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 6, 2011 | ||
Ciena Corporation (Exact Name of Registrant as Specified in Its Charter) | ||
Delaware (State or Other Jurisdiction of Incorporation) | ||
0-21969 | 23-2725311 | |
(Commission File Number) | (IRS Employer Identification No.) | |
1201 Winterson Road, Linthicum, MD | 21090 | |
(Address of Principal Executive Offices) | (Zip Code) | |
(410) 865-8500 | ||
(Registrant's Telephone Number, Including Area Code) | ||
_____n/a_________ | ||
(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): | ||
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
(c) | The following exhibit is being filed herewith: | |||
Exhibit Number | Description of Document | |||
Exhibit 99.1 | Text of Press Release dated December 8, 2011, issued by Ciena Corporation, reporting its results of operations for its fourth fiscal quarter and fiscal year ended October 31, 2011. | |||
Ciena Corporation | ||
Date: December 8, 2011 | By: | /s/ David M. Rothenstein |
David M. Rothenstein | ||
Senior Vice President, General Counsel and Secretary |
GAAP Results | ||||||||||||||||||
Q4 | Q3 | Q4 | Period Change | |||||||||||||||
FY 2011 | FY 2011 | FY 2010 | Q-T-Q* | Y-T-Y* | ||||||||||||||
Revenue | $ | 455.5 | $ | 435.3 | $ | 417.6 | 4.6 | % | 9.1 | % | ||||||||
Gross margin | 41.7 | % | 42.5 | % | 40.3 | % | (0.8 | )% | 1.4 | % | ||||||||
Operating expense | $ | 206.2 | $ | 202.3 | $ | 249.6 | 1.9 | % | (17.4 | )% | ||||||||
Operating margin | (3.6 | )% | (4.0 | )% | (19.4 | )% | 0.4 | % | 15.8 | % | ||||||||
Non-GAAP Results | ||||||||||||||||||
Q4 | Q3 | Q4 | Period Change | |||||||||||||||
FY 2011 | FY 2011 | FY 2010 | Q-T-Q* | Y-T-Y* | ||||||||||||||
Revenue | $ | 455.5 | $ | 435.3 | $ | 417.6 | 4.6 | % | 9.1 | % | ||||||||
Adj. gross margin | 43.2 | % | 44.1 | % | 43.7 | % | (0.9 | )% | (0.5 | )% | ||||||||
Adj. operating expense | $ | 180.8 | $ | 175.2 | $ | 195.3 | 3.2 | % | (7.4 | )% | ||||||||
Adj. operating margin | 3.5 | % | 3.8 | % | (3.1 | )% | (0.3 | )% | 6.6 | % | ||||||||
Revenue by Segment | ||||||||||||||||||
Q4 FY 2011 | Q3 FY 2011 | Q4 FY 2010 | ||||||||||||||||
Revenue | % | Revenue | % | Revenue | % | |||||||||||||
Packet-Optical Transport | $ | 296.2 | 65.1 | $ | 266.5 | 61.3 | $ | 282.4 | 67.6 | |||||||||
Packet-Optical Switching | 41.2 | 9.0 | 40.7 | 9.3 | 21.4 | 5.1 | ||||||||||||
Carrier-Ethernet Solutions | 28.8 | 6.3 | 40.5 | 9.3 | 30.0 | 7.2 | ||||||||||||
Software and Services | 89.3 | 19.6 | 87.6 | 20.1 | 83.8 | 20.1 | ||||||||||||
Total | $ | 455.5 | 100.0 | $ | 435.3 | 100.0 | $ | 417.6 | 100.0 | |||||||||
* Denotes % change, or in the case of margin, absolute change |
• | Non-U.S. customers contributed 45% of total revenue |
• | One 10%-plus customer represented a total of 15% of revenue |
• | Cash and investments totaled $592.2 million |
• | Cash flow from operations totaled $42.0 million |
• | Free cash flow totaled $30.8 million |
• | Average days' sales outstanding (DSOs) were 83 |
• | Accounts receivable balance was $417.5 million |
• | Inventories totaled $230.1 million, including: |
◦ | Raw materials: $45.3 million |
◦ | Work in process: $13.9 million |
◦ | Finished goods: $135.0 million |
◦ | Deferred cost of sales: $67.7 million |
◦ | Reserve for excess and obsolescence: $(31.8) million |
• | Product inventory turns were 3.7 |
• | Headcount totaled 4,339 |
• | Revenue in the range of $435 to $455 million |
• | Adjusted (non-GAAP) gross margin percentage in the low 40s range |
• | Adjusted (non-GAAP) operating expense in the low $180s million range |
Quarter Ended October 31, | Year Ended October 31, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Revenue: | ||||||||||||||||
Products | $ | 341,387 | $ | 368,049 | $ | 1,009,239 | $ | 1,406,532 | ||||||||
