INCOME TAXES

9 Months Ended

Jul. 30, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The effective tax rate for the quarter and nine months ended July 30, 2022 was higher than the effective tax rate for the quarter and nine months ended July 31, 2021, primarily due to the tax benefit associated with recording a deferred tax asset in the third quarter of fiscal 2021.

To accommodate the requirements of a global business, Ciena is reorganizing its global supply chain and distribution structure, which has included a legal entity reorganization and related system upgrade. During the third quarter of fiscal 2021, Ciena completed an internal transfer of certain of its non-U.S. intangible assets, which created amortizable tax basis resulting in the discrete recognition of a $124.2 million deferred tax asset with a corresponding tax benefit. The impact of this transfer is reflected in Ciena’s effective tax rate for the quarter and nine months ended July 31, 2021, which had a significant, one-time impact on its net income for these periods.

Ciena’s future income tax provisions and deferred tax balances may be affected by the amount of pre-tax income, the jurisdictions where it is earned, the existence and ability to utilize tax attributes and changes in tax laws and business reorganizations. Ciena continues to monitor these items and will adopt strategies to address their impact as appropriate. In certain jurisdictions, Ciena provides a valuation allowance for its deferred tax assets in excess of deferred tax liabilities because Ciena has concluded that it is more likely than not that such deferred tax assets will ultimately not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income (including the reversals of deferred tax liabilities) during the periods in which those deferred tax assets will become deductible. Ciena assesses available positive and negative evidence regarding its ability to realize deferred tax assets and record a valuation allowance when it is more likely than not that deferred tax assets will not be realized. To form a conclusion, management considers its recent financial results and trends and makes judgments and estimates related to projections of profitability, the timing and extent of the use of net operating loss carryforwards, and tax planning strategies.

Ciena will continue to evaluate future financial performance to determine whether such profitability is both sustainable and significant enough to provide sufficient evidence to support reversal of all or a portion of the valuation allowance. Any future release of valuation allowance may be recorded as a tax benefit increasing net income or as an adjustment to paid-in capital, based on tax ordering requirements.