the previous quarter. Pro forma operating margins also improved sequentially to 15.2% in the second quarter compared to 9.3% in the previous quarter.
Pro forma net income excluding non-cash charges for deferred compensation and acquisition-related costs and cash charges for other acquisition-related compensation was a record $7.5 million, or $.04 per diluted share, in the second quarter, an increase of 461% from $1.3 million, or $.01 per diluted share, from the second quarter of fiscal 2000 and up 53% sequentially from $4.9 million, or $.03 per diluted share, in the previous quarter.
Including the non-cash charges for deferred compensation and acquisition-related costs and cash charges for other acquisition-related compensation in accordance with generally accepted accounting principles, the Company recorded a loss of $22.5 million, or $.15 per diluted share, in the second quarter compared to a loss of $387,000, or $.00 per diluted share, in the second quarter of the prior year. The non-cash charges related to the Sensors Unlimited acquisition include $23.0 million related to the purchase of in-process research and development, $5.9 million in amortization of acquired intangible assets, $0.2 million in amortization of deferred compensation and $388,000 for other acquisition-related compensation charges, net of estimated tax savings.
The Company's cash and short-term investments balance was $269 million at the end of October, 2000 compared to $315 million at the end of July, 2000. Of the $46 million decrease, approximately $25 million is related to the use of cash in the acquisition of Sensors Unlimited, $11 million was used in strategic investments in other businesses and approximately $10 million was related to working capital requirements associated with the Company's growth during the last quarter.
``The revenue growth that we saw during this most recent quarter is further evidence that the demand for storage and gigabit connectivity continues to grow at an unprecedented rate,'' said Jerry Rawls, Finisar's President and CEO. ``Excluding Sensors Unlimited which accounted for less than $3 million in revenues, our growth in the most recent quarter came primarily from the same group of customers who build Fibre Channel and Gigabit Ethernet systems. Furthermore, we believe the sequential increase in our sale of 2 Gb/s network performance test systems is a positive leading indicator for the rollout of 2 Gb/s Fibre Channel SAN's next year,'' added Rawls.
``We were pleased to see our gross margins improve during the quarter and begin to reflect our efforts to reduce product costs,'' said Rawls. ``Even without the results of Sensors Unlimited, our gross margins were up sequentially from the previous quarter.''
ACQUISITIONS
The Company announced that it had entered into definitive agreements to acquire three companies: Demeter Technologies, Inc., Transwave Fiber, Inc., and Shomiti Systems, Inc.
``With respect to our acquisition activity, I think it's important for investors to understand that we are laying a broader foundation on which to build our future by acquiring these fundamental technologies,'' said Jerry Rawls, Finisar's President and CEO. ``We are not looking to buy market share. We are focused on acquiring the technologies that will empower us to continue to provide the timely gigabit solutions that our customers need.'' added Rawls. ``We expect these companies to continue to supply their existing customers while we draw on a deeper pool of talent for developing new, innovative, and cost effective products for the LAN, SAN, and MAN marketplace.''
ACQUISITION OF DEMETER TECHNOLOGIES, INC.
Demeter Technologies was founded in August 2000. The founders of Demeter have extensive experience in manufacturing laser diodes in large volumes. With its early access to semiconductor processing equipment for epitaxial growth and ability to employ world class manufacturing techniques, Demeter has already demonstrated state-of-the-art laser diodes that can be directly modulated at speeds up to 10 gigabits per second. With the acquisition of Demeter, Finisar gains access to this fundamental technology in its quest to extend its capabilities as a provider of next generation fiber optic network equipment for Gigabit Ethernet, Fibre Channel and SONET.
Under the terms of the agreement, Demeter Technologies merged with a wholly-owned subsidiary of Finisar, and Demeter's stockholders received approximately 6.6 million shares of Finisar Common Stock, including shares issuable upon exercise of options assumed in the merger. The transaction will be accounted for as a purchase and is intended to qualify as a tax-free reorganization. The closing price of Finisar's Common Stock on November 20, 2000 was $22.13 per share, giving the transaction an approximate value of $146 million. The acquisition was completed on November 21, 2000 and will be included in the financial results of Finisar for the third fiscal quarter ending January 31, 2001.
ACQUISITION OF TRANSWAVE FIBER, INC.
Established in February 2000 in Fremont, California, Transwave Fiber has focused on the development of passive optical components for fiber optic networks. These products build on the Company's core competencies in fusion couplers, crystal processing and instrumentation technologies. With access to a considerable pool of engineering talent plus manufacturing operations at its subsidiary in Shanghai, China, Transwave has quickly exercised its technical prowess by developing a broad line of passive optical products for datacom and telecom applications.
