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 11, 2014 | ||
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)) |
On December 11, 2014, Ciena Corporation ("Ciena") issued a press release announcing its financial results for its fourth quarter and fiscal year ended October 31, 2014. 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. |
As discussed in the press release above, Ciena will be hosting an investor call to discuss its results of operations for its fourth quarter and fiscal year ended October 31, 2014. Ciena is making available on its corporate website at http://investor.ciena.com/financials.cfm an investor presentation to accompany this call. This presentation includes certain highlighted items from the fourth quarter and year ended October 31, 2014 to be discussed on the call and certain historical results. |
Investors are encouraged to review the “Investors” page of our website at www.ciena.com because, as with the other disclosure channels that we use, from time to time we may post material information exclusively on that site. |
(d) | The following exhibit is being filed herewith: | |||
Exhibit Number | Description of Document | |||
Exhibit 99.1 | Text of Press Release dated December 11, 2014, issued by Ciena Corporation, reporting its results of operations for its fourth quarter and fiscal year ended October 31, 2014. |
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: December 11, 2014 | By: | /S/ David M. Rothenstein |
David M. Rothenstein | ||
Senior Vice President, General Counsel and Secretary |
GAAP Results (unaudited) | ||||||||||||||||||
Q4 | Q3 | Q4 | Period Change | |||||||||||||||
FY 2014 | FY 2014 | FY 2013 | Q-T-Q* | Y-T-Y* | ||||||||||||||
Revenue | $ | 591.0 | $ | 603.6 | $ | 583.4 | (2.1 | )% | 1.3 | % | ||||||||
Gross margin | 37.4 | % | 43.7 | % | 39.7 | % | (6.3 | )% | (2.3 | )% | ||||||||
Operating expense | $ | 222.7 | $ | 227.0 | $ | 232.1 | (1.9 | )% | (4.1 | )% | ||||||||
Operating margin | (0.3 | )% | 6.1 | % | (0.1 | )% | (6.4 | )% | (0.2 | )% |
Non-GAAP Results (unaudited) | ||||||||||||||||||
Q4 | Q3 | Q4 | Period Change | |||||||||||||||
FY 2014 | FY 2014 | FY 2013 | Q-T-Q* | Y-T-Y* | ||||||||||||||
Revenue | $ | 591.0 | $ | 603.6 | $ | 583.4 | (2.1 | )% | 1.3 | % | ||||||||
Adj. gross margin | 37.9 | % | 44.3 | % | 40.8 | % | (6.4 | )% | (2.9 | )% | ||||||||
Adj. operating expense | $ | 203.7 | $ | 206.3 | $ | 210.5 | (1.3 | )% | (3.2 | )% | ||||||||
Adj. operating margin | 3.4 | % | 10.1 | % | 4.7 | % | (6.7 | )% | (1.3 | )% |
Revenue by Segment (unaudited) | ||||||||||||||||||
Q4 FY 2014 | Q3 FY 2014 | Q4 FY 2013 | ||||||||||||||||
Revenue | % | Revenue | % | Revenue | % | |||||||||||||
Converged Packet Optical | $ | 383.3 | 64.9 | $ | 382.0 | 63.3 | $ | 350.9 | 60.2 | |||||||||
Packet Networking | 56.4 | 9.5 | 69.5 | 11.5 | 61.2 | 10.5 | ||||||||||||
Optical Transport | 26.5 | 4.5 | 31.0 | 5.1 | 52.6 | 9.0 | ||||||||||||
Software and Services | 124.8 | 21.1 | 121.1 | 20.1 | 118.7 | 20.3 | ||||||||||||
Total | $ | 591.0 | 100.0 | $ | 603.6 | 100.0 | $ | 583.4 | 100.0 |
* Denotes % change, or in the case of margin, absolute change |
• | Non-U.S. customers contributed 47.8% of total revenue |
• | One 10%-plus customer represented a total of 12.2% of revenue |
• | Cash and investments totaled $777.0 million |
• | Cash flow from operations totaled $73.8 million |
