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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) August 30, 2007
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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 August 30, 2007, Ciena Corporation issued a press release announcing its
financial results for the third fiscal quarter ended July 31, 2007. 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 August 30, 2007, issued by
Ciena Corporation, reporting its results of operations
for the third fiscal quarter ended July 31, 2007.
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: August 30, 2007 By: /S/ Russell B. Stevenson, Jr.
-------------------------------------------
Russell B. Stevenson, Jr.
Senior Vice President, General Counsel and
Secretary
EXHIBIT 99.1
Ciena Reports Fiscal Third Quarter 2007 Results
Company Demonstrates Improved Operating Leverage and Delivers 5.9%
Sequential, 34.4% Year-over-Year Revenue Growth
LINTHICUM, Md.--(BUSINESS WIRE)--August 30, 2007--Ciena(R)
Corporation (NASDAQ:CIEN), the network specialist, today announced
results for its fiscal third quarter ended July 31, 2007. Revenue for
the third quarter totaled $205.0 million, representing a 5.9%
sequential increase from fiscal second quarter revenue of $193.5
million, and an increase of 34.4% over the same period a year ago when
the Company reported sales of $152.5 million. For the nine months
ended July 31, 2007, Ciena reported revenue of $563.6 million,
representing an increase of 39.5% over revenue of $404.1 million for
the same nine-month year-ago period.
On the basis of generally accepted accounting principles (GAAP),
Ciena's net income for the fiscal third quarter 2007 was $28.3
million, or $0.29 per diluted share. This represents a 117.6%
sequential increase from fiscal second quarter GAAP net income of
$13.0 million, and compares with a reported GAAP net loss of $4.3
million, or a loss of $0.05 per share, for the same period a year ago.
For the nine-month period ended July 31, 2007, Ciena's reported GAAP
net income was $52.4 million, or $0.57 per diluted share. This
compares to a GAAP net loss of $12.5 million, or $0.15 per share, for
the same nine-month year-ago period. Note that calculating diluted
earnings per share for the fiscal third quarter 2007 and for the
nine-month period ended July 31, 2007 requires that the interest
expense of $1.3 million and $2.2 million for the periods respectively,
associated with the Company's 0.25% and 0.875% convertible senior
notes, be added to GAAP net income in order to arrive at the numerator
for the earnings per share calculation.
"Consistent execution of our network specialist strategy has
enabled Ciena to benefit from two significant industry trends: the
demand for increasing network capacity and the transition to
Ethernet/IP-based network infrastructures," said Gary Smith, Ciena
president and CEO. "At the same time, we continue to drive actions
resulting in improved financial performance across the Company."
Non-GAAP Presentation of Quarterly Results
In evaluating the operating performance of its business, Ciena's
management excludes certain charges and credits that are required by
GAAP. These items, which are identified in the table that follows (in
thousands, except per share data), 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
July 31, 2006 July 31, 2007
------------- -------------
Stock-based compensation-product $ 361 $ 131
Stock-based compensation-services 211 225
Stock-based compensation-research and
development 1,061 985
Stock-based compensation-sales and
marketing 715 1,898
Stock-based compensation-general and
administrative 594 1,724
Amortization of intangible assets 6,295 6,295
Legal settlement and related contingent
fees 5,705 2,250
Restructuring costs (recoveries) 11,008 (1,196)
Recovery of doubtful accounts, net (139) -
------------- -------------
Adjustments related to income (loss) from
operations $ 25,811 $ 12,312
Gain on equity investments, net (948) (592)
------------- -------------
Total adjustments $ 24,863 $ 11,720
============= =============
Income from Operations Reconciliation
(GAAP/non-GAAP)
GAAP income (loss) from operations $ (12,810) $ 16,028
Adjustments related to income (loss) from
operations 25,811 12,312
------------- -------------
Adjusted (non-GAAP) income from
operations $ 13,001 $ 28,340
============= =============
Net Income Reconciliation (GAAP/non-GAAP)
GAAP net income (loss) $ (4,285) $ 28,312
Adjustment for total adjustments noted
above 24,863 11,720
------------- -------------
Adjusted (non-GAAP) net income $ 20,578 $ 40,032
============= =============
Weighted average basic common shares
outstanding 84,197 85,651
Weighted average dilutive potential
common shares outstanding 92,952 101,568
GAAP diluted net income per share $ (0.05) $ 0.29
Adjusted (non-GAAP) diluted net income
per share $ 0.23 $ 0.41
Please see Appendix A for additional information about this table.
