SUNNYVALE, CA--(Marketwire - December 4, 2007) - Finisar Corporation (
NASDAQ:
FNSR), a
technology leader in gigabit fiber optic solutions for high-speed data
networks, today announced that it has completed and filed with the SEC its
annual report on Form 10-K for the fiscal year ended April 30, 2007. The
Company has also completed and filed with the SEC its previously delayed
quarterly reports on Form 10-Q for the second and third quarters of fiscal
2007 and the first quarter of fiscal 2008. These reports contain financial
statements that were restated as a result of the previously announced
investigation of the Company's historical stock option granting practices
conducted by the Audit Committee of the Company's Board of Directors.
With these filings, Finisar believes that it has complied with applicable
Nasdaq rules and satisfied conditions imposed by Nasdaq for the continued
listing of the Company's common stock on the Nasdaq Global Select Market;
however, the Company awaits confirmation from Nasdaq.
Summary of Stock Option Investigation
In late August 2006, Finisar's management commenced a preliminary internal
review of certain of Finisar's historical stock options granted since its
initial public offering in November 1999. The review was voluntarily
initiated by the Company due to widespread media attention concerning the
stock option granting practices of many companies and was not in response
to a news report or an investigation concerning Finisar by the SEC or any
other governmental agency.
Following management's initial review, the Audit Committee determined to
undertake a more comprehensive investigation of the Company's historical
practices for granting and accounting for stock options from the date of
Finisar's initial public offering through September 8, 2006. On November
30, 2006, Finisar issued a press release and filed a current report on Form
8-K announcing the commencement of this investigation and disclosing that
its previously filed financial statements could no longer be relied upon.
On June 12, 2007, Finisar issued a follow-up press release and filed a
current report on Form 8-K summarizing the initial findings of the
investigation as of that date. With the filing today of its previously
delayed SEC reports, the Company has completed its investigation.
Based on the results of its investigation, the Audit Committee determined
that measurement dates used by the Company when accounting for certain
stock option grants were incorrect under the applicable provisions of
APB 25 and related interpretations. The Audit Committee determined that
the incorrect measurement dates were the result of process-related
deficiencies and that the individuals involved in the option granting
process lacked a thorough understanding of the relevant accounting rules.
The Audit Committee found no evidence of intentional misconduct or
malfeasance on the part of Company personnel involved in selecting and
approving the grant dates or administering the stock option granting
process. A detailed description of the scope and findings of the
investigation can be found in the Company's annual report on Form 10-K that
was filed today.
On the basis of the Audit Committee's initial findings, the Company stated
in its June 12, 2007 press release that options granted to the Company's
officers and directors during the review period had been properly approved
and granted by the Board or the Board's Compensation Committee. Since
June 12, 2007, management and its consultants, under the direction of the
Audit Committee, performed additional detailed work to establish the proper
measurement dates for grants for which the original measurement dates had
been determined to be incorrect and to determine the proper accounting for
these grants. In the course of this additional work, it was discovered
that a broad-based annual performance grant of options to purchase a total
of 2,540,000 shares made in June 2000 by the Chief Executive Officer,
acting as the Stock Plan Committee, had erroneously included grants of
options to purchase an aggregate of 235,000 shares to three of Finisar's
officers (including its Chief Financial Officer). The Audit Committee has
not located conclusive evidence that the three officer grants were
separately approved by the Board of Directors or the Compensation
Committee; however, the Audit Committee considers the officer grants to be
a valid obligation of the Company. The measurement dates for these grants
were revised along with the grants to non-officers with which they were
included. None of the three officers exercised the options related to
these grants.
Summary of Financial Statement Impact
Based on the results of the investigation by the Audit Committee, and the
additional work performed by management and its consultants, the Company
revised option grant measurement dates resulting in total additional
non-cash stock-based compensation expense of $107.6 million, to be
recognized in fiscal years 2000 through 2006. Approximately 85% of this
total additional stock-based compensation expense, or $91.1 million, is
attributable to six key granting actions that occurred between November
1999 and August 2003, representing a total of approximately 21 million
shares, or 20% of all options granted during the review period.
Approximately 82% of the additional stock-based compensation expense was
recognized prior to fiscal 2004. In addition, the Company identified
modifications to certain stock options related to extended leaves of
absence that resulted in additional non-cash compensation expense of
$5.0 million.
The impact of these adjustments over fiscal years 2000 through 2006 is
summarized as follows (in thousands):
Fiscal Year End April 30,
----------------------------------------------------
2000 2001 2002 2003 2004 2005 2006 Total
------ ------- ------- ------- ------- ------ ------ --------
Stock-based
compensation
expense
resulting
from revised
measurement
dates $5,416 $27,160 $31,741 $24,441 $ 8,296 $3,257 $7,303 $107,614
Other -
leaves of
absence - - 39 41 4,791 183 - 5,054
------ ------- ------- ------- ------- ------ ------ --------
Total $5,416 $27,160 $31,780 $24,482 $13,087 $3,440 $7,303 $112,668
====== ======= ======= ======= ======= ====== ====== ========
Including related payroll taxes and inventory capitalization effects, the
Company recognized a total of $113.6 million in additional pretax expense
for fiscal years 2000 through 2006, all but $1.6 million of which was
non-cash. Approximately $3.6 million of deferred stock-based compensation
expense remained to be amortized as of April 30, 2006. The Company did not
recognize any significant tax benefit associated with this pretax charge.
For stock option grants that were awarded at less than fair market value
and vest after December 31, 2004, employees may be subject to excise tax of
up to 40% under Internal Revenue Code Section 409A and comparable state tax
provisions (calculated on the intrinsic value of the award on the date of
vesting). The Board of Directors has determined that it would be in the
best interests of the Company's stockholders and employees to reduce or
eliminate this Section 409A tax liability for the Company's employees. The
Board's decision in this regard will result in additional charges totaling
approximately $7 million which will be recognized in the Company's upcoming
third fiscal quarter.
Conference Call
Finisar will host a conference call to discuss these financial statements
in addition to its regular earnings conference call scheduled for tomorrow,
Wednesday, December 5, 2007 at 2:00 p.m., Pacific Time. To listen to the
call you may connect to the investor page of Finisar at
www.finisar.com or
dial 877-407-0890 (domestic) or 201-689-7827 (international) and enter
passcode 264132.
A replay will be available approximately one hour after the call for two
weeks following the call's conclusion. To access the replay, dial
877-660-6853 (domestic) or 210-612-7415 (international), and then following
the prompts to enter Account number 2791 followed by Conference ID number
264132. A Web archive will be made available at
www.finisar.com until the
next conference call to be held approximately 90 days following the call's
conclusion.
About Finisar
Finisar Corporation (
NASDAQ:
FNSR) is a global technology leader for fiber
optic components and subsystems and network test and monitoring systems.
These products enable high-speed voice, video and data communications for
networking, storage and wireless applications over Local Area Networks
(LANs), Storage Area Networks (SANs), and Metropolitan Area Networks (MANs)
using Ethernet, Fibre Channel, IP, SAS, SATA and SONET/SDH protocols. The
Company is headquartered in Sunnyvale, California, USA. More information
can be found at
www.finisar.com.
Contact Information: Contact:
Steve Workman
Chief Financial Officer
408-548-1000
Investor Relations
408-542-5050
investor.relations@Finisar.com