Ciena Reports Fiscal Fourth Quarter 2016 and Year-End Financial Results

December 8, 2016 at 8:00 AM EST

HANOVER, Md.--(BUSINESS WIRE)--Dec. 8, 2016-- Ciena® Corporation (NYSE: CIEN), the network specialist, today announced unaudited financial results for its fiscal fourth quarter and year ended October 31, 2016.

For the fiscal fourth quarter 2016, Ciena reported revenue of $716.2 million as compared to $692.0 million for the fiscal fourth quarter 2015. For fiscal year 2016, Ciena reported revenue of $2.6 billion, as compared to $2.4 billion for fiscal year 2015.

On the basis of generally accepted accounting principles (GAAP), Ciena's net income for the fiscal fourth quarter 2016 was $36.6 million, or $0.25 per diluted common share, which compares to a GAAP net loss of $13.8 million, or $0.10 per diluted common share, for the fiscal fourth quarter 2015. For fiscal year 2016, Ciena had a GAAP net income of $72.6 million, or $0.51 per diluted common share, which compares to a GAAP net income of $11.7 million or $0.10 per diluted common share for fiscal year 2015.

Ciena's adjusted (non-GAAP) net income for the fiscal fourth quarter 2016 was $69.4 million, or $0.44 per diluted common share, which compares to an adjusted (non-GAAP) net income of $67.3 million, or $0.42 per diluted common share, for the fiscal fourth quarter 2015. For fiscal year 2016, Ciena's adjusted (non-GAAP) net income was $214.6 million, or $1.38 per diluted common share, as compared to an adjusted (non-GAAP) net income of $179.0 million, or $1.31 per diluted common share for fiscal year 2015.

“Our strong fiscal 2016 results demonstrate our increasingly differentiated performance versus our competitors, marking Ciena's seventh consecutive year of growing faster than the overall market as well as steady improvement in our operating leverage, profitability and cash flow,” said Gary Smith, president and CEO, Ciena. “We believe that the combination of our leading technology, strategic investments, global scale and business diversification will enable us to continue to take market share and drive operating leverage in fiscal 2017.”

Fiscal Fourth Quarter 2016 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 2016   FY 2016   FY 2015   Q-T-Q*   Y-T-Y*
Revenue   $ 716.2     $ 670.6     $ 692.0     6.8 %   3.5 %
Gross margin     44.5 %     46.0 %     43.8 %   (1.5 )%   0.7 %
Operating expense   $ 258.9     $ 251.5     $ 293.6     2.9 %   (11.8 )%
Operating margin     8.3 %     8.5 %     1.4 %   (0.2 )%   6.9 %
     
    Non-GAAP Results (unaudited)
    Q4   Q3   Q4   Period Change
    FY 2016   FY 2016   FY 2015   Q-T-Q*   Y-T-Y*
Revenue   $ 716.2     $ 670.6     $ 692.0     6.8 %   3.5 %
Adj. gross margin     45.2 %     46.8 %     44.9 %   (1.6 )%   0.3 %
Adj. operating expense   $ 232.4     $ 223.4     $ 220.5     4.0 %   5.4 %
Adj. operating margin     12.8 %     13.5 %     13.0 %   (0.7 )%   (0.2 )%
 

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

 
     
    Revenue by Segment (unaudited)
    Q4 FY 2016   Q3 FY 2016   Q4 FY 2015
    Revenue   %   Revenue   %   Revenue   %
Networking Platforms                        
Converged Packet Optical   $ 488.0   68.1   $ 467.6   69.7   $ 484.3   70.0
Packet Networking     72.4   10.1     63.7   9.5     63.7   9.2
Optical Transport     5.8   0.8     9.6   1.4     16.7   2.4
Total Networking Platforms     566.2   79.0     540.9   80.6     564.7   81.6
                         
Software and Software-Related Services                        
Software Platforms     16.3   2.3     12.6   1.9     9.6   1.4
Software-Related Services     21.3   3.0     19.0   2.8     16.7   2.4
Total Software and Software-Related Services     37.6   5.3     31.6   4.7     26.3   3.8
                         
Global Services                        
Maintenance Support and Training     59.8   8.3     56.0   8.4     57.2   8.3
Installation and Deployment     38.6   5.4     31.2   4.7     33.5   4.8
Consulting and Network Design     14.0   2.0     10.9   1.6     10.3   1.5
Total Global Services     112.4   15.7     98.1   14.7     101.0   14.6
                         
Total   $ 716.2   100.0   $ 670.6   100.0   $ 692.0   100.0
                         
 