Adjusting Ciena's unaudited fiscal third quarter 2007 GAAP net
income of $28.3 million for the items noted above would increase the
Company's adjusted (non-GAAP) net income in the quarter to $40.0
million. Adding the interest expense of $1.3 million associated with
the Company's 0.25% and 0.875% convertible senior notes to the
adjusted (non-GAAP) net income in order to arrive at the numerator for
the earnings per share calculation, results in an as-adjusted net
income of $0.41 per adjusted diluted share. This compares with an
adjusted (non-GAAP) net income of $20.6 million, or $0.23 per adjusted
diluted share, in the same year-ago period. Note that calculating the
as-adjusted diluted earnings per share for the fiscal third quarter
2006 requires that interest expense of approximately $0.5 million
associated with the Company's 0.25% convertible senior notes be added
to GAAP net income in order to arrive at the numerator for the
earnings per share calculation.
Third Quarter 2007 Performance Highlights
-- Achieved sequential quarterly revenue growth of 5.9% and
year-over-year revenue growth of 34.4%.
-- Delivered overall gross margin of 47.7% and product gross
margin of 53.7%.
-- Delivered GAAP income from operations of 7.8% of revenue and
13.8% of revenue on an as-adjusted basis.
-- Completed a public offering of 0.875% Convertible Senior Notes
due 2017, in aggregate principal amount of $500 million.
-- Ended the fiscal third quarter 2007 with cash, cash
equivalents and short- and long-term investments of $1.7
billion.
Third Quarter 2007 Customer Highlights
-- BT has deployed Ciena's optical Ethernet transport and
switching solutions at more than 100 sites across the UK to
support the roll-out of its 21st Century Network (21CN).
-- THUS plc chose the CN 4200(TM) FlexSelect(TM) Advanced
Services Platform to support the delivery of a new
high-capacity, next-generation network to the London
Metropolitan Network (LMN).
-- AboveNet, Inc., a leader in private metro optical networks and
fiber-based connectivity solutions for businesses and
carriers, is deploying Ciena's CoreStream(R) Agility Optical
Transport System to upgrade its core optical network that
provides high-bandwidth, long-haul service between multiple
metro networks throughout the U.S.
-- Swedish University Network (SUNET) successfully rolled out its
new 10-Gigabit Ethernet (GbE) network, OptoSUNET, using
Ciena's FlexSelect Architecture including optical
transmission, multiservice transport, Ethernet services and
network management solutions.
-- Internet2 FiberCo(R), a fiber holding company formed to
support dark fiber initiatives for U.S. research and higher
education, teamed with Ciena to provide a suite of customized
professional services and optical networking equipment
solutions to assist Internet2 members with planning,
installing, and managing their advanced network
infrastructures.
-- Mid-Atlantic Crossroads (MAX) selected the CoreDirector(R)
Multiservice Switch for use in the organization's production
and research networking efforts.
-- Children's Hospital Boston, one of the largest pediatric
medical centers in the United States, deployed the CN 4200
FlexSelect Advanced Services Platform to enable high-speed
optical connections between multiple locations throughout its
Boston campus, and facilities in nearby Waltham and Needham,
Mass., to ensure reliable, efficient data connectivity for
critical applications and seamless business continuity and
disaster recovery.
-- JANET(UK) successfully delivered its first 40 Gbps service in
a production environment across its UK national research and
education network, using the new 40 Gbps capabilities of
Ciena's CoreStream Agility Optical Transport System.
Third Quarter 2007 Product Highlights
-- Ciena introduced its FlexSelect 40G Shelf, a universal
solution to transition metro, regional, long-haul and ultra
long-haul networks to 40 Gbps while providing a migration path
for 100G networking.
-- The Company announced the CN 4200 RS FlexSelect Advanced
Services Platform, the latest expansion of the Company's
flagship CN 4200 family of products and its FlexSelect
Architecture vision for flexible, service-enabled transport.
-- EMC(R) E-Lab(TM) qualified the CN 4200 FlexSelect Advanced
Services Platform at 4G and 10G Fibre Channel capacities.
-- The CN 4200 FlexSelect Advanced Services Platform achieved
technical acceptance under the United States Department of
Agriculture (USDA)'s Rural Development Telecommunications
Program, which offers funding and low-cost loans to service
providers investing in networks that serve rural communities.