• | Average days' sales outstanding (DSOs) were 79 |
• | Accounts receivable balance was $519.0 million |
• | Inventories totaled $254.7 million, including: |
◦ | Raw materials: $64.8 million |
◦ | Work in process: $8.4 million |
◦ | Finished goods: $165.8 million |
◦ | Deferred cost of sales: $75.8 million |
◦ | Reserve for excess and obsolescence: $(60.1) million |
• | Product inventory turns were 4.8 |
• | Headcount totaled 5,161 |
• | Revenue in the range of $540 to $570 million |
• | Adjusted (non-GAAP) gross margin percentage in the low 40s range |
• | Adjusted (non-GAAP) operating expense of approximately $210 million |
Quarter Ended October 31, | Year Ended October 31, | |||||||||||||||
2013 | 2014 | 2013 | 2014 | |||||||||||||
Revenue: | ||||||||||||||||
Products | $ | 476,409 | $ | 476,175 | $ | 1,680,125 | $ | 1,865,826 | ||||||||
Services | 106,976 | 114,788 | 402,421 | 422,463 | ||||||||||||
Total revenue | 583,385 | 590,963 | 2,082,546 | 2,288,289 | ||||||||||||
Cost of goods sold: | ||||||||||||||||
Products | 283,780 | 305,171 | 967,510 | 1,083,022 | ||||||||||||
Services | 67,959 | 64,955 | 249,861 | 256,915 | ||||||||||||
Total cost of goods sold | 351,739 | 370,126 | 1,217,371 | 1,339,937 | ||||||||||||
Gross profit | 231,646 | 220,837 | 865,175 | 948,352 | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 100,427 | 98,506 | 383,408 | 401,180 | ||||||||||||
Selling and marketing | 87,494 | 84,396 | 304,170 | 328,325 | ||||||||||||
General and administrative | 31,275 | 28,560 | 122,432 | 126,824 | ||||||||||||
Amortization of intangible assets | 12,439 | 11,019 | 49,771 | 45,970 | ||||||||||||
Restructuring costs | 428 | 171 | 7,169 | 349 | ||||||||||||
Total operating expenses | 232,063 | 222,652 | 866,950 | 902,648 | ||||||||||||
Income (loss) from operations | (417 | ) | (1,815 | ) | (1,775 | ) | 45,704 | |||||||||
Interest and other income (loss), net | 276 | (11,031 | ) | (5,744 | ) | (25,262 | ) | |||||||||
Interest expense | (10,946 | ) | (13,559 | ) | (44,042 | ) | (47,115 | ) | ||||||||
Loss on extinguishment of debt | — | — | (28,630 | ) | — | |||||||||||
Loss before income taxes | (11,087 | ) | (26,405 | ) | (80,191 | ) | (26,673 | ) | ||||||||
Provision (benefit) for income taxes | (1,290 | ) | 4,298 | 5,240 | 13,964 | |||||||||||
Net loss | $ | (9,797 | ) | $ | (30,703 | ) | $ | (85,431 | ) | $ | (40,637 | ) | ||||
Net Loss per Common Share | ||||||||||||||||
Basic net loss per common share | $ | (0.09 | ) | $ | (0.29 | ) | $ | (0.83 | ) | $ | (0.38 | ) | ||||
Diluted net loss per potential common share | $ | (0.09 | ) | $ | (0.29 | ) | $ | (0.83 | ) | $ | (0.38 | ) | ||||
Weighted average basic common shares outstanding | 103,523 | 106,931 | 102,350 | 105,783 | ||||||||||||
Weighted average dilutive potential common shares outstanding | 103,523 | 106,931 | 102,350 | 105,783 |
October 31, | |||||||
2013 | 2014 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 346,487 | $ | 586,720 | |||
Short-term investments | 124,979 | 140,205 | |||||
Accounts receivable, net | 488,578 | 518,981 | |||||
Inventories | 249,103 | 254,660 | |||||
Prepaid expenses and other | 186,655 | 192,624 | |||||
Total current assets | 1,395,802 | 1,693,190 | |||||
Long-term investments | 15,031 | 50,057 | |||||
Equipment, furniture and fixtures, net | 119,729 | 126,632 | |||||
Other intangible assets, net | 185,828 | 128,677 | |||||
