SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
August 21, 2003
Date of Report (Date of earliest event reported)
CIENA Corporation
(Exact name of registrant as specified in its charter)
Delaware | 0-21969 | 23-2725311 | ||
(State or other jurisdiction of incorporation) | (Commission File No.) | (IRS Employer Identification No.) |
1201 Winterson Road, Linthicum, Maryland 21090
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code:
(410) 865-8500
Not applicable
(Former name or former address, if changed since last report)
Exhibit Index on Page 2
The information in this Report, including the exhibit, is furnished under Item 12 of Form 8-K and, pursuant to General Instruction B.6. thereunder, is not filed for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section. Furthermore, the information in this Report, including the exhibit, is not incorporated by reference into the filings of the registrant under the Securities Act of 1933.
Item 7 Financial Statements and Exhibits.
(c) Exhibits The following exhibit is furnished as part of this Report:
Exhibit 99.1 Text of Press Release issued by CIENA Corporation, dated August 21, 2003. |
Item 12 Results of Operations and Financial Condition.
On August 21, 2003, CIENA Corporation issued a press release announcing its financial results for the fiscal quarter ended July 31, 2003. A copy of the press release is furnished as Exhibit 99.1 to this Report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CIENA CORPORATION | ||
Dated: August 21, 2003 | By: /s/ Russell B. Stevenson, Jr. | |
|
||
Senior Vice President, General Counsel | ||
and Secretary |
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Investor Contacts: | Suzanne DuLong or Jessica Towns | |
CIENA Corporation | ||
(888) 243-6223 | ||
email: ir@ciena.com | ||
Press Contacts: | Denny Bilter or Aaron Graham | |
CIENA Corporation | ||
(877) 857-7377 | ||
email: pr@ciena.com |
FOR IMMEDIATE RELEASE
CIENA Reports Third Quarter Results
LINTHICUM, Md. August 21, 2003 CIENA® Corporation (NASDAQ: CIEN), a leading global provider of innovative networking solutions, today reported its third quarter results for the period ending July 31, 2003. Revenue for the quarter totaled $68.5 million, an increase of 37% from same period a year ago. On a generally accepted accounting principles (GAAP) basis, CIENAs reported net loss for the period was $88.9 million, or a net loss of $0.20 per share.
Revenue for the nine months ending July 31, 2003 totaled $212.5 million. On a GAAP basis, CIENAs net loss for the nine-month period was $271.5 million, or a net loss of $0.62 per share.
Our actions to restore profitability and positive operating cash flow to our business are focused simultaneously on driving revenue, improving gross margin and aligning our costs in pursuit of growth market opportunities, said Gary Smith, CIENAs president and CEO. This quarter we recognized meaningful revenue from our recently completed acquisition of WaveSmith, improved our gross margin and achieved our operating expense targets a quarter ahead of plan.
CIENA is a very different company than it was just a year ago, and were not finished, said Smith. We have been taking deliberate steps to evolve into a more comprehensive network solutions provider. That transformation extends to every facet of our business from the markets we target and the products we sell to the way we receive and process orders to the way we prioritize R&D dollars.
This transformation is not an option, continued Smith. If CIENA is going to thrive in todays telecom environment, we must get bigger, not smaller. We continue to believe that we cannot simply cost-cut our way back to sustainable profitability. We believe restoring growth and profitability to our business will require the combination of expanding our addressable markets while simultaneously reducing and realigning our spending with the opportunities we see.
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CIENA Reports Q3 Results/August 21, 2003/Page 2 of 7
Non-GAAP Presentation
In evaluating the operating performance of its business, CIENAs management
excludes certain charges or credits that are required by GAAP. These items,
which are identified in the table below, 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 the
Companys control.
