Ciena Reports Fiscal Fourth Quarter 2015 and Year-End Financial Results

December 10, 2015 at 8:00 AM EST

Delivers 11% adjusted operating margin and $1.31 adjusted EPS for the year

HANOVER, Md.--(BUSINESS WIRE)--Dec. 10, 2015-- Ciena® Corporation (NYSE: CIEN), the network specialist, today announced unaudited financial results for its fiscal fourth quarter and year ended October 31, 2015.

For the fiscal fourth quarter 2015, Ciena reported revenue of $692.0 million as compared to $591.0 million for the fiscal fourth quarter 2014. For fiscal year 2015, Ciena reported revenue of $2.4 billion, as compared to $2.3 billion for fiscal year 2014.

On the basis of generally accepted accounting principles (GAAP), Ciena's net loss for the fiscal fourth quarter 2015 was $(13.8) million, or $(0.10) per diluted common share, which compares to a GAAP net loss of $(30.7) million, or $(0.29) per diluted common share, for the fiscal fourth quarter 2014. For fiscal year 2015, Ciena had a GAAP net income of $11.7 million, or $0.10 per diluted common share, which compares to a GAAP net loss of $(40.6) million or $(0.38) per diluted common share for fiscal year 2014.

Ciena's adjusted (non-GAAP) net income for the fiscal fourth quarter 2015 was $67.3 million, or $0.42 per diluted common share, which compares to an adjusted (non-GAAP) net loss of $(8.2) million, or $(0.08) per diluted common share, for the fiscal fourth quarter 2014. For fiscal year 2015, Ciena's adjusted (non-GAAP) net income was $179.0 million, or $1.31 per diluted common share, as compared to an adjusted (non-GAAP) net income of $65.8 million, or $0.59 per diluted common share for fiscal year 2014.

"Our strong financial performance in fiscal 2015 included substantial increases in gross and operating margin as well as meaningful cash generation, which enabled us to exceed the longer-term financial milestones that we established several years ago,” said Gary Smith, president and CEO, Ciena. “We believe that our proven ability to drive operating leverage from the business, when combined with strong market drivers from the next phase of network transformation, positions us well to deliver continued growth and profitability in fiscal 2016 and beyond.”

Fiscal Fourth Quarter 2015 Performance Summary

The tables below (in millions, except percentage data) provide comparisons of certain quarterly results to prior periods, including sequential quarterly and year over year changes. A reconciliation between the GAAP and adjusted (non-GAAP) measures contained in this release is included in Appendices A and B.

     
    GAAP Results (unaudited)
    Q4   Q3   Q4   Period Change
    FY 2015   FY 2015   FY 2014   Q-T-Q*   Y-T-Y*
Revenue   $ 692.0     $ 602.9     $ 591.0     14.8 %   17.1 %
Gross margin   43.8 %   44.8 %   37.4 %   (1.0 )%   6.4 %
Operating expense   $ 293.6     $ 225.4     $ 222.7     30.3 %   31.8 %
Operating margin   1.4 %   7.4 %   (0.3 )%   (6.0 )%   1.7 %
     
    Non-GAAP Results (unaudited)
    Q4   Q3   Q4   Period Change
    FY 2015   FY 2015   FY 2014   Q-T-Q*   Y-T-Y*
Revenue   $ 692.0     $ 602.9     $ 591.0     14.8 %   17.1 %
Adj. gross margin   44.9 %   45.3 %   37.9 %   (0.4 )%   7.0 %
Adj. operating expense   $ 220.5     $ 202.1     $ 203.7     9.1 %   8.2 %
Adj. operating margin   13.0 %   11.8 %   3.4 %   1.2 %   9.6 %
                               

* Denotes % change, or in the case of margin, absolute change

     
    Revenue by Segment (unaudited)
    Q4 FY 2015   Q3 FY 2015   Q4 FY 2014
    Revenue   %   Revenue   %   Revenue   %
Converged Packet Optical   $ 484.3     70.0     $ 408.0     67.7     $ 383.3     64.9
Packet Networking   63.8     9.2     57.2     9.5     56.4     9.5
Optical Transport   16.7     2.4     17.5     2.9     26.5     4.5
Software and Services   127.2     18.4     120.2     19.9     124.8     21.1
Total   $ 692.0     100.0     $ 602.9     100.0     $ 591.0     100.0
                                         

