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, 2012 | ||
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.) | |
7035 Ridge Road, Hanover, MD | 21076 | |
(Address of Principal Executive Offices) | (Zip Code) | |
(410) 694-5700 | ||
(Registrant's Telephone Number, Including Area Code) | ||
Not Applicable | ||
(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 August 30, 2012, issued by Ciena Corporation, reporting its results of operations for its third fiscal quarter ended July 31, 2012. | |||
Ciena Corporation | ||
Date: August 30, 2012 | By: | /s/ David M. Rothenstein |
David M. Rothenstein | ||
Senior Vice President, General Counsel and Secretary |
GAAP Results | ||||||||||||||||||
Q3 | Q2 | Q3 | Period Change | |||||||||||||||
FY 2012 | FY 2012 | FY 2011 | Q-T-Q* | Y-T-Y* | ||||||||||||||
Revenue | $ | 474.1 | $ | 477.6 | $ | 435.3 | (0.7 | )% | 8.9 | % | ||||||||
Gross margin | 38.2 | % | 38.3 | % | 42.5 | % | (0.1 | )% | (4.3 | )% | ||||||||
Operating expense | $ | 196.6 | $ | 194.4 | $ | 202.3 | 1.1 | % | (2.8 | )% | ||||||||
Operating margin | (3.2 | )% | (2.4 | )% | (4.0 | )% | (0.8 | )% | 0.8 | % | ||||||||
Non-GAAP Results | ||||||||||||||||||
Q3 | Q2 | Q3 | Period Change | |||||||||||||||
FY 2012 | FY 2012 | FY 2011 | Q-T-Q* | Y-T-Y* | ||||||||||||||
Revenue | $ | 474.1 | $ | 477.6 | $ | 435.3 | (0.7 | )% | 8.9 | % | ||||||||
Adj. gross margin | 39.6 | % | 39.6 | % | 44.1 | % | — | % | (4.5 | )% | ||||||||
Adj. operating expense | $ | 175.6 | $ | 172.9 | $ | 175.2 | 1.6 | % | 0.2 | % | ||||||||
Adj. operating margin | 2.5 | % | 3.4 | % | 3.8 | % | (0.9 | )% | (1.3 | )% | ||||||||
Revenue by Segment | ||||||||||||||||||
Q3 FY 2012 | Q2 FY 2012 | Q3 FY 2011 | ||||||||||||||||
Revenue | % | Revenue | % | Revenue | % | |||||||||||||
Packet-Optical Transport | $ | 298.5 | 63.0 | $ | 318.0 | 66.6 | $ | 266.6 | 61.2 | |||||||||
Packet-Optical Switching | 37.8 | 8.0 | 31.0 | 6.5 | 40.7 | 9.3 | ||||||||||||
Carrier-Ethernet Solutions | 31.3 | 6.6 | 30.6 | 6.4 | 40.5 | 9.3 | ||||||||||||
Software and Services | 106.5 | 22.4 | 98.0 | 20.5 | 87.5 | 20.2 | ||||||||||||
Total | $ | 474.1 | 100.0 | $ | 477.6 | 100.0 | $ | 435.3 | 100.0 | |||||||||
* Denotes % change, or in the case of margin, absolute change |
• | Non-U.S. customers contributed 50% of total revenue |
• | Cash and investments totaled $667.3 million |
• | Cash flow from operations totaled $23.1 million |
• | Free cash flow totaled $6.3 million |
• | Average days' sales outstanding (DSOs) were 72 |
• | Accounts receivable balance was $379.1 million |
• | Inventories totaled $245.0 million, including: |
◦ | Raw materials: $38.0 million |
◦ | Work in process: $12.6 million |
◦ | Finished goods: $185.7 million |
◦ | Deferred cost of sales: $46.1 million |
◦ | Reserve for excess and obsolescence: $(37.4) million |
• | Product inventory turns were 3.7 |
• | Headcount totaled 4,463 |
• | Revenue in the range of $455 to $480 million |
• | Adjusted (non-GAAP) gross margin of approximately 40 percent |
• | Adjusted (non-GAAP) operating expense in the low $180s million range |
Quarter Ended July 31, | Nine Months Ended July 31, | ||||||||||||||
2011 | 2012 | 2011 | 2012 | ||||||||||||
Revenue: | |||||||||||||||
Products | $ | 350,030 | $ | 373,418 | $ | 1,038,483 | $ | 1,091,817 | |||||||
Services | 85,283 | 100,672 | 248,032 | 276,575 | |||||||||||
Total revenue | 435,313 | 474,090 | 1,286,515 | 1,368,392 | |||||||||||
Cost of goods sold: | |||||||||||||||
Products | 198,217 | 225,238 | 615,283 | 657,362 | |||||||||||
Services | 52,199 | 67,531 | 151,996 | 179,012 | |||||||||||
Total cost of goods sold | 250,416 | 292,769 | 767,279 | 836,374 | |||||||||||
Gross profit | 184,897 | 181,321 | 519,236 | 532,018 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 93,216 | 88,315 | 288,630 | 268,378 | |||||||||||
Selling and marketing | 61,895 | 65,397 | 180,755 | 192,325 | |||||||||||
General and administrative | 28,172 | 27,870 | 98,966 | 84,350 | |||||||||||
Acquisition and integration costs | 4,822 | 6 | 39,748 | (140 | ) | ||||||||||
