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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) February 23, 2005
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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 February 23, 2005, Ciena Corporation issued a press release
announcing its financial results for the first quarter ended January 31, 2005.
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 February 23, 2005, issued by
Ciena Corporation, reporting its results of operations for
the first quarter ended January 31, 2005
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: February 23, 2005 By: /S/ Russell B. Stevenson, Jr.
-------------------------------------------
Russell B. Stevenson, Jr.
Senior Vice President, General Counsel and
Secretary
Exhibit 99.1
Ciena Reports First Quarter Fiscal 2005 Results
LINTHICUM, Md.--(BUSINESS WIRE)--February 23, 2005--
16% Sequential Revenue Growth Fueled by Growth From Product Lines
Targeting Core Networking, Data Networking and Broadband Applications
Ciena(R) Corporation (NASDAQ:CIEN), the network specialist, today reported
its fiscal first quarter 2005 results for the period ending January 31, 2005.
Revenue for the first quarter totaled $94.7 million, representing a 16%
sequential increase, and an increase of 43% over the same period a year ago.
On the basis of generally accepted accounting principles (GAAP), Ciena's
reported net loss for the fiscal first quarter was $57.0 million, or a net loss
of $0.10 per share. This loss compares to a GAAP net loss of $76.7 million, or a
net loss of $0.16 per share, in the same period a year ago.
"Strong growth from a number of application areas, including core optical
transport, core switching and data networking, fueled revenue growth in our
fiscal first quarter," said Gary Smith, Ciena's president and CEO. "While our
traditional specialty of core networking continues to be a focus for us, one of
the most telling signs of the scope and progress of our efforts to become a more
strategic provider is that we have increased the number of customers purchasing
from multiple product lines by 73 percent compared to the first quarter of 2004
and we're looking to build on that momentum."
First Quarter 2005 Highlights
-- Delivered sequential revenue growth of 16% and year-over-year revenue
growth of 43%.
-- Reduced research and development, sales and marketing and general and
administrative operating expenses by 9.9% sequentially (exclusive of
stock compensation costs in both the first and fourth fiscal quarters,
and in the fiscal fourth quarter, also exclusive of accelerated
amortization of leasehold improvements).
-- Reduced cash burn from operations by 11.1% sequentially, from $48.7
million in the fiscal fourth quarter of 2004 to $43.3 million in the
fiscal first quarter 2005.
-- Ended the fiscal first quarter 2005 with cash and short- and long-term
investments valued at $1.23 billion.
-- Announced that Cegetel had selected Ciena's next-generation optical
transport systems to improve the performance and reliability of the
French operator's national long-haul network and to facilitate new
revenue opportunities via more efficient broadband service delivery.
-- Introduced the CN 4350(TM) Ethernet services provisioning switch, the
foundation for telco and cable triple play networks.
-- Revenue derived from sales of products added to Ciena's portfolio
through acquisition since June 2003 increased to 37% of total revenue.
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
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Jan 31, Jan 31,
2004 2005
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Item (in thousands) (in thousands)
- -------- -------------- --------------
Stock compensation costs $ 2,844 $ 2,047
Amortization of intangible assets 3,396 10,411
Restructuring costs 3,393 1,125
Long-lived asset impairment - 184
Gain on equity investments, net (454) (22)
Loss on extinguishment of debt 8,216 -
Income tax benefit on adjusted net loss 21,035 15,513
============== ==============
Total Adjustments
$ 38,430 $ 29,258
============== ==============
GAAP Net Loss $ (76,708) $ (56,995)
Adjustment for items above 38,430 29,258
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Non-GAAP Net Loss $ (38,278) $ (27,737)
============== ==============
Please see Appendix A for additional information about this table.
As of the quarter ended January 31, 2005, Ciena's weighted average shares
outstanding were approximately 571,573,000. Adjusting Ciena's quarterly GAAP
results as noted above would reduce the Company's net loss in its fiscal first
quarter 2005 to $27.7 million, or a loss of $0.05 per share. This compares with
an adjusted net loss of $38.3 million, or a loss of $0.08 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.
