Leases

6 Months Ended

May 02, 2020

Leases [Abstract]

Leases

LEASES

Ciena leases over 1.4 million square feet of facilities globally related to the ongoing operations of its business segments and related functions. Ciena’s principal executive offices are located in Hanover, Maryland. Ciena’s largest facilities are research and development centers located in Ottawa, Canada and Gurgaon, India. Ciena also has engineering and/or service delivery facilities located in San Jose, California; Petaluma, California; Alpharetta, Georgia; Quebec, Canada; Austin, Texas; and Pune and Bangalore, India. In addition, Ciena leases various smaller offices in regions throughout the world to support sales and services operations. Office facilities are leased under various non-cancelable operating or finance leases. Ciena's current leases have remaining terms that vary up to 13 years. Certain leases provide for options to extend up to 10 years and/or options to terminate within eight years.

As discussed in Note 2, the restructuring reserve liability related to Ciena’s subleased space and vacated space for which subleases are being pursued was $11.1 million as of November 2, 2019. Upon Ciena’s adoption of ASC 842 on November 3, 2019, the existing Accrued liabilities and other short-term obligations and Other long-term obligations were reclassified as a reduction of the Operating right-of-use assets recorded in accordance with the updated guidance.

Leases included in the Condensed Consolidated Balance Sheets were as follows:

	Classification	As of May 2, 2020
Operating leases:
Operating ROU Assets	Operating right-of-use assets	$	47,864
Operating lease liabilities	Operating lease liabilities and Long-term operating lease liabilities	69,196
Finance leases:
Buildings, gross	Equipment, building, furniture and fixtures, net	$	66,931
Less: accumulated depreciation	Equipment, building, furniture and fixtures, net	(14,734		)
Buildings, net		$	52,197
Finance lease liabilities	Accrued liabilities and other short-term obligations and other long-term obligations	$	62,152

The components of lease expense included in the Condensed Consolidated Statement of Operations were as follows:

		Quarter Ended		Six Months Ended
	Classification	May 2, 2020		May 2, 2020
Operating lease costs	Operating expense	$	4,744	$	9,201
Finance lease cost:
Amortization of finance ROU asset	Operating expense	1,093		2,233
Interest on finance lease liabilities	Interest expense	1,168		2,412
Total finance lease cost		2,261		4,645
Non-capitalized lease cost	Operating expense	707		1,328
Variable lease cost(1)	Operating expense	1,324		2,635
Net lease cost(2)		$	9,036	$	17,809

⁽¹⁾ Variable lease costs include expenses relating to insurance, taxes, maintenance and other costs required by the applicable operating lease. Variable lease costs are determined by whether they are to be included in base rent and if amounts are based on a consumer price index.

⁽²⁾ Excludes other operating expense of $2.2 million and $6.5 million for the quarter and six months ended May 2, 2020, respectively, related to amortization of leasehold improvements.

Future minimum lease payments and the present value of minimum lease payments related to operating and finance leases as of May 2, 2020 were as follows:

	Operating Leases			Finance Leases			Total
Remaining fiscal 2020	$	10,052		$	7,039		$	17,091
2021	18,592			7,089			25,681
2022	14,030			7,524			21,554
2023	10,867			7,524			18,391
2024	8,805			7,584			16,389
Thereafter	12,464			58,786			71,250
Total lease payments	74,810			95,546			170,356
Less: Imputed interest	(5,614		)	(33,394		)	(39,008		)
Present value of lease liabilities	69,196			62,152			131,348
Less: Current portion of present value of minimum lease payments	(18,096		)	(2,585		)	(20,681		)
Long-term portion of present value of minimum lease payments	$	51,100		$	59,567		$	110,667

As of May 2, 2020, the weighted average remaining lease terms and weighted average discount rates for operating and finance leases were as follows:

Weighted-average remaining lease term in years:
Operating leases	4.79
Finance leases	12.22
Weighted-average discount rates:
Operating leases	3.12	%
Finance leases	7.56	%

As of November 2, 2019, minimum aggregate rentals under operating leases were as follows:

	2020		2021		2022		2023		2024		Thereafter		Total
Operating leases (1)	$	28,776	$	24,184	$	16,767	$	13,393	$	10,632	$	26,110	$	119,862

⁽¹⁾ The amount for operating lease commitments above include estimated variable expenses relating to insurance, taxes, maintenance and other costs required by the applicable operating lease.