Services | 76,227 | 87,406 | 227,397 | 335,438 | ||||||||||||
Total revenue | 417,614 | 455,455 | 1,236,636 | 1,741,970 | ||||||||||||
Cost of goods sold: | ||||||||||||||||
Products | 200,255 | 210,686 | 596,704 | 825,969 | ||||||||||||
Services | 48,969 | 54,859 | 142,431 | 206,855 | ||||||||||||
Total cost of goods sold | 249,224 | 265,545 | 739,135 | 1,032,824 | ||||||||||||
Gross profit | 168,390 | 189,910 | 497,501 | 709,146 | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 105,582 | 91,232 | 327,626 | 379,862 | ||||||||||||
Selling and marketing | 61,823 | 71,235 | 193,515 | 251,990 | ||||||||||||
General and administrative | 35,777 | 27,276 | 102,692 | 126,242 | ||||||||||||
Acquisition and integration costs | 18,094 | 2,340 | 101,379 | 42,088 | ||||||||||||
Amortization of intangible assets | 37,572 | 13,534 | 99,401 | 69,665 | ||||||||||||
Restructuring costs | 4,529 | 591 | 8,514 | 5,781 | ||||||||||||
Change in fair value of contingent consideration | (13,807 | ) | — | (13,807 | ) | (3,289 | ) | |||||||||
Total operating expenses | 249,570 | 206,208 | 819,320 | 872,339 | ||||||||||||
Loss from operations | (81,180 | ) | (16,298 | ) | (321,819 | ) | (163,193 | ) | ||||||||
Interest and other income (loss), net | 3,610 | (1,312 | ) | 3,917 | 6,022 | |||||||||||
Interest expense | (6,688 | ) | (9,500 | ) | (18,619 | ) | (37,926 | ) | ||||||||
Gain on cost method investments | — | 7,249 | — | 7,249 | ||||||||||||
Gain on extinguishment of debt | 4,948 | — | 4,948 | — | ||||||||||||
Loss before income taxes | (79,310 | ) | (19,861 | ) | (331,573 | ) | (187,848 | ) | ||||||||
Provision for income taxes | 1,007 | 2,468 | 1,941 | 7,673 | ||||||||||||
Net loss | $ | (80,317 | ) | $ | (22,329 | ) | $ | (333,514 | ) | $ | (195,521 | ) | ||||
Basic net loss per common share | $ | (0.86 | ) | $ | (0.23 | ) | $ | (3.58 | ) | $ | (2.04 | ) | ||||
Diluted net loss per potential common share | $ | (0.86 | ) | $ | (0.23 | ) | $ | (3.58 | ) | $ | (2.04 | ) | ||||
Weighted average basic common shares outstanding | 93,197 | 97,197 | 93,103 | 95,854 | ||||||||||||
Weighted average dilutive potential common shares outstanding | 93,197 | 97,197 | 93,103 | 95,854 |
October 31, | |||||||
2010 | 2011 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 688,687 | $ | 541,896 | |||
Accounts receivable, net | 343,582 | 417,509 | |||||
Inventories | 261,619 | 230,076 | |||||
Prepaid expenses and other | 147,680 | 143,357 | |||||
Total current assets | 1,441,568 | 1,332,838 | |||||
Long-term investments | — | 50,264 | |||||
Equipment, furniture and fixtures, net | 120,294 | 122,558 | |||||
Other intangible assets, net | 426,412 | 331,635 | |||||
Other long-term assets | 129,819 | 114,123 | |||||
Total assets | $ | 2,118,093 | $ | 1,951,418 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 200,617 | $ | 157,116 | |||
Accrued liabilities | 193,994 | 197,004 | |||||
Deferred revenue | 75,334 | 99,373 | |||||
Total current liabilities | 469,945 | 453,493 | |||||
Long-term deferred revenue | 29,715 | 24,425 | |||||
Other long-term obligations | 16,435 | 17,263 | |||||
Convertible notes payable | 1,442,705 | 1,442,364 | |||||
Total liabilities | 1,958,800 | 1,937,545 | |||||
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; 290,000,000 shares authorized; 94,060,300 and 97,440,436 shares issued and outstanding | 941 | 974 | |||||
Additional paid-in capital | 5,702,137 | 5,753,236 | |||||
Accumulated other comprehensive income | 1,062 | 31 | |||||
Accumulated deficit | (5,544,847 | ) | (5,740,368 | ) | |||
Total stockholders’ equity | 159,293 | 13,873 | |||||
Total liabilities and stockholders’ equity | $ | 2,118,093 | $ | 1,951,418 |
Year Ended October 31, | |||||||