Additional Performance Metrics for Fiscal Fourth Quarter 2016

 
    Revenue by Geographic Region (unaudited)
    Q4 FY 2016   Q3 FY 2016   Q4 FY 2015
    Revenue   %   Revenue   %   Revenue   %
North America   $ 463.1   64.7   $ 438.0   65.3   $ 480.0   69.4
Europe, Middle East and Africa     112.5   15.7     104.3   15.6     94.0   13.6
Caribbean and Latin America     46.8   6.5     46.6   6.9     45.7   6.6
Asia Pacific     93.8   13.1     81.7   12.2     72.3   10.4
Total   $ 716.2   100.0   $ 670.6   100.0   $ 692.0   100.0
                         
  • U.S. customers contributed 61% of total revenue
  • One 10%-plus customer represented a total of 18.3% of revenue
  • Cash and investments totaled $1.14 billion
  • Cash flow from operations totaled $136.7 million
  • Average days' sales outstanding (DSOs) were 72
  • Accounts receivable balance was $576.2 million
  • Inventories totaled $211.3 million, including:
    • Raw materials: $44.6 million
    • Work in process: $12.9 million
    • Finished goods: $156.4 million
    • Deferred cost of sales: $59.9 million
    • Reserve for excess and obsolescence: $(62.5) million
  • Product inventory turns were 6.1
  • Headcount totaled 5,555

Business Outlook for Fiscal First Quarter 2017

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 2017 to include:

  • Revenue in the range of $615 million to $645 million
  • Adjusted (non-GAAP) gross margin in the mid-40s percentage range
  • Adjusted (non-GAAP) operating expense in the range of $220 million to $225 million

Live Web Broadcast of Unaudited Fiscal Fourth Quarter 2016 Results

Ciena will host a discussion of its unaudited fiscal fourth quarter 2016 results with investors and financial analysts today, Thursday, December 8, 2016 at 8:30 a.m. (Eastern). The live broadcast will be available at www.ciena.com, and an archived replay will be available shortly following the conclusion of the live broadcast on the Investor Relations page of Ciena's website at www.ciena.com/investors. Ciena will also post to the Investor Relations page a presentation that includes certain highlighted information discussed on the call and certain historical results of operations.

Notes to Investors

Forward-Looking Statements. You are encouraged to review the Investors section of our website, where we routinely post press releases, SEC filings, recent news, financial results, supplemental financial information, and other announcements. From time to time we exclusively post material information to this website along with other disclosure channels that we use. 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 fiscal 2016 results demonstrate our increasingly differentiated performance versus our competitors, marking Ciena's seventh consecutive year of growing faster than the overall market as well as steady improvement in our operating leverage, profitability and cash flow."; "We believe that the combination of our leading technology, strategic investments, global scale and business diversification will enable us to continue to take market share and drive operating leverage in fiscal 2017." "Ciena expects fiscal first quarter 2017 financial performance to include: Revenue in the range of $615 million to $645 million; Adjusted (non-GAAP) gross margin in the mid-40s percentage range; Adjusted (non-GAAP) operating expense in the range of $220 million to $225 million."

Ciena's actual results, performance or events may differ materially from these forward-looking statements made or implied due to 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 large communication service providers; 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, which Ciena filed with the Securities and Exchange Commission on September 7, 2016. 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 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. Adjustments made in calculating Adjusted (non-GAAP) net income do not result in any incremental income tax due to the availability of Ciena's deferred tax assets which would offset any additional income. As such, the tax effect of these adjustments is not presented as a separate reconciling item. To the extent not previously disclosed in a prior Ciena financial results press release, Appendix A to this press release sets forth a complete GAAP to non-GAAP reconciliation of the non-GAAP measures contained in this release.

With respect to Ciena’s expectations under “Business Outlook for Fiscal First Quarter 2017” above, Ciena is not able to provide a quantitative reconciliation of the adjusted (non-GAAP) gross margin and adjusted (non-GAAP) operating expense guidance measures to the corresponding gross profit and gross profit percentage, and operating expense GAAP measures without unreasonable efforts. Ciena cannot provide meaningful estimates of the non-recurring charges and credits excluded from these non-GAAP measures due to the forward-looking nature of these estimates and their inherent variability and uncertainty. For the same reasons, Ciena is unable to address the probable significance of the unavailable information.

About Ciena. Ciena (NYSE: CIEN) is a network strategy and technology company. We translate best-in-class technology into value through a high-touch, consultative business model - with a relentless drive to create exceptional experiences measured by outcomes. For updates on Ciena, follow us on Twitter @Ciena, LinkedIn, the Ciena Insights blog, or visit www.ciena.com.