Additional Performance Metrics for Fiscal Fourth Quarter 2015

     
    Revenue by Geographic Region (unaudited)
    Q4 FY 2015   Q3 FY 2015   Q4 FY 2014
    Revenue   %   Revenue   %   Revenue   %
North America   $ 480.0     69.4     $ 389.6     64.6     $ 340.5     57.6
Europe, Middle East and Africa   94.0     13.6     93.2     15.5     133.7     22.6
Caribbean and Latin America   45.7     6.6     65.1     10.8     51.8     8.8
Asia Pacific   72.3     10.4     55.0     9.1     65.0     11.0
Total   $ 692.0     100.0     $ 602.9     100.0     $ 591.0     100.0
                                         
  • Non-U.S. customers contributed 34.5% of total revenue
  • Two 10%-plus customer represented a total of 29.6% of revenue
  • $84.4 million in revenue from the acquired Cyan business, principally relating to Z-Series Packet-Optical Platform
  • Cash and investments totaled $1,021.2 million
  • Cash flow from operations totaled $84.6 million
  • Average days' sales outstanding (DSOs) were 72
  • Accounts receivable balance was $550.8 million
  • Inventories totaled $191.2 million, including:
    • Raw materials: $53.1 million
    • Work in process: $9.1 million
    • Finished goods: $126.0 million
    • Deferred cost of sales: $56.0 million
    • Reserve for excess and obsolescence: $(53.0) million
  • Product inventory turns were 6.8
  • Headcount totaled 5,345

Business Outlook for Fiscal First Quarter 2016

Statements relating to business outlook are forward-looking in nature and actual results may differ materially. These statements should be read in the context of the Notes to Investors below.

Ciena expects financial performance for fiscal first quarter 2016 to include:

  • Revenue in the range of $555 million to $590 million
  • Adjusted (non-GAAP) gross margin of approximately 44 percent
  • Adjusted (non-GAAP) operating expense of approximately $220 million

Ciena expects financial performance for fiscal year 2016 to include:

  • Revenue growth in the range of 8 to 9 percent
  • Adjusted (non-GAAP) gross margin in the mid-40s percent range
  • Adjusted (non-GAAP) operating expense of approximately $225 million per quarter
  • Adjusted (non-GAAP) operating margin in the range of 11 to 12 percent

Live Web Broadcast

Ciena will host a conference call today, Thursday, December 10, 2015 at 8:30 a.m. (Eastern), with investors and financial analysts to discuss its unaudited fiscal fourth quarter 2015 and year-end results, as well as to provide a new next-stage financial milestone for the company.

The live broadcast of the discussion can be accessed via Ciena's homepage at http://www.ciena.com/, and an archived version will be available shortly following the conclusion of the live broadcast on the Investor Relations page of Ciena's website at http://www.ciena.com/investors.

About Ciena

Ciena (NYSE: CIEN) is the network specialist. We collaborate with customers worldwide to unlock the strategic potential of their networks and fundamentally change the way they perform and compete. Ciena leverages its deep expertise in packet and optical networking and distributed software automation to deliver solutions in alignment with its OPn architecture for next-generation networks. We enable a high-scale, programmable infrastructure that can be controlled and adapted by network-level applications, and provide open interfaces to coordinate computing, storage and network resources in a unified, virtualized environment. For updates on Ciena news, follow us on Twitter @Ciena or on LinkedIn at http://www.linkedin.com/company/ciena. Investors are encouraged to review the Investors section of our website at http://www.ciena.com/investors, where we routinely post press releases, SEC filings, recent news, financial results, and other announcements. From time to time we exclusively post material information to this website along with other disclosure channels that we use.