Amortization of intangible assets | 13,673 | 12,714 | 56,131 | 39,152 | |||||||||||
Restructuring costs | 504 | 2,291 | 5,190 | 5,864 | |||||||||||
Change in fair value of contingent consideration | — | — | (3,289 | ) | — | ||||||||||
Total operating expenses | 202,282 | 196,593 | 666,131 | 589,929 | |||||||||||
Loss from operations | (17,385 | ) | (15,272 | ) | (146,895 | ) | (57,911 | ) | |||||||
Interest and other income (loss), net | (3,160 | ) | (2,458 | ) | 7,334 | (11,732 | ) | ||||||||
Interest expense | (9,470 | ) | (9,597 | ) | (28,426 | ) | (28,813 | ) | |||||||
Loss before income taxes | (30,015 | ) | (27,327 | ) | (167,987 | ) | (98,456 | ) | |||||||
Provision for income taxes | 1,435 | 2,490 | 5,205 | 6,794 | |||||||||||
Net loss | $ | (31,450 | ) | $ | (29,817 | ) | $ | (173,192 | ) | $ | (105,250 | ) | |||
Basic net loss per common share | $ | (0.33 | ) | $ | (0.30 | ) | $ | (1.82 | ) | $ | (1.06 | ) | |||
Diluted net loss per potential common share | $ | (0.33 | ) | $ | (0.30 | ) | $ | (1.82 | ) | $ | (1.06 | ) | |||
Weighted average basic common shares outstanding | 96,313 | 99,530 | 95,389 | 98,922 | |||||||||||
Weighted average dilutive potential common shares outstanding | 96,313 | 99,530 | 95,389 | 98,922 |
October 31, 2011 | July 31, 2012 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 541,896 | $ | 617,232 | |||
Short-term investments | — | 50,115 | |||||
Accounts receivable, net | 417,509 | 379,092 | |||||
Inventories | 230,076 | 245,043 | |||||
Prepaid expenses and other | 143,357 | 119,039 | |||||
Total current assets | 1,332,838 | 1,410,521 | |||||
Long-term investments | 50,264 | — | |||||
Equipment, furniture and fixtures, net | 122,558 | 118,568 | |||||
Other intangible assets, net | 331,635 | 275,670 | |||||
Other long-term assets | 114,123 | 110,502 | |||||
Total assets | $ | 1,951,418 | $ | 1,915,261 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 157,116 | $ | 205,662 | |||
Accrued liabilities | 197,004 | 199,970 | |||||
Deferred revenue | 99,373 | 78,319 | |||||
Convertible notes payable | — | 216,210 | |||||
Total current liabilities | 453,493 | 700,161 | |||||
Long-term deferred revenue | 24,425 | 23,408 | |||||
Other long-term obligations | 17,263 | 26,052 | |||||
Long-term convertible notes payable | 1,442,364 | 1,225,898 | |||||
Total liabilities | 1,937,545 | 1,975,519 | |||||
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; 97,440,436 and 100,192,289 shares issued and outstanding | 974 | 1,002 | |||||
Additional paid-in capital | 5,753,236 | 5,788,887 | |||||
Accumulated other comprehensive income (loss) | 31 | (4,529 | ) | ||||
Accumulated deficit | (5,740,368 | ) | (5,845,618 | ) | |||
Total stockholders’ equity (deficit) | 13,873 | (60,258 | ) | ||||
Total liabilities and stockholders’ equity (deficit) | $ | 1,951,418 | $ | 1,915,261 |
Nine Months Ended July 31, | |||||||
2011 | 2012 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (173,192 | ) | $ | (105,250 | ) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||
Amortization of discount on marketable securities | (25 | ) | (39 | ) | |||
Change in fair value of embedded redemption feature | (3,380 | ) | 3,160 | ||||
Depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements | 44,765 | 43,514 | |||||
Share-based compensation costs | 27,919 | 23,656 | |||||
Amortization of intangible assets | 76,567 | 55,965 | |||||
Deferred tax provision (benefit) | — | (148 | ) | ||||
Provision for inventory excess and obsolescence | 11,461 | 19,071 | |||||
Provision for warranty | 10,538 | 23,495 | |||||
Other | 2,170 | 5,441 | |||||
Changes in assets and liabilities, net of effect of acquisition: | |||||||
Accounts receivable | (72,030 | ) | 37,223 | ||||
Inventories | 6,331 | (34,038 | ) | ||||
Prepaid expenses and other | (4,462 | ) | 10,890 | ||||
Accounts payable, accruals and other obligations | (81,388 | ) | 35,632 | ||||
Deferred revenue | 22,241 | (22,071 | ) | ||||
Net cash provided by (used in) operating activities | (132,485 | ) | 96,501 | ||||
Cash flows used in investing activities: | |||||||