2010 | 2011 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (333,514 | ) | $ | (195,521 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Gain on extinguishment of debt | (4,948 | ) | — | ||||
Amortization of premium (discount) on marketable debt securities | 574 | (38 | ) | ||||
Gain on cost method investments | — | (7,249 | ) | ||||
Change in fair value of embedded redemption feature | (2,510 | ) | (2,800 | ) | |||
Change in fair value of contingent consideration | (13,807 | ) | — | ||||
Depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements | 42,789 | 60,154 | |||||
Share-based compensation costs | 35,560 | 37,930 | |||||
Amortization of intangible assets | 127,018 | 95,927 | |||||
Deferred tax provision | 700 | — | |||||
Provision for inventory excess and obsolescence | 13,696 | 17,334 | |||||
Provision for warranty | 15,353 | 18,451 | |||||
Other | 2,296 | 5,396 | |||||
Changes in assets and liabilities, net of effect of acquisition: | |||||||
Accounts receivable | (218,196 | ) | (75,623 | ) | |||
Inventories | (40,957 | ) | 14,209 | ||||
Prepaid expenses and other | (34,908 | ) | (18,119 | ) | |||
Accounts payable, accruals and other obligations | 180,814 | (59,285 | ) | ||||
Deferred revenue | 1,030 | 18,749 | |||||
Net cash used in operating activities | (229,010 | ) | (90,485 | ) | |||
Cash flows used in investing activities: | |||||||
Payments for equipment, furniture, fixtures and intellectual property | (51,207 | ) | (52,367 | ) | |||
Restricted cash | (24,521 | ) | 10,751 | ||||
Purchase of available for sale securities | (63,591 | ) | (49,892 | ) | |||
Proceeds from maturities of available for sale securities | 454,141 | — | |||||
Proceeds from sales of available for sale securities | 179,531 | — | |||||
Proceeds from sale of cost method investment | — | 6,544 | |||||
Acquisition of business, net of cash acquired | (693,247 | ) | — | ||||
Receipt of contingent consideration related to business acquisition | — | 16,394 | |||||
Net cash used in investing activities | (198,894 | ) | (68,570 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from issuance of senior convertible notes payable | 725,000 | — | |||||
Repayment of senior convertible notes payable | (76,065 | ) | — | ||||
Debt issuance costs | (20,301 | ) | — | ||||
Proceeds from issuance of common stock | 1,570 | 13,202 | |||||
Net cash provided by financing activities | 630,204 | 13,202 | |||||
Effect of exchange rate changes on cash and cash equivalents | 682 | (938 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 202,982 | (146,791 | ) | ||||
Cash and cash equivalents at beginning of period | 485,705 | 688,687 | |||||
Cash and cash equivalents at end of period | $ | 688,687 | $ | 541,896 | |||
Supplemental disclosure of cash flow information | |||||||
Cash paid during the period for interest | $ | 12,248 | $ | 32,931 | |||
Cash paid during the period for income taxes, net | $ | 1,705 | $ | 3,204 | |||
Non-cash investing and financing activities | |||||||
Purchase of equipment in accounts payable | $ | 5,259 | $ | 6,431 | |||
Debt issuance costs in accrued liabilities | $ | 206 | $ | — |
APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measurements | ||||||||
Quarter Ended | ||||||||
October 31, | ||||||||
2010 | 2011 | |||||||
Gross Profit Reconciliation (GAAP/non-GAAP) | ||||||||
GAAP gross profit | $ | 168,390 | $ | 189,910 | ||||
Share-based compensation-products | 665 | 611 | ||||||
Share-based compensation-services | 402 | 365 | ||||||
Amortization of intangible assets | 5,784 | 5,827 | ||||||
Fair value adjustment of acquired inventory | 7,090 | — | ||||||
Total adjustments related to gross profit | 13,941 | 6,803 | ||||||
Adjusted (non-GAAP) gross profit | $ | 182,331 | $ | 196,713 | ||||
Adjusted (non-GAAP) gross profit percentage | 43.7 | % | 43.2 | % | ||||
Operating Expense Reconciliation (GAAP/non-GAAP) | ||||||||