Business Outlook
"Our strategy of prioritizing our investments and targeting high
growth market segments has enabled us to grow faster than the overall
market for the past two years, and at this point, we are on track to
do so once again with annual revenue growth of up to 37 percent in
fiscal 2007," said Smith. "At the same time, as evidenced by this
quarter's performance, we remain focused on maximizing the operating
leverage in our business model."
Live Web Broadcast of Fiscal Third Quarter Results
Ciena will host a discussion of its fiscal third quarter results
with investors and financial analysts today, Thursday, August 30, 2007
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-Q filed with the
Securities and Exchange Commission on June 1, 2007. 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:
our strategy of prioritizing our investments and targeting high growth
market segments has enabled us to grow faster than the overall market
for the past several years, and at this point, we are on track to do
so once again with annual revenue growth of up to 37 percent in fiscal
2007; and, at the same time, as evidenced by this quarter's
performance, we remain focused on maximizing the operating leverage in
our business model. 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
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
ASSETS
October 31, July 31,
------------ ------------
Current assets: 2006 2007
------------ ------------
Cash and cash equivalents $ 220,164 $ 724,271
Investments in marketable debt securities 628,393 1,004,492
Accounts receivable, net 107,172 117,806
Inventories, net 106,085 105,141
Prepaid expenses and other 36,372 43,382
------------ ------------
Total current assets 1,098,186 1,995,092
Investments in marketable debt securities 351,407 8,354
Equipment, furniture and fixtures, net 29,427 41,462
Goodwill 232,015 232,015
Other intangible assets, net 91,274 69,486
Other assets 37,404 67,270
------------ ------------
Total assets $ 1,839,713 $ 2,413,679
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 39,277 $ 51,798
Accrued liabilities 79,282 92,862
Restructuring liabilities 8,914 7,164
Unfavorable lease commitments 8,512 8,406
Income taxes payable 5,981 6,676
Deferred revenue 19,637 33,146
Convertible notes payable - 542,262
------------ ------------
Total current liabilities 161,603 742,314
Deferred revenue 21,039 26,978
Restructuring liabilities 26,720 21,188
Unfavorable lease commitments 32,785 26,473
Other obligations 1,678 1,503
Convertible notes payable 842,262 800,000
------------ ------------
Total liabilities 1,086,087 1,618,456
------------ ------------
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;
140,000,000 shares authorized; 84,891,656
and 85,948,654 shares issued and
outstanding 849 859
Additional paid-in capital 5,505,853 5,495,915
Unrealized loss on investments, net (496) (279)
Translation adjustment (580) (1,650)
Accumulated deficit (4,752,000) (4,699,622)
------------ ------------
Total stockholders' equity 753,626 795,223
------------ ------------
Total liabilities and stockholders' equity $ 1,839,713 $ 2,413,679
============ ============
CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Quarter Ended Nine Months Ended
July 31, July 31,
------------------- -------------------
2006 2007 2006 2007
--------- --------- --------- ---------
Revenues:
Products $137,809 $182,143 $360,958 $501,637
Services 14,690 22,808 43,146 61,942
--------- --------- --------- ---------
Total revenue 152,499 204,951 404,104 563,579
--------- --------- --------- ---------
Costs:
Products 70,356 84,383 189,712 250,681
Services 10,479 22,903 29,367 59,775
--------- --------- --------- ---------
Total cost of goods sold 80,835 107,286 219,079 310,456
--------- --------- --------- ---------
Gross profit 71,664 97,665 185,025 253,123
--------- --------- --------- ---------
Operating expenses:
Research and development 26,190 31,671 84,508 93,166
Selling and marketing 24,903 30,303 78,132 85,360
General and administrative 16,217 14,564 37,359 36,572
Amortization of intangible
assets 6,295 6,295 18,885 18,885
Restructuring costs
(recoveries) 11,008 (1,196) 16,037 (2,396)
Long-lived asset impairments - - (6) -
Recovery of doubtful
accounts, net (139) - (2,990) (10)
Gain on lease settlement - - (11,648) -
--------- --------- --------- ---------
Total operating expenses 84,474 81,637 220,277 231,577
--------- --------- --------- ---------
Income (loss) from operations (12,810) 16,028 (35,252) 21,546
Interest and other income, net 14,045 19,464 34,504 51,206
Interest expense (6,148) (6,931) (18,016) (19,227)
Gain on equity investments,
net 948 592 215 592
Gain on extinguishment of debt - - 7,052 -
--------- --------- --------- ---------
Income (loss) before income
