Leases

9 Months Ended

Aug. 01, 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; 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 ROU assets recorded in accordance with the updated guidance.

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

	Classification	As of August 1, 2020
Operating leases:
Operating ROU Assets	Operating right-of-use assets	$	48,573
Operating lease liabilities	Operating lease liabilities and Long-term operating lease liabilities	71,558
Finance leases:
Buildings, gross	Equipment, building, furniture and fixtures, net	$	70,289
Less: accumulated depreciation	Equipment, building, furniture and fixtures, net	(16,592)
Buildings, net		$	53,697
Finance lease liabilities	Accrued liabilities and other short-term obligations and other long-term obligations	$	64,608

ROU assets that involve subleased or vacant space aggregate $8.1 million as of August 1, 2020. These assets may become impaired if tenants are unable to service their obligations under the sublease, and/or if the estimates as to occupancy are not realized, either of which may be more likely as COVID-19 impacts evolve.

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

		Quarter Ended		Nine Months Ended
	Classification	August 1, 2020		August 1, 2020
Operating lease costs	Operating expense	$	4,234	$	13,435
Finance lease cost:
Amortization of finance ROU asset	Operating expense	1,097		3,330
Interest on finance lease liabilities	Interest expense	1,162		3,574
Total finance lease cost		2,259		6,904
Non-capitalized lease cost	Operating expense	883		2,211
Variable lease cost(1)	Operating expense	1,265		3,900
Net lease cost(2)		$	8,641	$	26,450

⁽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 $8.7 million for the quarter and nine months ended August 1, 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 August 1, 2020 were as follows:

	Operating Leases		Finance Leases		Total
Remaining fiscal 2020	$	5,423	$	7,392	$	12,815
2021	20,382		7,572		27,954
2022	15,692		7,902		23,594
2023	12,332		7,901		20,233
2024	9,927		8,013		17,940
Thereafter	13,193		59,712		72,905
Total lease payments	76,949		98,492		175,441
Less: Imputed interest	(5,391)		(33,884)		(39,275)
Present value of lease liabilities	71,558		64,608		136,166
Less: Current portion of present value of minimum lease payments	(19,417)		(2,765)		(22,182)
Long-term portion of present value of minimum lease payments	$	52,141	$	61,843	$	113,984

As of August 1, 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	4.60
Finance leases	11.97
Weighted-average discount rates:
Operating leases	3.03	%
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; 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 ROU assets recorded in accordance with the updated guidance.

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

	Classification	As of August 1, 2020
Operating leases:
Operating ROU Assets	Operating right-of-use assets	$	48,573
Operating lease liabilities	Operating lease liabilities and Long-term operating lease liabilities	71,558
Finance leases:
Buildings, gross	Equipment, building, furniture and fixtures, net	$	70,289
Less: accumulated depreciation	Equipment, building, furniture and fixtures, net	(16,592)
Buildings, net		$	53,697
Finance lease liabilities	Accrued liabilities and other short-term obligations and other long-term obligations	$	64,608

ROU assets that involve subleased or vacant space aggregate $8.1 million as of August 1, 2020. These assets may become impaired if tenants are unable to service their obligations under the sublease, and/or if the estimates as to occupancy are not realized, either of which may be more likely as COVID-19 impacts evolve.

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

		Quarter Ended		Nine Months Ended
	Classification	August 1, 2020		August 1, 2020
Operating lease costs	Operating expense	$	4,234	$	13,435
Finance lease cost:
Amortization of finance ROU asset	Operating expense	1,097		3,330
Interest on finance lease liabilities	Interest expense	1,162		3,574
Total finance lease cost		2,259		6,904
Non-capitalized lease cost	Operating expense	883		2,211
Variable lease cost(1)	Operating expense	1,265		3,900
Net lease cost(2)		$	8,641	$	26,450

⁽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 $8.7 million for the quarter and nine months ended August 1, 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 August 1, 2020 were as follows:

	Operating Leases		Finance Leases		Total
Remaining fiscal 2020	$	5,423	$	7,392	$	12,815
2021	20,382		7,572		27,954
2022	15,692		7,902		23,594
2023	12,332		7,901		20,233
2024	9,927		8,013		17,940
Thereafter	13,193		59,712		72,905
Total lease payments	76,949		98,492		175,441
Less: Imputed interest	(5,391)		(33,884)		(39,275)
Present value of lease liabilities	71,558		64,608		136,166
Less: Current portion of present value of minimum lease payments	(19,417)		(2,765)		(22,182)
Long-term portion of present value of minimum lease payments	$	52,141	$	61,843	$	113,984

As of August 1, 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	4.60
Finance leases	11.97
Weighted-average discount rates:
Operating leases	3.03	%
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.