GAAP operating expense | $ | 249,570 | $ | 206,208 | ||||
Share-based compensation-research and development | 2,362 | 2,558 | ||||||
Share-based compensation-sales and marketing | 2,925 | 3,312 | ||||||
Share-based compensation-general and administrative | 2,610 | 3,117 | ||||||
Acquisition and integration costs | 18,094 | 2,340 | ||||||
Amortization of intangible assets | 37,572 | 13,534 | ||||||
Restructuring costs | 4,529 | 591 | ||||||
Change in fair value of contingent consideration | (13,807 | ) | — | |||||
Total adjustments related to operating expense | 54,285 | 25,452 | ||||||
Adjusted (non-GAAP) operating expense | $ | 195,285 | $ | 180,756 | ||||
Income (Loss) from Operations Reconciliation (GAAP/non-GAAP) | ||||||||
GAAP loss from operations | $ | (81,180 | ) | $ | (16,298 | ) | ||
Total adjustments related to gross profit | 13,941 | 6,803 | ||||||
Total adjustments related to operating expense | 54,285 | 25,452 | ||||||
Adjusted (non-GAAP) (loss) income from operations | $ | (12,954 | ) | 15,957 | ||||
Adjusted (non-GAAP) operating margin percentage | (3.1 | )% | 3.5 | % | ||||
Net Income (Loss) Reconciliation (GAAP/non-GAAP) | ||||||||
GAAP net loss | $ | (80,317 | ) | $ | (22,329 | ) | ||
Total adjustments related to gross profit | 13,941 | 6,803 | ||||||
Total adjustments related to operating expense | 54,285 | 25,452 | ||||||
Gain on extinguishment of debt | (4,948 | ) | — | |||||
Gain on cost method investment | — | (7,249 | ) | |||||
Change in fair value of embedded redemption feature | 60 | 580 | ||||||
Adjusted (non-GAAP) net income (loss) | $ | (16,979 | ) | $ | 3,257 | |||
Weighted average basic common shares outstanding | 93,197 | 97,197 | ||||||
Weighted average dilutive potential common shares outstanding | 93,197 | 97,857 | ||||||
Net Income (Loss) per Common Share | ||||||||
GAAP diluted net loss per common share | $ | (0.86 | ) | $ | (0.23 | ) | ||
Adjusted (non-GAAP) diluted net income (loss) per common share | $ | (0.18 | ) | $ | 0.03 |
APPENDIX B - Reconciliation of Adjusted (Non- GAAP) Annual Measurements | ||||||||
Year Ended | ||||||||
October 31, | ||||||||
2010 | 2011 | |||||||
Gross Profit Reconciliation (GAAP/non-GAAP) | ||||||||
GAAP gross profit | $ | 497,501 | $ | 709,146 | ||||
Share-based compensation-products | 2,140 | 2,269 | ||||||
Share-based compensation-services | 1,717 | 1,881 | ||||||
Amortization of intangible assets | 14,521 | 23,307 | ||||||
Fair value adjustment of acquired inventory | 42,221 | 5,735 | ||||||
Product rationalization charges | 6,572 | — | ||||||
Total adjustments related to gross profit | 67,171 | 33,192 | ||||||
Adjusted (non-GAAP) gross profit | $ | 564,672 | $ | 742,338 | ||||
Adjusted (non-GAAP) gross profit percentage | 45.7 | % | 42.6 | % | ||||
Operating Expense Reconciliation (GAAP/non-GAAP) | ||||||||
GAAP operating expense | $ | 819,320 | $ | 872,339 | ||||
Share-based compensation-research and development | 9,310 | 10,149 | ||||||
Share-based compensation-sales and marketing | 10,950 | 12,182 | ||||||
Share-based compensation-general and administrative | 9,959 | 11,140 | ||||||
Acquisition and integration costs | 101,379 | 42,088 | ||||||
Amortization of intangible assets | 99,401 | 69,665 | ||||||
Restructuring costs | 8,514 | 5,781 | ||||||
Change in fair value of contingent consideration | (13,807 | ) | (3,289 | ) | ||||
Settlement of patent litigation | — | 500 | ||||||
Total adjustments related to operating expense | 225,706 | 148,216 | ||||||
Adjusted (non-GAAP) operating expense | $ | 593,614 | $ | 724,123 | ||||
Loss from Operations Reconciliation (GAAP/non-GAAP) | ||||||||
GAAP loss from operations | $ | (321,819 | ) | $ | (163,193 | ) | ||
Total adjustments related to gross profit | 67,171 | 33,192 | ||||||