First Quarter 2005 Result Details
Ciena recognized revenue from two customers that each contributed more than
ten percent of the fiscal first quarter's total revenue. Combined, the two ten
percent customers accounted for 31.7% of the quarter's total revenue. In
addition, approximately 83% of Ciena's business in the fiscal first quarter came
from domestic customers.
As a result of product mix, Ciena's gross margin in the quarter was 25.6%,
compared to 29.5% in its fiscal fourth quarter.
"During the quarter we secured long-haul optical transport footprint faster
than expected," said Smith. "While this had a negative effect on gross margin in
the quarter, it means we've successfully captured more long-distance routes than
we had anticipated and our customers are deploying Ciena common equipment that
will require the subsequent addition of higher-margin channel cards."
In addition to higher-than-anticipated shipments of optical transport
common equipment, the Company's gross margin in the quarter was adversely
affected by low-volume shipments of its CN 1000(TM) next generation broadband
access platform.
"As is the case with many products early in their life cycle, gross margin
improvements on our CN 1000 platform will be volume dependent and we are
currently pursuing broadband access opportunities globally to drive volume for
this new product," said Smith.
For operating purposes, Ciena is currently organized into four business
units. Unaudited revenue contribution by business unit appears in the following
table:
Fiscal Q4 Fiscal Q1
2004 2005
Revenue Percent Revenue Percent
(in of (in of
Business Unit thousands) Total thousands) Total
- ------------- ------- ----- ------- -----
Broadband Access (BBG) $16,332 19.9% $15,281 16.1%
Data Networking (DNG) $9,311 11.4% $16,579 17.5%
Global Network Services (GNS) $13,231 16.1% $12,448 13.1%
Transport and Switching (TSG) $43,131 52.6% $50,440 53.3%
------- ----- ------- -----
$82,005 100.0% $94,748 100.0%
Business Outlook
"In addition to enhancing our position as a strategic supplier through our
diversified, application-focused product portfolio and by targeting customer
segments beyond our traditional telco service provider customers, we are seeing
early signs of what could be a thaw in demand for core networking applications,"
said Smith. "We expect a number of applications, including intelligent core
networking, data networking, and broadband access will drive Ciena's revenue
growth in 2005. Near term, we anticipate sequential revenue growth of five to
seven percent in our fiscal second quarter."
Live Web Broadcast of Fiscal First Quarter Results
Ciena will host a discussion of its fiscal first quarter results with
investors and financial analysts today, Wednesday, February 23, 2005 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 filed 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: in addition
to enhancing our position as a strategic supplier through our diversified,
application-focused product portfolio and by targeting customer segments beyond
our traditional telco service provider customers, we are seeing early signs of
what could be a thaw in demand for core networking applications; we expect a
number of applications, including intelligent core networking, data networking,
and broadband access will drive Ciena's revenue growth in 2005; and near term,
we anticipate sequential revenue growth of five to seven percent in our fiscal
second quarter. 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
January 31,
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2004 2005
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Revenues:
Products $ 54,674 $ 82,300
Services 11,740 12,448
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Total revenue 66,414 94,748
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Costs:
Products 34,560 60,848
Services 11,301 9,669
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Total cost of goods sold 45,861 70,517
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Gross profit 20,553 24,231
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Operating expenses:
Research and development 47,177 33,651
Selling and marketing 25,468 25,964
General and administrative 7,091 7,496
Stock compensation costs:
Research and development 2,205 1,011
Selling and marketing 518 876
General and administrative 121 160
Amortization of intangible assets 3,396 10,411
Restructuring costs 3,393 1,125
Long-lived asset impairments - 184
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Total operating expenses 89,369 80,878
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Loss from operations (68,816) (56,647)
Interest and other income, net 7,678 6,676
Interest expense (7,384) (6,469)
Gain on equity investments, net 454 22
Loss on extinguishment of debt (8,216) -
--------- ---------