 

CIENA CORPORATION

CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 
    Quarter Ended October 31,   Year Ended October 31,
    2016   2015   2016   2015
Revenue:                
Products   $ 582,455     $ 574,281     $ 2,117,472     $ 2,002,395  
Services     133,736       117,692       483,101       443,274  
Total revenue     716,191       691,973       2,600,573       2,445,669  
Cost of goods sold:                
Products     324,663       323,090       1,176,304       1,120,373  
Services     72,980       65,895       262,693       249,733  
Total cost of goods sold     397,643       388,985       1,438,997       1,370,106  
Gross profit     318,548       302,988       1,161,576       1,075,563  
Operating expenses:                
Research and development     112,448       107,859       451,794       414,201  
Selling and marketing     96,853       93,003       349,731       333,836  
General and administrative     32,147       33,804       132,828       123,402  
Amortization of intangible assets     14,551       36,454       61,508       69,511  
Acquisition and integration costs           22,084       4,613       25,539  
Restructuring costs     2,876       366       4,933       8,626  
Total operating expenses     258,875       293,570       1,005,407       975,115  
Income from operations     59,673       9,418       156,169       100,448  
Interest and other income (loss), net     (1,339 )     (6,232 )     (12,795 )     (25,505 )
Interest expense     (15,371 )     (12,688 )     (56,656 )     (51,179 )
Income (loss) before income taxes     42,963       (9,502 )     86,718       23,764  
Provision for income taxes     6,376       4,330       14,134       12,097  
Net income (loss)   $ 36,587     $ (13,832 )   $ 72,584     $ 11,667  
                 
Net Income (loss) per Common Share                
Basic net income (loss) per common share   $ 0.26     $ (0.10 )   $ 0.52     $ 0.10  
Diluted net income (loss) per potential common share1   $ 0.25     $ (0.10 )   $ 0.51     $ 0.10  
                 
Weighted average basic common shares outstanding     139,741       134,097       138,312       118,416  
Weighted average diluted potential common shares outstanding 2     165,298       134,097       150,704       120,101  
                                 
1. The calculation of GAAP diluted net income per common share for the fourth quarter of fiscal 2016 requires adding back interest expense of approximately $0.7 million associated with Ciena's 0.875% convertible senior notes, due June 15, 2017 and approximately $3.6 million associated with Ciena's 3.75% convertible senior notes, due October 15, 2018 to the GAAP net income in order to derive the numerator for the diluted earnings per common share calculation.
 
The calculation of GAAP diluted net income per common share for fiscal 2016 requires adding back interest expense of approximately $4.8 million associated with Ciena's 0.875% convertible senior notes, due June 15, 2017 to the GAAP net income in order to derive the numerator for the diluted earnings per common share calculation.
 
2. Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per common share for the fourth quarter of fiscal 2016 includes 1.6 million shares underlying certain stock options and restricted stock units, 6.6 million shares underlying Ciena's 0.875% convertible senior notes, due June 15, 2017 and 17.4 million shares underlying Ciena's 3.75% convertible senior notes, due October 15, 2018.
 
Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per common share for fiscal 2016 includes 1.3 million shares underlying certain stock options and restricted stock units and 11.1 million shares underlying Ciena's 0.875% convertible senior notes, due June 15, 2017.
 
Weighted average dilutive potential common shares outstanding used in calculating 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,
    2016   2015
ASSETS        
Current assets:        
Cash and cash equivalents   $ 777,615     $ 790,971  
Short-term investments     275,248       135,107  
Accounts receivable, net     576,235       550,792  
Inventories     211,251       191,162  
Prepaid expenses and other     172,843       196,178  
Total current assets     2,013,192       1,864,210  
Long-term investments     90,172       95,105  
Equipment, building, furniture and fixtures, net     288,406       191,973  
Goodwill, net     266,974       256,434  
Other intangible assets, net     146,711       202,673  
Other long-term assets     76,987       84,656  
Total assets   $ 2,882,442     $ 2,695,051  
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)        
Current liabilities:        
Accounts payable   $ 235,942     $ 222,140  
Accrued liabilities and other short-term obligations     310,353       316,283  
Deferred revenue     109,009       126,111  
Current portion of long-term debt     236,558       2,500  
Total current liabilities     891,862       667,034  
Long-term deferred revenue     73,854       62,962  
Other long-term obligations     124,394       72,540  
Long-term debt, net     1,025,991       1,271,639  
Total liabilities   $ 2,116,101     $ 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; 139,767,627 and 135,612,217 shares issued and outstanding     1,398       1,356  
Additional paid-in capital     6,715,478       6,640,436  
Accumulated other comprehensive loss     (24,329 )     (22,126 )
Accumulated deficit     (5,926,206 )     (5,998,790 )
Total stockholders’ equity     766,341       620,876  
Total liabilities and stockholders’ equity   $ 2,882,442     $ 2,695,051  
                 