Quarter Ended | Nine Months Ended | ||||||||
July 31, 2003 | July 31, 2003 | ||||||||
Item | (in thousands) | (in thousands) | |||||||
Deferred stock compensation |
$ | 3,931 | $ | 13,290 | |||||
Amortization of intangible assets |
4,479 | 11,453 | |||||||
In-process research and development |
1,500 | 1,500 | |||||||
Nortel settlement |
| 2,500 | |||||||
Restructuring costs |
15,527 | 18,251 | |||||||
Loss on equity investments |
| 10 | |||||||
Loss on extinguishment of debt |
| 20,606 | |||||||
Income tax benefit on adjusted net loss |
22,397 | 71,944 | |||||||
Total Adjustments |
$ | 47,834 | $ | 139,554 | |||||
GAAP Net Loss |
$ | (88,874 | ) | $ | (271,477 | ) | |||
Adjusted for items above |
47,834 | 139,554 | |||||||
Non GAAP Net Loss |
$ | (41,040 | ) | $ | (131,923 | ) | |||
Please see Appendix A for additional information about this table.
These adjustments are not in accordance with GAAP, and making such adjustments may not permit meaningful comparisons to other companies. As of the quarter ended July 31, 2003, CIENAs weighted average shares outstanding were approximately 451,009,000. Adjusting CIENAs quarterly GAAP results as noted would reduce the Companys net loss in its third fiscal quarter to $0.09 per share.
As of the nine months ended July 31, 2003, CIENAs weighted average shares outstanding were approximately 438,133,000. Adjusting CIENAs nine-month GAAP results as noted would reduce the Companys net loss for the period to $0.30 per share.
Third Quarter Performance Highlights
| Recognized revenue from a record-high 72 customers. | ||
| Added seven new customers in the quarter, including two incumbent carriers. | ||
| Lowered cash burn 13% sequentially. | ||
| Ended the quarter with cash and short- and long-term securities valued at $1.75 billion, using cash of $68.2 million in the quarter. |
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CIENA Reports Q3 Results/August 21, 2003/Page 3 of 7
| Closed the acquisition of WaveSmith Networks and recognized meaningful revenue from the DN platform in the quarter. | ||
| Achieved operating expense target of low-to-mid $80 million one quarter ahead of plan. | ||
| Reduced inventory for the eighth sequential quarter. |
Third Quarter Solution Highlights
| Launched ONLINE Metro Service Aggregator to support multiple data services in one platform. | ||
| Integrated management of multiservice solutions extending CIENAs point-and-click service provisioning and other management functions into the data layer. | ||
| Introduced enhancements to MetroDirector K2 enabling flexible new Ethernet services on existing networks. | ||
| Announced new CoreStream capabilities enabling end-to-end data service offerings and lower network costs. | ||
| Released ON-Designer software suite for automated design, validation and turn-up of end-to-end networks. | ||
| Delivered integrated Ethernet multiplexing on ONLINE Edge. |
Business Outlook
We continue to win new customers and to expand the solution set sold to
existing customers, said Smith. However, the timing of revenue recognition,
particularly with incumbent carriers, remains difficult to predict with
certainty. As a result, we believe revenue in our fourth fiscal quarter is
likely to be between five percent up or down from our fiscal third quarter
revenue, depending on the timing of significant orders.
As part of ongoing efforts to transform CIENA and restore profitability, we also have set new operating expense targets, said Smith. CIENA has consistently viewed cost reduction holistically as a process ultimately leading toward a different CIENA. We believe the restructuring steps taken previously make it possible for us to reduce ongoing operating expenses by an additional 10% to 20% over the next year without jeopardizing customer commitments or near- or long-term growth opportunities.
Further, we expect to realize a significant portion of our total longer-term cost savings starting in the first half of fiscal 2004. We also expect to continue to take steps that enable us to lower our quarterly cash burn and improve our already strong balance sheet, concluded Smith.
Separately today, CIENA announced its intent to acquire Akara Corporation, signaling its entrée into the growing market for SONET/SDH-based extended storage area networking (SAN) solutions. CIENA expects this transaction to be completed in its fourth fiscal quarter 2003.
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CIENA Reports Q3 Results/August 21, 2003/Page 4 of 7
Live Web Broadcast of Q3 Results
CIENA will host a discussion of its fiscal third quarter 2003 results with
investors and financial analysts today, Thursday, August 21, 2003 at 8:30 a.m.
(Eastern). The live broadcast of the discussion will be available via CIENAs
homepage at www.CIENA.com. An archived version of the discussion will be
available shortly following the conclusion of the live broadcast on the
Investor Relations page of CIENAs website at: www.CIENA.com/investors.