Total adjustments related to operating expense | 225,706 | 148,216 | ||||||
Adjusted (non-GAAP) (loss) income from operations | $ | (28,942 | ) | 18,215 | ||||
Adjusted (non-GAAP) operating margin percentage | (2.3 | )% | 1.0 | % | ||||
Loss Reconciliation (GAAP/non-GAAP) | ||||||||
GAAP net loss | $ | (333,514 | ) | $ | (195,521 | ) | ||
Total adjustments related to gross profit | 67,171 | 33,192 | ||||||
Total adjustments related to operating expense | 225,706 | 148,216 | ||||||
Gain on extinguishment of debt | (4,948 | ) | — | |||||
Gain on cost method investment | — | (7,249 | ) | |||||
Change in fair value of embedded redemption feature | (2,510 | ) | (2,800 | ) | ||||
Adjusted (non-GAAP) net loss | $ | (48,095 | ) | $ | (24,162 | ) | ||
Weighted average basic common shares outstanding | 93,103 | 95,854 | ||||||
Weighted average dilutive potential common shares outstanding | 93,103 | 95,854 | ||||||
Net Loss per Common Share | ||||||||
GAAP diluted net loss per common share | $ | (3.58 | ) | $ | (2.04 | ) | ||
Adjusted (non-GAAP) diluted net income (loss) per common share | $ | (0.52 | ) | $ | (0.25 | ) |
• | Share-based compensation expense - a non-cash expense incurred in accordance with share-based compensation accounting guidance. |
• | Amortization of intangible assets - a non-cash expense arising from the acquisition of intangible assets, principally developed technologies and customer-related intangibles acquired from the MEN Business, that Ciena is required to amortize over its expected useful life. |
• | Fair value adjustment of acquired inventory - an infrequent charge required by acquisition accounting rules resulting from the required revaluation of inventory acquired from the MEN Business to estimated fair value. This revaluation resulted in a net increase in inventory carrying value and an increase in cost of goods sold for the periods indicated. |
• | Product rationalization charges - infrequent costs relating to excess and obsolete inventory charges and purchase commitment losses associated with product rationalization decisions made by Ciena as to the combined portfolio of products to be offered following the completion of the MEN business acquisition. |
• | Acquisition and integration costs - reflects transaction expense, and consulting and third party service fees associated with the acquisition of the Nortel MEN Business and the integration of this business into Ciena's operations. |
• | Restructuring costs - costs incurred as a result of restructuring activities (or in the case of recoveries, previous restructuring activities) taken to align resources with perceived market opportunities. |
• | Change in fair value of contingent consideration – a non-cash, unrealized gain during the periods identified related to Nortel's intent to exercise its early termination right relating to the Carling, Canada facility lease entered into as part of the acquisition of the MEN Business. |
• | Settlement of patent litigation - included in general and administrative expense during our first quarter of fiscal 2011 is a $0.5 million patent litigation settlement. |
• | Gain on extinguishment of debt - an infrequent gain related to the repurchase and early extinguishment of a portion of our outstanding senior convertible notes during the fourth quarter of fiscal 2010. |
• | Gain on cost method investments – a non-cash gain related to the sale of a privately held technology company in which Ciena held a minority equity investment, which gain Ciena does not believe is reflective of its ongoing operating costs. |
• | Change in fair value of embedded redemption feature - a non-cash unrealized gain or loss reflective of a mark to market fair value adjustment of an embedded derivative related to the redemption feature of Ciena's outstanding 4.0% senior convertible notes. |