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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
August 19, 2004
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 (Commission File No.) (IRS Employer
of incorporation) Identification No.)
1201 Winterson Road, Linthicum, Maryland 21090
(Address of principal executive offices) (Zip Code)
Registrant's 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.
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 -- RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On August 19, 2004, CIENA Corporation issued a press release announcing its
financial results for the fiscal quarter ended July 31, 2004. The text of the
press release is furnished as Exhibit 99.1 to this Report.
EXHIBIT INDEX
Exhibit Number Description of Document
- -------------- -----------------------
Exhibit 99.1 Text of Press Release dated August 19, 2004, issued by CIENA
Corporation, reporting its results of operations for the
third quarter of fiscal 2004.
-2-
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 19, 2004 By: /s/ Russell B. Stevenson, Jr.
----------------------------------------------
Senior Vice President, General Counsel
and Secretary
-3-
Exhibit 99.1
CIENA Reports Third Quarter 2004 Results
LINTHICUM, Md.--(BUSINESS WIRE)--Aug. 19, 2004--CIENA(R)
Corporation (NASDAQ:CIEN), a leading global provider of intelligent
service creation and delivery solutions, today reported its third
fiscal quarter results for the period ending July 31, 2004. Consistent
with information in the Company's preliminary results announcement of
August 3, 2004, revenue for the quarter totaled $75.6 million,
representing a 1.2% sequential increase, and an increase of 10.4% for
the same period a year ago. On a generally accepted accounting
principles (GAAP) basis, CIENA's reported net loss for the quarter was
$141.5 million, or a net loss of $0.25 per share.
"More than a year ago CIENA embarked toward a goal of
significantly diversifying our product portfolio, and our business,"
said Gary Smith, CIENA's president and CEO. "As a result of strategic
acquisitions, partnerships and internal development efforts, we now
participate in new data and service delivery markets, targeting
high-value applications such as DSL, Fiber-to-the-X, storage
extension, and the triple-play of voice, video and data. In fact,
revenue from these new opportunities represented more than 35% of
total revenue in the third quarter.
"We have taken a number of important steps toward restoring health
and profitability to our business, and over the next several quarters,
our focus and execution will be crucial for success," said Smith.
CIENA's Board of Directors affirmed its support of the Company's
strategy.
"CIENA is pursuing a complex, long-term strategy in an
unpredictable and dynamic market," said H. Berry Cash, lead
independent director for CIENA. "The Company has substantially
expanded its addressable markets while simultaneously implementing
significant cost reductions and operating changes. The Board is
confident these actions represent the best long-term interests of the
Company's shareholders and will lead to a return to profitability and
improved shareholder value."
Separately today, CIENA announced that Michael J. Rowny, chairman
of Rowny Capital and former president and CEO of MCI's International
Ventures, Alliances and Correspondent group, has joined CIENA's board
of directors as its tenth member and eighth independent director.
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.
Quarter Ended 9 Months Ended
-------------- --------------
July 31, 2004 July 31, 2004
-------------- --------------
Item (in thousands) (in thousands)
- ---------------------------------------- -------------- --------------
Stock compensation costs $ 3,953 $ 8,699
Amortization of intangible assets 12,667 19,458
In-process research and development 30,200 30,200
Accelerated amortization of leasehold
improvements 12,504 14,153
Restructuring costs 13,547 22,125
Long-lived asset impairments 7,217 7,217
Recovery of sales, export, use tax
liabilities & payments (3,457) (5,388)
Recovery of doubtful accounts, net - (2,794)
(Gain)/loss on equity investments, net 200 (393)
Loss on extinguishment of debt - 8,216
Income tax benefit on adjusted net loss 22,756 68,193
-------------- --------------
Total Adjustments $ 99,587 $ 169,686
============== ==============
GAAP Net Loss $ (141,467) $ (294,391)
Adjusted for items above 99,587 169,686
-------------- --------------
$ (41,880) $ (124,705)
Non GAAP Net Loss
-------------- --------------
Non GAAP Net Loss per Share $ (0.07) $ (0.25)
============== ==============
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 July 31, 2004, CIENA's weighted average
shares outstanding were approximately 566,234,000. Adjusting CIENA's
quarterly GAAP results as noted would reduce the Company's net loss in
its third fiscal quarter to $0.07 per share.
For the nine months ended July 31, 2004, CIENA's weighted average
shares outstanding were approximately 504,812,000. Adjusting CIENA's
nine-month GAAP results as noted would reduce the Company's net loss
for the period to $0.25 per share.
Third Quarter 2004 Highlights
-- Successfully completed the acquisitions and the operational
integration of both Catena Networks and Internet Photonics.