 

CIENA CORPORATION

CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 
    Year Ended October 31,
    2016   2015
Cash flows from operating activities:        
Net income   $ 72,584     $ 11,667  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements     63,394       55,901  
Share-based compensation costs     51,993       55,340  
Amortization of intangible assets     78,298       79,866  
Provision for inventory excess and obsolescence     33,713       26,846  
Provision for warranty     15,483       17,881  
Other     25,514       27,373  
Changes in assets and liabilities:        
Accounts receivable     (26,074 )     (37,297 )
Inventories     (53,000 )     46,898  
Prepaid expenses and other     30,047       (46,383 )
Accounts payable, accruals and other obligations     7,153       (10,505 )
Deferred revenue     (9,585 )     34,525  
Net cash provided by operating activities     289,520       262,112  
Cash flows used in investing activities:        
Payments for equipment, furniture, fixtures and intellectual property     (107,185 )     (62,109 )
Restricted cash     11       (40 )
Purchase of available for sale securities     (365,191 )     (245,323 )
Proceeds from maturities of available for sale securities     230,612       205,000  
Settlement of foreign currency forward contracts, net     (18,506 )     24,133  
Purchase of cost method investment     (4,000 )     (2,000 )
Acquisition of business, net of cash acquired     (32,000 )     37,212  
Net cash used in investing activities     (296,259 )     (43,127 )
Cash flows from financing activities:        
Proceeds from issuance of long-term debt, net     248,750        
Payment of long-term debt     (266,116 )     (29,867 )
Payment of debt and equity issuance costs     (3,987 )     (421 )
Payment of capital lease obligations     (5,966 )     (8,038 )
Proceeds from issuance of common stock     23,091       30,275  
Net cash used in financing activities     (4,228 )     (8,051 )
Effect of exchange rate changes on cash and cash equivalents     (2,389 )     (6,683 )
Net increase in cash and cash equivalents     (13,356 )     204,251  
Cash and cash equivalents at beginning of fiscal year     790,971       586,720  
Cash and cash equivalents at end of fiscal year   $ 777,615     $ 790,971  
Supplemental disclosure of cash flow information        
Cash paid during the fiscal year for interest   $ 46,897     $ 40,772  
Cash paid during the fiscal year for income taxes, net   $ 15,268     $ 10,668  
Non-cash investing and financing activities        
Purchase of equipment in accounts payable   $ 15,030     $ 20,922  
Equipment acquired under capital leases   $ 5,322     $ 464  
Building subject to capital lease   $ 8,993     $ 14,939  
Construction in progress subject to build-to-suit lease   $ 39,914     $ 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,

    2016   2015
Gross Profit Reconciliation (GAAP/non-GAAP)        
GAAP gross profit   $ 318,548     $ 302,988  
Share-based compensation-products     612       589  
Share-based compensation-services     557       573  
Amortization of intangible assets     4,320       3,438  
Fair value adjustment of acquired inventory           3,069  
Total adjustments related to gross profit     5,489       7,669  
Adjusted (non-GAAP) gross profit   $ 324,037     $ 310,657  
Adjusted (non-GAAP) gross profit percentage     45.2 %     44.9 %
         
Operating Expense Reconciliation (GAAP/non-GAAP)        
GAAP operating expense   $ 258,875     $ 293,570  
Share-based compensation-research and development     3,172       3,850  
Share-based compensation-sales and marketing     2,890       4,468  
Share-based compensation-general and administrative     2,961       5,860  
Share-based compensation-acquisition and integration           7,588  
Amortization of intangible assets     14,551       36,454  
Acquisition and integration costs, excluding share-based compensation           14,496  
Restructuring costs     2,876       366  
Total adjustments related to operating expense     26,450       73,082  
Adjusted (non-GAAP) operating expense   $ 232,425     $ 220,488  
         
Income from Operations Reconciliation (GAAP/non-GAAP)        
GAAP income from operations   $ 59,673     $ 9,418  
Total adjustments related to gross profit     5,489       7,669  
Total adjustments related to operating expense     26,450       73,082  
Adjusted (non-GAAP) income from operations     91,612     $ 90,169  
Adjusted (non-GAAP) operating margin percentage     12.8 %     13.0 %
         
