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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
December 11, 2003
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Date of Report (Date of earliest event reported)
CIENA Corporation
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(Exact name of registrant as specified in its charter)
Delaware 0-21969 23-2725311
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
1201 Winterson Road, Linthicum, Maryland 21090
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(410) 865-8500
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Not applicable
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(Former name or former address, if changed since last report)
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 12 -- Regulation FD Disclosure (Information Provided Under Item 12 Results
of Operations and Financial Condition)
On December 11, 2003, CIENA Corporation issued a press release announcing its
financial results for the fourth fiscal quarter and fiscal year ended October
31, 2003. The text 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
Date: December 11, 2003 By: /s/ Russell B. Stevenson, Jr.
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Russell B. Stevenson, Jr.
Senior Vice President, General
Counsel and Secretary
3
Exhibit 99.1
CIENA Reports Fourth Quarter and Fiscal Year 2003 Results
LINTHICUM, Md.--(BUSINESS WIRE)--Dec. 11, 2003--CIENA(R)
Corporation (NASDAQ:CIEN), a leading global provider of innovative
networking solutions, today reported its fourth quarter results for
the period ending October 31, 2003. Revenue for the quarter totaled
$70.6 million, a 3% sequential increase and an increase of 14% from
same period a year ago. On a generally accepted accounting principles
(GAAP) basis, CIENA's reported net loss for the quarter was $115.0
million, or a net loss of $0.24 per share.
Revenue for the fiscal year ending October 31, 2003 totaled $283.1
million, a 22% decrease from fiscal 2002. On a GAAP basis, CIENA's net
loss for the fiscal year was $386.5 million, or a net loss of $0.87
per share, compared to the previous year's GAAP net loss of $1.6
billion, or $4.37 per share.
"CIENA continues to make strides toward sustained profitability,"
said Gary Smith, CIENA's president and chief executive officer. "Since
the fourth quarter of last year we have worked to enable growth by
entering four new markets and by adding nine new products to our
solutions portfolio as a result of both acquisitions and strategic
partnerships. During that same time, we have improved gross margins 17
points and reduced our ongoing operating expenses by 25%.
"Key to the success of CIENA's strategy of continued investment is
establishing the foundation for future revenue growth," said Smith.
"Overall, we believe we have made solid progress, and we are
encouraged by what seems to be a greater level of stability in the
telecom industry."
Non-GAAP Presentation
In evaluating the operating performance of its business, CIENA's
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 Company's control.
Fiscal Year
Quarter Ended Ended
October 31, October 31,
2003 2003
Item (in thousands) (in thousands)
---- -------------- --------------
Deferred stock compensation $3,487 $16,777
Amortization of intangible assets 6,416 17,870
In-process research and development 1,300 2,800
Restructuring costs 12,904 31,155
Goodwill and intangible impairment 29,596 29,596
Loss on equity investments, net 4,750 4,760
Loss on extinguishment of debt - 20,606
Nortel settlement - 2,500
Income tax benefit on adjusted net loss 20,031 91,975
-------------- --------------
Total Adjustments $78,484 $218,039
============== ==============
GAAP Net Loss $(115,040) $(386,517)
Adjusted for items above 78,484 218,039
-------------- --------------
Non GAAP Net Loss $(36,556) $(168,478)
============== ==============
Please see Appendix A for additional information about this table.
These adjustments are not in accordance with GAAP, and making
these adjustments may not permit meaningful comparisons to other
companies. As of the quarter ended October 31, 2003, CIENA's weighted
average shares outstanding were approximately 470,244,000. Adjusting
CIENA's quarterly GAAP results as noted would reduce the Company's net
loss in its fourth fiscal quarter to $0.08 per share.
As of the fiscal year ended October 31, 2003, CIENA's weighted
average shares outstanding were approximately 446,696,000. Adjusting
CIENA's twelve-month GAAP results as noted would reduce the Company's
net loss for the period to $0.38 per share.
Fourth Quarter 2003 Performance Highlights
-- Recognized revenue from 99 customers.
-- Completed the acquisition of Akara Corporation, recognizing
initial revenue from Akara's CN platform in the quarter and
adding 16 new CN customers.
-- Added six additional (non CN) first-time, revenue-generating
customers in the quarter.
-- Ended the quarter with cash and short- and long-term
investments valued at $1.63 billion, using cash of $123
million in the quarter.
-- Delivered lower-than-expected research and development, sales
and marketing, and general and administrative operating
expenses, despite the addition of a full quarter of
WaveSmith-related expenses and the addition of Akara-related
expenses.