taxes (3,965) 29,153 (11,497) 54,117
Provision for income taxes 320 841 989 1,739
--------- --------- --------- ---------
Net income (loss) $ (4,285) $ 28,312 $(12,486) $ 52,378
========= ========= ========= =========
Basic net income (loss) per
common share $ (0.05) $ 0.33 $ (0.15) $ 0.61
========= ========= ========= =========
Diluted net income (loss) per
potential common share $ (0.05) $ 0.29 $ (0.15) $ 0.57
========= ========= ========= =========
Weighted average basic common
shares outstanding 84,197 85,651 83,568 85,268
========= ========= ========= =========
Weighted average dilutive
potential common shares
outstanding 84,197 101,568 83,568 95,107
========= ========= ========= =========
CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended July 31,
--------------------------
2006 2007
------------ -------------
Cash flows from operating activities:
Net income (loss) $ (12,486) $ 52,378
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Early extinguishment of debt (7,052) -
Amortization of premium (discount) on
marketable securities 2,058 (8,093)
Non-cash loss from equity investments 733 -
Depreciation of equipment, furniture and
fixtures; and amortization of leasehold
improvements 13,173 9,407
Stock compensation 10,953 14,258
Amortization of intangible assets 21,788 21,788
Provision for inventory excess and
obsolescence 6,158 8,860
Provision for warranty 10,885 8,910
Other 1,236 1,754
Changes in assets and liabilities:
Accounts receivable (16,852) (10,634)
Inventories (52,646) (7,916)
Prepaid expenses and other 1,282 (16,776)
Accounts payable, accrued liabilities
and other obligations (42,744) 3,316
Income taxes payable 70 695
Deferred revenue (917) 19,448
------------ -------------
Net cash provided by (used in) operating
activities (64,361) 97,395
------------ -------------
Cash flows from investing activities:
Additions to equipment, furniture and
fixtures (13,332) (21,442)
Restricted cash 1,347 (11,904)
Purchases of available for sale
marketable debt securities (403,664) (564,399)
Maturities of available for sale
marketable debt securities 485,916 539,663
Minority equity investments, net 948 411
------------ -------------
Net cash provided by (used in) investing
activities 71,215 (57,671)
------------ -------------
Cash flows from financing activities:
Proceeds from issuance of convertible
senior notes 300,000 500,000
Repurchase of 3.75% convertible notes (98,410) -
Debt issuance costs (7,990) (11,431)
Purchase of call spread option (28,457) (42,500)
Proceeds from exercise of stock options 22,225 18,314
------------ -------------
Net cash provided by financing activities 187,368 464,383
------------ -------------
Net increase in cash and cash equivalents 194,222 504,107
Cash and cash equivalents at beginning of
period 358,012 220,164
------------ -------------
Cash and cash equivalents at end of period $ 552,234 $ 724,271
============ =============
Appendix A
The adjustments management makes in analyzing Ciena's fiscal third
quarter 2007 GAAP results are as follows:
-- Stock-based compensation costs - A non-cash expense incurred
in accordance with SFAS 123R using the modified prospective
application transition method.
-- 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.
-- Legal settlement and related contingent fees - included in
general and administrative expenses during our third quarter
of fiscal 2007 were $2.3 million in expenses associated with
patent litigation settlements. Included in general and
administrative expenses in the third quarter of fiscal 2006
were $5.7 million in contingent fees paid to outside counsel
and advisors resulting from the settlement of patent
litigation with Nortel Networks.
-- Restructuring costs (recoveries) - infrequent charges or
recoveries 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.
-- Recovery of doubtful accounts - an infrequent gain unrelated
to normal operations resulting from the recovery of a
previously assessed doubtful payment due to a customer's
financial condition.
-- Gain on equity investments, net - a non-recurring loss or gain
related to changes in the value of the Company's equity
investments which the Company feels is not reflective of its
ongoing operating costs.
About Ciena
Ciena specializes in network transition. We provide the flexible
platforms, intelligent software and professional services to
build converged networks for enhanced services and applications. With
a growing global presence, Ciena leverages its heritage of practical
innovation to deliver maximum performance and economic value in
communications networks worldwide. For more information, visit
www.ciena.com.
CONTACT: Ciena Corporation
Press Contact:
Nicole Anderson, 410-694-5786
pr@ciena.com
or
Investor Contact:
Suzanne DuLong, 888-243-6223
ir@ciena.com