Net Income Reconciliation (GAAP/non-GAAP)        
GAAP net income (loss)   $ 36,587     $ (13,832 )
Total adjustments related to gross profit     5,489       7,669  
Total adjustments related to operating expense     26,450       73,082  
Loss on extinguishment of debt     376        
Non-cash interest expense     500       362  
Adjusted (non-GAAP) net income   $ 69,402     $ 67,281  
         
Weighted average basic common shares outstanding     139,741       134,097  
Weighted average dilutive potential common shares outstanding1     174,496       177,054  
         
Net Income (Loss) per Common Share        
GAAP diluted net income (loss) per common share   $ 0.25     $ (0.10 )
Adjusted (non-GAAP) diluted net income per common share2   $ 0.44     $ 0.42  
                 
 
APPENDIX B - Reconciliation of Adjusted (Non- GAAP) Annual Measurements (unaudited)
 
   

Year Ended
October 31,

    2016   2015
Gross Profit Reconciliation (GAAP/non-GAAP)        
GAAP gross profit   $ 1,161,576     $ 1,075,563  
Share-based compensation-products     2,457       2,400  
Share-based compensation-services     2,479       2,156  
Amortization of intangible assets     16,401       10,039  
Fair value adjustment of acquired inventory           3,069  
Total adjustments related to gross profit     21,337       17,664  
Adjusted (non-GAAP) gross profit   $ 1,182,913     $ 1,093,227  
Adjusted (non-GAAP) gross profit percentage     45.5 %     44.7 %
         
Operating Expense Reconciliation (GAAP/non-GAAP)        
GAAP operating expense   $ 1,005,407     $ 975,115  
Share-based compensation-research and development     13,870       10,665  
Share-based compensation-sales and marketing     15,138       15,539  
Share-based compensation-general and administrative     17,342       17,018  
Share-based compensation-acquisition and integration     714       7,588  
Amortization of intangible assets     61,508       69,511  
Acquisition and integration costs, excluding share-based compensation     3,899       17,951  
Restructuring costs     4,933       8,626  
Settlement of patent litigation     1,200       500  
Total adjustments related to operating expense     118,604       147,398  
Adjusted (non-GAAP) operating expense   $ 886,803     $ 827,717  
         
Income from Operations Reconciliation (GAAP/non-GAAP)        
GAAP income from operations   $ 156,169     $ 100,448  
Total adjustments related to gross profit     21,337       17,664  
Total adjustments related to operating expense     118,604       147,398  
Adjusted (non-GAAP) income from operations   $ 296,110     $ 265,510  
Adjusted (non-GAAP) operating margin percentage     11.4 %     10.9 %
         
Income Reconciliation (GAAP/non-GAAP)        
GAAP net income   $ 72,584     $ 11,667  
Total adjustments related to gross profit     21,337       17,664  
Total adjustments related to operating expense     118,604       147,398  
Loss on extinguishment of debt     226        
Non-cash expense associated with the conversion of convertible notes           768  
Non-cash interest expense     1,881       1,491  
Adjusted (non-GAAP) net income   $ 214,632     $ 178,988  
         
Weighted average basic common shares outstanding     138,312       118,416  
Weighted average dilutive potential common shares outstanding3     177,258       163,308  
         
Net Income per Common Share        
GAAP diluted net income per common share   $ 0.51     $ 0.10  
Adjusted (non-GAAP) diluted net income per common share4   $ 1.38     $ 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 2016 includes 1.6 million shares underlying certain stock options and restricted stock units, 6.6 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 and 9.2 million shares underlying Ciena's 4.0% convertible senior notes, due December 15, 2020.
 
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 2016 requires adding back interest expense of approximately $0.7 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 and approximately $2.9 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 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 2016 includes 1.3 million shares underlying certain stock options and restricted stock units, 11.1 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 and 9.2 million shares underlying Ciena's 4.0% convertible senior notes, due December 15, 2020.
 
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 2016 requires adding back interest expense of approximately $4.8 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 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 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 acquisitions of Cyan and TeraXion. 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 period 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 $1.2 million patent litigation settlement during the second quarter of fiscal 2016 and a $0.5 million patent litigation settlement during the third quarter of fiscal 2015.
  • Loss on extinguishment of debt - a loss related to certain private repurchases conducted with several holders of Ciena's 0.875% convertible senior notes, due June 15, 2017.
  • 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.

Source: Ciena Corporation

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