Under the terms of the agreement, Transwave Fiber will merge with Finisar, and Transwave stockholders will be entitled to receive up to approximately 3.6 million shares of Finisar Common Stock including shares issuable upon exercise of options assumed in the merger. One-third of the shares issued in the merger will be deposited in an escrow and will be released to the former shareholders of Transwave Fiber upon the achievement of certain financial and technical milestones during a three year period following the completion of the merger. The transaction will be accounted for as a purchase and is intended to qualify as a tax-free reorganization. The closing price of Finisar's Common Stock on November 20, 2000 was $22.13 per share, giving the transaction an approximate value of $80 million. The transaction is expected to close during the first calendar quarter of 2001 and is subject to approval by Transwave's stockholders and other customary conditions.
ACQUISITION OF SHOMITI SYSTEMS, INC.
Established in 1995, Shomiti Systems is a technology leader in designing products which measure the performance of Ethernet networks in order to enhance their quality of service (QoS). Shomiti's award winning ``Surveyor'' and ``Explorer'' line of products are currently being deployed for measuring and monitoring 10-100 megabit and Gigabit Ethernet local area networks (LANs) and e-commerce storage server farms. With the acquisition of Shomiti Systems, Finisar will gain access to this fundamental technology in its quest to extend its capabilities as a provider of next generation test equipment for Fibre Channel, Gigabit Ethernet and Infiniband networks.
Under the terms of the agreement, Shomiti Systems will merge with a wholly-owned subsidiary of Finisar, and Shomiti stockholders will be entitled to receive up to approximately 4.3 million shares of Finisar Common Stock including shares issuable upon exercise of options assumed in the merger. The transaction will be accounted for as a purchase and is intended to qualify as a tax-free reorganization. The closing price of Finisar's Common Stock on November 20, 2000 was $22.13 per share, giving the transaction an approximate value of $95 million. The transaction is expected to close during the first calendar quarter of 2001 and is subject to approval by Shomiti's stockholders, the notification requirements of the Hart-Scott-Rodino Antitrust Act and other customary conditions.
BUSINESS OUTLOOK
Finisar plans to review its second quarter results and discuss its outlook for the upcoming quarter and future periods during a conference call for investors at 5:00pm EDT (2:00pm PDT) today, Tuesday, November 21. The call will be broadcast live over the Internet on the investor relations section of Finisar's Web site, located at www.finisar.com. To listen to the Webcast, interested investors are encouraged to log onto the broadcast at least 15 minutes prior to the call. Participating in the call will be Jerry Rawls, Finisar's President and CEO,and Steve Workman, Finisar's CFO.
FINISAR REVISES ITS PROCEDURES PURSUANT TO NEW REGULATION FD
In connection with the recent adoption of new SEC rules on corporate disclosure, Finisar will make forward-looking statements in its web conference calls regarding expected financial results for the upcoming quarter and additional future periods. Finisar will keep its latest earnings release and web conference call publicly available on its web site at www.finisar.com but assumes no obligation to update any forward looking statements contained therein although it may choose to do so from time to time in accordance with the provisions of Regulation FD. Following the quarterly earnings release, Finisar will continue its current practice of having corporate representatives meet privately during the quarter with investors, the media, investment analysts and others.
SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
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 and Exchange Act of 1934, as amended, including statements regarding Finisar's expectations, beliefs, intentions, or strategies regarding the future. 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. These risks include those associated with 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 customers in any period; ongoing new product development and introduction of new and enhanced products; the challenges of rapid growth; intensive competition; and potential problems related to the assimilation and integration of the operations, technologies and products of two recently acquired companies, Sensors Unlimited and Demeter Technologies, as well as those of Transwave Fiber and Shomiti Systems which Finisar has agreed to acquire. Other risks relating to Finisar's business are set forth in Finisar's Annual Report on Form 10-K and other interim reports as filed with the Securities and Exchange Commission.
ABOUT FINISAR
Finisar Corporation (NASDAQ:FNSR - news) is a leading provider of fiber optic subsystems and network performance test systems which enable high-speed data communications over Gigabit Ethernet local area networks (LANs), Fibre Channel storage area networks (SANs), and wide-area and metropolitan data networking applications (WANs and MANs). The Company is focused on the application of digital fiber optics to provide a broad line of high-performance, reliable, value-added optical subsystems for networking and storage equipment manufacturers. The Company's headquarters are located at 1308 Moffett Park Drive, Sunnyvale, CA 94089. For more information, visit the Company's web site at finisar.com.