-- Improved gross margin from 11.0% in the fiscal second quarter
to 24.9% in the third quarter.
-- Delivered lower-than-anticipated ongoing operating expenses,
overachieving cost-reduction targets in the quarter by
approximately $10 million.
-- Secured three new customers for the new CN 1000
next-generation broadband access platform and agreed to
product trials with a regional Bell operating company (RBOC).
-- Recognized initial revenue from Verizon for DN 7000 series
multiservice edge switching deployments.
-- Ended the quarter with cash and short- and long-term
investments valued at $1.36 billion.
Third Quarter Product and Application Developments
CIENA made several new data and access-focused product and feature
announcements during the quarter, including:
-- Introduced the CNX-100(TM) Modular Broadband Loop Carrier
designed to broadband-enable an estimated 30 million POTS-only
access lines.
-- Introduced a new integrated, 10-Gigabit add/drop multiplexer
(ADM) for the ONLINE Metro(TM) multiservice DWDM optical
transport platform, driving down the cost of high-bandwidth
metro, enterprise and multiservice networks.
-- Announced the CN 2600(TM) Multiservice Edge Aggregator, an
edge-optimized platform to deliver low- and high-bandwidth TDM
and Ethernet services for remote terminals, multi-tenant units
and central offices.
-- Announced CoreDirector(R) services gateway solutions for metro
data networking and IP/MPLS core convergence, expanding
CoreDirector's capabilities into Layer 2 applications with
Ethernet interfaces and packet-aware intelligence.
-- Introduced integrated Layer 2 packet switching to intelligent
metro access and transport solutions to drive
revenue-generating services for cable operators and service
providers.
-- Demonstrated the world's first ultra long-haul optical
transport connection at 40 Gigabits per second (Gbps) with MCI
and Mintera to facilitate the roll-out of next-generation
IP-based services on MCI's existing 10 Gbps backbone.
-- Participated in a 40 Gbps trial on Sprint's production IP
network between San Jose and Stockton, Calif., utilizing
CIENA's dense wave division multiplexing technology.
Business Outlook
"As a result of our broader product portfolio, we are engaged in
significantly more customer interactions and are confident that those
interactions will translate into opportunities longer-term," said
Smith. "Short term, we expect revenue for our fourth fiscal quarter
will be roughly flat with our third fiscal quarter revenue, reflecting
ongoing customer uncertainty and caution."
Live Web Broadcast of Third Quarter Results
CIENA will host a discussion of this morning's announcements with
investors and financial analysts today, Thursday, August 19, 2004 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 INVESTORS
This press release contains certain forward-looking statements
based on current expectations, forecasts and assumptions that involve
risks and uncertainties. These statements are based on information
available to the Company as of the date hereof; and CIENA's actual
results could differ materially from those stated or implied, due to
risks and uncertainties associated with its business, which include
the risk factors disclosed in its Report on Form 10-Q, which CIENA
filed with the Securities and Exchange Commission on May 20, 2004.
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: The Board is confident these actions represent
the best long-term interests of the Company's shareholders and will
lead to a return to profitability and improved shareholder value; as a
result of our broader product portfolio, we are engaged in
significantly more customer interactions and are confident that those
interactions will translate into opportunities longer-term; and, short
term, we expect revenue for our fourth fiscal quarter will be roughly
flat with our third fiscal quarter revenue, reflecting ongoing
customer uncertainty and caution. CIENA assumes no obligation to
update the information included in this press release, whether as a
result of new information, future events or otherwise.