Fourth Quarter 2003 Solution and Strategic Highlights
-- Entered the extended SONET/SDH-based storage area networking
(SAN) market with the acquisition of Akara.
-- Integrated Ethernet multiplexing into ONLINE Edge.
-- Entered the service edge router market with a worldwide
reseller agreement with Laurel Networks.
-- Entered the multiservice transport market with a worldwide
reseller agreement with Luminous Networks.
-- Reduced the cost of delivering storage extension services by
introducing ESCON enhancements to the ONLINE Edge platform.
-- Gained 'RUS Acceptance' from USDA's Rural Utilities Service on
CIENA's metro networking solutions.
Business Outlook
"In the last year, we have substantially increased CIENA's
addressable market and we believe, our future revenue and earnings
potential, by entering new markets where we anticipate growth,
predominantly as a result of the demand for a converged, all-service
network," said Smith. "Going forward, we will look for additional
opportunities to further expand our solution portfolio and to increase
our addressable market through both additional partnerships and
acquisitions.
"We expect that revenue in our first fiscal quarter will be flat
to up as much as ten percent from our fiscal fourth quarter revenue,
though as always, these expectations include some risk. We are growing
increasingly confident about our position with a number of incumbent
carriers and believe that the combination of new wins, our broader
solutions offering and our expanding customer base will fuel
meaningful revenue growth in fiscal 2004," concluded Smith.
Live Web Broadcast of Q4 and Fiscal Year Results Conference Call
CIENA will host a discussion of its fourth quarter and fiscal 2003
results with investors and financial analysts today, Thursday,
December 11, 2003 at 8:30 a.m. (Eastern). The live broadcast of the
discussion will be available via CIENA's 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
CIENA's website at: www.CIENA.com/investors.
NOTE TO CIENA INVESTORS
This press release contains certain forward-looking statements
based on current expectations, forecasts and assumptions of CIENA (the
Company) that involve risks and uncertainties. Forward-looking
statements in this release, including: CIENA continues to make strides
toward sustained profitability; key to the success of CIENA's strategy
of continued investment is establishing the foundation for future
revenue growth; overall, we believe we have made solid progress, and
we are encouraged by what seems to be a greater level of stability in
the telecom industry; in the last year, we have substantially
increased CIENA's addressable market and we believe, our future
revenue and earnings potential, by entering new markets where we
anticipate growth, predominantly as a result of the demand for a
converged, all-service network; going forward, we will look for
additional opportunities to further expand our solution portfolio and
to increase our addressable market through both additional
partnerships and acquisitions; we expect that revenue in our first
fiscal quarter will be flat to up as much as ten percent from our
fiscal fourth quarter revenue, though as always, these expectations
include some risk; and, we are growing increasingly confident about
our position with a number of incumbent carriers and believe that the
combination of new wins, our broader solutions offering and our
expanding customer base will fuel meaningful revenue growth in fiscal
2004, are based on information available to the Company as of the date
hereof. The Company's actual results could differ materially from
those stated or implied in such forward-looking statements, due to
risks and uncertainties associated with the Company's business, which
include the risk factors disclosed in the Company's Report on Form
10-K filed with the Securities and Exchange Commission on December 11,
2003. Forward-looking statements include statements regarding the
Company'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. The Company
assumes no obligation to update the information included in this press
release, whether as a result of new information, future events or
otherwise.
