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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) December 9, 2004
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Ciena Corporation
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-21969 23-2725311
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(Commission File Number) (IRS Employer Identification No.)
1201 Winterson Road, Linthicum, MD 21090
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(Address of Principal Executive Offices) (Zip Code)
(410) 865-8500
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 - Results of Operations and Financial Condition
On December 9, 2004, Ciena Corporation issued a press release announcing
its financial results for the fourth quarter and fiscal year ended October 31,
2004. The text of the press release is furnished as Exhibit 99.1 to this Report.
The information in this Report shall not be deemed "filed" for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liabilities of that section, and shall not be incorporated by
reference into any registration statement pursuant to the Securities Act of
1933, as amended.
Item 9.01 - FINANANCIAL STATEMENTS AND EXHIBITS
(c) The following exhibit is being filed herewith:
Exhibit Number Description of Document
-------------- -----------------------
Exhibit 99.1 Text of Press Release dated December 9, 2004, issued
by Ciena Corporation, reporting its results of
operations for the fourth quarter and fiscal year
ended October 31, 2004.
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 9, 2004 By: /s/ Russell B. Stevenson, Jr.
--------------------------------------
Russell B. Stevenson, Jr.
Senior Vice President, General Counsel
and Secretary
EXHIBIT 99.1
Ciena Reports Fourth Quarter and Fiscal Year 2004 Results;
Revenue Increases 8.5% Sequentially, 16.1% Year-over-Year
LINTHICUM, Md.--(BUSINESS WIRE)--Dec. 9, 2004--Ciena(R)
Corporation (NASDAQ:CIEN), the network specialist, today reported its
fourth quarter and fiscal year 2004 results for the period ending
October 31, 2004. Revenue for the fourth quarter totaled $82.0
million, representing an 8.5% sequential increase, and an increase of
16.1% over the same period a year ago. For the year, Ciena's revenue
totaled $298.7 million, representing an increase of 5.5% over 2003
revenue of $283.1 million.
On a generally accepted accounting principles (GAAP) basis,
Ciena's reported net loss for the fiscal fourth quarter was $495.1
million, or a net loss of $0.87 per share. This loss includes a
goodwill impairment of $371.7 million and compares to a GAAP net loss
of $115.0 million, or a net loss of $0.24 per share, in the same
period a year ago. On a GAAP basis, Ciena's reported net loss for the
fiscal year was $789.5 million, or a net loss of $1.51 per share. This
compares to a GAAP net loss of $386.5 million, or a net loss of $0.87
per share, in fiscal 2003.
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 tables that follow,
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 Quarter
Ended Ended
----------- -----------
Oct 31, Oct 31,
2003 2004
----------- -----------
(in (in
Item thousands) thousands)
- ---- ----------- -----------
Stock compensation costs $ 3,487 $ 3,184
Amortization of intangible assets 6,416 11,381
In-process research and development 1,300 -
Restructuring costs 8,972 34,982
Goodwill impairment - 371,712
Long-lived asset impairment 33,528 8,709
Recovery of use tax payments - -
Recovery of doubtful accounts, net - -
Accelerated amortization of leasehold
improvements - 8,382
Loss (gain) on equity investments, net 4,750 4,500
Loss on extinguishment of debt - -
Income tax benefit on adjusted net loss 20,031 18,328
----------- -----------
Total Adjustments $ 78,484 $ 461,178
=========== ===========
GAAP Net Loss $ (115,040) $ (495,073)
Adjustment for items above 78,484 461,178
----------- -----------
Non-GAAP Net Loss $ (36,556) $ (33,895)
=========== ===========
Please see Appendix A for additional information about this table.
As of the quarter ended October 31, 2004, Ciena's weighted average
shares outstanding were approximately 569,462,000. Adjusting Ciena's
quarterly GAAP results as noted would reduce the Company's net loss in
its fiscal fourth quarter to $0.06 per share. This compares with an
adjusted net loss of $0.08 per share in the same period a year ago.
Year Year
Ended Ended
----------- -----------
Oct 31, Oct 31,
2003 2004
----------- -----------
(in (in
Item thousands) thousands)
- ---- ----------- -----------
Stock compensation costs $ 16,777 $ 11,883
Amortization of intangible assets 17,870 30,839
In-process research and development 2,800 30,200
Restructuring costs 13,575 57,107
Goodwill impairment - 371,712
Long-lived asset impairment 47,176 15,926
Recovery of use tax payments - (5,388)
Recovery of doubtful accounts, net - (2,794)
Accelerated amortization of leasehold
improvements - 22,535
Loss (gain) on equity investments, net 4,760 4,107
Loss on extinguishment of debt 20,606 8,216
Income tax benefit on adjusted net loss 92,850 86,521
----------- -----------
Total Adjustments $ 216,414 $ 630,864
=========== ===========
GAAP Net Loss $ (386,517) $ (789,464)
Adjustment for items above 216,414 630,864
----------- -----------
Non-GAAP Net Loss $ (170,103) $ (158,600)
=========== ===========
Please see Appendix A for additional information about this table.
