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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) June 2, 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 June 2, 2005, Ciena Corporation issued a press release announcing its
financial results for the second quarter ended April 30, 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 - FINANCIAL STATEMENTS AND EXHIBITS
(c) The following exhibit is being filed herewith:
Exhibit Number Description of Document
-------------- -----------------------
Exhibit 99.1 Text of Press Release dated June 2, 2005, issued by Ciena
Corporation, reporting its results of operations for the
second quarter ended April 30, 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: June 2, 2005 By: /S/ Russell B. Stevenson, Jr.
--------------------------------------
Russell B. Stevenson, Jr.
Senior Vice President, General Counsel
and Secretary
Exhibit 99.1
Ciena Reports Fiscal Second Quarter 2005 Results
LINTHICUM, Md.--(BUSINESS WIRE)--June 2, 2005--Ciena(R)
Corporation (NASDAQ:CIEN), the network specialist, today reported its
fiscal second quarter 2005 results for the period ending April 30,
2005. Revenue for the second quarter totaled $103.8 million,
representing a 9.6% sequential increase, and an increase of 39.0% over
the same period a year ago.
On the basis of generally accepted accounting principles (GAAP),
Ciena's reported net loss for the fiscal second quarter was $74.8
million, or a net loss of $0.13 per share. This loss compares to a
GAAP net loss of $76.2 million, or a net loss of $0.16 per share, in
the same period a year ago. For the six-month period ended April 30,
2005, Ciena's reported GAAP net loss was $131.8 million, or a net loss
of $0.23 per share. This loss compares to a GAAP net loss of $152.9
million, or a net loss of $0.32 per share, in the same six-month
period a year ago.
"Ciena's application-driven, network specialist approach enables
us to differentiate ourselves in an often crowded market, and is
clearly resonating with our customers," said Gary Smith, Ciena's
president and CEO. "With our fifth sequential quarter of solid revenue
growth, we are growing faster than the market and beginning to take
share on a global basis. In addition to strong revenue growth, we
continue to improve other important financial metrics, including
delivering gross margin improvement and reducing our use of cash in
our fiscal second quarter."
Second Quarter 2005 Highlights
-- Delivered sequential revenue growth of 9.6% and year-over-year
revenue growth of 39.0%.
-- Improved overall gross margin from 25.6% in the fiscal first
quarter to 26.2% in the fiscal second quarter.
-- Announced that BT had selected Ciena as a preferred supplier
to support its 21st Century Network (21CN), including Ciena's
optical switching, optical transport and Ethernet transport
platforms.
-- For the second consecutive year, Ciena was honored by SBC
Communications as an "Outstanding Supplier."
-- Ciena expanded its strategic relationship with TELMEX and
announced that its CoreDirector(R) multiservice switching
system had been selected for Telefonos de Mexico's nationwide
long-distance network and that new Ethernet modules will be
added to existing CoreDirectors in TELMEX's Mexico City metro
area network.
-- Reduced cash burn from operations by 15.5% sequentially, from
$43.3 million in the fiscal first quarter of 2005 to $36.6
million in the fiscal second quarter 2005.
-- Ended the fiscal second quarter 2005 with cash and short- and
long-term investments valued at $1.19 billion.
Non-GAAP Presentation of Quarterly Results
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
-------------- --------------
April 30, April 30,
2004 2005
-------------- --------------
Item (in thousands) (in thousands)
- -------- -------------- --------------
Stock compensation costs $ 1,902 $ 3,481
Amortization of intangible assets 3,395 10,204
Restructuring costs 5,185 9,765
Long-lived asset impairment - (25)
Recovery of use tax payments (1,931) -
Recovery of doubtful accounts, net (2,794) -
Loss (gain) on equity investments, net (139) 7,300
Income tax benefit on adjusted net loss 24,979 15,723
============== ==============
Total Adjustments
$ 30,597 $ 46,448
============== ==============
GAAP Net Loss $ (76,216) $ (74,807)
Adjustment for items above 30,597 46,448
-------------- --------------
Non-GAAP Net Loss $ (45,619) $ (28,359)
============== ==============
Please see Appendix A for additional information about this table.