Notes to Investors

Forward-looking statements. This press release contains certain forward-looking statements that involve risks and uncertainties. These statements are based on current expectations, forecasts, assumptions and other information available to the Company as of the date hereof. Forward-looking statements include statements regarding Ciena's expectations, beliefs, intentions or strategies regarding the future and can be identified by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," and "would" or similar words. Forward-looking statements in this release include: “Our strong financial performance in fiscal 2015 included substantial increases in gross and operating margin as well as meaningful cash generation, which enabled us to exceed the longer-term financial milestones that we established several years ago”; “We believe that our proven ability to drive operating leverage from the business, when combined with strong market drivers from the next phase of network transformation, positions us well to deliver continued growth and profitability in fiscal 2016 and beyond"; "Ciena expects financial performance for fiscal first quarter 2016 to include revenue in the range of $555 million to $590 million, adjusted (non-GAAP) gross margin of approximately 44 percent, adjusted (non-GAAP) operating expense of approximately $220 million"; "Ciena expects financial performance for fiscal year 2016 to include revenue growth in the range of 8 to 9 percent, adjusted (non-GAAP) gross margin in the mid-40s percent range; adjusted (non-GAAP) operating expense of approximately $225 million per quarter, adjusted (non-GAAP) operating margin in the range of 11 to 12 percent."

Ciena's actual results, performance or events may differ materially from these forward-looking statements made or implied due a number of risks and uncertainties relating to Ciena's business, including: the effect of broader economic and market conditions on our customers and their business; changes in network spending or network strategy by our customers; seasonality and the timing and size of customer orders, including our ability to recognize revenue relating to such sales; the level of competitive pressure we encounter; the product, customer and geographic mix of sales within the period; supply chain disruptions and the level of success relating to efforts to optimize Ciena's operations; changes in foreign currency exchange rates affecting revenue and operating expense; and the other risk factors disclosed in Ciena's Report on Form 10-Q filed with the Securities and Exchange Commission on September 9, 2015. Ciena assumes no obligation to update any forward-looking information included in this press release.

Non-GAAP Presentation of Quarterly Results. This release includes non-GAAP measures of Ciena's gross profit, operating expense, income (loss) from operations, net income (loss) and net income (loss) per share. In evaluating the operating performance of Ciena's business, management excludes certain charges and credits that are required by GAAP. These items share one or more of the following characteristics: they are unusual and Ciena does not expect them to recur in the ordinary course of its business; they do not involve the expenditure of cash; they are unrelated to the ongoing operation of the business in the ordinary course; or their magnitude and timing is largely outside of Ciena's control. Management believes that the non-GAAP measures below provide management and investors useful information and meaningful insight to the operating performance of the business. The presentation of these non-GAAP financial measures should be considered in addition to Ciena's GAAP results and these measures are not intended to be a substitute for the financial information prepared and presented in accordance with GAAP. Ciena's non-GAAP measures and the related adjustments may differ from non-GAAP measures used by other companies and should only be used to evaluate Ciena's results of operations in conjunction with our corresponding GAAP results. To the extent not previously disclosed in a prior Ciena financial results press release, Appendixes A and B to this press release sets forth a complete GAAP to non-GAAP reconciliation of the non-GAAP measures contained in this release.

         
CIENA CORPORATION
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
         
    Quarter Ended October 31,   Year Ended October 31,
    2014   2015   2014   2015
Revenue:                
Products   $ 476,175     $ 574,281     $ 1,865,826     $ 2,002,395  
Services   114,788     117,692     422,463     443,274  
Total revenue   590,963     691,973     2,288,289     2,445,669  
Cost of goods sold:                
Products   305,171     323,090     1,083,022     1,120,373  
Services   64,955     65,895     256,915     249,733  
Total cost of goods sold   370,126     388,985     1,339,937     1,370,106  
Gross profit   220,837     302,988     948,352     1,075,563  
Operating expenses:                
Research and development   98,506     107,859     401,180     414,201  
Selling and marketing   84,396     93,003     328,325     333,836  
General and administrative   28,560     33,804     126,824     123,402  
Amortization of intangible assets   11,019     36,454     45,970     69,511  
Acquisition and integration costs       22,084         25,539  
Restructuring costs   171     366     349     8,626  
Total operating expenses   222,652     293,570     902,648     975,115  
Income (loss) from operations   (1,815 )   9,418     45,704     100,448  
Interest and other income (loss), net   (11,031 )   (6,232 )   (25,262 )   (25,505 )
Interest expense   (13,559 )   (12,688 )   (47,115 )   (51,179 )
Income (loss) before income taxes   (26,405 )   (9,502 )   (26,673 )   23,764  
Provision (benefit) for income taxes   4,298     4,330     13,964     12,097  
Net income (loss)   $ (30,703 )   $ (13,832 )   $ (40,637 )   $ 11,667  
                 