Finisar Corporation
Pro Forma Consolidated Statement of Operations
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
October 31, October 31,
2000 1999 2000 1999
--------- --------- --------- ---------
Revenues
Optical subsystems $ 37,325 $ 10,828 $ 59,363 $ 20,308
Test systems 7,203 5,249 12,377 9,648
--------- --------- --------- ---------
Total revenues 44,528 16,077 71,740 29,956
Cost of revenues 26,028 7,878 42,499 14,130
--------- --------- --------- ---------
Gross profit 18,500 8,199 29,241 15,826
Operating expenses:
Research and
development 6,320 3,333 10,634 6,173
Sales and marketing 3,693 1,895 6,200 3,437
General and
administrative 1,722 864 3,107 1,623
--------- --------- --------- ---------
Total operating
expenses 11,735 6,092 19,941 11,233
Income from operations 6,765 2,107 9,300 4,593
Interest income, net 4,055 (84) 8,500 (173)
Other non-operating
income (expense), net (21) (28) (43) (56)
--------- --------- --------- ---------
Income before
income taxes 10,799 1,995 17,757 4,364
Provision for
income taxes 3,291 659 5,327 1,488
--------- --------- --------- ---------
Net income 7,508 1,336 $ 12,430 $ 2,876
========= ========== ========= =========
Net income per
share - basic $ 0.05 $ 0.02 $ 0.08 $ 0.03
========= ========== ========= =========
Net income per
share - diluted $ 0.04 $ 0.01 $ 0.07 $ 0.02
========= ========= ========= =========
Shares used in
per-share
calculation-basic 154,313 88,650 152,115 88,521
Shares used in
per-share
calculation-diluted 169,225 130,086 167,227 129,087
The above pro forma results for the three months and six months
ended October 31, 2000 have been adjusted to exclude non-cash charges
for the amortization of deferred compensation and merger related
costs. Results including these charges under generally accepted
accounting principles are summarized below:
Finisar Corporation
Consolidated Statement of Operations
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
October 31, October 31,
2000 1999 2000 1999
--------- --------- --------- ---------
Revenues
Optical subsystems $ 37,325 $ 10,828 $ 59,363 $ 20,308
Test systems 7,203 5,249 12,377 9,648
--------- --------- --------- ---------
Total revenues 44,528 16,077 71,740 29,956
Cost of revenues 26,028 7,878 42,499 14,130
Amortization
of acquired developed
technology 916 -- 916 --
--------- --------- --------- ---------
Gross profit 17,584 8,199 28,325 15,826
Operating expenses:
Research and
development 6,320 3,333 10,634 6,173
Sales and marketing 3,693 1,895 6,200 3,437
General and
administrative 1,722 864 3,107 1,623
Amortization of
deferred
compensation 1,183 1,723 2,882 2,010
In-process
Research and
Development 23,027 -- 23,027 --
Amortization of
intangibles 5,002 -- 5,002 --
Other acquisition
compensation 554 -- 554
--------- --------- --------- ---------
Total operating
expenses 41,501 7,815 51,406 13,243
Income from
operations (23,917) 384 (23,081) 2,583
Interest
income, net 4,055 (84) 8,500 (173)
Other non-operating
income
(expense), net (21) (28) (43) (56)
--------- --------- --------- ---------
Income before
income taxes (19,883) 272 (14,624) 2,354
Provision for
income taxes 2,601 659 4,637 1,488
--------- --------- --------- ---------
Net income (loss) (22,484) $ (387) $ (19,261) $ 866
========= ========= ========= =========
Net income (loss)
per share - basic $ (0.15) $ (0.00) $ (0.13) $ 0.01
========= ========= ========= =========
Net income (loss)
per share - diluted $ (0.15) $ (0.00) $ (0.13) $ 0.01
========= ========= ========= =========
Shares used in
per-share
calculation-basic 154,313 88,650 152,115 88,521
Shares used
in per-share
calculation-diluted 154,313 88,650 152,115 129,087
FINISAR CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
November 21, 2000
October 31, April 30,
ASSETS 2000 2000
--------- ---------
Cash and short-term investments $ 269,232 $ 320,735
Accounts receivable, net 29,615 14,348
Inventories 36,582 16,494
Income tax receivable 1,539 148
Other receivables 5,514 151
Deferred tax asset 2,384 2,653
Other current assets 636 278
--------- ---------
Total current assets 345,502 354,807
Property, plant, equipment
and improvements, net 20,914 9,426
Intangible assets 60,638 --
Goodwill 286,121 --
Other long-term assets 13,007 809
--------- ---------
Total assets $ 726,182 $ 365,042
========= =========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable 16,053 5,908
Accrued compensation 4,339 3,001
Other accrued liabilities 11,894 3,065
Income taxes payable -- 122
Short-term debt 633 --
Capital lease obligations,
current portion -- --
--------- ---------
Total current liabilities 32,919 12,096
Notes payable, long-term portion -- --
Capital lease obligations,
long-term portion -- --
Long-term debt 1,493 --
Other long-term liabilities 893 524
Deferred tax liability 28,048 --
Preferred stock -- --
Common stock 687,276 384,686
Deferred stock
compensation (15,266) (9,404)
Notes receivable from stockholders (2,394) (3,248)
Unrealized loss on
short-term investments 162 (182)
Retained earnings (6,949) (19,430)
--------- ---------
Total preferred stock and
stockholders' equity 662,829 352,422
--------- ---------
Total liabilities and
stockholders' equity $ 726,182 $ 365,042
========= =========
--------------------------------------------------------------------------------
Contact:
Finisar Corporation
Steve Workman, 408/542-5050 (VP Finance, CFO)
Shelby Palmer, 408/542-5050 (Investor Relations)
investor.relations@finisar.com |