Other long-term assets | 86,380 | 74,076 | |||||
Total assets | $ | 1,802,770 | $ | 2,072,632 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 254,849 | $ | 209,777 | |||
Accrued liabilities and other short-term obligations | 271,656 | 276,608 | |||||
Deferred revenue | 88,550 | 104,688 | |||||
Current portion of long-term debt | — | 190,063 | |||||
Total current liabilities | 615,055 | 781,136 | |||||
Long-term deferred revenue | 23,620 | 40,930 | |||||
Other long-term obligations | 34,753 | 45,390 | |||||
Long-term debt, net | 1,212,019 | 1,274,791 | |||||
Total liabilities | 1,885,447 | 2,142,247 | |||||
Stockholders’ equity (deficit): | |||||||
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; 103,705,709 and 106,979,960 shares issued and outstanding | 1,037 | 1,070 | |||||
Additional paid-in capital | 5,893,880 | 5,954,440 | |||||
Accumulated other comprehensive loss | (7,774 | ) | (14,668 | ) | |||
Accumulated deficit | (5,969,820 | ) | (6,010,457 | ) | |||
Total stockholders’ equity (deficit) | (82,677 | ) | (69,615 | ) | |||
Total liabilities and stockholders’ equity (deficit) | $ | 1,802,770 | $ | 2,072,632 |
Year Ended October 31, | |||||||
2013 | 2014 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (85,431 | ) | $ | (40,637 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Loss on extinguishment of debt | 28,630 | — | |||||
Depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements | 55,699 | 55,616 | |||||
Share-based compensation costs | 37,720 | 42,930 | |||||
Amortization of intangible assets | 71,308 | 57,151 | |||||
Provision for inventory excess and obsolescence | 19,938 | 32,332 | |||||
Provision for warranty | 24,558 | 22,129 | |||||
Other | 9,023 | 25,668 | |||||
Changes in assets and liabilities: | |||||||
Accounts receivable | (145,421 | ) | (33,164 | ) | |||
Inventories | (8,943 | ) | (37,889 | ) | |||
Prepaid expenses and other | (82,809 | ) | (7,931 | ) | |||
Accounts payable, accruals and other obligations | 115,312 | (59,837 | ) | ||||
Deferred revenue | 5,094 | 33,448 | |||||
Net cash provided by operating activities | 44,678 | 89,816 | |||||
Cash flows used in investing activities: | |||||||
Payments for equipment, furniture, fixtures and intellectual property | (43,814 | ) | (48,216 | ) | |||
Restricted cash | 2,338 | 2,060 | |||||
Purchase of available for sale securities | (184,864 | ) | (245,196 | ) | |||
Proceeds from maturities of available for sale securities | 95,000 | 195,000 | |||||
Settlement of foreign currency forward contracts, net | 479 | (10,041 | ) | ||||
Net cash used in investing activities | (130,861 | ) | (106,393 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from issuance of long-term debt, net | — | 248,750 | |||||
Payment of long-term debt | (216,210 | ) | (625 | ) | |||
Payment of debt and equity issuance costs | (3,692 | ) | (4,227 | ) | |||
Payment of capital lease obligations | (3,335 | ) | (3,034 | ) | |||
Proceeds from issuance of common stock | 15,898 | 17,663 | |||||
Net cash provided by (used in) financing activities | (207,339 | ) | 258,527 | ||||
Effect of exchange rate changes on cash and cash equivalents | (2,435 | ) | (1,717 | ) | |||
Net increase (decrease) in cash and cash equivalents | (295,957 | ) | 240,233 | ||||
Cash and cash equivalents at beginning of fiscal year | 642,444 | 346,487 | |||||
Cash and cash equivalents at end of fiscal year | $ | 346,487 | $ | 586,720 | |||