For the fiscal year ended October 31, 2004, Ciena's weighted
average shares outstanding were approximately 521,454,000. Adjusting
Ciena's fiscal year 2004 GAAP results as noted would reduce the
Company's net loss for the period to $0.30 per share. This compares
with an adjusted net loss of $0.38 per share in the same period a year
ago.
These adjustments are not in accordance with GAAP, and making
these adjustments may not permit meaningful comparisons to other
companies.
"Our fiscal fourth quarter was significant in a number of ways: we
delivered stronger-than-expected revenue growth and improved gross
margin, and we lowered our cash burn," said Gary Smith, Ciena's
president and CEO. "There is more work to be done, but we have made
meaningful progress in a number of strategic areas. In addition to
expanding the breadth of product we are selling to existing customers,
we also have developed new channel partnerships. These actions support
our specialist approach to the market and our focus on specific
applications that have a major impact on our customers' businesses."
Fourth Quarter 2004 Highlights
-- Delivered sequential revenue growth of 8.5% and year-over-year
revenue growth of 16.1%.
-- Improved gross margin from 24.9% in the fiscal third quarter
to 29.5% in the fiscal fourth quarter.
-- Reduced ongoing research and development, sales and marketing
and general and administrative operating expenses by 9%
sequentially.
-- Reduced cash burn, ending the quarter with cash and short- and
long-term investments valued at $1.29 billion.
-- Forwarded enterprise channel strategy with the formal
announcement of a partnership with EMC and secured several new
enterprise customers including one of the nation's largest
retailers.
-- 35% of the quarter's total revenue resulted from recently
acquired products targeting high-value data and service
delivery applications.
Business Outlook
"We have taken a number of important steps toward restoring health
and profitability to our business, and we have set the stage for
continued meaningful improvements to Ciena's operating model," said
Smith. "Short term, we expect customer spending patterns to drive
revenue growth and anticipate our fiscal first quarter revenue will
increase by between seven to ten percent from our fiscal fourth
quarter revenue."
Live Web Broadcast of Fourth Quarter and Fiscal Year Results
Ciena will host a discussion of its fourth quarter and fiscal year
results with investors and financial analysts today, Thursday,
December 9, 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: http://www.ciena.com/investors/investors.htm
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-K, which Ciena
expects to file with the Securities and Exchange Commission on
December 9, 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: we have taken a
number of important steps toward restoring health and profitability to
our business, and we have set the stage for continued meaningful
improvements to Ciena's operating model; short term, we expect
customer spending patterns to drive revenue growth and anticipate our
fiscal first quarter revenue will increase by between seven to ten
percent from our fiscal fourth quarter revenue. 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 Oct 31, Year Ended Oct 31,
--------------------- ---------------------
2003 2004 2003 2004
---------- ---------- ---------- ----------
Revenue:
Products $ 56,858 $ 68,774 $ 240,772 $ 250,210
Services 13,786 13,231 42,364 48,497
---------- ---------- ---------- ----------
Total revenue 70,644 82,005 283,136 298,707
---------- ---------- ---------- ----------
Costs:
Products 34,425 47,543 153,602 186,461
Services 14,189 10,281 56,489 40,493
---------- ---------- ---------- ----------
Total cost of goods sold 48,614 57,824 210,091 226,954
---------- ---------- ---------- ----------
Gross profit 22,030 24,181 73,045 71,753
---------- ---------- ---------- ----------
Operating Expenses
Research and development 45,809 47,432 199,699 198,850
Selling and marketing 26,389 28,248 103,193 108,259
General and
administrative 7,737 7,222 38,478 27,274
Stock compensation costs
Research and
development 2,688 1,041 12,824 6,514
Selling and marketing 606 1,904 2,728 4,051
General and
administrative 193 239 1,225 1,318
Amortization of
intangible assets 6,416 11,381 17,870 30,839
In-process research and
development 1,300 - 2,800 30,200
Restructuring costs 8,972 34,982 13,575 57,107
Goodwill impairment - 371,712 - 371,712
Long-lived asset
impairment 33,528 8,709 47,176 15,926
Recovery of sale,
export, use tax
liabilities and
payments - - - (5,388)
Provision (benefit) for
doubtful accounts, net - - - (2,794)
---------- ---------- ---------- ----------
Total operating
expenses 133,638 512,870 439,568 843,868
---------- ---------- ---------- ----------
Loss from operations (111,608) (488,689) (366,523) (772,115)
Interest and other income
(expense), net 9,662 4,680 42,959 22,908
Interest expense (7,997) (6,487) (36,331) (26,813)
Gain (loss) on equity
investments, net (4,750) (4,500) (4,760) (4,107)
Loss on extinguishment of
debt - - (20,606) (8,216)
---------- ---------- ---------- ----------
Loss before income taxes (114,693) (494,996) (385,261) (788,343)