As of the quarter ended April 30, 2005, Ciena's weighted average
shares outstanding were approximately 573,569,000. Adjusting Ciena's
quarterly GAAP results as noted above would reduce the Company's net
loss in its fiscal second quarter 2005 to $28.4 million, or a loss of
$0.05 per share. This compares with an adjusted net loss of $45.6
million, or a loss of $0.10 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.
Business Outlook
"We expect continued revenue growth, improving gross margin and
lower operating expenses will combine to drive meaningful improvement
in Ciena's financial performance over the balance of 2005," said
Smith. "In addition to our expectations of five percent sequential
revenue growth in our fiscal third quarter, we also expect product mix
and ongoing cost reduction efforts to drive meaningful gross margin
improvement for the second half of our fiscal year."
Live Web Broadcast of Fiscal Second Quarter Results
Ciena will host a discussion of its fiscal second quarter results
with investors and financial analysts today, Thursday, June 2, 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
Web site 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-Q filed with the
Securities and Exchange Commission on June 2, 2005. 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 expect continued revenue growth, improving gross margin and lower
operating expenses will combine to drive meaningful improvement in
Ciena's financial performance over the balance of 2005; and in
addition to our expectations of five percent sequential revenue growth
in our fiscal third quarter, we also expect product mix and ongoing
cost reduction efforts to drive meaningful gross margin improvement
for the second half of our fiscal year. 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 BALANCE SHEETS
(in thousands, except share data)
(unaudited)
ASSETS
October 31, April 30,
2004 2005
-----------------------
Current assets:
Cash and cash equivalents $202,623 $255,822
Short-term investments 753,251 682,766
Accounts receivable, net 45,878 66,482
Inventories, net 47,614 45,489
Prepaid expenses and other 29,906 33,740
----------- -----------
Total current assets 1,079,272 1,084,299
Long-term investments 329,704 251,951
Equipment, furniture and fixtures, net 51,252 41,019
Goodwill 408,615 408,615
Other intangible assets, net 208,015 185,466
Other long-term assets 60,196 49,015
----------- -----------
Total assets $2,137,054 $2,020,365
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $31,509 $36,441
Accrued liabilities 76,045 76,732
Restructuring liabilities 16,203 15,638
Unfavorable lease commitments 9,902 9,640
Income taxes payable 3,354 4,169
Deferred revenue 21,566 32,144
----------- -----------
Total current liabilities 158,579 174,764
Long-term deferred revenue 16,010 14,446
Long-term restructuring liabilities 65,180 63,002
Long-term unfavorable lease commitments 51,341 46,293
Other long-term obligations 1,522 1,321
Convertible notes payable 690,000 690,000
----------- -----------
Total liabilities 982,632 989,826
----------- -----------
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
575,511,943 shares issued and outstanding
as of October 31, 2004 and April 30, 2005,
respectively 5,717 5,755
Additional paid-in capital 5,482,175 5,485,257
Deferred stock compensation (13,761) (6,554)
Notes receivable from stockholders (48) -
Changes in unrealized gains on investments,
net (2,488) (4,940)
Translation adjustment (277) (281)
Accumulated deficit (4,316,896) (4,448,698)
----------- -----------
Total stockholders' equity 1,154,422 1,030,539
----------- -----------
Total liabilities and stockholders' equity $2,137,054 $2,020,365
=========== ===========
CIENA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Quarter Ended Six Months Ended
April 30, April 30,
--------------------- ---------------------
2004 2005 2004 2005
---------- ---------- ---------- ----------
Revenues:
Products $62,422 $91,618 $117,096 $173,918
Services 12,277 12,228 24,017 24,676
---------- ---------- ---------- ----------
Total revenue 74,699 103,846 141,113 198,594
---------- ---------- ---------- ----------
Costs:
Products 56,289 65,843 90,849 126,691
Services 10,188 10,837 21,489 20,506
---------- ---------- ---------- ----------
Total cost of goods sold 66,477 76,680 112,338 147,197
---------- ---------- ---------- ----------