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,
2003 2004 2003 2004
--------- ---------- ---------- ----------
Revenues:
Products $ 59,294 $ 64,340 $ 183,914 $ 181,436
Services 9,184 11,249 28,578 35,266
--------- ---------- ---------- ----------
Total revenue 68,478 75,589 212,492 216,702
Costs:
Products 39,194 48,069 119,177 138,918
Services 12,749 8,723 42,300 30,212
--------- ---------- ---------- ----------
Total cost of goods sold 51,943 56,792 161,477 169,130
--------- ---------- ---------- ----------
Gross profit 16,535 18,797 51,015 47,572
Operating expenses: --------- ---------- ---------- ----------
Research and development
(exclusive of stock
compensation costs below) 47,963 57,762 153,890 151,418
Selling and marketing
(exclusive of stock
compensation costs below) 24,536 29,468 76,804 80,011
General and
administrative
(exclusive of stock
compensation costs
below) 7,969 6,969 30,741 20,052
Stock compensation
costs:
Research and
development 2,932 1,860 10,136 5,473
Selling and
marketing 687 1,214 2,122 2,147
General and
administrative 312 879 1,032 1,079
Amortization of
intangible assets 4,479 12,667 11,454 19,458
In-process research and
development 1,500 30,200 1,500 30,200
Restructuring costs 15,527 13,547 18,251 22,125
Long-lived asset
impairments - 7,217 - 7,217
Recovery of sale, export,
use tax liabilities and
payments - (3,457) - (5,388)
Recovery of doubtful
accounts, net - - - (2,794)
Total operating --------- ---------- ---------- ----------
expenses 105,905 158,326 305,930 330,998
--------- ---------- ---------- ----------
Loss from operations (89,370) (139,529) (254,915) (283,426)
Interest and other income,
net 8,865 4,936 33,297 18,228
Interest expense (8,070) (6,469) (28,334) (20,326)
Gain (loss) on equity
investments, net - (200) (10) 393
Loss on extinguishment of
debt - - (20,606) (8,216)
--------- ---------- ---------- ----------
Loss before income taxes (88,575) (141,262) (270,568) (293,347)
Provision for income taxes 299 205 909 1,044
--------- ---------- ---------- ----------
Net loss $(88,874) $(141,467) $(271,477) $(294,391)
========= ========== ========== ==========
Basic and diluted net loss
per common share and
dilutive potential common
share $ (0.20) $ (0.25) $ (0.62) $ (0.58)
========= ========== ========== ==========
Weighted average basic
common and dilutive
potential common shares
outstanding 451,009 566,234 438,133 504,812
========= ========== ========== ==========
CIENA CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
October 31, July 31,
2003 2004
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 309,665 $ 255,730
Short-term investments 796,809 358,369
Accounts receivable, net 43,600 49,821
Inventories, net 44,995 49,836
Prepaid expenses and other 34,334 29,663
------------ ------------
Total current assets 1,229,403 743,419
Long-term investments 519,744 732,967
Equipment, furniture and fixtures, net 114,930 77,499
Goodwill 336,039 780,875
Other intangible assets, net 108,408 210,762
Other long-term assets 69,641 67,924
------------ ------------
Total assets $ 2,378,165 $ 2,613,446
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 44,402 $ 35,570
Accrued liabilities 98,926 81,505
Restructuring liabilities 14,378 13,718
Unfavorable lease commitments 9,380 9,857
Income taxes payable 4,640 5,609
Deferred revenue 14,473 17,525
------------ ------------
Total current liabilities 186,199 163,784
Long-term deferred revenue 14,547 16,730
Long-term restructuring liabilities 52,164 43,831
Long-term unfavorable lease commitments 61,312 53,903
Other long-term obligations 2,698 2,826
Convertible notes payable 730,428 690,000
------------ ------------
Total liabilities 1,047,348 971,074
------------ ------------
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; 473,214,856 and
568,890,725 shares issued and outstanding 4,732 5,689
Additional paid-in capital 4,861,182 5,479,672
Deferred stock compensation (9,664) (17,204)
Notes receivable from stockholders (448) (401)
Accumulated other comprehensive income
(loss) 2,447 (3,561)
Accumulated deficit (3,527,432) (3,821,823)
------------ ------------
Total stockholders' equity 1,330,817 1,642,372
------------ ------------
Total liabilities and stockholders' equity $ 2,378,165 $ 2,613,446
============ ============
Appendix A
The adjustments management makes in analyzing CIENA's third
quarter fiscal 2004 GAAP results are as follows:
-- 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.
-- Amortization of intangible assets - a non-cash expense
unrelated to normal operations arising from acquisitions of
intangible assets, principally developed technology, which
CIENA is required to amortize over its expected useful life.
-- In-process research and development - a non-recurring expense
related to in-process technology that, as of the date of
acquisition, has not reached technological feasibility and has
no alternative future use.
-- Accelerated amortization of leasehold improvements - a
non-cash expense related to the planned closing of our San
Jose, California facility.
-- 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.
-- Long-lived asset impairments - non-recurring charges,
unrelated to normal operations, incurred as a result of excess
equipment classified as held for sale.
-- Recovery of sales, export and use tax liabilities and payments
- a non-recurring gain unrelated to normal operations
-- Recovery of doubtful accounts, net - a non-recurring gain
unrelated to normal operations due to payment received from a
customer from which payment was previously deemed doubtful due
to the customer's financial condition.
-- Gain (loss) on equity investments, net - a non-recurring gain
or loss unrelated to normal operations.
-- Loss on extinguishment of debt - a non-recurring expense,
unrelated to normal operations.
-- 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, cable operators 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:
Aaron Graham or Nicole Anderson
(877) 857-7377
email: pr@ciena.com