Supplemental disclosure of cash flow information | |||||||
Cash paid during the fiscal year for interest | $ | 32,397 | $ | 36,276 | |||
Cash paid during the fiscal year for income taxes, net | $ | 10,679 | $ | 11,396 | |||
Non-cash investing and financing activities | |||||||
Purchase of equipment in accounts payable | $ | 6,191 | $ | 4,961 | |||
Fixed assets purchased under capital leases | $ | 2,538 | $ | 10,424 |
APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measurements (unaudited) | ||||||||
Quarter Ended | ||||||||
October 31, | ||||||||
2013 | 2014 | |||||||
Gross Profit Reconciliation (GAAP/non-GAAP) | ||||||||
GAAP gross profit | $ | 231,646 | $ | 220,837 | ||||
Share-based compensation-products | 617 | 547 | ||||||
Share-based compensation-services | 448 | 496 | ||||||
Amortization of intangible assets | 5,384 | 2,201 | ||||||
Total adjustments related to gross profit | 6,449 | 3,244 | ||||||
Adjusted (non-GAAP) gross profit | $ | 238,095 | $ | 224,081 | ||||
Adjusted (non-GAAP) gross profit percentage | 40.8 | % | 37.9 | % | ||||
Operating Expense Reconciliation (GAAP/non-GAAP) | ||||||||
GAAP operating expense | $ | 232,063 | $ | 222,652 | ||||
Share-based compensation-research and development | 1,923 | 1,960 | ||||||
Share-based compensation-sales and marketing | 3,603 | 2,759 | ||||||
Share-based compensation-general and administrative | 3,157 | 3,025 | ||||||
Amortization of intangible assets | 12,439 | 11,019 | ||||||
Restructuring costs | 428 | 171 | ||||||
Total adjustments related to operating expense | 21,550 | 18,934 | ||||||
Adjusted (non-GAAP) operating expense | $ | 210,513 | $ | 203,718 | ||||
Income (Loss) from Operations Reconciliation (GAAP/non-GAAP) | ||||||||
GAAP loss from operations | $ | (417 | ) | $ | (1,815 | ) | ||
Total adjustments related to gross profit | 6,449 | 3,244 | ||||||
Total adjustments related to operating expense | 21,550 | 18,934 | ||||||
Adjusted (non-GAAP) income from operations | $ | 27,582 | 20,363 | |||||
Adjusted (non-GAAP) operating margin percentage | 4.7 | % | 3.4 | % | ||||
Net Income (Loss) Reconciliation (GAAP/non-GAAP) | ||||||||
GAAP net loss | $ | (9,797 | ) | $ | (30,703 | ) | ||
Total adjustments related to gross profit | 6,449 | 3,244 | ||||||
Total adjustments related to operating expense | 21,550 | 18,934 | ||||||
Non-cash interest expense | 284 | 351 | ||||||
Change in fair value of embedded redemption feature | (230 | ) | — | |||||
Adjusted (non-GAAP) net income (loss) | $ | 18,256 | $ | (8,174 | ) | |||
Weighted average basic common shares outstanding | 103,523 | 106,931 | ||||||
Weighted average dilutive potential common shares outstanding1 | 119,401 | 106,931 | ||||||
Net Income (Loss) per Common Share | ||||||||
GAAP diluted net loss per common share | $ | (0.09 | ) | $ | (0.29 | ) | ||
Adjusted (non-GAAP) diluted net income (loss) per common share2 | $ | 0.16 | $ | (0.08 | ) |
APPENDIX B - Reconciliation of Adjusted (Non- GAAP) Annual Measurements (unaudited) | ||||||||
Year Ended | ||||||||
October 31, | ||||||||
2013 | 2014 | |||||||
Gross Profit Reconciliation (GAAP/non-GAAP) | ||||||||
GAAP gross profit | $ | 865,175 | $ | 948,352 | ||||
Share-based compensation-products | 2,522 | 2,531 | ||||||
Share-based compensation-services | 1,771 | 2,216 | ||||||
Amortization of intangible assets | 21,537 | 11,181 | ||||||
