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Finisar Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: December 6, 2012 03:07PM

Finisar Corp. (FNSR) filed Quarterly Report for the period ended 2012-10-28. Finisar Corporation has a market cap of $1.26 billion; its shares were traded at around $13.99 with a P/E ratio of 26.1 and P/S ratio of 1.3.



Highlight of Business Operations:

The provisional acquisition-date fair value of the consideration transferred totaled $30.6 million, consisting of a $23.7 million upfront cash payment and $6.9 million of contingent consideration. The contingent consideration arrangement requires the Company to pay up to $15 million, payable in cash or shares of the Company's common stock at the Company's option, subject to Red-C achieving a specified level of gross profit during calendar year 2013. The provisional acquisition-date fair value of the contingent consideration arrangement was $6.9 million, which the Company estimated using a probability-weighted discounted cash flow model. The fair value measurement was based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC 820. The key assumptions in applying the income approach were as follows: 5% discount rate and 100% probability of achieving an expected level of gross profit. In addition, the Company may be required to pay certain former Red-C shareholders additional cash compensation of up to an aggregate of $5 million contingent upon their continuing employment with the Company for 12-, 24- and 36-month periods subsequent to the acquisition date. Such amounts, as deemed probable of payment, are being recorded as compensation expense and recognized ratably over the related respective service periods.

Gross Profit. Gross profit decreased $6.4 million, or 9.1%, to $63.9 million in the quarter ended October 28, 2012 compared to $70.3 million in the quarter ended October 30, 2011. Gross profit as a percentage of revenues decreased by 1.6%, from 29.1% in the quarter ended October 30, 2011 to 27.4% in the quarter ended October 28, 2012. We recorded charges of $7.8 million for obsolete and excess inventory in the quarter ended October 28, 2012 compared to $5.7 million in the quarter ended October 30, 2011. We sold inventory that was written-off in previous periods resulting in a benefit of $5.5 million in the quarter ended October 28, 2012 and $3.0 million in the quarter ended October 30, 2011. As a result, we recognized a net charge of $2.3 million in the quarter ended October 28, 2012 compared to a net charge of $2.7 million in the quarter ended October 30, 2011. Cost of revenues included stock-based compensation charges of $1.7 million in the quarter ended October 28, 2012 and $1.6 million in the quarter ended October 30, 2011. The decrease in gross margin primarily reflects a decline in average selling prices, partially offset by reduced material costs.

Gross profit decreased $15.1 million, or 11.0%, to $121.7 million in the six months ended October 28, 2012 compared to $136.8 million in the six months ended October 30, 2011. Gross profit as a percentage of revenues decreased by 2.2%, from 29.1% in the six months ended October 30, 2011 to 26.9% in the six months ended October 28, 2012. We recorded charges of $17.3 million for obsolete and excess inventory in the six months ended October 28, 2012 compared to $11.4 million in the six months ended October 30, 2011. We sold inventory that was written-off in previous periods resulting in a benefit of $10.1 million in the six months ended October 28, 2012 and $7.0 million in the six months ended October 30, 2011. As a result, we recognized a net charge of $7.2 million in the six months ended October 28, 2012 compared to a net charge of $4.4 million in the six months ended October 30, 2011. Cost of revenues included stock-based compensation charges of $3.1 million in the six months ended October 28, 2012 and $3.3 million in the six months ended October 30, 2011. The decrease in gross margin primarily reflects a decline in average selling prices, partially offset by reduced material costs, and higher net charges for excess and obsolete inventory.

General and Administrative Expenses. General and administrative expenses decreased $854,000, or 6.2%, to $12.9 million in the quarter ended October 28, 2012 compared to $13.8 million in the quarter ended October 30, 2011. The decrease was due to a $680,000 reduction in transaction-related expenses, as we incurred $420,000 in transaction costs in connection with the acquisition of Red-C in the quarter ended October 28, 2012 compared to $1.1 million incurred in connection with the acquisition of Ignis in the quarter ended October 30, 2011. This reduction, as well as a reduction in legal costs, was partially offset by higher stock-based compensation expense. Included in general and administrative expenses were stock-based compensation charges of $2.9 million in the quarter ended October 28, 2012 and $1.9 million in the quarter ended October 30, 2011. General and administrative expenses as a percent of revenues decreased to 5.6% in the quarter ended October 28, 2012 compared to 5.7% in the quarter ended October 30, 2011.

General and administrative expenses decreased $1.5 million, or 5.3%, to $26.3 million in the six months ended October 28, 2012 compared to $27.7 million in the six months ended October 30, 2011. The decrease was due to a $680,000 reduction in transaction-related expenses, as we incurred $420,000 in transaction costs in connection with the acquisition of Red-C in the six months ended October 28, 2012 compared to $1.1 million incurred in connection with the acquisition of Ignis in the six months ended October 30, 2011. This reduction, as well as a reduction in legal costs was partially offset by higher stock-based compensation expense. Included in general and administrative expenses were stock-based compensation charges of $5.6 million in the six months ended October 28, 2012 and $3.8 million in the six months ended October 30, 2011. General and administrative expenses as a percent of revenues decreased to 5.8% in the six months ended October 28, 2012 compared to 5.9% in the six months ended October 30, 2011.

Read the The complete Report



Stocks Discussed: FNSR,
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