Net Income (loss) per Common Share                
Basic net income (loss) per common share   $ (0.29 )   $ (0.10 )   $ (0.38 )   $ 0.10  
Diluted net income (loss) per potential common share   $ (0.29 )   $ (0.10 )   $ (0.38 )   $ 0.10  
                 
Weighted average basic common shares outstanding   106,931     134,097     105,783     118,416  
Weighted average diluted potential common shares outstanding 1   106,931     134,097     105,783     120,101  
     
1.   Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per common share for fiscal 2015 includes 1.7 million shares underlying certain stock options and restricted stock units.
     
CIENA CORPORATION
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
     
    October 31,
    2014   2015
ASSETS        
Current assets:        
Cash and cash equivalents   $ 586,720     $ 790,971  
Short-term investments   140,205     135,107  
Accounts receivable, net   518,981     550,792  
Inventories   254,660     191,162  
Prepaid expenses and other   192,624     196,178  
Total current assets   1,693,190     1,864,210  
Long-term investments   50,057     95,105  
Equipment, building, furniture and fixtures, net   126,632     191,973  
Goodwill, net       256,434  
Other intangible assets, net   128,677     202,673  
Other long-term assets   74,076     84,656  
Total assets   $ 2,072,632     $ 2,695,051  
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)        
Current liabilities:        
Accounts payable   $ 209,777     $ 222,140  
Accrued liabilities and other short-term obligations   276,608     316,283  
Deferred revenue   104,688     126,111  
Current portion of long-term debt   190,063     2,500  
Total current liabilities   781,136     667,034  
Long-term deferred revenue   40,930     62,962  
Other long-term obligations   45,390     72,540  
Long-term debt, net   1,274,791     1,271,639  
Total liabilities   2,142,247     2,074,175  
         
Stockholders’ equity (deficit):        
Preferred stock — par value $0.01; 20,000,000 shares authorized; zero shares issued and outstanding        
Common stock — par value $0.01; 290,000,000 shares authorized; 106,979,960 and 135,612,217 shares issued and outstanding   1,070     1,356  
Additional paid-in capital   5,954,440     6,640,436  
Accumulated other comprehensive loss   (14,668 )   (22,126 )
Accumulated deficit   (6,010,457 )   (5,998,790 )
Total stockholders’ equity (deficit)   (69,615 )   620,876  
Total liabilities and stockholders’ equity (deficit)   $ 2,072,632     $ 2,695,051  
     