NOTE TO CIENA INVESTORS
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CIENA Reports Q3 Results/August 21, 2003/Page 5 of 7
CIENA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Quarter Ended | Nine Months Ended | ||||||||||||||||
July 31, | July 31, | July 31, | July 31, | ||||||||||||||
2002 | 2003 | 2002 | 2003 | ||||||||||||||
Revenues: |
|||||||||||||||||
Products |
$ | 41,029 | $ | 59,294 | $ | 254,428 | $ | 183,913 | |||||||||
Services |
8,999 | 9,184 | 44,809 | 28,579 | |||||||||||||
Total Revenue |
50,028 | 68,478 | 299,237 | 212,492 | |||||||||||||
Costs: |
|||||||||||||||||
Products |
37,450 | 39,249 | 191,595 | 123,335 | |||||||||||||
Services |
13,510 | 12,749 | 66,163 | 42,300 | |||||||||||||
Provision (benefit) for excess and obsolete inventory costs |
41,192 | (55 | ) | 284,883 | (4,158 | ) | |||||||||||
Total cost of goods sold |
92,152 | 51,943 | 542,641 | 161,477 | |||||||||||||
Gross profit (loss) |
(42,124 | ) | 16,535 | (243,404 | ) | 51,015 | |||||||||||
Operating expenses: |
|||||||||||||||||
Research and development (exclusive of $3,860, $2,932, $11,277
and $10,136 deferred stock compensation costs) |
53,950 | 47,963 | 178,264 | 153,890 | |||||||||||||
Selling and marketing (exclusive of $842, $687, $2,649 and
$2,122 deferred stock compensation costs) |
30,829 | 24,536 | 98,264 | 76,805 | |||||||||||||
General and administrative (exclusive of $256, $312, $658, and
$1,032 deferred stock compensation costs) |
10,798 | 7,969 | 37,729 | 28,241 | |||||||||||||
Deferred stock compensation costs |
4,958 | 3,931 | 14,584 | 13,290 | |||||||||||||
Amortization of intangible assets (exclusive of $0, $966, $0,
and $2,315 included in cost of goods sold related to certain
technology licenses) |
2,343 | 4,479 | 5,969 | 11,453 | |||||||||||||
In-process research and development |
| 1,500 | | 1,500 | |||||||||||||
Nortel Networks settlement costs |
| | | 2,500 | |||||||||||||
Restructuring costs |
18,562 | 15,527 | 146,738 | 18,251 | |||||||||||||
Provision for doubtful accounts |
(1,242 | ) | | 14,813 | | ||||||||||||
Total operating expenses |
120,198 | 105,905 | 496,361 | 305,930 | |||||||||||||
Loss from operations |
(162,322 | ) | (89,370 | ) | (739,765 | ) | (254,915 | ) | |||||||||
Interest and other income (expense), net |
13,558 | 8,865 | 44,775 | 33,297 | |||||||||||||
Interest expense |
(10,614 | ) | (8,070 | ) | (29,756 | ) | (28,334 | ) | |||||||||
Loss on equity investments, net |
| | (5,740 | ) | (10 | ) | |||||||||||
Loss on extinguishment of debt |
| | | (20,606 | ) | ||||||||||||
Loss before income taxes |
(159,378 | ) | (88,575 | ) | (730,486 | ) | (270,568 | ) | |||||||||
Provision for income taxes |
607 | 299 | 112,243 | 909 | |||||||||||||
Net loss |
$ | (159,985 | ) | $ | (88,874 | ) | $ | (842,729 | ) | $ | (271,477 | ) | |||||
Basic and dilutive net loss per common share and
dilutive potential common share |
$ | (0.42 | ) | $ | (0.20 | ) | $ | (2.45 | ) | $ | (0.62 | ) | |||||
Weighted average basic common and dilutive potential
common shares outstanding |
376,548 | 451,009 | 344,242 | 438,133 | |||||||||||||
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CIENA Reports Q3 Results/August 21, 2003/Page 6 of 7
CIENA CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
October 31, | July 31, | |||||||||||
2002 | 2003 | |||||||||||
ASSETS |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 377,189 | $ | 585,258 | ||||||||
Short-term investments |
1,130,414 | 727,078 | ||||||||||
Accounts receivable, net |
28,680 | 41,966 | ||||||||||
Inventories, net |
47,023 | 26,954 | ||||||||||
Prepaid expenses and other |
54,351 | 33,863 | ||||||||||
Total current assets |
1,637,657 | 1,415,119 | ||||||||||
Long-term investments |
570,861 | 437,135 | ||||||||||
Equipment, furniture and fixtures, net |
196,951 | 132,061 | ||||||||||
Goodwill |