Loss before income taxes (76,284) (56,418)
Provision for income taxes 424 577
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Net loss $(76,708) $(56,995)
========= =========
Basic and diluted net loss per common share and
dilutive potential common share $ (0.16) $ (0.10)
========= =========
Weighted average basic common and dilutive
potential common shares outstanding 472,935 571,573
========= =========
CIENA CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
ASSETS
October 31, January 31,
2004 2005
----------- -----------
Current assets:
Cash and cash equivalents $ 202,623 $ 192,949
Short-term investments 753,251 704,691
Accounts receivable, net 45,878 52,122
Inventories, net 47,614 46,257
Prepaid expenses and other 29,906 27,757
----------- -----------
Total current assets 1,079,272 1,023,776
Long-term investments 329,704 332,023
Equipment, furniture and fixtures, net 51,252 46,709
Goodwill 408,615 408,615
Other intangible assets, net 208,015 196,637
Other long-term assets 60,196 58,295
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Total assets $2,137,054 $2,066,055
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 31,509 $ 32,719
Accrued liabilities 76,045 72,517
Restructuring liabilities 16,203 15,114
Unfavorable lease commitments 9,902 9,514
Income taxes payable 3,354 3,672
Deferred revenue 21,566 18,732
----------- -----------
Total current liabilities 158,579 152,268
Long-term deferred revenue 16,010 15,408
Long-term restructuring liabilities 65,180 60,670
Long-term unfavorable lease commitments 51,341 48,786
Other long-term obligations 1,522 1,509
Convertible notes payable 690,000 690,000
----------- -----------
Total liabilities 982,632 968,641
----------- -----------
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; 571,656,659 and
572,229,867 shares issued and outstanding 5,717 5,722
Additional paid-in capital 5,482,175 5,481,560
Deferred stock compensation (13,761) (10,757)
Notes receivable from stockholders (48) (3)
Changes in unrealized gains on investments,
net (2,488) (4,932)
Translation adjustment (277) (285)
Accumulated deficit (4,316,896) (4,373,891)
----------- -----------
Total stockholders' equity 1,154,422 1,097,414
----------- -----------
Total liabilities and stockholders' equity $2,137,054 $2,066,055
=========== ===========
CIENA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
January 31,
-------------------
2004 2005
--------- ---------
Cash flows from operating activities:
Net loss $(76,708) $(56,995)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Early extinguishment of debt 8,216 -
Amortization of premium on marketable securities 7,166 4,913
Non-cash impairment of long-lived assets - 184
Accretion of convertible notes payable 599 -
Depreciation and amortization of leasehold
improvements 13,142 8,383
Stock compensation 2,844 2,047
Amortization of intangibles 4,363 11,378
Provision for inventory excess and obsolescence 1,043 1,115
Provision for warranty and other contractual
obligations 2,214 3,016
Other 841 749
Changes in assets and liabilities:
Accounts receivable (2,276) (6,244)
Inventories (5,290) 242
Prepaid expenses and other 958 4,888
Accounts payable and accrued liabilities (16,357) (13,889)
Income taxes payable 455 318
Deferred revenue and other obligations 7,397 (3,436)
--------- ---------
Net cash used in operating activities (51,393) (43,331)
--------- ---------
Cash flows from investing activities:
Additions to equipment, furniture, fixtures and
intellectual property (5,869) (4,201)
Proceeds from sale of equipment, furniture and
fixtures - 177
Purchases of available for sale securities (112,313) (161,847)
Maturities of available for sale securities 198,797 200,731
Minority equity investments, net - (1,595)
--------- ---------
Net cash provided by investing activities 80,615 33,265
--------- ---------
Cash flows from financing activities:
Net proceeds from (repayment of) other
obligations 39 -
Repayment of convertible notes payable (49,243) -
Proceeds from issuance of common stock 6,632 347
Repayment of notes receivable from stockholders - 45
--------- ---------
Net cash used in financing activities (42,572) 392
--------- ---------
Net increase (decrease) in cash and cash
equivalents (13,350) (9,674)
Cash and cash equivalents at beginning of period 309,665 202,623
--------- ---------
Cash and cash equivalents at end of period $296,315 $192,949
========= =========
Appendix A
The adjustments management makes in analyzing Ciena's first fiscal quarter
2005 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.
-- 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.
-- 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.
-- 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 Contacts:
Jessica Towns, 888-243-6223
ir@ciena.com
or
Press Contacts:
Nicole Anderson, 410-694-5786
pr@ciena.com