Total adjustments related to gross profit | 25,830 | 15,928 | ||||||
Adjusted (non-GAAP) gross profit | $ | 891,005 | $ | 964,280 | ||||
Adjusted (non-GAAP) gross profit percentage | 42.8 | % | 42.1 | % | ||||
Operating Expense Reconciliation (GAAP/non-GAAP) | ||||||||
GAAP operating expense | $ | 866,950 | $ | 902,648 | ||||
Share-based compensation-research and development | 8,214 | 9,682 | ||||||
Share-based compensation-sales and marketing | 13,290 | 14,958 | ||||||
Share-based compensation-general and administrative | 12,055 | 13,568 | ||||||
Amortization of intangible assets | 49,771 | 45,970 | ||||||
Restructuring costs | 7,169 | 349 | ||||||
Settlement of patent litigation | 1,500 | 2,000 | ||||||
Total adjustments related to operating expense | 91,999 | 86,527 | ||||||
Adjusted (non-GAAP) operating expense | $ | 774,951 | $ | 816,121 | ||||
Loss from Operations Reconciliation (GAAP/non-GAAP) | ||||||||
GAAP income (loss) from operations | $ | (1,775 | ) | $ | 45,704 | |||
Total adjustments related to gross profit | 25,830 | 15,928 | ||||||
Total adjustments related to operating expense | 91,999 | 86,527 | ||||||
Adjusted (non-GAAP) income from operations | $ | 116,054 | 148,159 | |||||
Adjusted (non-GAAP) operating margin percentage | 5.6 | % | 6.5 | % | ||||
Loss Reconciliation (GAAP/non-GAAP) | ||||||||
GAAP net loss | $ | (85,431 | ) | $ | (40,637 | ) | ||
Total adjustments related to gross profit | 25,830 | 15,928 | ||||||
Total adjustments related to operating expense | 91,999 | 86,527 | ||||||
Loss on extinguishment of debt | 28,630 | — | ||||||
Non-cash interest expense | 898 | 1,273 | ||||||
Change in fair value of embedded redemption feature | (2,950 | ) | 2,740 | |||||
Adjusted (non-GAAP) net income | $ | 58,976 | $ | 65,831 | ||||
Weighted average basic common shares outstanding | 102,350 | 105,783 | ||||||
Weighted average dilutive potential common shares outstanding3 | 120,263 | 120,950 | ||||||
Net Loss per Common Share | ||||||||
GAAP diluted net loss per common share | $ | (0.83 | ) | $ | (0.38 | ) | ||
Adjusted (non-GAAP) diluted net income per common share4 | $ | 0.54 | $ | 0.59 |
• | 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, that Ciena is required to amortize over the expected useful life. |
• | Restructuring costs - costs incurred as a result of restructuring activities taken to align resources with perceived market opportunities. |
• | Settlement of patent litigation - included in general and administrative expense is a $1.5 million patent litigation settlement during the third quarter of fiscal 2013 and a $2.0 million patent litigation settlement during the second quarter of fiscal 2014. |
• | Loss on extinguishment of debt - a non-cash loss, recorded in connection with convertible note exchange transactions completed during the first quarter of fiscal 2013, reflecting the fair value of Ciena's 4.0% senior convertible notes due December 15, 2020, as compared to the retirement of a portion of Ciena's outstanding 4.0% senior convertible notes due March 15, 2015. |
• | Non-cash interest expense - a non-cash debt discount expense amortized as interest expense during the term of Ciena's 4.0% senior convertible notes due December 15, 2020 relating to the required separate accounting of the equity component of these convertible notes. |
• | 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 due March 15, 2015. |