CIENA CORPORATION
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
     
    Year Ended October 31,
    2014   2015
Cash flows from operating activities:        
Net income (loss)   $ (40,637 )   $ 11,667  
Adjustments to reconcile net loss to net cash provided by operating activities:        
Depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements   55,616     55,901  
Share-based compensation costs   42,930     55,340  
Amortization of intangible assets   57,151     79,866  
Provision for inventory excess and obsolescence   32,332     26,846  
Provision for warranty   22,129     17,881  
Other   25,668     (1,023 )
Changes in assets and liabilities:        
Accounts receivable   (33,164 )   (9,496 )
Inventories   (37,889 )   49,501  
Prepaid expenses and other   (7,931 )   (21,988 )
Accounts payable, accruals and other obligations   (59,837 )   (29,195 )
Deferred revenue   33,448     26,812  
Net cash provided by operating activities   89,816     262,112  
Cash flows used in investing activities:        
Payments for equipment, furniture, fixtures and intellectual property   (48,216 )   (62,109 )
Restricted cash   2,060     (40 )
Purchase of available for sale securities   (245,196 )   (245,323 )
Proceeds from maturities of available for sale securities   195,000     205,000  
Settlement of foreign currency forward contracts, net   (10,041 )   24,133  
Purchase of cost method investment       (2,000 )
Acquisition of business, net of cash acquired       37,212  
Net cash used in investing activities   (106,393 )   (43,127 )
Cash flows from financing activities:        
Proceeds from issuance of long-term debt, net   248,750      
Payment of long-term debt   (625 )   (29,867 )
Payment of debt and equity issuance costs   (4,227 )   (421 )
Payment of capital lease obligations   (3,034 )   (8,038 )
Proceeds from issuance of common stock   17,663     30,275  
Net cash provided by (used in) financing activities   258,527     (8,051 )
Effect of exchange rate changes on cash and cash equivalents   (1,717 )   (6,683 )
Net increase in cash and cash equivalents   240,233     204,251  
Cash and cash equivalents at beginning of fiscal year   346,487     586,720  
Cash and cash equivalents at end of fiscal year   $ 586,720     $ 790,971  
Supplemental disclosure of cash flow information        
Cash paid during the fiscal year for interest   $ 36,276     $ 40,772  
Cash paid during the fiscal year for income taxes, net   $ 11,396     $ 10,668  
Non-cash investing and financing activities        
Purchase of equipment in accounts payable   $ 4,961     $ 20,922  
Equipment acquired under capital leases   $ 10,424     $ 464  
Building subject to capital lease   $     $ 14,939  
Construction in progress subject to build-to-suit lease   $     $ 18,663  
Non-cash financing activities        
Conversion of 4.0% convertible senior notes, due March 15, 2015 into 8,898,387 shares of common stock   $     $ 180,645  
Conversion of 8.0% convertible senior notes, due December 15, 2019, assumed from the Cyan acquisition, into 4,589,626 shares of common stock   $     $ 117,140  
Fair value of shares issued related to acquisition of business   $     $ 302,114  
 
APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measurements (unaudited)
         
    Quarter Ended
    October 31,
    2014   2015
Gross Profit Reconciliation (GAAP/non-GAAP)        
GAAP gross profit   $ 220,837     $ 302,988  
Share-based compensation-products   547     589  
Share-based compensation-services   496     573  
Amortization of intangible assets   2,201     3,438  
Fair value adjustment of acquired inventory       3,069  
Total adjustments related to gross profit   3,244     7,669  
Adjusted (non-GAAP) gross profit   $ 224,081     $ 310,657  
Adjusted (non-GAAP) gross profit percentage   37.9 %   44.9 %
         
Operating Expense Reconciliation (GAAP/non-GAAP)        
GAAP operating expense   $ 222,652     $ 293,570  
Share-based compensation-research and development   1,960     3,850  
Share-based compensation-sales and marketing   2,759     4,468  
Share-based compensation-general and administrative   3,025     5,860  
Share-based compensation-acquisition and integration       7,588  
Amortization of intangible assets   11,019     36,454  
Acquisition and integration costs, excluding share-based compensation       14,496  
Restructuring costs   171     366  
Total adjustments related to operating expense   18,934     73,082  
Adjusted (non-GAAP) operating expense   $ 203,718     $ 220,488  
         
Income (Loss) from Operations Reconciliation (GAAP/non-GAAP)        
GAAP income (loss) from operations   $ (1,815 )   $ 9,418  
Total adjustments related to gross profit   3,244     7,669  
Total adjustments related to operating expense   18,934     73,082  
Adjusted (non-GAAP) income from operations   $ 20,363     90,169  
Adjusted (non-GAAP) operating margin percentage   3.4 %   13.0 %
         
Net Income (Loss) Reconciliation (GAAP/non-GAAP)        
GAAP net loss   $ (30,703 )   $ (13,832 )
Total adjustments related to gross profit   3,244     7,669  
Total adjustments related to operating expense   18,934     73,082  
Non-cash interest expense   351     362  
Adjusted (non-GAAP) net income (loss)   $ (8,174 )   $ 67,281  
         
Weighted average basic common shares outstanding   106,931   134,097
Weighted average dilutive potential common shares outstanding1   106,931   177,054
         