Gross profit 8,222 27,166 28,775 51,397
---------- ---------- ---------- ----------
Operating expenses
Research and development 46,479 34,766 93,656 68,417
Selling and marketing 25,075 27,201 50,543 53,165
General and
administrative 5,992 8,702 13,083 16,198
Stock compensation costs
Research and
development 1,408 842 3,613 1,853
Selling and marketing 415 2,447 933 3,323
General and
administrative 79 192 200 352
Amortization of
intangible assets 3,395 10,204 6,791 20,615
Restructuring costs 5,185 9,765 8,578 10,890
Long-lived asset
impairments - (25) - 159
Recovery of use tax
payments (1,931) - (1,931) -
Recovery of doubtful
accounts, net (2,794) - (2,794) -
---------- ---------- ---------- ----------
Total operating
expenses 83,303 94,094 172,672 174,972
---------- ---------- ---------- ----------
Loss from operations (75,081) (66,928) (143,897) (123,575)
Interest and other income,
net 5,614 6,346 13,292 13,022
Interest expense (6,473) (6,473) (13,857) (12,942)
Gain (loss) on equity
investments, net 139 (7,300) 593 (7,278)
Loss on extinguishment of
debt - - (8,216) -
---------- ---------- ---------- ----------
Loss before income taxes (75,801) (74,355) (152,085) (130,773)
Provision for income taxes 415 452 839 1,029
---------- ---------- ---------- ----------
Net loss $(76,216) $(74,807) $(152,924) $(131,802)
========== ========== ========== ==========
Basic and diluted net loss
per common share and
dilutive potential common
share $(0.16) $(0.13) $(0.32) $(0.23)
========== ========== ========== ==========
Weighted average basic
common and dilutive
potential common shares
outstanding 475,189 573,569 474,192 572,674
========== ========== ========== ==========
CIENA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
April 30,
---------------------
2004 2005
---------- ----------
Cash flows from operating activities:
Net loss $(152,924) $(131,802)
Adjustments to reconcile net loss to net cash
used in operating activities:
Early extinguishment of debt 8,216 -
Amortization of premium on marketable
securities 15,868 9,265
Non-cash impairment of long-lived assets - 159
Non-cash loss on equity investments - 7,278
Accretion of convertible notes payable 599 -
Depreciation and amortization of leasehold
improvements 27,639 16,292
Stock compensation 4,746 5,528
Amortization of intangibles 8,726 22,549
Provision of doubtful accounts 284 -
Provision for inventory excess and obsolescence 1,082 2,695
Provision for warranty and other contractual
obligations 4,996 5,802
Other 1,537 1,510
Changes in assets and liabilities:
Accounts receivable 4,723 (20,604)
Inventories 9,456 (570)
Prepaid expenses and other (7,208) 598
Accounts payable and accrued liabilities (32,195) (8,437)
Income taxes payable 956 815
Deferred revenue and other obligations 4,317 9,014
---------- ----------
Net cash used in operating activities (99,182) (79,908)
---------- ----------
Cash flows from investing activities:
Additions to equipment, furniture, fixtures and
intellectual property (13,646) (6,457)
Proceeds from sale of equipment, furniture and
fixtures - 239
Purchases of available for sale securities (333,524) (316,529)
Maturities of available for sale securities 389,877 453,050
Minority equity investments, net - (2,043)
---------- ----------
Net cash provided by investing activities 42,707 128,260
---------- ----------
Cash flows from financing activities:
Net proceeds from other obligations 46 -
Repayment of convertible notes payable (49,243) -
Proceeds from issuance of common stock 14,152 4,799
Repayment of notes receivable from stockholders - 48
---------- ----------
Net cash used in financing activities (35,045) 4,847
---------- ----------
Net increase in cash and cash equivalents (91,520) 53,199
Cash and cash equivalents at beginning of period 309,665 202,623
---------- ----------
Cash and cash equivalents at end of period $218,145 $255,822
========== ==========
Appendix A
The adjustments management makes in analyzing Ciena's fiscal
second 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.
-- Recovery of use tax 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.
-- 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.
-- 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
Press Contact:
Nicole Anderson, 877-857-7377
pr@ciena.com
or
Investor Contact:
Jessica Towns, 888-243-6223
ir@ciena.com