Payments for equipment, furniture, fixtures and intellectual property | (41,138 | ) | (33,000 | ) | |||
Restricted cash | (8,727 | ) | 3,546 | ||||
Purchase of available for sale securities | (49,894 | ) | — | ||||
Proceeds from sale of cost method investment | — | 524 | |||||
Receipt of contingent consideration related to business acquisition | 16,394 | — | |||||
Net cash used in investing activities | (83,365 | ) | (28,930 | ) | |||
Cash flows from financing activities: | |||||||
Repayment of capital lease obligations | — | (1,231 | ) | ||||
Proceeds from issuance of common stock | 13,183 | 12,022 | |||||
Net cash provided by financing activities | 13,183 | 10,791 | |||||
Effect of exchange rate changes on cash and cash equivalents | 312 | (3,026 | ) | ||||
Net increase (decrease) in cash and cash equivalents | (202,667 | ) | 78,362 | ||||
Cash and cash equivalents at beginning of period | 688,687 | 541,896 | |||||
Cash and cash equivalents at end of period | $ | 486,332 | $ | 617,232 | |||
Supplemental disclosure of cash flow information | |||||||
Cash paid during the period for interest | $ | 18,869 | $ | 18,978 | |||
Cash paid during the period for income taxes, net | $ | 1,781 | $ | 7,807 | |||
Non-cash investing and financing activities | |||||||
Purchase of equipment in accounts payable | $ | 5,186 | $ | 2,686 | |||
Fixed assets acquired under capital leases | $ | 1,268 | $ | 6,033 |
APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measurements | ||||||||
Quarter Ended | ||||||||
July 31, | ||||||||
2011 | 2012 | |||||||
Gross Profit Reconciliation (GAAP/non-GAAP) | ||||||||
GAAP gross profit | $ | 184,897 | $ | 181,321 | ||||
Share-based compensation-products | 579 | 564 | ||||||
Share-based compensation-services | 511 | 332 | ||||||
Amortization of intangible assets | 5,826 | 5,385 | ||||||
Total adjustments related to gross profit | 6,916 | 6,281 | ||||||
Adjusted (non-GAAP) gross profit | $ | 191,813 | $ | 187,602 | ||||
Adjusted (non-GAAP) gross profit percentage | 44.1 | % | 39.6 | % | ||||
Operating Expense Reconciliation (GAAP/non-GAAP) | ||||||||
GAAP operating expense | $ | 202,282 | $ | 196,593 | ||||
Share-based compensation-research and development | 2,423 | 1,841 | ||||||
Share-based compensation-sales and marketing | 2,736 | 2,589 | ||||||
Share-based compensation-general and administrative | 2,882 | 1,547 | ||||||
Acquisition and integration costs | 4,822 | 6 | ||||||
Amortization of intangible assets | 13,673 | 12,714 | ||||||
Restructuring costs | 504 | 2,291 | ||||||
Total adjustments related to operating expense | 27,040 | 20,988 | ||||||
Adjusted (non-GAAP) operating expense | $ | 175,242 | $ | 175,605 | ||||
Income (Loss) from Operations Reconciliation (GAAP/non-GAAP) | ||||||||
GAAP loss from operations | $ | (17,385 | ) | $ | (15,272 | ) | ||
Total adjustments related to gross profit | 6,916 | 6,281 | ||||||
Total adjustments related to operating expense | 27,040 | 20,988 | ||||||
Adjusted (non-GAAP) income (loss) from operations | $ | 16,571 | 11,997 | |||||
Adjusted (non-GAAP) operating margin percentage | 3.8 | % | 2.5 | % | ||||
Net Income (Loss) Reconciliation (GAAP/non-GAAP) | ||||||||
GAAP net loss | $ | (31,450 | ) | $ | (29,817 | ) | ||
Total adjustments related to gross profit | 6,916 | 6,281 | ||||||
Total adjustments related to operating expense | 27,040 | 20,988 | ||||||
Change in fair value of embedded redemption feature | 5,780 | (1,570 | ) | |||||
Adjusted (non-GAAP) net income (loss) | $ | 8,286 | $ | (4,118 | ) | |||
Weighted average basic common shares outstanding | 96,313 | 99,530 | ||||||
Weighted average dilutive potential common shares outstanding | 104,146 | 99,530 | ||||||
Net Income (Loss) per Common Share | ||||||||
GAAP diluted net loss per common share | $ | (0.33 | ) | $ | (0.30 | ) | ||
Adjusted (non-GAAP) diluted net income (loss) per common share | $ | 0.08 | $ | (0.04 | ) |
• | 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. |
• | 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 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. |