Leases

LEASES

Ciena leases over 1.4 million square feet of facilities globally related to the ongoing operations of its business segments and related functions. Ciena’s principal executive offices are located in Hanover, Maryland. Ciena’s largest facilities are research and development centers located in Ottawa, Canada and Gurgaon, India. Ciena also has engineering and/or service delivery facilities located in San Jose, California; Petaluma, California; Alpharetta, Georgia; Quebec, Canada; Austin, Texas; and Pune and Bangalore, India. In addition, Ciena leases various smaller offices in regions throughout the world to support sales and services operations. Office facilities are leased under various non-cancelable operating or finance leases. Ciena's current leases have remaining terms that vary up to 13 years. Certain leases provide for options to extend up to 10 years and/or options to terminate within eight years.

As discussed in Note 2, the restructuring reserve liability related to Ciena’s subleased space and vacated space for which subleases are being pursued was $11.1 million as of November 2, 2019. Upon Ciena’s adoption of ASC 842 on November 3, 2019, the existing Accrued liabilities and other short-term obligations and Other long-term obligations were reclassified as a reduction of the Operating right-of-use assets recorded in accordance with the updated guidance.

Leases included in the Condensed Consolidated Balance Sheets were as follows:

	Classification	As of May 2, 2020
Operating leases:
Operating ROU Assets	Operating right-of-use assets	$	47,864
Operating lease liabilities	Operating lease liabilities and Long-term operating lease liabilities	69,196
Finance leases:
Buildings, gross	Equipment, building, furniture and fixtures, net	$	66,931
Less: accumulated depreciation	Equipment, building, furniture and fixtures, net	(14,734		)
Buildings, net		$	52,197
Finance lease liabilities	Accrued liabilities and other short-term obligations and other long-term obligations	$	62,152

The components of lease expense included in the Condensed Consolidated Statement of Operations were as follows:

		Quarter Ended		Six Months Ended
	Classification	May 2, 2020		May 2, 2020
Operating lease costs	Operating expense	$	4,744	$	9,201
Finance lease cost:
Amortization of finance ROU asset	Operating expense	1,093		2,233
Interest on finance lease liabilities	Interest expense	1,168		2,412
Total finance lease cost		2,261		4,645
Non-capitalized lease cost	Operating expense	707		1,328
Variable lease cost(1)	Operating expense	1,324		2,635
Net lease cost(2)		$	9,036	$	17,809

⁽¹⁾ Variable lease costs include expenses relating to insurance, taxes, maintenance and other costs required by the applicable operating lease. Variable lease costs are determined by whether they are to be included in base rent and if amounts are based on a consumer price index.

⁽²⁾ Excludes other operating expense of $2.2 million and $6.5 million for the quarter and six months ended May 2, 2020, respectively, related to amortization of leasehold improvements.

Future minimum lease payments and the present value of minimum lease payments related to operating and finance leases as of May 2, 2020 were as follows:

	Operating Leases			Finance Leases			Total
Remaining fiscal 2020	$	10,052		$	7,039		$	17,091
2021	18,592			7,089			25,681
2022	14,030			7,524			21,554
2023	10,867			7,524			18,391
2024	8,805			7,584			16,389
Thereafter	12,464			58,786			71,250
Total lease payments	74,810			95,546			170,356
Less: Imputed interest	(5,614		)	(33,394		)	(39,008		)
Present value of lease liabilities	69,196			62,152			131,348
Less: Current portion of present value of minimum lease payments	(18,096		)	(2,585		)	(20,681		)
Long-term portion of present value of minimum lease payments	$	51,100		$	59,567		$	110,667

As of May 2, 2020, the weighted average remaining lease terms and weighted average discount rates for operating and finance leases were as follows:

Weighted-average remaining lease term in years:
Operating leases	4.79
Finance leases	12.22
Weighted-average discount rates:
Operating leases	3.12	%
Finance leases	7.56	%

As of November 2, 2019, minimum aggregate rentals under operating leases were as follows:

	2020		2021		2022		2023		2024		Thereafter		Total
Operating leases (1)	$	28,776	$	24,184	$	16,767	$	13,393	$	10,632	$	26,110	$	119,862

⁽¹⁾ The amount for operating lease commitments above include estimated variable expenses relating to insurance, taxes, maintenance and other costs required by the applicable operating lease.