Provision for income taxes 347 77 1,256 1,121
---------- ---------- ---------- ----------
Net loss $(115,040) $(495,073) $(386,517) $(789,464)
========== ========== ========== ==========
Basic and diluted net loss
per common share and
dilutive potential common
share $ (0.24) $ (0.87) $ (0.87) $ (1.51)
========== ========== ========== ==========
Weighted average basic
common and dilutive
potential common shares
outstanding 470,244 569,462 446,696 521,454
========== ========== ========== ==========
Ciena Corporation
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
ASSETS
October 31,
-----------------------
Current assets: 2003 2004
----------- -----------
Cash and cash equivalents $ 309,665 $ 202,623
Short-term investments 796,809 753,251
Accounts receivable, net 43,600 45,878
Inventories, net 44,995 47,614
Prepaid expenses and other 34,334 29,906
----------- -----------
Total current assets 1,229,403 1,079,272
Long-term investments 519,744 329,704
Equipment, furniture and fixtures, net 114,930 51,252
Goodwill 336,039 408,615
Other intangible assets, net 108,408 208,015
Other long-term assets 69,641 60,196
----------- -----------
Total assets $2,378,165 $2,137,054
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 44,402 $ 31,509
Accrued liabilities 98,926 76,045
Restructuring liabilities 14,378 16,203
Unfavorable lease commitments 9,380 9,902
Income taxes payable 4,640 3,354
Deferred revenue 14,473 21,566
----------- -----------
Total current liabilities 186,199 158,579
Long-term deferred revenue 14,547 16,010
Long-term restructuring liabilities 52,164 65,180
Long-term unfavorable lease commitments 61,312 51,341
Other long-term obligations 2,698 1,522
Convertible notes payable 730,428 690,000
----------- -----------
Total liabilities 1,047,348 982,632
----------- -----------
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
571,656,659 shares issued and outstanding 4,732 5,717
Additional paid-in capital 4,861,182 5,482,175
Deferred stock compensation (9,664) (13,761)
Notes receivable from stockholders (448) (48)
Accumulated other comprehensive income
(loss) 2,447 (2,765)
Accumulated deficit (3,527,432) (4,316,896)
----------- -----------
Total stockholders' equity 1,330,817 1,154,422
----------- -----------
Total liabilities and stockholders' equity $2,378,165 $2,137,054
=========== ===========
Appendix A
The adjustments management makes in analyzing Ciena's fourth
quarter and fiscal year 2004 GAAP results are as follows:
-- Stock compensation costs - a non-cash expense which arises
under GAAP accounting from the assumption of unvested stock
options issued by any companies we acquire and which the
Company feels is not reflective of its ongoing operating
costs.
-- Amortization of intangible assets - a non-cash expense arising
from acquisitions of intangible assets, principally developed
technology, which Ciena is required to amortize over its
expected useful life and which the Company feels is not
reflective of its ongoing operating costs.
-- 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.
-- Restructuring costs - non-recurring charges 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, which the
Company feels are not reflective of its ongoing operating
costs.
-- Goodwill impairment - non-cash expense resulting from the
decline in the forecasted market demand for the Company's
products and the reduction in valuations of comparable
businesses.
-- Long-lived asset impairments - non-recurring charges, incurred
as a result of excess equipment classified as held for sale
which the Company feels are not reflective of its ongoing
operating costs.
-- Recovery of sales, export and use tax liabilities and payments
- a non-recurring gain which the Company feels is not
reflective of its ongoing operating costs.
-- Recovery of doubtful accounts, net - a non-recurring gain due
to payment received from a customer from which payment was
previously deemed doubtful due to the customer's financial
condition which the Company feels is not reflective of its
ongoing operating costs.
-- Accelerated amortization of leasehold improvements - a
non-cash expense related to the closure of our San Jose,
California facility.
-- Loss (gain) on equity investments, net - a non-recurring gain
or loss related to changes in the value of the Company's
equity investments which the Company feels is not reflective
of its ongoing operating costs.
-- Loss on extinguishment of debt - a non-recurring expense
related to early extinguishment of long-term debt which the
Company feels is not reflective of its ongoing operating
costs.
-- 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 is the network specialist, focused on expanding
the possibilities for its customers' networks while reducing their
cost of ownership. The Company's systems, software and services target
and cure specific network pain points so that telcos, cable operators,
governments and enterprises can best exploit the new applications that
are driving their businesses forward. For more information, visit
www.ciena.com.
CONTACT: Ciena Corporation
Investor Contact:
Jessica Towns, 888-243-6223
ir@ciena.com
or
Press Contacts:
Nicole Anderson, 410-694-5786
pr@ciena.com