Net Income (Loss) per Common Share        
GAAP diluted net loss per common share   $ (0.29 )   $ (0.10 )
Adjusted (non-GAAP) diluted net income (loss) per common share2   $ (0.08 )   $ 0.42  
 
APPENDIX B - Reconciliation of Adjusted (Non- GAAP) Annual Measurements (unaudited)
         
    Year Ended
    October 31,
    2014   2015
Gross Profit Reconciliation (GAAP/non-GAAP)        
GAAP gross profit   $ 948,352     $ 1,075,563  
Share-based compensation-products   2,531     2,400  
Share-based compensation-services   2,216     2,156  
Amortization of intangible assets   11,181     10,039  
Fair value adjustment of acquired inventory       3,069  
Total adjustments related to gross profit   15,928     17,664  
Adjusted (non-GAAP) gross profit   $ 964,280     $ 1,093,227  
Adjusted (non-GAAP) gross profit percentage   42.1 %   44.7 %
         
Operating Expense Reconciliation (GAAP/non-GAAP)        
GAAP operating expense   $ 902,648     $ 975,115  
Share-based compensation-research and development   9,682     10,665  
Share-based compensation-sales and marketing   14,958     15,539  
Share-based compensation-general and administrative   13,568     17,018  
Share-based compensation-acquisition and integration       7,588  
Amortization of intangible assets   45,970     69,511  
Acquisition and integration costs, excluding share-based compensation       17,951  
Restructuring costs   349     8,626  
Settlement of patent litigation   2,000     500  
Total adjustments related to operating expense   86,527     147,398  
Adjusted (non-GAAP) operating expense   $ 816,121     $ 827,717  
         
Income (Loss) from Operations Reconciliation (GAAP/non-GAAP)        
GAAP income from operations   $ 45,704     $ 100,448  
Total adjustments related to gross profit   15,928     17,664  
Total adjustments related to operating expense   86,527     147,398  
Adjusted (non-GAAP) income from operations   $ 148,159     265,510  
Adjusted (non-GAAP) operating margin percentage   6.5 %   10.9 %
         
Income (Loss) Reconciliation (GAAP/non-GAAP)        
GAAP net income (loss)   $ (40,637 )   $ 11,667  
Total adjustments related to gross profit   15,928     17,664  
Total adjustments related to operating expense   86,527     147,398  
Non-cash expense associated with the conversion of convertible notes       768  
Non-cash interest expense   1,273     1,491  
Change in fair value of embedded redemption feature   2,740      
Adjusted (non-GAAP) net income   $ 65,831     $ 178,988  
         
Weighted average basic common shares outstanding   105,783   118,416
Weighted average dilutive potential common shares outstanding3   120,950   163,308
         
Net Income (Loss) per Common Share        
GAAP diluted net income (loss) per common share   $ (0.38 )   $ 0.10  
Adjusted (non-GAAP) diluted net income per common share4   $ 0.59     $ 1.31  
                 

1. Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per common share for the fourth quarter of fiscal 2015 includes 2.7 million shares underlying certain stock options and restricted stock units, 13.0 million shares underlying Ciena's 0.875% convertible senior notes, due June 15, 2017, 17.4 million shares underlying Ciena's 3.75% convertible senior notes, due October 15, 2018, 0.7 million shares underlying the 8.0% convertible senior notes, due December 15, 2019 assumed from the Cyan acquisition and 9.2 million shares underlying Ciena's 4.0% convertible senior notes, due December 15, 2020.

2. The calculation of Adjusted (non-GAAP) diluted net income per common share for the fourth quarter of fiscal 2015 requires adding back interest expense of approximately $1.4 million associated with Ciena's 0.875% convertible senior notes, due June 15, 2017, approximately $3.6 million associated with Ciena's 3.75% convertible senior notes, due October 15, 2018, approximately $0.1 million associated with Ciena's 8.0% convertible senior notes, due December 15, 2019 assumed from the Cyan acquisition and approximately $2.8 million associated with Ciena's 4.0% convertible senior notes, due December 15, 2020 to the Adjusted (non-GAAP) net income in order to derive the numerator for the Adjusted earnings per common share calculation.

3. Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per common share for fiscal 2014 includes 2.1 million shares underlying certain stock options and restricted stock units and 13.1 million shares underlying Ciena's 0.875% convertible senior notes, due June 15, 2017.

Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per common share for fiscal 2015 includes 1.7 million shares underlying certain stock options and restricted stock units, 3.4 million shares underlying Ciena's 4.0% convertible senior notes (which were paid at maturity during the second quarter of fiscal 2015), 13.1 million shares underlying Ciena's 0.875% convertible senior notes, due June 15, 2017, 17.4 million shares underlying Ciena's 3.75% convertible senior notes, due October 15, 2018, 0.2 million shares underlying Ciena's 8.0% convertible senior notes assumed from the Cyan acquisition, due December 15, 2019, and 9.2 million shares underlying Ciena's 4.0% convertible senior notes, due December 15, 2020.

4. The calculation of Adjusted (non-GAAP) diluted net income per common share for fiscal 2014 requires adding back interest expense of approximately $5.5 million associated with Ciena's 0.875% convertible senior notes, due June 15, 2017 to the Adjusted (non-GAAP) net income in order to derive the numerator for the Adjusted earnings per common share calculation.

The calculation of Adjusted (non-GAAP) diluted net income per common share for fiscal 2015 requires adding back interest expense of approximately $3.2 million approximately associated with Ciena's 4.0% convertible senior notes (which were paid at maturity during the second quarter of fiscal 2015), approximately $5.5 million associated with Ciena's 0.875% convertible senior notes, due June 15, 2017, approximately $14.3 million associated with Ciena's 3.75% convertible senior notes, due October 15, 2018, approximately $0.1 million associated with Ciena's 8.0% convertible senior notes, due December 15, 2019 assumed from the Cyan acquisition and approximately $11.4 million associated with Ciena's 4.0% convertible senior notes, due December 15, 2020 to the Adjusted (non-GAAP) net income in order to derive the numerator for the Adjusted earnings per common share calculation.

* * *

The adjusted (non-GAAP) measures above and their reconciliation to Ciena's GAAP results for the periods presented reflect adjustments relating to the following items:

  • Share-based compensation expense - a non-cash expense incurred in accordance with share-based compensation accounting guidance.
  • Acquisition and integration costs - consist of financial, legal and accounting advisors, facilities and systems consolidation costs, and severance and other employment-related costs related to our recent acquisition of Cyan. Ciena does not believe that these costs are reflective of its ongoing operating expense following its completion of these integration activities.
  • Amortization of intangible assets - a non-cash expense arising from the acquisition of intangible assets, principally developed technologies and customer-related intangibles, that Ciena is required to amortize over the expected useful life.
  • Fair value adjustment of acquired inventory - an infrequent charge required by acquisition accounting rules resulting from the required revaluation of inventory acquired from Cyan to estimated fair value. This revaluation resulted in a net increase in inventory carrying value and an increase in cost of goods sold for the periods indicated.
  • Restructuring costs - costs incurred as a result of restructuring activities taken to align resources with perceived market opportunities.
  • Settlement of patent litigation - included in general and administrative expense is a $2.0 million patent litigation settlement during the second quarter of fiscal 2014 and a $0.5 million patent litigation settlement during the third quarter of fiscal 2015.
  • Non-cash expense associated with the conversion of convertible notes - a non-cash expense related to certain private exchange offers conducted with several holders of Ciena's 4.0% senior convertible notes due March 15, 2015 prior to maturity of such notes
  • Non-cash interest expense - a non-cash debt discount expense amortized as interest expense during the term of Ciena's 4.0% senior convertible notes due December 15, 2020 relating to the required separate accounting of the equity component of these convertible notes.
  • Change in fair value of embedded redemption feature - a non-cash unrealized gain or loss reflective of a mark to market fair value adjustment of an embedded derivative related to the redemption feature of Ciena's outstanding 4.0% senior convertible notes due March 15, 2015, which were paid at maturity during the second quarter of fiscal 2015.

Source: Ciena Corporation

Press Contact:
Ciena Corporation
Nicole Anderson, 877-857-7377
pr@ciena.com
or
Investor Contact:
Ciena Corporation
Gregg Lampf, 877-243-6273
ir@ciena.com