(Consolidated Statements of Operations and Consolidated Balance
Sheets follow)
CIENA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Quarter Ended Year Ended
October 31, October 31,
--------------------- ---------------------
2002 2003 2002 2003
---------- ---------- ---------- ----------
Revenue:
Products $49,726 $56,858 $304,155 $240,772
Services 12,192 13,786 57,000 42,364
---------- ---------- ---------- ----------
Total revenue 61,918 70,644 361,155 283,136
---------- ---------- ---------- ----------
Costs:
Products 36,479 35,563 228,074 158,898
Services 15,322 14,189 81,485 56,489
Excess and
obsolete
inventory costs 1,592 (1,138) 286,475 (5,296)
---------- ---------- ---------- ----------
Total cost of goods sold 53,393 48,614 596,034 210,091
---------- ---------- ---------- ----------
Gross profit
(loss) 8,525 22,030 (234,879) 73,045
---------- ---------- ---------- ----------
Operating Expenses
Research and
development 61,355 45,809 239,619 199,699
Selling and
marketing 32,012 26,389 130,276 103,193
General and
administrative 14,883 7,737 52,612 38,478
Deferred stock
compensation
costs
Research and
development 4,396 2,688 15,672 12,824
Selling and
marketing 911 606 3,560 2,728
General and
administrative(1) 433 193 1,092 1,225
Amortization of
intangible
assets 3,003 6,416 8,972 17,870
In-process
research and
development - 1,300 - 2,800
Restructuring
costs 78,691 12,904 225,429 31,155
Goodwill and
intangible
impairment 557,286 29,596 557,286 29,596
Provision for
doubtful
accounts - - 14,813 -
---------- ---------- ---------- ----------
Total operating
expenses 752,970 133,638 1,249,331 439,568
---------- ---------- ---------- ----------
Loss from operations (744,445) (111,608) (1,484,210) (366,523)
Interest and other
income, net 16,370 9,662 61,145 42,959
Interest expense (15,583) (7,997) (45,339) (36,331)
Loss on equity
investments, net (9,937) (4,750) (15,677) (4,760)
Loss on extinguishment
of debt (2,683) - (2,683) (20,606)
---------- ---------- ---------- ----------
Loss before income taxes (756,278) (114,693) (1,486,764) (385,261)
Provision (benefit) for
income taxes (1,508) 347 110,735 1,256
---------- ---------- ---------- ----------
Net loss $(754,770) $(115,040) $(1,597,499) $(386,517)
========== ========== ========== ==========
Basic and diluted net
loss per common share
and dilutive potential
common share $(1.75) $(0.24) $(4.37) $(0.87)
========== ========== ========== ==========
Weighted average basic
common and dilutive
potential common
shares outstanding 431,257 470,244 365,202 446,696
========== ========== ========== ==========
(1) During the quarter and year ended October 31, 2002 general and
administrative costs include $1.8 million related to the settlement of
Pirelli litigation. During the year ended October 31, 2003 general and
administrative costs include $2.5 million related to the settlement of
Nortel litigation.
CIENA CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
October 31,
----------------------
2002 2003
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $377,189 $309,665
Short-term investments 1,130,414 796,809
Accounts receivable, net 28,680 43,600
Inventories, net 47,023 44,995
Prepaid expenses and other 54,351 34,334
---------- ----------
Total current assets 1,637,657 1,229,403
Long-term investments 570,861 519,744
Equipment, furniture and fixtures, net 196,951 114,930
Goodwill 212,500 336,039
Other intangible assets, net 62,457 108,408
Other long-term assets 70,596 69,641
---------- ----------
Total assets $2,751,022 $2,378,165
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $39,841 $44,402
Accrued liabilities 132,588 98,926
Restructuring liabilities 27,423 14,378
Unfavorable lease commitments 7,630 9,380
Income taxes payable - 4,640
Deferred revenue 15,388 14,473
Other current obligations 948 -
---------- ----------
Total current liabilities 223,818 186,199
Long-term deferred revenue 15,444 14,547
Long-term restructuring liabilities 65,742 52,164
Long-term unfavorable lease commitments 70,124 61,312
Other long-term obligations 5,009 2,698
Convertible notes payable 843,616 730,428
---------- ----------
Total liabilities 1,223,753 1,047,348
---------- ----------
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
473,214,856 shares issued and outstanding 4,328 4,732
Additional paid-in capital 4,683,865 4,861,182
Deferred stock compensation (24,983) (9,664)
Notes receivable from stockholders (3,866) (448)
Accumulated other comprehensive income 8,840 2,447
Accumulated deficit (3,140,915) (3,527,432)
---------- ----------
Total stockholders' equity 1,527,269 1,330,817
---------- ----------
Total liabilities and stockholders' equity $2,751,022 $2,378,165
========== ==========
Appendix A
The adjustments management makes in analyzing CIENA's fourth
quarter and fiscal 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 assets - a non-cash expense
unrelated to normal operations arising from acquisitions of
intangible assets, principally developed technology acquired
in the Cyras, ONI, WaveSmith and Akara 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.
-- Restructuring costs - non-recurring charges, unrelated to
normal operations, incurred as the result of reducing the size
of the Company's 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.
-- Goodwill and intangible impairment - a non-cash expense
unrelated to normal operations.
-- Loss on equity investments, net - a decline in the fair market
value of an equity investment that is determined to be
other-than-temporary.
-- Loss on extinguishment of debt - a non-recurring expense,
unrelated to normal operations.
-- Nortel litigation - a non-recurring expense, unrelated to
normal operations incurred in the first quarter fiscal 2003
and included in general and administrative expense for fiscal
2003.
-- 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
world's largest service providers and enterprises, 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.
CONTACT: CIENA Corporation
Investor Contacts:
Suzanne DuLong or Jessica Towns, (888) 243-6223
email: ir@ciena.com
or
Press Contacts:
Denny Bilter or Aaron Graham, (877) 857-7377
email: pr@ciena.com