212,500 | 301,024 | ||||||||||
Other intangible assets, net |
62,457 | 130,889 | ||||||||||
Other long-term assets |
70,596 | 62,635 | ||||||||||
Total assets |
$ | 2,751,022 | $ | 2,478,863 | ||||||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||||||
Current liabilities: |
||||||||||||
Accounts payable |
$ | 39,841 | $ | 40,390 | ||||||||
Accrued liabilities |
132,588 | 110,880 | ||||||||||
Restructuring liabilities |
27,423 | 12,686 | ||||||||||
Unfavorable lease commitments |
7,630 | 8,744 | ||||||||||
Income taxes payable |
| 5,203 | ||||||||||
Deferred revenue |
15,388 | 16,802 | ||||||||||
Other current obligations |
948 | | ||||||||||
Total current liabilities |
223,818 | 194,705 | ||||||||||
Long-term deferred revenue |
15,444 | 13,342 | ||||||||||
Long-term restructuring liabilities |
65,742 | 53,657 | ||||||||||
Long-term unfavorable lease commitments |
70,124 | 63,365 | ||||||||||
Other long-term obligations |
5,009 | 2,886 | ||||||||||
Convertible notes payable |
843,616 | 729,514 | ||||||||||
Total liabilities |
1,223,753 | 1,057,469 | ||||||||||
Commitments and contingencies |
||||||||||||
Stockholders equity: |
||||||||||||
Preferred stock par value $0.01; 20,000,000 shares authorized;
zero shares issued and outstanding |
| | ||||||||||
Common stock par value $0.01; 980,000,000 shares authorized;
432,842,481 and 468,743,185 shares issued and outstanding |
4,328 | 4,687 | ||||||||||
Additional paid-in capital |
4,683,865 | 4,841,120 | ||||||||||
Deferred stock compensation |
(24,983 | ) | (14,878 | ) | ||||||||
Notes receivable from stockholders |
(3,866 | ) | (545 | ) | ||||||||
Accumulated other comprehensive income |
8,840 | 3,402 | ||||||||||
Accumulated deficit |
(3,140,915 | ) | (3,412,392 | ) | ||||||||
Total stockholders equity |
1,527,269 | 1,421,394 | ||||||||||
Total liabilities and stockholders equity |
$ | 2,751,022 | $ | 2,478,863 | ||||||||
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CIENA Reports Q3 Results/August 21, 2003/Page 7 of 7
Appendix A
The adjustments management makes in analyzing CIENAs third quarter 2003 GAAP results are as follows:
| Deferred stock compensation costs a non-cash expense largely unrelated to normal operations, and which arises under GAAP accounting from the assumption of unvested stock options issued by any companies we acquire, including Cyras, ONI and WaveSmith. | ||
| Amortization of intangible asset a non-cash expense unrelated to normal operations arising from acquisitions of intangible assets, principally developed technology acquired in the Cyras, ONI and WaveSmith acquisitions which CIENA is required to amortize over its expected useful life. | ||
| In-process research and development a non-recurring expense related to acquired technology. | ||
| Nortel litigation a non-recurring expense, unrelated to normal operations. | ||
| Restructuring costs non-recurring charges, unrelated to normal operations, incurred as the result of reducing the size of the Companys operations to align its resources with the reduced size of the telecommunications market as well as the result of targeting new segment opportunities within the overall market. | ||
| Income tax benefit on adjusted net loss the income tax charge or benefit on the adjusted net loss, which is a necessary adjustment for consistency. The Company currently has a full valuation allowance for GAAP reporting purposes and accordingly does not recognize a tax benefit for losses generated. |
ABOUT CIENA
CIENA Corporation delivers innovative network solutions to the worlds largest
service providers, increasing the cost-efficiency of current services while
enabling the creation of new carrier-class data services built upon the
existing network infrastructure. Additional information about CIENA can be
found at www.ciena.com.
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