Fair Value Measurements

12 Months Ended

Oct. 31, 2014

As of the date indicated, the following tables summarizes the fair value of assets and liabilities that were recorded at fair value on a recurring basis (in thousands):



	October 31, 2013
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	254,330	$	—	$	—	$	254,330
U.S. government obligations	—		115,016		—		115,016
Commercial paper	—		44,991		—		44,991
Embedded redemption feature	—		—		2,740		2,740
Total assets measured at fair value	$	254,330	$	160,007	$	2,740	$	417,077

Liabilities:
Foreign currency forward contracts	$	—	$	442	$	—	$	442
Total liabilities measured at fair value	$	—	$	442	$	—	$	442



	October 31, 2014
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	440,013	$	—	$	—	$	440,013
U.S. government obligations	—		160,268		—		160,268
Commercial paper	—		89,989		—		89,989
Foreign currency forward contracts	$	—	$	1,561	$	—	$	1,561
Total assets measured at fair value	$	440,013	$	251,818	$	—	$	691,831

Liabilities:
Foreign currency forward contracts	$	—	$	200	$	—	$	200
Forward interest rate swap contract	—		2,083		—		2,083
Total liabilities measured at fair value	$	—	$	2,283	$	—	$	2,283

As of the dates indicated, the assets and liabilities above were presented on Ciena’s Consolidated Balance Sheet as follows (in thousands):



	October 31, 2013
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	252,241	$	19,997	$	—	$	272,238
Short-term investments	—		124,979		—		124,979
Prepaid expenses and other	52		—		—		52
Long-term investments	—		15,031		—		15,031
Other long-term assets	2,037		—		2,740		4,777
Total assets measured at fair value	$	254,330	$	160,007	$	2,740	$	417,077

Liabilities:
Accrued liabilities	$	—	$	442	$	—	442
Total liabilities measured at fair value	$	—	$	442	$	—	$	442



	October 31, 2014
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	440,013	$	59,995	$	—	$	500,008
Short-term investments	—		140,205		—		140,205
Prepaid expenses and other	—		1,561		—		1,561
Long-term investments	—		50,057		—		50,057
Total assets measured at fair value	$	440,013	$	251,818	$	—	$	691,831

Liabilities:
Accrued liabilities	$	—	$	200	$	—	$	200
Other long-term obligations	—		2,083		—		2,083
Total liabilities measured at fair value	$	—	$	2,283	$	—	$	2,283

Ciena’s Level 3 assets that were included in other long-term assets reflect an embedded redemption feature contained within the 2015 Notes. The embedded redemption feature is bifurcated from the 2015 Notes using the “with-and-without” approach. As such, the total value of the embedded redemption feature is calculated as the difference between the value of the 2015 Notes (the “Hybrid Instrument”) and the value of an identical instrument without the embedded redemption feature (the “Host Instrument”). Both the Host Instrument and the Hybrid Instrument are valued using a modified binomial model. The modified binomial model utilizes a risk free interest rate, an implied volatility of Ciena’s stock, the recovery rates of bonds and the implied default intensity of the 2015 Notes. The value of this feature was immaterial at October 31, 2014.

As of the dates indicated, the following table sets forth, in thousands, the reconciliation of changes in Level 3 assets recorded at fair value:



	Level 3
Balance at October 31, 2013	$	2,740
Issuances	—
Settlements	—
Changes in unrealized loss	(2,740		)
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at October 31, 2014	$	—

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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